To further implement the “Administrative Measures for the Transfer of State-owned Assets in Financial Enterprises” (Ministry of Finance Order No. 54, hereinafter referred to as the “Measures”), standardize the transfer of state-owned assets in financial enterprises, promote the orderly circulation of such assets, and strengthen the supervision and management by fiscal authorities over transfer activities, we hereby notify you of the following matters:

I. Clearly define responsibilities and ensure the effective implementation of all relevant regulations.

The Measures specify the procedures for the transfer of state-owned assets in financial enterprises and clearly define the responsibilities of the fiscal authorities, state-owned and state-controlled financial enterprises, property rights trading institutions, and social intermediary agencies. All relevant entities shall conscientiously implement the Measures in accordance with the principles of “clearly defined responsibilities, standardized operations, stringent oversight, and effective supervision.”

(1) Local financial authorities should strengthen the management of transfers of state-owned financial assets. The finance departments (bureaus) of provinces, autonomous regions, municipalities directly under the central government, and cities under separate planning (hereinafter referred to as provincial-level finance departments) shall, in accordance with these Measures and taking into account the actual conditions of their respective regions, formulate implementation measures for the management of transfers of state-owned assets by the financial enterprises they oversee and their subsidiaries, and submit these measures to our Ministry for record.

(2) Financial enterprises under central administration must strictly implement the Measures. All centrally-administered state-owned and state-controlled financial enterprises shall develop implementation measures and working procedures for the management of state-owned asset transfers within their respective groups (holding companies), and submit these documents to our ministry for record-keeping. They must designate internal functional departments and personnel responsible for overseeing state-owned asset transfers, clearly defining their respective duties and responsibilities. They should strengthen the management and review of state-owned asset transfer activities at all levels of subsidiaries, and implement continuous monitoring and oversight over every stage of the process—from entry into property rights trading institutions to listing on securities trading systems—so as to effectively safeguard the rights and interests of owners and prevent the loss of state-owned assets.

(3) Property rights trading institutions must conscientiously fulfill their duties. Property rights trading institutions that undertake the transfer of state-owned assets in financial enterprises shall actively cooperate with the finance departments in conducting training and publicity activities as well as collecting and compiling transaction information. They shall conscientiously perform tasks such as reviewing the eligibility of property rights trading entities, ensuring information disclosure, registering prospective transferees, organizing and implementing public bidding, settling transactions, issuing certificates of property rights transactions, maintaining archives of property rights transactions, and collecting and compiling transaction information. The transfer conditions stipulated in property rights transfer announcements must not contain any explicitly targeted or unfair competition-violating provisions. Institutions should strengthen communication and coordination among themselves and explore the development of unified operational guidelines for the transfer of state-owned assets in financial enterprises.

II. Enhance awareness and strictly enforce the system of mandatory on-exchange trading for the transfer of state-owned assets.

Financial departments at all levels and centrally-administered state-owned and state-controlled financial enterprises must fully recognize the significance of conducting transactions of state-owned financial assets through a public platform. They should strictly limit the scope of direct negotiated transfers, rigorously implement the system of on-platform trading, make full use of property rights trading institutions and securities trading systems, shorten the investment management chain, promote the orderly circulation of state-owned financial assets, and ensure that the transfer of state-owned assets in financial enterprises is fair, just, and transparent.

(1) Selection and regulation of property rights trading institutions. Provincial-level financial authorities must attach great importance to and earnestly carry out the selection of property rights trading institutions that will undertake the business of trading state-owned assets in financial enterprises. In accordance with the "Measures," promptly finalize the list of provincial-level property rights trading institutions in your region that will handle the trading of state-owned assets in financial enterprises, and recommend one property rights trading institution to take on the responsibility of handling the transfer of state-owned assets in centrally-managed financial enterprises. After completing the selection and recommendation process, each provincial-level financial authority shall publicly announce the basic information of the selected and recommended trading institutions through appropriate channels and submit a record of such institutions to our Ministry by the end of March 2010. Furthermore, strengthen daily supervision and management of property rights trading institutions undertaking trading activities, especially those involved in the transfer of state-owned assets in centrally-managed financial enterprises. Any property rights trading institution that fails to meet the basic requirements for engaging in the trading of state-owned equity in financial enterprises as stipulated in the "Measures," or that engages in fraudulent practices, neglects its duties, or harms national interests or the legitimate rights and interests of both parties involved in the transaction, shall have its qualification to engage in the trading of state-owned assets in financial enterprises immediately revoked and the revocation shall be publicly announced.

