Absorption of Foreign Capital by Financial Asset Management Companies to Participate in Asset Restructuring and Disposal Tentative Provisions

Article 4: Asset Management Companies that intend to absorb foreign capital to effect asset restructurings and disposals shall comply with State policies on guiding foreign investment in industry. Foreign capital shall be excluded from participating in the restructuring and disposal of assets in the cultural, financial and insurance sectors as well as sectors in which the Foreign Investment Industrial Guidance Catalogue prohibits foreign investment. In projects for which the Foreign Investment Industrial Guidance Catalogue stipulates that the Chinese side must hold a controlling interest, the Chinese side shall, in principle, continue to maintain its controlling interest after foreign capital has participated in the restructuring.

Article 5: Scope of assets to be restructured and disposed of:

(1) enterprise equity owned by an Asset Management Company, including the equity obtained by the Asset Management Company from swapping the enterprise's debt for equity, the equity owned by the Asset Management Company after its restructuring of a debtor enterprise and equity that has otherwise come into the ownership of the Asset Management Company;

(2) an enterprise's physical assets over which the Asset Management Company has the right of control and disposal;

(3) corporate debt owned by the Asset Management Company.

Article 6: Methods of restructuring and disposing of assets:

(1) the Asset Management Company sells or transfers an unlisted company's equity or debt owned by it to a foreign business entity after restructuring;

(2) the Asset Management Company directly sells or transfers an unlisted company's equity or debt owned by it to a foreign business entity;

(3) the Asset Management Company sells by way of a negotiated transfer, tender, auction, etc. physical assets owned by it to a foreign business entity;

(4) the Asset Management Company contributes, according to the appraised value, an enterprise's equity and physical assets owned by it to a foreign investment enterprise that it has established with a foreign business entity on the basis of the original enterprise.

Article 7: When an Asset Management Company intends to restructure and dispose of assets, it shall consult with the other investors in the enterprise and, all things being equal, those other investors shall have priority in purchasing such assets.

Article 8: Appraisal and transaction prices of assets that are the subject of restructuring and disposal:

Before selling or transferring assets that are the subject of restructuring and disposal, an Asset Management Company must have them appraised by a qualified asset appraisal institution. The asset appraisal shall take full account of all the factors involved in the asset restructuring and disposal. The asset appraisal shall accord with international practice and shall be conducted using a method that is generally accepted internationally.

The Asset Management Company shall comprehensively consider such factors as the appraised net value of the assets, the potential appreciation of the assets, the current state of the assets, etc. and, in accordance with the relevant provisions of the Ministry of Finance, Administration of the Disposition of Assets by Financial Asset Management Companies Procedures, determine on its own the transaction price of the assets that are the subject of restructuring and disposal.

Article 9: Procedures for the restructuring and disposal of assets:

(1) The Asset Management Company shall have a specialized asset disposal examination authority examine and approve its restructuring and disposal plan in accordance with the relevant provisions of the Ministry of Finance, Administration of the Disposition of Assets by Financial Asset Management Companies Procedures. If the assets to be restructured and disposed of fall within the restricted category of the Foreign Investment Industrial Guidance Catalogue, the Asset Management Company shall obtain the consent of the competent department before the approval of its restructuring and disposal plan.

(2) The Asset Management Company shall execute the relevant legal instruments with the foreign business entity pursuant to its approved asset restructuring and disposal plan.

(3) The Asset Management Company shall carry out with the Ministry of Foreign Trade and Economic Cooperation the relevant application procedures for the establishment of a foreign investment enterprise in accordance with the law and obtain an approval certificate.

Article 10: The participation in the restructuring and disposal of assets of Asset Management Companies by investors from Hong Kong, Macao and Taiwan shall be handled with reference to these Provisions.