SECURITIES LAW

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SECURITIES LAW

Category	SECURITIES	Organ of Promulgation	The Standing Committee of the National People's Congress	Status of Effect	In Force
Date of Promulgation	1998-12-29	Effective Date	1999-07-01

Securities Law of the People's Republic of China

Contents
Chapter I  General Provisions
Chapter II  Securities Issuance
Chapter III  Securities Trading
Chapter IV  Listed Company Acquisition
Chapter V  Securities Exchanges
Chapter VI  Security Companies
Chapter VII  Securities Registration and Settlement Agencies
Chapter VIII  Securities Trading Services Agencies
Chapter IX  Securites Industry Associations
Chapter X  Securities Supervision and Administration Institution
Chapter XI  Legal Liability
Chapter XII  Supplementary Provisions

(Adopted at the 6th Meeting of the Standing Committee of the 9th

National People's Congress on December 29, 1998 and promulgated by
Order No. 12 of the President of the People's Republic of China on
December 29, 1998)
Contents

Chapter I General Provisions

Chapter II Securities Issuance

Chapter III Securities Trading

Section 1 General Rules

Section 2 Securities Listing

Section 3 Sustained Open Information

Section 4 Prohibited Trading Acts

Chapter IV Listed Company Acquisition

Chapter V Securities Exchanges

Chapter VI Security Companies

Chapter VII Securities Registration and Settlement Agencies

Chapter VIII Securities Trading Services Agencies

Chapter IX Securiities Industy Associations

Chapter X Securities Supervision and Administration Institutions

Chapter XI Legal Liabiliby

Chapter XII Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is enacted for purposes of standardizing acts of securities issuance and trading, protecting the legitimate rights and
interests of investors, maintaining socioeconomic order and public interest
of society and promoting the development of the socialist market economy.

Article 2 This Law shall be applicable to the issuance and trading of stocks, corporate bonds and other securities confirmed by the State Council
according to law within the territory of China. Where there are no provisions
in this Law, provisions of the Company Law, and other laws and regulations
shall be applicable.

Issuance and trading of government bonds shall be prescribed by law
or administrative regulations separately.

Article 3 The principle of openness, fairness and justice must be
practised in operations of securities issuance and trading.

Article 4 Parties interested in operations of securities issuance
and trading have equal legal status and should abide by the principle
of voluntariness, compensation, honesty and trustworthiness.

Article 5 Operations of securities issuance and trading must abide by
laws and administrative regulations; acts of fraud, inside trading and
manipulation of securities trading markets shall be prohibited.

Article 6 The securities industry and banking industry, trust business
and insurance industry shall be put under separate industry-wise management
and separate industry-wise administration. Security companies and banking,
trust and insurance business instituions shall be established separately.

Artilce 7 The securities supervision and administration institution
under the State Council practises centralized and unified supervision and
administration of securities markets nationwide.

The securities supervision and administration institution under the
State Council may establish representative offices which shall fulfil
the duties and responsibilities authorized.

Article 8 Securities industry associations established according to law
shall practise self-policing administration under the prerequisite of the
exercise by the state of centralized and unified supervision and
administration over operations of securities issuance and trading.

Artilce 9 State audit organs shall conduct audit suspervision
according to law over securities exchanges, security companies, securities
registration and settlement agencies and securities supervision and
administration institutions.
Chapter II Securities Issuance

Article 10 Public issuance of securities must conform to the criteria
prescribed by laws and administrative regulations, and be submitted to the
securities supervision and administration institution under the State Council
or the deparments authorized by the State Council according to law for
verification and approval or examination and approval; no unit or individual
shall, without verification and approval or examination and approval according
to law, publicly issue securities in society.

Article 11 Public issuance of stocks must, pursuant to the conditions
prescribed in the Company Law, be submitted to the securities supervision
and administration institution under the State Council for verification and
approval. The issuer must present the application document prescribed by the
Company Law and the relevant documents prescribed by the securities
supervision and administration institution under the State Council to
the securities supervision and administration institution under the State
Council.

Issuance of corporate bonds must, pursuant to the criteria prescribed in
the Company Law, be submitted to the department authorized by the State
Council for examination and approval. The issuer must present the applicatiion
document prescribed by the Company Law and other documents prescribed by the
department authorized by the State Council to the department authorized by
the State Council.

Article 12 The format and ways of submission of the application
document to be presented by the issuer for application for public issuance
of securities according to law shall be prescribed by the institution or
department resposnsible for verification and approval or examination and
approval accordindg to law.

Article 13 The application document for securities issuance to be
presented by the issuer to the securities supervision and administration
institution under the State Council or the department authorized by the
State Council must be truthful, accurate and complete.

The specialized agencies and personnel for drawing up relevant documents
for securities issuance must strictly fulfil the legal duties and
responsibilities to ensure the truthfulness, accuracy and completeness
of the documents drawn up by them.

Article 14 An issuance examination and verification commission shall
be established under the securities supervision and administration
institution under the State Council for examination and verification
of applications for issuance of stocks in accordance with law.

The issuance examination and verification commission shall be composed of specialized personnel of the securities supervision and administration
institution under the State Council and specialists concerned employed
from outside the said institution and come up with views on examination
and verification and decide by vote on applications for stock issuance
in the form of ballot.

Specific measures for the composition, tenure of office for its members
and the working procedures of the issuance examination and verification
commission shall be formulated by the securities supervision and
administration institution under the State Council and submitted to the
State Council for approval.

Article 15 The securities supervision and administration institution
under the State Council shall, pursuant to legal conditions, be responsible
for the verification and approval of applications for stock issuance.
The procedures for verification and approval shall be open and be
subject to supervision in accordance with law.

Personnel participating in the verification and approval of applications
for stock issuance shall not have relations of interests with issuance
application units; shall not accept present(s) of issuance application
unit(s); shall not hold stocks the issuance application of which has been
approved; and shall not come into contact with issuance application unit(s)
in private.

Examination and approval of applications for issuance of corporate bonds
by the departments authorized by the State Council shall be processed by
referring to the provisions of the two preceding paragraphs.

Article 16 The securities supervision and administration instituion
under the State Council or the departments authorized by the State Council
should, within 3 months starting from the date of acceptance of securities
issuance application documents, make a decision; explanations shall be made
for non-approval or non examination and approval.

Article 17 An issuer shall, with the approval or examination and
approval of the securities issuance application, make an announcement of
the document on public issuance and raising and place the said document at
designated site(s) for public reference prior to the public issuance of the securities pursuant to the provisions of laws and administrative
regulations.

Prior to the information on securities issuance being made public
in accordance with law, no insider shall make public or disclose the
said information.

No issuer shall issue securities prior to the announcement of the
document on public issuance and raising.

Article 18 The securities supervision and administration institution
under the State Council or the departments authorized by the State Council
shall, upon discovery of the decision already made on the approval or
examination and approval of securities issuance to be not in conformity
with the provisions of laws and administrative regulations, revoke the
said decision; where issuance of securities has not been initiated, the
issuance shall be suspended; where the securities have already been issued,
the securities holders may, in accordance with the issuing price with
the added calculation of interests for deposit of the corresponding
period, ask the issuer for refund.

Article 19 The issuer shall be responsible for himself/herself for
changes in the management and returns of the issuer after issuance of the
stocks in accordance with law; the investors shall be responsible for
himself/herself for investment risks resulting from the changes.

Article 20 New stocks issued by a listed company should conform to
the conditions governing issuance of new stocks specified in the Company
Law, and may be raised in public in society, or allocated to original
stock-holders.

Funds raised by a listed company from stock issuance must be used
according to the uses of the funds listed in the prospectus. Change
in fund uses listed in the prospectus must be subject to the approval
of the general meeting of shareholders. Where arbitary change in use
without rectification has occurred, or the change has taken place without
affirmation of the general meeting of shareholders, no new stocks shall
be issued.

Article 21 Security companies should, pursuant to the provisions of laws and administrative regulations, sell issuers' securites for public
issuance in society. Securities sales business take the form of sale on
a commission basis or exclusive sales.

Sale on a commission basis of securities mean the the form of underwriting
of selling of securities by security companies for issuers and returning all
the unsold securities to issuers at the conclusion of the selling period.

Exclusive sales of securities mean the form of underwriting of total
buying in of issuers' securities by security companies or total buying in of
the securities left over after sales by security companies themselves at the
conclusion of the selling period in accordance with agreement.

Article 22 An issuer of securities for public issuance has the right to
choose independently an underwriting security company in accordance with law.
No security company shall solicit business of underwriting by means of unfair
competition.

Article 23 A security company shall, in business of underwriting,
conclude an agreement on the sale on a commission basis or exclusive sales
with the issuer carrying the following particulars:

(1)names and residences of the parties interested and names of legal
representatives;

(2)types, quantity, amount and issuing price of the securities for
sale on a commission basis or exclusive sales;

(3)duration for sale on a commission basis or exclusive sales and
dates of commencement and termination;

(4)mode of payment and dates for sale on a commission basis or
exclusive sales;

(5)charges and settlement measures for sale on a commission basis or
exclusive sales;

(6)liability for breach of contract; and

(7)other matters prescribed by the securities supervision and
administration institution under the State Council.