(2) The scope of property rights trading institutions selected by centrally-managed financial enterprises. When state-owned and state-controlled financial enterprises under central administration transfer state-owned equity in non-listed enterprises, such transfers shall be conducted through the Beijing Equity Exchange, the Tianjin Property Rights Trading Center, the Shanghai United Equity Exchange, the Chongqing United Equity Exchange, and provincial-level property rights trading institutions recommended and designated by the respective provincial finance departments, all in accordance with the principles of maximizing returns and facilitating transactions. These transfers are not subject to any restrictions based on region, industry, investor type, or organizational affiliation.

(3) Several special provisions for the transfer of state-owned equity in non-listed enterprises. The “Measures” define “important industries” as the eight sectors of finance, military industry, power grid and electricity, petroleum and petrochemicals, telecommunications, coal, civil aviation, and shipping. “Key subsidiaries” refer to companies in the aforementioned industries in which state-owned and state-controlled financial enterprises hold controlling interests, as well as listed companies in which such enterprises hold controlling interests. According to the “Measures,” any transfer of state-owned equity involving key subsidiaries must be submitted to the financial authorities for approval. If a state-owned or state-controlled financial enterprise intends to transfer equity in key subsidiaries held by special-purpose companies established domestically or abroad, such transfer must also be submitted to the financial authorities for approval. In principle, when a state-controlled financial enterprise plans to transfer equity in an unlisted subsidiary located overseas, the transaction should take place through one of the property rights trading institutions specified in the “Measures.” However, if objective conditions prevent the solicitation of potential transferees, and after thorough market inquiries and approval by the competent financial authority, the transfer may be conducted via direct negotiated agreement.

III. Improve procedures and standardize the transfer of state-owned assets by financial enterprises.

Financial departments at all levels and centrally-administered state-owned and state-controlled financial enterprises, in the process of promoting the strategic realignment and structural adjustment of state-owned financial assets and facilitating the rational circulation of state-owned financial capital, shall, in accordance with the provisions of the “Measures,” strictly regulate the transfer of state-owned assets by financial enterprises.

(1) Strengthen the full-process management of the transfer of state-owned assets in financial enterprises. State-owned and state-controlled financial enterprises must strictly adhere to internal decision-making and approval procedures; conduct financial audits and asset appraisals in accordance with regulations, and use the appraisal values as a reference for determining transfer prices. They must ensure that asset transfers are conducted on public markets, guarantee full disclosure of transfer information, and eliminate any backroom dealings. Timely completion of collection of transfer payments, issuance of transfer certificates, and registration of property rights is also essential. In cases involving the transfer of state-owned shares in listed companies, relevant regulations issued by the securities regulatory authorities must also be complied with.

(2) Strengthen the organic integration of various foundational tasks in the management of state-owned financial assets. Financial departments at all levels shall perform well the registration and management of property rights and asset valuation for state-owned assets in financial enterprises involved in asset transfers, and strengthen coordination in all foundational tasks related to the management of state-owned financial assets.

(3) Strengthen supervision and inspection of the transfer of state-owned financial assets. The Ministry of Finance is responsible for supervising and inspecting the asset transfer activities of state-owned and state-controlled financial enterprises under central administration as well as those in various provinces. Any violations of laws and regulations discovered will be dealt with strictly in accordance with relevant provisions. All centrally-administered state-owned and state-controlled financial enterprises must earnestly fulfill their regulatory responsibilities by conducting rigorous reviews and oversight—before, during, and after—the transfer of state-owned assets at all levels of subsidiary enterprises.

IV. Strengthen information management and establish a sound reporting system for the transfer of state-owned assets in financial enterprises.

To ensure effective statistical analysis of information on the transfer of state-owned assets in financial enterprises, provincial-level finance departments and all centrally-administered state-owned and state-controlled financial enterprises should make full use of information technology to explore the establishment of a basic information database for the transfer of state-owned financial assets, thereby gaining a comprehensive understanding of relevant details regarding the transfer of state-owned assets under their management.

(1) Ensure the timely submission of information. Before the end of March each year, provincial-level financial authorities and all state-owned and state-controlled financial enterprises under central administration shall compile and submit to our ministry a statistical summary of the transfer of state-owned assets in financial enterprises for the previous year.

(2) Do a good job on the research report. Financial departments at all levels and state-owned financial enterprises should pay close attention to identifying and summarizing new situations and emerging issues that arise in the transfer of state-owned assets, and promptly report any significant developments or major issues to our ministry.

Ministry of Finance

December 27, 2009