Supervision and Administration of Enterprise State-owned Assets Tentative Regulations

These Regulations shall not apply to the supervision and administration of the State-owned assets of financial institutions.

Article 3: For the purposes of these Regulations, the term "Enterprise State-owned Assets" means the various forms of investment in enterprises by the State, the rights and interests arising from such investments and other rights and interests that, in accordance with the law, are determined to be State-owned.

Article 4: Enterprise State-owned Assets are owned by the State. The State implements a system for the management of State-owned assets wherein the State Council and the local people's governments separately perform the responsibilities of investors and enjoy the rights and interests of owners on behalf of the State, wherein rights, obligations and responsibilities are unified and wherein the management of assets is combined with the management of persons and matters.

Article 5: On behalf of the State, the State Council performs the responsibilities of investor in large enterprises owned, controlled or participated in by the State that are the core of the national economy or involve national security and in enterprises owned, controlled or participated in by the State that are involved in such sectors as major utilities and important natural resources, etc. The enterprises in which the State Council performs the responsibilities of investor will be determined and announced by the State Council.

The people's governments of provinces, autonomous regions and municipalities directly under the central government and the people's governments at the level of municipalities divided into districts and autonomous prefectures separately perform the responsibilities of investor on behalf of the State in enterprises owned, controlled or participated in by the State other than those in which the State Council performs the responsibilities of investor. The people's governments of the provinces, autonomous regions and municipalities directly under the central government shall determine and announce the enterprises owned, controlled or participated in by the State in which they perform the responsibilities of investor and shall report the same to the State Council's State-owned asset supervision and administration authority for the record. The people's governments at the level of municipalities divided into districts and autonomous prefectures shall determine and announce the enterprises owned, controlled or participated in by the State in which they perform the responsibilities of investor and shall report the same to the State-owned asset supervision and administration authorities of the people's governments of the provinces, autonomous regions and municipalities directly under the central government for the record.

The enterprises in which the State Council, the people's governments of provinces, autonomous regions and municipalities directly under the central government and the people's governments at the level of municipalities divided into districts and autonomous prefectures perform the responsibilities of investor are hereinafter referred to as "Investee Enterprises".

Article 6: The State Council, the people's governments of the provinces, autonomous regions and municipalities directly under the central government and the people's governments at the level of municipalities divided into districts and autonomous prefectures shall separately establish State-owned asset supervision and administration authorities. State-owned asset supervision and administration authorities shall, as authorized, perform the responsibilities of investors in accordance with the law and shall supervise and administer Enterprise State-owned Assets in accordance with the law.

A municipality divided into districts or autonomous prefecture with relatively few Enterprise State-owned Assets may, subject to the approval of the people's government of the province, autonomous region or municipality directly under the central government, be exempted from the requirement to establish a stand-alone State-owned asset supervision and administration authority.

Article 7: People's governments at every level shall strictly implement laws and regulations for the administration of State-owned assets, rigorously separate the public administration function and the State-owned asset investor function of government, strictly maintain the separation of government and enterprise and implement the separation of ownership and the right to operate.

State-owned asset supervision and administration authorities shall not exercise the public administration function of government, and other government authorities and departments shall not perform the responsibilities of investor of Enterprise State-owned Assets.

Article 8: State-owned asset supervision and administration authorities shall establish sound internal supervision systems in accordance with these Regulations and other relevant laws and administrative regulations and strictly implement laws and administrative regulations.

Article 9: In the event of a war, serious natural disaster or other major emergency, the State may centrally reallocate and dispose of Enterprise State-owned Assets in accordance with the law.

Article 10: Investee Enterprises and the enterprises that they have invested in and established shall enjoy the right of autonomous operation as specified in relevant laws and administrative regulations.

State-owned asset supervision and administration authorities shall support the autonomous operation of enterprises in accordance with the law and may not interfere in the production and operational activities of enterprises except in performing their responsibilities as investors.

Article 11: Investee Enterprises shall endeavour to improve their economic returns and shall be responsible for maintaining and increasing the value of the Enterprise State-owned Assets that they operate with and manage.

Investee Enterprises shall be subject to the lawful supervision and administration of the State-owned asset supervision and administration authorities and may not prejudice the lawful rights and interests of the owner of the Enterprise State-owned Assets and the other investors.

PART TWO: STATE-OWNED ASSET SUPERVISION AND ADMINISTRATION AUTHORITIES

Article 12: The State Council's State-owned asset supervision and administration authority is a directly subordinate agency specially established to perform the responsibilities of investor on behalf of the State Council and is responsible for the supervision and administration of Enterprise State-owned Assets.