Article 24 A security company shall, in business of underwriting,
check and verify the truthfulness, accuracy and completeness of the document
for public issuance and raising; no sales operations shall be carried out upon
uncovering of the document containing false recordings, misleading statements
or having major omissions; where sales have been under way, the sales
operations must be suspended forthwith and correction measures shall be
taken.

Article 25 Underwriting of securities for public issuance in society
the total face value of which exceeds RMB 50 million Yuan shall be undertaken
by an underwriting syndicate. The underwriting syndicate shall be composed of the leading underwriting security company and participating underwriting
security companies.

Article 26 The longest duration for sale on a commission basis or
exclusive sales of securities shall not exceed 90 days.

A security company shall, within the duration of sale on a commission
basis or exclusive sales, ensure that the securities it has undertaken for
sale on a commission basis or exclusive sales are first sold to the
subcribers, and the security company shall not retain in advance the
securities the sale on a commission basis of which has been undertaken by
the company and buy in beforehand and retain the securities undertaken by
the company for exclusive sales.

Article 27 A security company that undertakes exclusive sales of securities shall, within 15 days at the expiration of the duration for
exclusive sales, submit the information on exclusive sales to the securities
supervision and administration institution under the State Council for the
record.

A security company that undertakes sales of securities on a commission
basis shall, within 15 days at the expiration of the duration for sale on a
commission basis, together with the issuer submit the imformation on the
sales of securities on a commission basis to the securities supervision and
administration institution under the State Council for the record.

Article 28 Where stock issuance takes the form of premium issuance,
its issuing price shall be decided by the issuer and the underwriting
security company through consultation and submitted to the securities
supervision and administration institution under the State Council for
verification and approval.

Article 29 A domestic enterprise that goes in for direct or indirect
issuance of securities overseas or listing for trading of its securities
overseas must be subject to the approval of the securities supervision and
administration institution under the State Council for approval.
Chapter III Securities Trading

Section 1 General Rules

Article 30 Securities bought or sold according to law by parties
interested to securities trading must be securities issued and delivered
in accordance with law.

No securities issued not in accordance with law shall be bought or sold.

Article 31 Stocks, corporate bonds and other securities issued in
accordance with law restrictive provisions have been imposed by law on
their time limit for transfer shall not be bought or sold within the
restricted time limit.

Article 32 Stocks, corporate bonds and other securities the listing
for trading of which has been verified and approved in accordance with law
should be listed for trading at securities exchanges.

Article 33 Listing for trading of securities at securities exchanges
should take the form of open and centralized competitive bidding.

Centralized competitive bidding in securities trading should follow
the principle of price preference and time preference.

Article 34 Securities bought or sold by parties interested to
securities trading may take paper form or other forms laid down by the
securities supervision and administration institution under the State Council.

Article 35 Transactions in securities trading shall be concluded in
spot stocks.

Article 36 Security companies shall not engage in securities trading
operations of financing or securities accomodation from clients.

Article 37 Employees of securities exchanges, security companies and
securities registration and settlement agencies, staff members of securities
supervision and administration institutions and other personnel prohibited
from participating in stocks trading by laws and regulations shall not, within
their tenure of office or the legal time limit, hold, buy or sell stocks
directly or use an assumed name or in the name of others, nor shall they
accept stocks donated by others.

Anyone must, at the time becoming one of the personnel listed in the
preceding paragraph, transfer the stocks originally held by him/her according
to law.

Article 38 Securities exchanges, security companies and securities
registration and settlement agencies must maintain secrecy for the accounts
opened for their clients according to law.

Article 39 The specialized agency and personnel for drawing up such
papers as the audit report, assets assessment report or legal advice for
stock issuance shall not, within the underwriting period of the said stocks
and within 6 months at the expiration of the time period, buy or sell the
said stocks.

In addition to the provisions of the preceding paragraph, the specialized
agency and personnel for drawing up the audit report, assets assessment report
or legal advice for a listed company shall not, starting from the date of acceptance of entrustment of the listed company to within 5 days after the
above-mentioned documents have been made public, buy or sell the said stocks.

Article 40 Collection of fees for securities trading must be reasonable
and items for fee collection, rates for fee collection and methods of fee
collection shall be made public.

Items for fee collection, rates of fee collection and measures for
administration shall be uniformly determined by the departments of administration concerned under the State Council.

Article 41 A stockholder holding 5% of the stocks issued by a
joint-stock company limited should, within 3 days starting from the date of the amount of stocks held by him/her reaching the said percentage, report
to the company which must report to the securities supervision and
administration institution under the State Council within 3 days starting
from the date of receipt of the report; when it belongs to a listed company,
a report shall be submitted simultaneously to the securities exchanges.

Article 42 The stockholder prescribed in the preceding Article who
sells the stocks of the said company held by him/her within 6 months after
buying in, or again buys in within 6 months of selling, the returns accrued
therefrom shall belong to the said company, and the board of directors of the company should withdraw the returns gained by the said stockholder.
However, a security company that holds more than 5% of the stocks as a
result of the left-over stocks after sales of buying in for exclusive sales,
its sale of the said stocks shall not be subject to the time limit of 6
months.

Where the board of directors of a company fails to implement the
provisions of the preceding paragraph, other stockholders have the right to
demand implementation by the board of directors.

Where the board of directors of a company fails to implement the
provisions of the First Paragraph resulting in damage to the company,
the director(s) held responsible shall bear joint responsibility for
compensation in accordance with law.

Section 2 Securities Listing

Article 43 Application by a joint-stock company limited for listing for
trading of its stocks must be submitted to the securities supervision and
administration institution under the State Council for verification and
approval.

The securities supervision and administration institution under the
State Council may authorize securities exchanges to verify and approve
applications for listing of stocks pursuant to legal terms and legal
procedures.

Article 44 The state encourages the listing for trading of corporate
stocks conforming both to the industrial policy and conditions for listing.

Article 45 The following documents shall be presented at the time of filing an application for listing for trading with the securities supervision
and administration institution under the State Council:

(1)a report on listing;

(2)the resolution of the general meeting of shareholders for the
application for listing;

(3)articles of association of the company;

(4)business licence of the company;

(5)financial and accounting reports of last three years of the company
or those since the establishment of the company examined and certified by
a legal certification agency;

(6)legal advice and a letter of reference by a security company; and

(7)the latest prospectus.

Article 46 An issuer shall, upon verification and approval of the
application for listing for trading of the stocks by the securities
supervision and administration institution under the State Council,
present the approval document and the relevant documents prescribed in
the preceding paragraph to securities exchanges.

The securities exchanges shall, within 6 months starting from the date
of receipt of the documents prescribed in the preceding paragraph presented
by the issuer of the said stocks, arrange the listing for trading of the
said stocks.

Article 47 The listed company shall, upon the consent of the securities
exchanges on the application for listing for trading of its stocks, announce
the approved relevant documents for the listing of the stocks, and place
the said documents at a designated place for public reference 5 days before
the listing for trading.

Article 48 In addition to announcing the application document for
listing prescribed in the preceding Article, the listed company shall
also announce the following particulars:

(1)the date of approval of trading of its stocks at securities exchanges;

(2)list of the top ten stockholders holding maximum shares of the
company and the number of shares held by them; and

(3)names of directors, commissioners, managers and high-level
administrators concerned and information on the stocks and bonds of the
comapany held by them.

Article 49 For a listed company that has forfeited the listed
requirements prescribed by the Company Law, its stocks shall be suspended
for listing or terminated for listing according to law.

Article 50 An application by a company for listing for trading of the
corporate bonds issued by it must be submitted to the securities supervision
and administration institution under the State Council for verification and
approval.

The securities supervision and administration institution under the State
Council may authorize a securities exchange in the verification and approval
of the application for listing of corporate bonds pursuant to legal terms
and legal procedures.

Article 51 Application by a company for listing for trading for its
corporate bonds must meet the following requirements:

(1)the time limit of the corporate bonds shall be more than one year;

(2)the actual issuance amount of the corporate bonds shall not be
less than RMB 50 million Yuan; and

(3)the company still meets the legal requirements for the issuance of corporate bonds at the time of application for listing of its bonds.

Article 52 The following documents shall be presented at the time of filing an application for listing of corporate bonds with the securities
supervision and administration institution under the State Council:

(1)a report on listing;

(2)the resolution of the board of directors on the application for
listing;

(3)articles of association of the company;

(4)business licence of the company;

(5)measures for the raising of corporate bonds; and

(6)the actual amount of issuance of corporate bonds.

Article 53 Upon verification and approval of the application for listing
for trading of corporate bonds, their issuer should present the approval
document and the relevant documents prescribed in the preceding Article
to the securities exchanges.

The securities exchanges should, within 3 months starting from the date
of receipt of the documents prescribed in the preceding Article which have
been presented by the said bonds issuer, arrange the listing for trading
of the said bonds.

