Promulgated by Decree No.324 of the State Council on November 23. 2001

Chapter 1 General Provisions

1. In a bid to strengthen the supervision and administration over the financial activities, safeguard the financial orders and protect national interests as well as public interests, Regulations on Closure of Financial Institutions (the Regulations) are hereby formulated.

2. The closure of financial institutions by the People’s Bank of China (the PBOC) shall be conducted in accordance with the Regulations.

The closure stated herein refers to the acts in which the PBOC takes the compulsory administrative measures towards the financial institutions with the status of legal entity approved for establishment by the PBOC to terminate their business activities and dissolve them.

3. The PBOC and its personnel and other related personnel shall fulfill their duties in conformity with the Regulations and keep the secrets for the financial institutions closed according to law.

4. The local people’s governments where the closed financial institutions are seated shall organize the relevant departments to conduct the work related to closure of financial institutions.

Chapter 2 Decisions of Closure

5. If the financial institutions are found to have such cases as the business activities against laws and regulations or the improper business and management and their continued operations are expected to seriously damage the financial order and social and public interests, they shall be closed according to law.

6. If the PBOC decides to abolish the financial institutions, the letters of decision of closure shall be produced.

The decisions of closure shall come into effect upon the formal announcements of the PBOC.

The decisions of closure shall be published on the newspapers and posted in the business offices of closed financial institutions.

7. Since the decisions of closure take effect, the closed financial institutions shall immediately stop their operations and return their certificates of incorporation and the business licenses of their branches, and their senior executives, boards of directors and the shareholders’ meetings shall not exercise their powers any more.

Chapter 3 Liquidation upon Closure

8. The PBOC shall set up the liquidation teams when the commercial banks are closed according to law. The PBOC or the relevant local people’s governments entrusted by the PBOC shall set up the liquidation teams when the non-bank financial institutions are abolished. The liquidation work shall be started as soon as the decisions of closure become effective. The liquidation teams shall take the responsibilities for the PBOC and report their work progress to the latter.

The liquidation teams shall consist of the representatives from the PBOC, the financial and auditing departments and other departments and the local people’s governments, and the shareholders’ representatives of closed financial institutions and the related professionals. The leaders and members of liquidation teams shall be appointed or approved by the PBOC.

In the process of liquidation, the liquidation teams shall perform the management functions that used to be granted to the closed financial institutions, and the leaders of liquidation teams shall exercise the scopes of power that used to be granted to the legal representatives of the aforesaid institutions.

9. When the liquidation teams have been organized, the legal representatives and other related leaders of the closed financial institutions shall hand over all the seals, accounting books, documents, notes, files and materials of their former units to the liquidation teams and assist the liquidation teams in their work.

10. In the process of liquidation, the legal representatives, the members of boards of directors and supervisory committees, the senior executives above the departmental level, the financial personnel and other related personnel of the closed financial institutions shall conduct their work according to the requirements of liquidation teams and shall not leave their posts or go abroad with the prior approval.

11. In the process of liquidation, the liquidation teams shall perform the following duties:

(1) Keeping and clearing the properties, and compiling the balance sheets and the lists of properties of the closed financial institutions;

(2) Sending notices to or making declarations for the depositors and other creditors so as to define the creditors’ rights;

(3) Handling and liquidating the operations of the closed financial institutions that require further processing.

(4) Liquidating the creditors’ rights and debts, sending urgent notices to claim the creditors’ rights and disposing of the assets.

(5) Developing the liquidation plans and liquidating the debts in accordance with the approved plans;

(6) Clearing and paying all the owed taxes.

(7) Disposing of the remaining assets of the closed financial institutions when the debts have been liquidated.

(8) Participating in the lawsuits and arbitrations on behalf of the closed financial institutions;

(9) Proposing the investigation of legal responsibility of the senior executives directly in charge and other personnel concerned in the closed financial institutions;

(10) Handling other affairs related to liquidation.

12. In the process of liquidation, the liquidation teams may entrust the actual liquidation work to the financial institutions appointed by the PBOC (hereinafter referred to as the trustee institutions).

The trustee institutions shall not assume the debts of the closed financial institutions, make the advance payments or take the responsibilities for the placement of unemployed personnel. The trustee’s fee shall be included into the liquidation expenses of the closed financial institution.