The State-owned asset supervision and administration authorities of the people's governments of the provinces, autonomous regions and municipalities directly under the central government and those of the people's governments at the level of municipalities divided into districts and autonomous prefectures are directly subordinate agencies specially established to perform the responsibilities of investors on behalf of the people's governments at their level and are responsible for the supervision and administration of Enterprise State-owned Assets.

The State-owned asset supervision and administration authorities of people's governments at higher levels shall guide and supervise the State-owned asset supervision and administration work of people's governments at lower levels.

Article 13: The main responsibilities of State-owned asset supervision and administration authorities are set forth below:

(1) performing the responsibilities of investors in their Investee Enterprises and safeguarding the owner's rights and interests in accordance with such laws and regulations as the PRC Company Law, etc.;

(2) guiding and promoting the reform and restructuring of State-owned and State-controlled enterprises;

(3) appointing supervisors to the supervisory boards of their Investee Enterprises in accordance with provisions;

(4) appointing, dismissing, assessing, and rewarding and punishing on the basis of the results of such assessments, the persons in charge of Investee Enterprises in accordance with statutory procedures;

(5) overseeing the maintenance and increase of the value of Enterprise State-owned Assets through the compilation of statistics, audits, etc.; and

(6) performing other responsibilities of investors and handling other matters delegated to them by the governments at the same level.

In addition to the responsibilities specified in the preceding paragraph, the State Council's State-owned asset supervision and administration authority may formulate rules and systems for the supervision and administration of Enterprise State-owned Assets.

Article 14: The main obligations of State-owned asset supervision and administration authorities are set forth below:

(1) promoting the rational circulation and optimal allocation of State-owned assets and the adjustment of the layout and structure of the State-owned part of the economy;

(2) protecting and improving the control exercised by, and the competitiveness of, the sectors of the State-owned part of the economy that are the core of the national economy or involve national security and improving the overall quality of the State-owned part of the economy;

(3) exploring effective systems and methods of operating Enterprise State-owned Assets, strengthening the supervision and administration of Enterprise State-owned Assets, and promoting the maintenance and increase of the value and preventing the erosion of Enterprise State-owned Assets;

(4) guiding and promoting the establishment of modern corporate systems, the improvement of legal person governance structures and the implementation of modern management methods by State-owned and State-controlled enterprises;

(5) respecting and safeguarding the right of autonomous operation of State-owned and State-controlled enterprises, safeguarding the legitimate rights and interests of enterprises in accordance with the law, promoting the operation and management of enterprises in accordance with the law and increasing enterprise competitiveness; and

(6) guiding and coordinating the solution of difficulties and problems encountered by State-owned and State-controlled enterprises in the course of reform and development.

Article 15: State-owned asset supervision and administration authorities shall report on their supervision and administration of Enterprise State-owned Assets, the maintenance and increase of the value of State-owned assets and other major matters to the governments at the same level.

PART THREE: ADMINISTRATION OF THE PERSONS IN CHARGE OF ENTERPRISES

Article 16: State-owned asset supervision and administration authorities shall establish sound selection mechanisms and incentive and constraint mechanisms for persons in charge of enterprises. The said mechanisms shall satisfy the requirements of modern corporate systems.

Article 17: State-owned asset supervision and administration authorities shall appoint and dismiss or propose the appointment and dismissal of the persons in charge of Investee Enterprises in accordance with relevant provisions:

(1) appointing and dismissing the general manager, deputy general manager(s), chief accountant and other persons in charge of wholly State-owned enterprises;

(2) appointing and dismissing the chairman of the board of directors, vice chairman/chairmen of the board of directors and the directors, and proposing the appointment and dismissal of the general manager, deputy general manager(s), chief accountant, etc., of wholly State-owned companies;

(3) nominating candidates for the positions of director and supervisor of State-controlled companies, recommending candidates for the positions of chairman of the board of directors, vice chairman of the board of directors and chairman of the supervisory board of State-controlled companies, and proposing candidates for the positions of general manager, deputy general manager and chief accountant therein, in accordance with the companies' articles of association; and

(4) nominating candidates for the positions of director and supervisor of companies participated in by the State, in accordance with the companies' articles of association.

If the State Council, the people's government of a province, autonomous region or municipality directly under the central government or a people's government at the level of municipality divided into districts or autonomous prefectures has other provisions on the appointment and dismissal of the persons in charge of Investee Enterprises, the relevant provisions shall prevail.