Article 54 The issuer should, upon consent of the application for listing
for trading of corporate bonds by the securities exchanges, announce the
report on the listing of corporate bonds, the approval document and relevant
application documents for listing 5 days before the listing for trading of the corporate bonds, and place them at a designated place for public
reference.

Article 55 Any company that has any of the following circumstances
following the listing for trading of its corporate bonds, the listing for
trading of its corporate bonds shall be temporarily suspended according to
the decision of the securities supervision and administration institution
under the State Council:

(1)the company has committed major illegal acts;

(2)a major change has taken place in the company that does not conform to
the listing requirements for corporate bonds;

(3)the funds raised through corporate bonds have not been used in uses
approved by the examination and approval organ;

(4)failure to fulfil obligations in accordance with the measures for
the raising of corporate bonds; and

(5)the company has suffered losses for two consecutive years.

Article 56 Any company that has any of the circumstances listed in
Section (1) and Section (4) of the preceding paragraph which has been
ascertained to have serious consequences, or has any of the circumstances
listed in Section (2), Section (3) and Section (5) of the preceding paragraph
which has not been removed within the specified time period, the listing of
the said corporate bonds shall be terminated according to the decision of the securities supervision and administration institution under the State
Council.

In the event of disbandment, being ordered to close down according to law
or declared bankrupt of a company, the securities exchanges shall terminate
the listing of its corporate bonds and submit a report to the securities
supervision and administration institution under the State Council for
the record.

Article 57 The securities supervision and administration institution
under the State Council may authorize securities exchanges to suspend or
terminate the listing of stocks or corporate bonds according to law.

Section 3 Sustained Open Information

Article 58 For issuance of stocks according to law verified and approved
by the securities supervision and administration institution under the State
Council, or issuance of corporate bonds according to law approved by the
departments authorized by the State Council, an announcement shall, pursuant
to the provisions of the Company Law, be made on the propectus and measures
for the raising of corporate bonds. For issuance of new shares or corporate
bonds according to law, an announcement shall also be made on the financial
and accounting report.

Article 59 Documents for the issuance and listing of stocks or corporate
bonds announced by a company must be truthful, accurate and complete, and
must not carry false recordings, misleading statements or have major
omissions.

Article 60 Any company whose stocks or corporate bonds have been listed
for trading should, within two months starting from the date of the conclusion
of the first half of every accounting year, submit a mid-term report recording
the following contents to the securities supervision and administration
institution under the State Council and the securities exchanges and make an
announcements thereof:

(1)the financial and accounting report and management information of the
company;

(2)particulars involving the company's major litigations;

(3)information on changes in stocks and corporate bonds already issued;

(4)major matters presented to the general meeting of stockholders for
review; and

(5)other matters prescribed by the securities supervision and
administration institution under the State Council.

Article 61 Any company whose stocks or corporate bonds have been listed
for trading should, within four months starting from the date of the
conclusion of every accounting year, submit an annual report recording the
following contents to the securities supervision and administratiion
institution under the State Council and the securities exchanges and make
an announcement thereof:

(1)an overview of the company;

(2)the financial and accounting report and management information of the
company;

(3)brief life sketches of the directors, commissioners, managers and
high-level administrators concerned and information on stocks held by them;

(4)information on the stocks and corporate bonds already issued including
a list of the top 10 stockholders holding the maximum shares of the company
and the amount of shares held by them; and

(5)other matters prescribed by the securities supervision and
administration institution under the State Council.

Article 62 A listed company should, in the event of occurrence of a
major event which may have a big impact on the trading price of the stocks
of the listed company yet the investors are unaware thereof, submit forthwith
an interim report on the said major event to the securities supervision and
administration institution under the State Council and the securities
exchanges, and make an announcement thereof, explaining the substance of the
event.

The following situations shall be construed as major events referred to
in the preceding paragraph:

(1)major changes in the management policy and business scope of the
company;

(2)decision(s) on major investment acts and major property acquisition
of the company;

(3)an important contract concluded by the company that may have
crucial impact on the assets, liabilities, rights and interests and
managment achievements;

(4)the situation of occurrence of major liabilities and failure to
liquidate major liabilities due for breach of contract by the company;

(5)incurring of major losses or major losses exceeding 10% of the
net assets of the company;

(6)major changes have taken place in the external conditions for
the production and managment of the company;

(7)changes have taken place in the chariman of the board of directors,
and over one third of the directors or managers;

(8)great changes havw occurred in the shares held by stockholders holding
more than 5% of the company's shares;

(9)decision on investment reduction, amalgamation, separation, disbandment
and bankruptcy application of the company;

(10)revocation of resolution(s) of the general meeting of stockholders
and board of directors by a court according to law on major litigation(s)
involving the company; and

(11)other matters prescribed by laws and regulations.

Article 63 Any issuer, underwriting security company that has false
recordings, misleading statements or major omissions resulting in losses
of investors in securities trading in announcing the prospectus, measures
for the raising of corporate bonds, the financial and accounting report, the
listing reporting document, annual report, mid-term report, interim report,
the issuer, underwriting security company should bear the responsibility
for compensation, and the issuer, directors, commissioneers and managers of the underwriting security company held responsible should bear joint
responsibility for compensation.

Article 64 The announcements that have to be made pursuant to the
provisions of laws and regulations should be carried in newspapers and
periodicals designated by the departments concerned of the state or in
a gazette published for the specific purpose, and shall be placed at offices
of the companies and securities exchanges for reference by the public of society.

Article 65 The securities supervision and administration institution
under the State Council shall exercise supervision over the annual reports,
mid-term reports, interim reports as well as announcements of the listed
companies, and exercise supervision over the distribution or allotment of new stocks for sale.

Securities supervision and administration institutions, securities
exchanges, underwriting security companies and the personnel concerned
must not disclose the contents of the announcements that have to be made
by the companies pursuant to the provisions of laws and regulations
prior to the announcement.

Article 66 The securities supervision and administration institution
under the State Council shall make an announcement in time with respect to
the nullification of listing qualifications of a listed company that
has committed major illegal acts or does not possess other conditions for
listing.

A securities exchange shall make an announcement in time when making
a decision prescribed in the preceding paragraph pursuant to authorization
and submit it to the securities supervision and administration institution
under the State Council for the record.

Section 4 Prohibited Trading Acts

Article 67 Insiders of securities trading inside information shall be
prohibited from carrying out securities trading operations by taking
advantage of the inside information.

Article 68 The following personnel shall be the insiders having knowledge
of securities trading inside information:

(1)directors, commissioners, managers, assistant managers and high-level
administrators concerned of companies issuing stocks or corporate bonds;

(2)stockholders holding more than 5% of the shares;

(3)high-level administrators of holding companies of a comapany issuing
stocks;

(4)personnel who due to their positions in comapnies are able to obtain
information on securities trading of the companies;

(5)staff members of securities supervision and administration institutions
and other personnel exercising administration over securities trading owing
to legal responsibilities;

(6)personnel concerned of intermediary agencies of society participating
in securities trading or securities registration and settlement agencies
and securities trading services agencies owing to legal responsibilities; and

(7)other personnel prescribed by the securities supervision and
administration institution under the State Council.

Article 69 Information involving the management, finance of a company or
having a major impact on the market price of the securities of the said
company not yet made public in securities trading operations shall be inside
information.

The following items of information all fall into inside information:

(1)major events listed in the Second Paragraph of Article 62 of this Law;

(2)the plan of a company for dividend distribution or investment
increment;

(3)major changes in stock ownership of a company;

(4)major changes in liability guaranty of a company;

(5)mortgage, sale or scrapping of the major assets of a company for
business purposes exceeding 30% of the said assets for a single time;

(6)acts of directors, commissioners, managers, assistant managers or
other high-level administrators of a company possible of bearing liability
for major damage compensation;

(7)the plan governing acquisition of a listed company; and

(8)other important information affirmed by the securities supervision
and adminstration institution under the State Council to have a marked
impact on securities trading prices.

Article 70 Insiders having knowledge of securities trading inside
information or other personnel having obtained the inside information
illegally must not buy in or sell the securities of the said company held
by him/her/them, or disclose the said information or suggest others to buy
or sell the said securities.

Where this Law has separate provisions, those provisions shall be
applicable to the purchase of shares of a listed company by a stockholder
holding more than 5% of the shares.

Article 71 Anyone shall be prohibited from employing the following means
to obtain unjust interests or shift risks:

(1)to concentrate efforts in making use of the advantage in funds, the
advantage in holdings or the advantage in information individually or in
collusion in joint or continuous buying and selling and manipulating
securities trading prices;

(2)to engage in mutual securities trading or mutual buying and selling
of securities not held to influence securities trading price or securities
trading volume at the time, price and in the mode agreed on in advance in
collusion with others;

(3)to make oneself the object of trading to engage in self-buying and
self-selling without transfer of ownership to influence securities trading
price or securities trading volume; and

(4)to manipulate securities trading price by other means.