13. The local people’s governments where the closed financial institutions are seated shall set up the leading teams of closure and the team leaders shall be the related leaders of the said governments.

The leading teams of closure shall support and work together with the liquidation teams to claim for the creditors’ rights and handle other liquidation work, organize the relevant departments to maintain the social security orders, cope with the unexpected events, investigate and prosecute the illegal activities, and investigate the legal responsibilities of related personnel responsible according to law.

14. The liquidation teams shall send to the creditors the written notices about declaration of the creditors’ rights within 10 days following their establishment, and make the announcements at least three times on the newspapers within 60 days.

The creditors shall declare their creditors’ rights within 30 days in receipt of the notices. If the creditors have not received the notices, they shall declare their creditors’ rights within 90 days after the date of the first announcement.

The liquidation teams may decide that the depositors with petty deposits are exempt from declaring their creditors’ rights, and the liquidation teams shall confirm and register the saving deposits in conformity with the accounting books and related vouchers of the closed financial institutions.

15. When the creditors declare the creditor’s rights, they shall describe the nature, amount and time of their creditors’ rights and provide the supporting evidences. The liquidation teams shall examine the evidences necessary for declaring the creditors’ rights, make sure whether the creditors’ rights include the property warranty and the relevant amount, and then register the creditors’ rights with and without property warranty separately.

16. The following provisions shall be abided by when the creditors fail to declare their creditors’ rights prior to the set deadline:

(1) The creditors’ rights of known creditors shall be deemed as part of the liquidation work.

(2) The creditors’ rights of unknown creditors are allowed to apply for liquidation before the allocation of liquidation properties in the closed financial institutions is completed. When all the liquidation properties of the said institutions have been allocated, no more liquidity will be allowed.

17. The debts of the closed financial institutions shall not have their interests calculated since the decisions of closure become effective.

18. The following properties of the closed financial institutions shall be used as the liquidation properties for settling the debts.

(1) All the properties of the closed financial institutions, since the liquidation is started, including the financial contributions and other equities of their shareholders, and the properties and shares invested of their solely-funded subsidiaries.

(2) The properties gained according to law by the closed financial institutions in the course of liquidation.

(3) Other properties of the closed financial institutions.

Before the decisions of closure take effect, the malicious or disguised transfers of properties by the closed financial institutions shall be deemed as invalid. The liquidation teams shall assume the responsibilities for recovering and integrating the said properties into the liquidation properties.

19. When the liquidation teams clean up the properties of the closed financial institutions, they shall assess the actual values of these properties. In case of any financial losses, the amount of losses shall be verified.

20. The valid assets of the closed financial institutions can be sold according to law by the liquidation teams. In case the valid assets are subject to auctions, the auction base prices shall be determined in line with the assessment results issued by the agencies with assets assessment qualification.

The valid properties stated hereinbefore refer to the properties with actual values when the properties of the closed financial institutions have been cleaned up and verified.

21. The liquidation and disposition of properties in the closed financial institutions shall be exempt from the taxes and administrative charges.

22. When the properties of the closed financial institutions have been cleaned up and verified, the liquidation teams shall develop the liquidation plans.

The liquidation plans shall contain the profiles of creditors, the amounts of creditors’ rights, liquidation properties, principals and legal interests for paying the individual saving deposits, and the amounts of other debts liquidated. In addition, the said plans shall also include such materials as the balance sheets, lists of properties and assets assessment reports.

The liquidation teams and the creditors shall conduct the consultations and submit the liquidation plans to the PBOC for confirmation.

Chapter 4 Settlement of Debts

23. The liquidation properties of the closed financial institutions shall be used to make the advance payment for the principals and legal interests of personal saving deposits.

24. After the liquidation properties of the said institutions are used to pay for the principals and legal interests of personal saving deposits, the remaining properties shall be used to clear off the debts of legal entities and other organizations.

25. The remaining properties after the liquidation properties of the said institutions are used to clear off the debts shall be distributed according to the rate of financial contributions or shares of the shareholders.

Chapter 5 Cancellation of Registration

26. Upon the completion of liquidation work, the liquidation teams shall compile the liquidation reports, the statements of incomes and expenditures and various financial accounting books, and then submit them to the PBOC for confirmation.

