1. Securities Regulations in China April 15, 2005 The views expressed here are solely those of the author and should not be attributed to Chinaclear, its officials or other staff. Niu Wenjie Director of Law Dept. Chinaclear ShenZhen Branch

2. Statutory Legal Framework Statutes: Securities Act of 1998; Securities Investment Funds Act of 2003 Pertinent Acts: Company law, Trust Law Regulations: Issued by the State Council Releases: Issued by CSRC, around 300 items Business Rules: Issued by Stock Exchanges and Chinaclear

3. Basic Contents of Securities Regulation Issuing of Securities: focus on IPO procedures and lack of provisions on exemptions Trading of Securities: centralized trading at competing prices; listing and continuing disclosure; trading prohibition Takeover of listed companies: strict procedure, high cost Stock Exchanges, securities firms, securities registration and clearing institution, and trading service organizations Securities Association and Securities Regulatory Authority: Limited scope of authority Legal liability: Lack of civil liability, too much administrative liability

4. Business Rules of Stock Exchanges and Chinaclear Listing Rules Trading Rules Membership Management Rules Securities Registration and Settlement Rules

5. Hot Topics on Revisions of Current Act Separate regulation of Securities business: Article 6 Funds of Bank flowing to the market against the regulations: Article 133 Margin transaction: Article 141 Spot Transaction: Article 35 Lack of provisions on exemptions of registration: Chapter II Settlement risk protection: Chapter VII Management of Securities Firms: Chapter VI Lack of provisions of civil liabilities: Chapter XI

6. Issues in amending the business rules Listing requirement not characterized Trading method is not diversified (assorted), only spot transaction Limited authority on investigating the member firms Direct registration or Nominee registration Risk Protection systems is not perfect

7. Trends and Strategies Call for modifying the current Securities Act and Company law, especially the latter, but not easy. Regulations by CSRC and Stock Exchanges and Chinaclear are easy to be amended Many efforts to improve the Corporate Governance and market regulations

8. Useful resourses CSRC http://www.csrc.gov.cnhttp://www.csrc.gov.cn Shanghai Stock Exchange http://www.sse.com.cnhttp://www.sse.com.cn Shenzhen Stock Exchange http://www.szse.cnhttp://www.szse.cn Chinaclear http://www.chinaclear.com.cnhttp://www.chinaclear.com.cn SAC http://www.s-a-c.org.cnhttp://www.s-a-c.org.cn

9. Thank you for your patience!