Article 72 Functionaries of the state, employees of news media and
relevant personnel are prohibited from fabricating and disseminating false
information to seriously influence securities trading.

Securities exchanges, security companies, securities registration and
settlement agencies, securities trading services agencies, intermediary
agencies of society and their employees, securities industry associations,
securities supervision and administration institutions and their staff members
are prohibited from making false statements or providing information
misguidance in securities trading operations.

Dissemination of securities trading information by various media must
be truthful, objective and misguidance shall be prohibited.

Article 73 Security companies and their employees shall, in securities
trading, be prohibited from engaging in the following fraudulent acts of harming the interests of clients:

(1)to buy or sell securities for the client contrary to his/her
entrustment;

(2)to provide the client with the written confirmation document of the
trading not at the fixed time;

(3)to divert the securities the buying or selling of which has been
entrusted by the client or divert the funds in the account of the client
to other purposes;

(4)to buy or sell the securities in the account of the client wihout
permission or to buy or sell securities usurping the name of the client;

(5)to induce the client to engage in unnecessary buying or selling of securities to seek commission; and

(6)other acts of harming the interests of the client in other indications
contrary to the true intentions of the client.

Article 74 A legal person shall, in securities trading, be prohibited
from opening an account in his/her/its name for the buying and selling of securities.

Article 75 Anyone shall, in securities trading, be prohibited from
diverting public money to buy and sell securities.

Article 76 State-owned enterprises and holding enterprises of state-
owned assets must not scalp stocks listed for trading.

Article 77 Securities exchanges, security companies, securities
registration and settlement agencies, securities trading services agencies,
intermediary agencies of society and their employees shall report to
securities supervision and administration institutions in time on the
prohibited trading acts uncovered in securities trading.
Chapter IV Listed Company Acquisition

Article 78 Listed company acquisition may take the form of acquisition
by offer or acquisition by agreement.

Article 79 When an investor holds 5% of the shares issued by a listed
comapny through securities trading at a securities exchange, he/she/it shall,
within 3 days starting from the date of occurrence of the said fact, submit
a report in writing to the securities supervision and administration
institution under the State Council and the securities exchange, inform
the listed company and make an announcement thereof; the investor shall not,
within the above-mentioned specified time limit, buy or sell the stocks of the said listed company anymore.

When the percentage of stocks issued by the said listed company held by
the investor increases or decreases by every 5% through securities trading
at a securities exchange after the investor holding 5% of the stocks issued
by a listed company, he/she/it shall submit a report and make an announcement
thereof pursuant to the provisions of the preceding paragraph. The investor
shall not, within the time limit of reporting and within two days of making
the report and announcement, buy or sell the stocks of the said listed
company anymore.

Article 80 The report and announcement in writing to be made pursuant
to the provisions of the preceding paragraph should contain the following
contents:

(1)name and residence of the stockholder;

(2)name and amount of stocks held; and

(3)date of the stocks held reaching legal percentage or the date of changes in increase or decrease of stocks held reaching legal percentage.

Article 81 At the time of an investor holding 30% of the stocks issued
by a listed company through securities trading at a securitied exchange,
when he/she/it continues to make acquisitions, the investor should send
an acquisition offer to all the stockholders of the said listed company
according to law. However, where an exemption from sending an offer has
been granted by the securities supervision and administration institution
under the State Council is excluded.

Article 82 An acquirer who sends an acquisition offer pursuant to the
provisions of the preceding paragraph must submit an acquisition report
on the listed company to the securities supervision and administration
institution under the State Council in advance recording expressly the
following particulars:

(1)name and residence of the acquirer;

(2)decision on acquisition by the acquirer;

(3)name of the listed company to be acquired;

(4)purpose of acquisition;

(5)detailed names of the stocks to be acquired and the amount of shares
to be acquired pre-determined;

(6)time limit of acquisition and price of acquisition;

(7)amount of fund required and fund guarantee for the acquisition; and

(8)percentage of number of shares of the company to be acquired held in
the total number of shares issued by the said company at the time of
submission of the acquisition report on the listed company.

The acquirer shall also submit simultaneously the company acquisition
report prescribed in the preceding paragraph to the securities exchange.

Article 83 The acquirer shall, after 15 days starting from the date of submission of the listed company acquisition report pursuant to the
provisions of the preceding paragraph, announce his/her/its acquisition offer.

The time limit for the acquisition offer must not be less than 30 days
and must not be more than 60 days.

Article 84 The acquirer must not, within the time of validity of the acquisition offer, withdraw his/her/its acquisition offer.

The acquirer who needs to efffect changes in the particulars in the
acquisition offer within the period of validity of the acquisition offer
must submit a report in advance to the securities supervision and
administration institution under the State Council and the securities
exchange and make an announcement thereof on approval.

Article 85 Various conditions for acquisition put forth in the
acquisition offer shall be applicable to all the stockholders of the
company to be acquired.

Article 86 When the shares of the company to be acquired held by the
acquirer reach over 75% of the total number of shares issued by the said
company at the expiration of the period of the acquisition offer, listing
for trading of the stocks of the said listed company should be terminated
at the securities exchanges.

Article 87 When the shares of the company to be acquired held by the
acquirer reach over 90% of the total number of shares issued by the said
company at the expiration of the acquisition offer, the remaining stockholders
still holding the stocks of the company to be acquired have the right to sell
their stocks to the acquirer on equal terms specified in the acquisition
offer and the acquirer should acquire them.

The company acquired which is no longer qualified for the requirements
specified in the Comapany Law upon completion of the act of acquisition
should effect a change in its enterprise form.

Article 88 Where the form of acquisition by offer is adopted, the
acquirer must not, within the period of the acquisition offer, buy or
sell the stocks of the comapny to be acquired in forms other than those
specified in the offer and on terms beyond those of the offer.

Article 89 Where the from of acquisition by agreement is adopted, the
acquirer may, pursuant to the provisions of laws and regulations, effect
transfer of stockholders' right with the stockholders of the company to
be acquired in the form of an agreement.

Where the form of acquisition of listed company by agreement is adopted,
the acquirer must, within 3 days upon conclusion of the agreement, submit a
report in writing on the acquisition agreement to the securities supervision
and administration institution under the State Council and make an
announcement thereof.

The acquisition agreement shall not be implemeted prior to the
announcement.

Article 90 Where the form of acquisition by agreement is adopted, both
parties to the agreement may temporarily entrust a securities registration
and settlement agency for the safekeeping of the stocks transferred by
agreement, and deposit the fund in a designated bank.

Article 91 The acquirer must not, in the acquisition of a listed
company, transfer the stocks of the listed company to be acquired held by
him/her/it within 6 months upon completion of the act of acquisition.

Article 92 Where the stocks of the company acquired are obtained through
the form of acquisition by offer or acquisition by agreement and the said
company has been disbanded that falls into company merger, the original
stocks of the disbanded company shall be exchanged by the acquirer according
to law.

Article 93 The acquirer should, upon conclusion of the act of acquisition
of a listed company, submit a report on the acquisition to the securities
supervision and administration institution under the State Council and the
securities exchanges, and make an announcement thereof.

Article 94 Where the shares held by an investment agency authorized by
the state are involved in the acquisition of a listed company, it shall be
subject to the approval of the competent department concerned pursuant to
the provisions of the State Council.
Chapter V Securities Exchanges

Article 95 A securities exchange is a legal entity that provides a
trading site for centralized competitive bidding for securities with no
purpose of profit-making.

Establishment and disbandment of a securities exchange shall be subject
to the decision of the State Council.

Article 96 Articles of association must be formulated for the
establishment of a securities exchange.

Formulation and revision of articles of association of a securities
exchange must be subject to the approval of the securities supervision and
administration institution under the State Council.

Article 97 A securities exchange must display expressly the words of
securities exchange in its name. Any other unit or individual must not use
the name of securities exchange or a similar name.

Article 98 The various revenues at the disposal of a securities exchange
on its own should first be used to guarantee the normal operation and
gradual improvement of the securities trading site and facilities.

The accumulation of a securities exchange belongs to its members, its
rights and interests shall be shared jointly by the members, and the
accumulation must not be distributed to the mmembers during its existence.

Article 99 A securities exchange shall establish a board of directors.

Article 100 A securities exchange shall have a general manager who
shall be appointed or relieved of his/her duties by the securities supervision
and administration institution under the State Council.

Article 101 Whoever has the circumstances specified in Article 57 of the
Company Law or any of the following circumstances shall not serve as the
person-in-charge of a securities exchange:

(1)the person-in-charge of a securities exchange or a securities
registration and settlement agency or a director, or a commissioner
or a manager of a security company who was removed from office as a result of
illegal acts or acts of violation of discipline for not more than 5 years
starting from the date of removal from office; and

(2)a lawyer, a chartered accountant or a specialized member of a legal
asset assessment agency or authentication agency whose qualification has been
revoked as a result of illegal acts or acts of violation of discipline for
not more than 5 years starting from the date of revocation of the
qualification.

