Provisions on Strategic Investment in Listed Companies by Foreign Investors of the PRC — Full English Translation (2005)

Promulgated by the Ministry of Commerce, the China Securities Regulatory Commission, the State Administration of Taxation, the State Administration for Industry and Commerce, and the State Administration of Foreign Exchange on December 31, 2005

Effective: January 31, 2006

Table of Contents

Chapter I — General Provisions

Article 1 — These Provisions are formulated in accordance with the relevant laws and regulations on foreign investment and securities for the purposes of regulating the conduct of foreign investors making strategic investments in listed companies, introducing advanced overseas management experience, technology, and capital, improving the corporate governance of listed companies, and protecting the lawful rights and interests of investors.

Article 2 — These Provisions shall apply to the conduct of foreign investors investing in A-share listed companies that have completed the non-tradable share reform (hereinafter referred to as “listed companies”) through strategic investment, acquiring A-share shares of listed companies by means of a transfer by agreement, a private placement by the listed company, or other methods prescribed by the state, and holding such shares for a medium to long term.

Article 3 — Strategic investment by foreign investors shall comply with the following principles:

(1) Abiding by the relevant laws and regulations of the state concerning foreign investment, the administration of the securities market, and foreign exchange, and not jeopardizing national security and public interests;

(2) Adhering to the principles of openness, fairness, and impartiality, and safeguarding the lawful rights and interests of the listed company and its shareholders;

(3) Encouraging medium and long-term investment, and maintaining the normal order of the securities market; and

(4) Prohibiting insider trading and market manipulation.

Chapter II — Qualifications of Strategic Investors

Article 4 — A foreign investor making a strategic investment in a listed company shall meet the following conditions:

(1) Being a legal person or other organization legally established and in good standing outside China, with a sound financial structure, good creditworthiness, and mature management experience;

(2) Having total assets outside China of not less than USD 100 million, or total assets under management outside China of not less than USD 500 million; or having total assets outside China of not less than USD 50 million, or total assets under management outside China of not less than USD 300 million, where the investor is a qualified foreign institutional investor prescribed by the China Securities Regulatory Commission (CSRC);

(3) Having a sound governance structure and a good record of compliance, and having not been subject to material penalties by the regulatory authorities in the preceding three years; and

(4) Other conditions as prescribed by the CSRC.

Article 5 — Strategic investment by a foreign investor may be made in the following manners:

(1) Acquiring shares of a listed company by means of a transfer by agreement between the foreign investor and the shareholders of the listed company;

(2) Subscribing for new shares issued by the listed company through a private placement; and

(3) Other methods prescribed by the state.

Article 6 — The proportion of A-share shares acquired by a foreign investor through strategic investment in a listed company for the first time shall not be less than 10% of the total shares of the listed company that have been issued.

The A-share shares acquired by a foreign investor through strategic investment shall not be transferred within three years.

Chapter III — Procedures and Requirements

Article 7 — A foreign investor making a strategic investment in a listed company shall submit the following documents to the Ministry of Commerce for approval:

(1) An application for strategic investment;

(2) A statement of no affiliated party relationship among the strategic investors where there is more than one strategic investor;

(3) The relevant resolutions adopted by the board of directors and the shareholders’ meeting of the listed company;

(4) The transfer agreement by agreement or the private placement agreement;

(5) The creditworthiness certification and the registration and business operation documents of the foreign investor; and

(6) Other documents required by the Ministry of Commerce.

Article 8 — The Ministry of Commerce shall, within 30 days from the date of receipt of the complete application documents, make a decision on approval or disapproval. Where the application meets the conditions, a certificate of approval shall be issued. Where the application does not meet the conditions, the reasons shall be stated in writing.

Article 9 — After obtaining the approval from the Ministry of Commerce, the listed company shall apply to the CSRC for approval of the relevant matters. The CSRC shall make a decision on approval or disapproval within the statutory time limit.

Article 10 — After obtaining the approvals from the Ministry of Commerce and the CSRC, the foreign investor shall open an A-share securities account with a securities registration and clearing institution, and the listed company shall undergo the procedures for the alteration of registration with the administrative department for industry and commerce.

Chapter IV — Supervision and Administration

Article 11 — A foreign investor that has made a strategic investment shall perform its information disclosure obligations in accordance with the law and shall not engage in insider trading, market manipulation, or other activities prohibited by laws and regulations.

Article 12 — A foreign investor that has made a strategic investment shall not directly or indirectly transfer the A-share shares acquired through strategic investment within three years from the date of the first acquisition, unless otherwise provided for in the special provisions of the state.

Article 13 — After the expiry of the three-year period specified in the preceding Article, where the foreign investor intends to transfer the A-share shares acquired through strategic investment, the transfer shall be conducted in accordance with the relevant provisions on the transfer of shares by foreign shareholders of listed companies.

Article 14 — The Ministry of Commerce, the CSRC, the State Administration of Foreign Exchange, and other relevant departments shall strengthen the supervision of foreign investors making strategic investments and investigate and deal with illegal acts in accordance with the law.

Chapter V — Supplementary Provisions

Article 15 — The strategic investment in listed companies by investors from Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan shall be governed by these Provisions with reference made thereto.

Article 16 — The Ministry of Commerce, the CSRC, and the State Administration of Foreign Exchange shall be responsible for the interpretation of these Provisions.

Article 17 — These Provisions shall enter into force on January 31, 2006.

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