27. Upon the completion of liquidation work, the liquidation teams shall have their registrations cancelled by the administrations for industry and commerce. Once the qualification of shareholders in the closed financial institutions is terminated, the said institutions are dissolved immediately and the PBOC shall make the formal announcements as well.

28. When the registration is cancelled, all the accounting documents, books and statements and other materials as well as the important operation and liquidation files of the closed financial institutions shall be kept by the institutions appointed by the PBOC.

29. The auditing organs shall conduct the auditing work over the leaders of the closed financial institutions.

Chapter 6 Legal liabilities

30. If the senior executives and other related personnel of the closed financial institutions are found to use their favorable posts to accept the presents from others, infringe the related laws to issue the loans and financial documents, and bend the laws for personal gains and engage in frauds, leading to the closure of their financial institutions, their criminal liabilities shall be investigated according to the crime of briber acceptance, crime of unlawful loan issuance, crime of illegal financial documents issuance, crime of bankruptcy and loss caused by bending the law for personal gains and other related provisions of the Criminal Law. If their offenses don’t constitute the crimes, they shall be given such a disciplinary action as dismissal from their posts and even expelling from the unit. Additionally, they are not allowed during their lifetime to assume the posts as senior executives or equivalent posts in any financial institutions.

31. If the personnel of the PBOC examine and approve the financial institutions against the related laws and fail to conduct the supervision and management of financial institutions or investigate and prosecute their infringements according to law, leading to the closure of financial institutions, their criminal liabilities shall be investigated in accordance with the crime of abusing the power, crime of neglecting the duties and other crimes. If their offenses don’t constitute the crimes, they shall be given such a disciplinary action as the severe demerit recording, demotion or dismissal from their posts.

32. If any personnel of state organs interfere in the regular operations of financial institutions against the laws and shall assume the direct responsibilities for closure of the financial institutions, their criminal liabilities shall be investigated according to the crime of abusing the power or other crimes. If their offenses don’t constitute the crimes, they shall be given such a disciplinary action as the severe demerit recording, demotion or dismissal from their posts.

33. When the closure and liquidation are processed, the personnel of the closed financial institutions, once found to have any of following acts, shall have their criminal liabilities investigated according to the crime of interference with official business, crime of interference with liquidation and other crimes. If their offenses don’t constitute the crimes, they shall be given such a disciplinary action as dismissal from their posts or expelling from the unit.

(1) Obstructing the liquidation teams from fulfilling their legal duties;

(2) Refusing to provide the information or providing the false information;

(3) Illicitly withdrawing the capitals, hiding the properties to evade the debts;

(4) Transferring in a malicious or disguised manner the properties of the closed financial institutions.

34. If the closed financial institutions continue to conduct their illegal operations even when the decisions of closure have taken effect, their operations shall be banned in accordance with the Measures for Banning Illegal Financial Institutions and Illegal Financial Activities. The criminal liabilities shall be investigated according to the crime of illegally attracting the public deposits or other crimes. If their offenses don’t constitute the crimes, they shall be given the administrative penalties.

35. If the personnel of liquidation teams abuse their powers, neglect their duties and bend the laws for personal gains and engage in frauds, leading to the property losses or damaging the benefits of creditors, their criminal liabilities shall be investigated. If their offenses don’t constitute the crimes, they shall be given the administrative or disciplinary actions such as the demotion and even expelling from the unit.

36. If the personnel of the PBOC and other related personnel, in the course of fulfilling their duties, disclose the state secrets or their known commercial secrets, their criminal liabilities shall be investigated according to the crime of disclosing the state secrets, crime of infringement upon the commercial secrets or other crimes. If their offenses don’t constitute the criminal penalties, they shall be given the administrative or disciplinary actions such as the demotion and even expelling from the unit.

37. If the trustee institutions fail to fulfill their trustee duties and cause the property losses of the closed financial institutions, they shall assume the civil liabilities according to law and the executives in charge and other personnel directly responsible shall be given the disciplinary actions.

Chapter 7 Supplementary Provisions

38. The Regulations shall come into effect since December 15, 2001.

The China Securities Regulatory Commission

(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)