Article 102 An employee of a securities exchange, a securities
registration and settlement agency or a security company and a functionary
of a state organ who has been dismissed as a result of illegal acts or acts
of violation of discipline shall not be employed as an employee of a
securities exchange.

Article 103 Those that enter securities exchanges to participate in
centralized competitive bidding in trading must be security companies with
securities exchange memebership.

Article 104 An investor should open an account for securities trading
in a security company and entrust the security company that has opened an
account for him/her/it to buy or sell securities on his/her/its behalf
in writing, making telephone calls or in other forms.

An investor that buys or sells securities through the security company
that has opened an account for him/her/it should adopt market price commission
or limited price commission.

Article 105 A security company shall, in accordance with the entrustment
of an investor and the rule of time preference, file a trading application
for participating in centralized bidding for trading on the trading floor of a securities exchange; a securities registration and settlement agency shall,
on the basis of transaction results and pursuant to the rules of settlement
and delivery, carry out settlement and delivery of securities and funds, and
process the formalities of ownership transfer of securities registration.

Article 106 A securitty company that accepts entrustment or engages in
self-operations must not sell the securities again on the day they are
bought in.

Article 107 Securities exchanges should provide safeguards for
organizing fair and centralized competitive bidding in trading, make public
real-time quotations for securities trading, and make tabulated quotations
for the securities market according to trading day and make an announcement
thereof.

Article 108 Securities exchanges shall, pursuant to the provisions of laws and regulations, handle affairs of suspension of listing, resumption of listing or termination of listing of stocks and corporate bonds. Specific
measures shall be formulated by the securities supervision and administration
institution under the State Council.

Article 109 A securities exchange may, in the event of an emergency
that affects the normal process of securities trading, take technical
measures of suspending the listing; a securities exchange may, in the event of an emergency by force majeure or for the purpose of maintaining normal order
of securities trading, decide to temporarily suspend the market.

A securities exchange that takes technical measures of suspending the
lisitng or a decision on temporary suspension of the market must submit a
report to the securities supervision and administration institution under
the State Council in time.

Article 110 Securities exchanges shall carry out real-time monitoring
of the securitties transactions going on in the exchanges and submit a report
on the abnormal trading pursuant to the requirements of the securities
supervision and administration institution under the State Council.

Securities exchanges should exercise supervision over information
disclosure by the listed companies and supervise and urge the listed
companies to dicclose information timely and accurately according to law.

Article 111 Securities exchanges should withdraw a certain percentage
of amount of money from the trading charges, membership fees and seating
fees collected by them for the establishment of a venture capital. The
venture capital shall be administered by the board of directors of the
securities exchanges.

Specific percentage to be withdrawn from and measures for the use of
the venture capital shall be laid down by the securities supervision and
administration institution under the State Council in conjunction with the
department of finance under the State Council.

Article 112 Securities exchanges should deposit the guaranty money for
trading and venture capital collected and kept in a special account of a
bank of deposit. and must not use them without authorization.

Article 113 Securitiies exchanges shall, pursuant to laws and
administrative regulations on securities, formulate specific rules for
centralized competitive bidding for securities trading, formulate rules
for membership management of securities exchanges and business rules for
employees of securities exchanges and submit them to the securities
supervision and administration institution under the State Council for
approval.

Article 114 The person-in-charge and other employees of a securities
exchange should practise challenge in the discharge of duties relating to
securities trading involving relations of interests of the person himself/
herself or his/her relations.

Article 115 The transaction results for transactions concluded pursuant
to the trading rules formulated according to law must not be changed. Civil
liability to be borne by the trader who has violated rules in trading must
not be absolved; benefits accrued from trading against rules shall be
dealt with pursuant to relevant provisions.

Article 116 Any person engaging in securities trading in a securities
exchange violates the rules governming trading of a securities exchange
shall be imposed disciplinary sanctions by the securities exchange; where
the circumstances are serious, his/her qualification shall be revoked and
he/she shall be prohibited from entering the trading place for securities
trading.
Chapter VI Security Companies

Article 117 Establishment of a security company must be subject to the
examination and approval of the securities supervision and administration
institution under the State Council. No securities business operations
shall be conducted without the approval of the securities supervision and
administration institution under the State Council.

Article 118 A security company referred to in this Law means a limited
liability company or a join-stock company limited engaging in securities
business operations approved pursuant to the provisions of the Comapny Law
and the provisions of the preceding Article.

Article 119 The state exercises classified administration over
security companies which shall be classified into integrated security
companies and brokerage security companies, and the securities supervision
and administration institution under the State Council shall issue business
licences accoring to the classification.

Article 120 A security company must expressly display the words of limited liability security company or joint-stock security company limited
in its name.

A securities brokerage company must expressly display the word of brokerage in its name.

Article 121 Establishment of an intergarted security company must
have the following qualifications:

(1)a minimum registered capital of RMB 500 million Yuan;

(2)its main administrators and business personnel must have qualifications
for the securities profession;

(3)has a fixed business site and qualified trading facilites; and

(4)has sound and complete management rules and standardized classified
management systems for self-operated business and brokerage business.

Article 122 The minimum registered capital of a securities brokerage
company shall be RMB 50 million Yuan; its main administrators and business
personnel must have qualifications for the securities profession; it has a
fixed business site and qualified trading facilities; and it has sound and
complete management rules.

Article 123 Establishment or withdrawal of branch(es), change in business
scope or registered capital, change in articles of association, amalgamation,
separation, change in the form of the company or disbandment of a security
company must be subject to the approval of the securities supervision and
administration institution under the State Council.

Article 124 The total amount of external liabilities of a security
company must not exceed the prescribed multiple(times) of its amount of net assets; its total amount of floating liabilities must not exceed
a certain percentage of the total amount of its floating assets; its
specific mutiple(times), percentage and control measures shall be worked
out by the securities supervision and administration institution under the
State Council.

Article 125 Whoever has the circumstance prescribed in Article 57 of the Company Law or any of the following circumstances shall not serve as a
director, a commissioner or a manager of a security company:

(1)the person-in-charge of a securities exchange or a securities
registration and settlement agency of a director, or a commissioner, or
a mannger of a security company who was relieved of the post for illegal
acts or acts of violation of discipline for not more than 5 years starting
from the date of relief of the post; and

(2)a lawyer, a chartered accountant or specialized personnel of legal
asset assessment agency or authentication agency whose qualification
was revoked for illegal acts or acts of violation of discipline for not
more than 5 years starting from the date of revocation of the qualification.

Article 126 Employees of securities exchanges, securities registration
aand settlement agencies and security companies and functionaries of state
organs dismissed for illegal acts or acts of violation of discipline must
not be employed as employees of security companies.

Article 127 Functionaries of state organs and other personnel whose
holding of concurrent posts in companies is prohibited by provisions of laws
and administrative regulations must not take up concurrent positions in
security companaies.

Diirectors, commissioners, managers and business personnel of a security
company must not take up concurrent positions in other security companies.

Article 128 Security companies shall withdraw trading risk reserve from
the yearly after-tax profit for making up the losses in securities trading,
specific percentage of the withdrawal shall be fixed by the securities
supervision and administration institution under the State Council.

Article 129 An integrated security company may operate the following
securities businesses:

(1)securities brokerage business;

(2)self-operated securities business;

(3)securiities underwriting business; and

(4)other securities businesses verified and determined by the securities
supervision and administration institution under the State Council.

Article 130 A securities brokerage company shall be permitted to
specialize in securities brokerage business only.

Article 131 A security company should, pursuant to the business
prescribed in the two preceding Articles, file a business scope application
which shall be verified and determined by the securities supervision and
administration institution under the State Council.

A security company must not operate securities businesses and other
businesses beyond the verified and determined business scope.

Article 132 An integrated security company must handle its brokerage
business and self-operated business separately, the business personnel and
financial accounts should also be separated, and there must be no mixed
operations.

The transaction settlement funds of clients must be deposited in full
in a designated commercial bank and a separate account be opened for
management. Diversion of clients' transaction settlement funds to other
purposes shall be strictly prohibited.

Article 133 Bank funds shall be prohibited from flowing into stock
markets in violation of regulations.

A security company must use its own funds and funds raised according to
law in its self-operated business.

Article 134 The self-operated business of a security company must be
conducted in its own name and must not be conducted under the cloak of
other's name or in the name of an individual.

A security company must not lend its self-operations account to others
for use.

Article 135 A security company has the right to autonomous management
according to law, its lawful management shall be free fron intervention.

Article 136 A security company whose registered capital is lower than
that required for corresponding business prescribed by this Law shall be
revoked of the verification and determination of its relevant business scope
by the securities supervision and administration institution under the State
Council.

Article 137 A security company engaging in intermediary business,
buying and selling securities for clients as an agent in securities trading
shall be a securities broker with legal personality.

Article 138 A security company must, in handling brokerage business, open
separate securities accounts and fund accounts for clients and manage the
securities and funds delivered by the clients on separate ledgers according
to each account, make truthful records on transactions and must not make false
records.

A client opening an account must hold lawful certification proving the
identity of Chinese citizenship or Chinese legal personality.

Article 139 A security company should, in handling brokerage business,
prepare and place the uniformly printed letters of authority for buying and
selling of securities for use by clients. Records on clientage must be made
for the adoption of other forms of clientage.

For authority by clients for buying and selling of securities, whether
a transaction has been concluded or not, the record on its authority should
be deposited at the security company in accordance with the specified time
period.

Article 140 A security company that accepts the entrustment of buying
and selling of securities should buy and sell securities by proxy according
to the trading rules on the basis of the names of the securities, amount of buying and selling, mode of offer price and price range; a report slip on
the conclusion of buying and selling shall be prepared according to rules and
handed over to the client on the conclusion of the buying and selling.

The reconciliation sheet confirming the trading acts and its trading
results in securities trading must be truthful and shall be examined and
verified by an auditor other than the consigner case by case to ensure the
consistency of the balance of securities in book account and the securities
in actual possession.

Article 141 A security company that accepts entrustment to sell
securities must be the securities actually in the securities account of
a client and must not make an accommodation in securities trading for the
client.

A security company that accepts entrustment to buy in securities must
effect payment with the fund actually in the fund account of a client
and must not arrange financing in trading for the client.

Article 142 A security company that handles brokerage business must
not accept carte blanches of a client and decide the buying and selling of securities, select types of securities and decide the quantity of buying
and selling or price of buying and selling.

Article 143 A security company must not in any form make a commitment
to a client on the returns of buying and selling of securities or compensation
for the losses in buying and selling of securities.

Article 144 A security company and its employees must not accept the
entrustment of a client to buy and sell securities in private without going
through the location of business established according to law.

Artile 145 For an employee of a security company who violates trading
rules in securities trading operations according to the directive of the
security company to which he/she belongs or by taking advantage of his/her
position, the security company to which he/she belongs shall bear full
responsibility.
Chapter VII Securities Registration and Settlement Agencies

Article 146 A securities registration and settlement agency provides
centralized services in registration, trust and settlement for security
transactions and constitutes a legal entity with no purpose of profit-making.

Establishment of a securiities registration and settlement agency must
be subject to the approval of the securities supervision and administration
institution under the State Council.

Article 147 Establishment of a securities registration and settlement
agency should have the following qualifications:

(1)its own capital shall be not less than RMB 200 million Yuan;

(2)it has a location and facilities necessary for securitiies
registration, trust and settlement serviices;

(3)its main administrators and business personnel must have employment
qualification for securities business; and

(4)other qualifications prescribed by the securities supervision and
administration institution under the State Council.

The words of securities registration and settlement should be expressly
displayed in the name of a securities registration and settlement agency.

Article 148 A securities registration and settlement agency shall
perform the following functions:

(1)establishment of securities accounts and settlement accounts;

(2)trust and ownership transfer of securities;

(3)roster registration of securities holders;

(4)settlement and delivery and receipt of listed securities transactions
of securities exchanges;

(5)allotment and payout of equity entrusted by issuers;

(6)handling of inquiries relating to the above-mentioned businesses; and

(7)other businesses approved by the securities supervision and
administration institution under the State Council.

Article 149 Securities registration and settlement shall adopt
centralized and uniform operational mode nationwide.

Articles of association and business rules of securities registration and
settlement agencies should be formulated according to law and must be subject
to the approval of the securities supervision and administration institution
under the State Council.

Article 150 The securities held by a securities holder should, prior to
listing for trading, be put under trust in full at a securities registration
and settlement agency.

A securities registration and settlement agency must not use the
securities of a client for hypothecation or lendidng to others.

Article 151 A securities registration and settlement agency should
provide a roster of securities holders and its relevant materials to the
securities issuer.

A securities registration and settlement agency should, on the basis of the results of securities registration and settlement, confirm the fact of securities held by a securities holder and provide materials on the
registration of the securities holder.

A securities registration and settlement agency should guarantee the
truthfulness, accuracy and completeness of the roster of securities holders
and records of ownership transfer registration and no forgery, tampering
with and destruction thereof shall be permitted.

Article 152 A securities registration and settlement agency should
take the following measures to ensure normal business operations:

(1)it has essential services equipment and perfect data security
protection measures;

(2)to establish sound and perfect business, financial and security
and precaution and other management rules; and

(3)to establish a perfect risk managment system.

Article 153 A securities registration and settlement agency should
preserve the original vouchers of registration, trust and settlement in
a proper way. The period of safekeeping of important original vouchers
shall not be less than 20 years.

Article 154 A securities registration and settlement agency should
establish a settlement venture capital and deposit it in a rubricated account
in a designated bank. The settlement venture capital shall be used for losses
caused to the securities registration and settlement agency as a result of technical failure, mistakes in operations and force majeure.

The securities settlement venture capital shall be withdrawn from the
business revenue and returns of the securities registration and settlement
agency and may be paid by security companies according to a certain percentage
of the business volume of securities trading.

Measures for the raising and administration of securities venture capital
shall be formulated by the securities supervision and administration
institution under the State Council in conjunction with the department of
finance under the State Council.

Article 155 The securities settlement venture capital should be put under
special-purpose administration.

Upon compensation with the venture capital by a securities registration
and settlement agency, recourse of compensation should be sought from
the responsible person involved.

    Article 156  Application for disbandment of a securities registration
and settlement agency  should be subject to the approval of the securities
supervision and administration institution under the State Council.
Chapter VIII  Securities Trading Services Agencies

Article 157 Specialized securities investment consultancy agencies and
credit appraisal agencies may be established in accordance with the
requirements of the securities investment and securities trading businesses.
Conditions for the establishment of, procedures for examination and approval
and business rules of securities investment consultancy agencies and credit
appraisal agencies shall be formulated by the securities supervision and
administration institution under the State Council.

Article 158 Business personnel of specialized securities investment
concultancy agencies and credit appraisal agencies must have professional
knowledge about securities and experiences of over 2 years in securities
business. Standards for affirming the qualaiafication for securities business
and measures for management shall be formulated by the securities supervision
and administration institution under the State Council.

Article 159 Employees of securities investment consultancy agencies must
not commit the following acts:

(1)to engage in securities investment for a client as an agent;

(2)to agree with a client on the sharing of securities investment returns
or sharing of securities investment losses;

(3)to buy or sell the stocks of the listed companies for which the
consultancy agency provides services; and

(4)other acts prohibited undr laws and regulations.

Article 160 Specialized securities investment consultancy agencies and
credit appraisal agencies should, pursuant to the rates or measures for the
collection of charges worked out by the departments of administration
concerned under the State Council, collect service charges.

Article 161 Specialized agencies and personnel for drawing up such
documents as the audit report, asset assessment report or legal advice for
the issuance and listing of securities or securities trading operations
must, pursuant to the working procedures prescribed in the employment rules,
draw up the reports, and verify and authenticate the truthfulness, accuracy
and completeness of the contents of the reports drawn up by them, and
bear joint responsibility for the part(s) for which it/he/she is responsible.
Chapter IX Securites Industry Associations

Article 162 Securities industry asociations are self-policing
organizations of the securities industry and constitute juridical
associations.

Security companies should join the securities industry association.

The general meeting of members composed of all the members constitutes
the organ of power of the securities industry association.

Article 163 The articles of association of the securities industry
association shall be formulated by the general meeting of members and
submitted to the securities supervision and administration institution
under the State Council for the record.

Article 164 The securities industry association performs the following
duties and responsibilities:

(1)to assist securities supervision and administration institutions in
the education and organization of members in implementing laws and
administrative regulations on securities;

(2)to safeguard the legitimate rights and interests of members according
to law and report the suggestions and requests of members to the securities
supervision and administration institution;

(3)to gather and sort out securities information to provide services
for the members;

(4)to formulate rules whiich the members should abide by, organize
employees of member units in professional training and conduct business
exchange among members;

(5)to mediate disputes among members and between members and clients;

(6)to organize members in carrying out research on the development,
operation and relevant contents of the securities industry;

(7)to supervise and inspect acts of members and impose disciplinary
sanctions on members pursuant to provisions for violation of laws,
administrative regulations or articles of association of the association; and

(8)other duties and responsibilities vested by the securities supervision
and administration institution under the State Council.

Article 165 The securiities industry association shall set up a council.
Members of the council shall be elected according to the provisions of the
articles of association.
Chapter X Securities Supervision and Administration Institution

Article 166 The securities supervision and administration institution
under the State Council exercises supervision and administration over the
securities market, maintain the order of the securities market and ensure its
lawful operation.

Article 167 The securities supervision and administration institution
under the State Council shall, in the exercise of supervision and
administration of the securities market, perform the following duties
and responsibilities:

(1)to formulate rules and regulations governing securities market
supervision and administration according to law and to exercise the power
of examination and approval or of verification and approval according to law;

(2)to carry out supervision and administration of the issuance, trading,
registration, trust and settlement of securities according to law;

(3)to exercise supervision and administration of securities business
operations of securities issuers, listed companies, securities exchanges,
security companies, securities registration and settlement agencies,
securities investment fund administration agencies, securities investment
consultancy agencies, credit appraisal agencies as well as law firms,
accounting firms and asset assessment agencies according to law;

(4)to formulate qualification standards and code of conduct for business
personnel engaging in securities and supervise their implementation according
to law;

(5)to supervise and inspect the openness of information on securities
issuance and trading according to law;

(6)to provide guidance for and supervision over activities of the
securities industry associations according to law;

(7)to investigate and handle acts in violation of the laws and
regulations governing supervision and administration of the securities
market according to law; and

(8)other duties and responsibilities stipulated in laws and regulations.

Article 168 The securities supervision and administraton institution
under the State Council has the power to adopt the following measures in
performing its duties and responsibilities according to law:

(1)to enter a site of occurrence of illegal acts for investigation and
evidence gathering;

(2)to inquire the parties concerned, unit(s) and individual(s) concerned
of the event under investigation, and ask them to make explanations of matters relating to the event under investigation;

(3)to look up, copy the records on securities transactions, records on
ownership transfer registration, financial and accounting materials as well
as other relevant documents and materials of the parties concerned and unit(s)
and individual(s) concerned of the event under investigation, and may seal
up those documents and materials that may be transferred or concealed for
safekeeping; and

(4)to investigate and make inquiry of the fund accounts, securities
accounts of the parties concerned and unit(s) and individual(s) concerned of the event under investigation, and an application may be filed with the
judicial organ for the freezing of the illegal funds and securities when
there is evidence to prove that there are signs of transfer or concealment
thereof.

Article 169 Functionaries of the securities supervision and
administration institution under the State Council shall, in performing
their duties and responsibilities, in carrying out supervision and inspection
or investigation according to law, produce relevant ID cards, and have the
obligation to keep the secrecy of the commercial secrets of the unit(s)
and individual(s) concerned they have come to know.

Article 170 Functionaries of the securities supervision and
administration institution under the State Council must be devoted to their
duties, handle matters according to law, be impartial, honest and clean, and
must not seek unlawful profits by taking advantage of their own positions.

Article 171 The securities supervision and administration institution
under the State Council shall perform its duties and responsibilites according
to law, the unit(s) and individual(s) under inspection and investigation
should cooperate, truthfully provide relevant documents and materials, and
must not refuse, obstruct or conceal.

Article 172 The securities supervision and administration institution
under the State Council shall make public rules and regulations and rules
for supervision and administration work formulated according to law.

The securities supervision and administration institution under the
State Council should make public penalty decision(s) taken on illegal acts
in securities on the basis of the results of investigation.

Article 173 The securities supervision and administration institution
under the State Council should, upon uncovering of illegal acts in securities
suspected of commitment of a crime in the performance of its duties and
responsibilities according to law, transfer the case to a judicial organ for
handling.

Article 174 Functionaries of the securities supervision and
administration institution under the State Council must not take up
concurrent posts in institutions under its supervision and control.
Chapter XI Legal Liability

Article 175 Whoever issues securities without authorization or issues
securities by fabricating false issuaance documents without verification and
approval or examination and approval of a legal organ shall be ordered to
stop the issuance, refund the funds raised and the additionally calculated
bank deposit interests of the corresponding period, and concurrently imposed
a fine of more than 1% less than 5% of the amount of funds raised illegally.
The person-in-charge directly responsible and other personnel directly
responsible shall be administered a warning and concurrently imposed a fine
of more than RMB 30000 Yuan less than RMB 300000 Yuan. Where a crime has been
constituted, criminal liability shall be investigated according to law.

Article 176 A security company that underwrites or acts as a commission
agent for the buying and selling of securities issued without authorization
and without verification and approval or examination and approval shall be
banned by the securities supervision and administration institution,
confisticated of the illegal income, and concurrently imposed a fine of more than 100% less than 500% of the illegal income. The person-in-charge
directly responsible and other personnel directly responsible shall be
administered a warning and concurrently imposed a fine of more than RMB
30000 Yuan less than RMB 300000 Yuan. Where a crime has been constituted,
criminal liability shall be investigated according to law.

Article 177 Any issuer of securities verified and approved for listing
for trading pursuant to the provisions of this Law who fails to disclose
information in accordance with relevant provisions, or the information
disclosed carries false recordings, misleading statements or has major
omissions shall be ordered by the securities supervision and administration
institution to make a rectification and the issuer shall be imposed a fine
of more than RMB 300000 Yuan less than RMB 600000 Yuan. The person-in-charge
directly responsible and other personnel directly responsible shall be
administered a warning and concurrently imposed a fine of more than RMB
30000 Yuan less than RMB 300000 Yuan. Where a crime has been constituted,
criminal liability shall be investigated according to law.

Any issuer of the preceding paragraph who fails to make an announcement
of its listing documents or submit the relevant report on the specified time
shall be ordered by the securities supervision and administration institution
to make a rectification, and the issuer shall be imposed a fine of more than
RMB 50000 Yuan less than RMB 100000 Yuan.

Article 178 Whoever illegally establishes a securities trading site
shall be banned by the securities supervision and administration institution,
confisticated of the illegal income and concurrently imposed a fine of more
than 100% less than 500% of the illegal income. Where there is no illegal
income, a fine of more than RMB 100000 Yuan less than RMB 500000 Yuan shall
be imposed. The person-in-charge directly responsible and other personnel
directly responsible shall be administered a warning and concurrently imposed
a fine of more than RMB 30000 Yuan less than RMB 300000 Yuan. Where a crime
has been constituted, criminal liability shall be investigated according to
law.

Article 179 Whoever establishes a security company operating securities
business without authorization and without approval and obtainment of a
business license shall be banned by the securities supervision and
administration instituion, confisticated of the illegal income and
concurrently imposed a fine of more than 100% less than 500% of the
illegal income. Where there is no illegal income, a fine of more than
RMB 30000 Yuan less than RMB 100000 Yuan shall be impossed. Where a crime
has been constituted, criminal liability shall be investigated according
to law.

Article 180 Any of the personnel prohibited from participating in stock
trading provided for in laws and regulations who holds or buys and sells
stocks directly or by using an assumed name or under the cloak of another
person's name shall be ordered to dispose of the illegally held stocks
according to law, confisticated of the illegal income and concurrently
imposed a fine of less than the equivalent value of the stocks bought or
sold; whoever is a state functionary shall also be imposed administrative
sanctions according to law.

Article 181 Any employee of a securities exchange, a security company,
a securities registration and settlement agency, a securities trading services
agency, any staff member of a securities industry association or a securities
supervision and adminiistration institution who induces and lures investor(s)
to buy or sell securities by deliberately providing false materials, forging,
altering or destroying trading records shall be revoked of his/her employment
qualification and concurrently imposed a fine of more than RMB 30000 Yuan less
than RMB 50000 Yuan; whoever is a state functionary shall also be imposed
administrative sanctions. Where a crime has been constituted, criminal
liability shall be investigated according to law.

Article 182 Any specialized agency or its member drawing up such
documents as an audit report, an asset assessment report or a legal advice
for the issuance or listing of stocks that buys and sells stocks in violation
of the provisions of Article 39 of this Law shall be ordered to dispose of the illegally acquired stocks according to law, confisticated of the illegal
income and concurrently imposed a fine of less than the equivalent value of the stocks bought and sold.

Article 183 Any insider of inside information on securities trading or
any person illegally acquiring inside information on securities trading who.
prior to information involving securities issuance, trading or other
information having a major influence on securities price being made public,
buys in or sells the said securities or discloses the said information or
suggests others to buy or sell the said securities shall be ordered to
dispose of the illegally obtained securities according to law, confisticated
of the illegal income and concurrently imposed a fine of more than 100% less
than 500% of the illegal income or less than the equivalent value of the
securities bought and sold illegally. Where a crime has been constituted,
criminal liability shall be investigated according to law.

Heavy penalty shall be imposed on any functionary of a securities
supervision and administration institution for inside trading.

Article 184 Whoever obtains unjust profits or transfers risks by
manipulating securities trading prices, or fabricating false prices for
securities trading or false securities transaction volume in violation of the provisions of Article 71 of this Law shall be confisticated of the illegal
income and concurrently imposed a fine of more than 100% less than 500% of the
illegal income. Where a crime has been constituted, criminal liability shall
be investigated according to law.

Article 185 Whoever diverts public money to buy and sell securities
in violation of the provisions of this Law shall be confisticated of the
illegal inccome and concurrently imposed a fine of more than 100% less than
500% of the illegal income; whoever is a state functionary shall also be
imposed administrative sanctions according to law. Where a crime has been
constituted, criminal liability shall be investigated according to law.

Article 186 Any security company that sells for a client securities
not actually in his/her/its account or buys in securities for a client
through accomodation of funds in violation of the provisions of this Law
shall be confisticated of the illegal income and concurrently imposed a
fine of equivalent value of the illegally bought or sold securities. The
person-in-charge directly responsible and other personnel directly responsible
shall be administered a warning and concurrently imposed a fine of more than
RMB 30000 Yuan less than RMB 300000 Yuan. Where a crime has been constituted,
criminal liability shall be investigated according to law.

Article 187 Any security company that accepts the entrustment of a client
or buys in securities in self-operations on the date of issue and again sells
the said securities on the very day in violation of the provisions of this Law
shall be confisticated of the illegal income and concurrently imposed a fine
of more than 5% less than 20% of the total amount of transactions done in
buying and selling of securities.

Article 188 Whoever fabricates and disseminates false information
influencing securities trading, disrupting the securities trading market
shall be imposed a fine of more than RMB 30000 Yuan less than RMB 200000 Yuan.
Where a crime has been constituted, criminal liability shall be investigated
according to law.

Article 189 Any securities exchange, any security company, any securities
registration and settlement agency, any securities trading services agency,
any intermediary agency of society and any of its employees, or any securities
industry association, the securities supervision and administration
institution or any of its staff members that makes a false statement or
provide information misguidance in securities trading operations shall be
ordered to make a rectification and imposed a fine of more than RMB 30000 Yuan
less than RMB 200000 Yuan; whoever is a state functionary shall also be
imposed administrative sanctions according to law. Where a crime has been
constituted, criminal liability shall be investigated according to law.

Article 190 Any legal entity that opens an account in the name of an
individual for the buying and selling of securities in violation of the
provisions of this Law shall be ordered to make a rectification, confisticated
of the illegal income and concurrently imposed a fine of more than 100% less
than 500% of the illegal income; its person-in-charge directly responsible
and other personnel directly responsible who are state functionaries shall
be imposed administrative sanctions.

Article 191 Any integrated security company that engages in self-operated
businesses under the cloak of another person's name or in the name of an
individual in violation of the provisions of this Law shall be ordered to
make a rectification, confisticated of the illegal income and concurrently
imposed a fine of more than 100% less than 500% of the illegal income; where
there are serious circumstances, its self-operated businesses shall be
terminated.

Article 192 Any security company that causes losses to a client for
breach of the entrustment of the client in buying and selling of securities,
in handling trading matters and in handling other matters other than
trading contrary to the indication of the real intention of the client
shall bear responsibility for compensation according to law and concurrently
be impoosed a fine of more than RMB 10000 Yuan less than RMB 100000 Yuan.

Article 193 Any security company or securities registration and
settlement agency and any of its employees who, without the entrustment of a client, buys and sells, diverts to other purposes or lends the securities
in the client's account or use the client's securities for hypothecation, or
diverts the funds in the client's account to other purposes shall be ordered
to make a rectification, confisticated of the illegal income, and imposed
a fine of more than 100% less than 500% of the illegal income, and shall be
ordered to close down or revoked of the employment qualification certificate
of the person responsible. Where a crime has been constituted, criminal
liability shall be investigated according to law.

Article 194 Any security company handling brokerage business that accepts
carte blanches of a client in buying and selling securities, or makes a
commitment to the client on the returns on the buying and selling of
securities or compensation for the losses in securities buying and selling
shall be ordered to make a rectification and imposed a fine of more than RMB
50000 Yuan less than RMB 200000 Yuan.

Article 195 Whoever seeks unjust profits by taking advantage of the
acquisition of a listed company in violation of the legal procedures for the
acquisition of listed companies shall be ordered to make a rectification,
confisticated of the illegal income and concurrently imposed a fine of more than 100% less than 500% of the illegal income.

Article 196 Any security company and any of its employees that accepts
the entrustment of a client in private for the buying and selling of
securities in violation of the provisions of this Law shall be confisticated
of the illegal income and concurrently imposed a fine of more than 100% less
than 500% of the illegal income.

Article 197 Any security company that manages unlisted securities trading
without approval in violation of the provisions of this Law shall be ordered
to make a rectification, confisticated of the illegal income and concurrently
imposed a fine of more than 100% less than 500% of the illegal income.

Article 198 A security company that fails to start business for more than
3 months without any justifiable reason or close down on its own for more than
3 months in a row after opening for business upon establishment shall be
revoked of the company's business licence by the company registration organ.

Article 199 Any security company that operates securities businesses
beyond the business scope permitted in violation of the provisions of this
Law shall be ordered to make a rectification, confisticated of the illegal
income and concurrently imposed a fine of more than 100% less than 500% of the illegal income. Where there are serious circumstances, it shall be ordered
to shut down.

Article 200 Any security company in simultaneous operations of securities
brokerage business and self-managed securities business that fails to handle
the businesses separately according to law and conduct mixed operations shall
be ordered to make a rectification, confisticated of the illegal income and
concurrently imposed a fine of more than 100% less than 500% of the illegal
income; where there are serious circumstances, it shall be revoked of the
securities businesses originally verified and determined by the securities
supervision and administration institution.

Article 201 Whoever obtains securities business permit by deceitful means
by presenting false certification documents or employing other fraudulent
means to conceal important facts, or any security company that commits serious
illegal acts in securities trading and is no longer qualified for the
operations shall be revoked of its securities business permit and ordered
to close down.

Article 202 Any specialized agency that draws up audit reports, asset
assessment reports or legal advice for the issuance and listing of securities
or for securities trading operations practises fraud in the contents for
which it should have been responsible shall be confisticated of the illegal
income, concurrently imposed a fine of more than 100% less than 500% of the
illegal income, and the competent department concerned shall order the said
agency to close down and revoke the qualaification certificate of the
person(s) directly responsible.

Article 203 Any securities registration and settlement agency or
securities trading services agency established without authorization and
without the approval of the securities supervision and administration
institution shall be banned by the securities supervision and administration
institution, confisticated of the illegal income and concurrently imposed
a fine of more than 100% less than 500% of the illegal income.

Any securities registration and settlement agency and securities trading
services agency that violates the provisions of this Law or the business rules
uniformly formulated by the securities supervision and administration
institution shall be ordered by the securities supervision and administration
institution to make a rectification, confisticated of the illegal income and
concurrently imposed a fine of more than 100% less than 500% of the illegal
income. Where there are serious circumstances, it shall be ordered to close
down.

Article 204 Any securities supervision and administration institution
that verifies and approves an application for securities issuance and listing
not in conformity with the provisions of this Law, or approves an application
for the establishment of a security company, a securities registration and
settlement agency or securities trading services agency not in conformity
with the qualifications provided for in this Law constituting serious
circumstances, the person-in-charge directly responsible and other personnel
directly responsible shall be imposed administrative sanctions according to
law. Where a crime has been constituted, criminal liability shall be
investigated according to law.

Article 205 Any functionary of the securities supervision and
administration insstitution and any member on the issuane examaination and
verification committee who fails to fulfil the duties and responsibilities
specified in this Law, indulges in malpractices for selfish gains, negligence
of duty or deliberately making things difficult for the relevant parties
interested shall be imposed administrative sanctions. Where a crime has been
constituted, criminal liability shall be investigated according to law.

Article 206 Whoever issues or underwrites corporate bonds in violation
of the provisions of this Law shall be imposed a penalty by the department
authorized by the State Council pursuant to the provisions of Article 175,
Article 176 and Article 202 of this Law.

Article 207 Whoever should bear civil liability for compensation and
effect payment of a fine or penalty in violation of the provisions of this
Law while his/her property is insufficient to make simultaneous payment
thereof shall bear civil liability for compensation first.

Article 208 Whoever obstructs the securities supervision and
administration institution in the exercise of its duties and responsibilities
of supervision and inspection with violence and threat shall be investigated
for criminal liability according to law; whoever refuses and obstructs the
securities supervision and administration institution and its staff members
in the exercise of the duties and responsibilities of supervision and
inspection without resorting to violence and threat shall be imposed penalty
pursuant to the provisions of the Regulations on Public Security
Administration Penalties.

Article 209 The illegal income confisticated and fines from illegal acts
of securities issuance and trading pursuant to this Law shall be handed over
to the state treasury in full.

Article 210 The party interested that refuses to obey the penalty
decision of the securities supervision and administration institution or
the department authorized by the State Council may apply for reconsideration
according to law, or take legal action at a people's court directly according
to law.
Chapter XII Supplementary Provisions

Article 211 Securities the listing for trading of which at securities
exchanges already approved pursuant to administrative regulations prior to
the coming into force of this Law shall continue to be traded according to
law.

Securities operating agencies the establishment of which was approved
pursuant to the provisions of administrative regulations and the department
of banking administration under the State Council prior to the coming into
force of this Law which are not in full conformity with the provisions of this Law should meet the specified requirements within the given time period.
Specific measures for implementation shall be formulated by the State Council
separately.

Article 212 Procedures for the implementation of provision governing
the clients' transaction settlement funds of this Law shall be worked out by
the State Council separately.

Article 213 Specific measures for the subscription and trading of stocks
of domestic companies in foreign currencies for overseas personages and
institutions shall be formulated by the State Council separately.

Article 214 This Law shall enter into force as of July 1, 1999.

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