Article 18: State-owned asset supervision and administration authorities shall establish systems for the assessment of the executive performance of the persons in charge of enterprises, execute performance contracts with the persons in charge of enterprises that they appoint and conduct annual and service term assessments of the persons in charge of enterprises in accordance with their performance contracts.

Article 19: State-owned asset supervision and administration authorities shall determine the salaries of the persons in charge of the wholly-State owned enterprises and wholly State-owned companies among their Investee Enterprises in accordance with relevant provisions. They shall decide on the rewarding and punishment of the persons in charge of enterprises that they have appointed to their Investee Enterprises based on assessment results.

PART FOUR: ADMINISTRATION OF MAJOR MATTERS OF ENTERPRISES

Article 20: State-owned asset supervision and administration authorities shall be responsible for guiding State-owned and State-controlled enterprises in the establishment of modern corporate systems. They shall also be responsible for examining and approving the restructuring plans, and plans to convert to joint stock systems, of the wholly State-owned enterprises and wholly State-owned companies among their Investee Enterprises and the articles of association of the wholly State-owned companies among their Investee Enterprises.

Article 21: State-owned asset supervision and administration authorities shall decide upon such important matters as the division, merger, bankruptcy, dissolution, capital increase or reduction, issuance of corporate bonds, etc. of wholly State-owned enterprises and wholly State-owned companies among their Investee Enterprises in accordance with statutory procedures. After examining the division, merger, bankruptcy or dissolution of important wholly State-owned enterprises and wholly State-owned companies, State-owned asset supervision and administration authorities shall report the same to the people's government at the same level for its approval.

When, in accordance with statutory procedures, State-owned asset supervision and administration authorities examine and render decisions on the important matters of those of their Investee Enterprises that are wholly State-owned enterprises or wholly State-owned companies in the national defence science and technology industrial sector, they shall proceed in accordance with relevant State laws and provisions.

Article 22: State-owned asset supervision and administration authorities shall nominate shareholder representatives and directors in accordance with the Company Law to attend shareholders' meetings and board meetings of companies controlled or participated in by the State.

When the shareholders' meeting or board of directors of a company controlled or participated in by the State decides upon such important matters as the company's division, merger, bankruptcy, dissolution, capital increase or reduction, issuance of corporate bonds, appointment or dismissal of persons in charge of the enterprise, etc., the shareholder representatives and/or directors appointed by the State-owned asset supervision and administration authority shall express opinions and exercise their voting rights as instructed by the State-owned asset supervision and administration authority.

The shareholder representatives and directors appointed by the State-owned asset supervision and administration authority shall report the details on the performance of their responsibilities to the State-owned asset supervision and administration authority in a timely manner.

Article 23: State-owned asset supervision and administration authorities shall decide upon the assignment of the State-owned equity in their Investee Enterprises. In the event that such assignment is an assignment of all State-owned equity, or an assignment of part of the State-owned equity that would result in the State no longer having a controlling position, it shall be reported to the government at the same level for its approval.

Article 24: Major matters of important subsidiaries invested in and established by Investee Enterprises shall be reported by the Investee Enterprise to the State-owned asset supervision and administration authority for its approval. The procedures for the administration thereof shall be formulated separately by the State Council's State-owned asset supervision and administration authority and submitted to the State Council for its approval.

Article 25: State-owned asset supervision and administration authorities shall organize and coordinate the work associated with the merger and bankruptcy of the wholly State-owned enterprises and wholly State-owned companies among their Investee Enterprises in accordance with relevant State provisions and shall cooperate with the relevant authorities in properly carrying out such tasks as the resettlement of the idled staff and workers of the enterprises, etc.

Article 26: State-owned asset supervision and administration authorities shall draft guiding opinions on the reform of the revenue distribution systems of their Investee Enterprises in accordance with relevant State provisions and shall regulate the overall wage distribution levels of their Investee Enterprises.

Article 27: Upon approval by the State Council, the wholly State-owned enterprises and wholly State-owned companies among Investee Enterprises may enjoy the rights mentioned in Article 12 of the Company Law in the capacity of investment companies or holding companies specified by the State Council and the rights specified in Article 20 of the Company Law in the capacity of institutions authorized by the State to make investments.

Article 28: State-owned asset supervision and administration authorities may authorize wholly State-owned enterprises and wholly State-owned companies among their Investee Enterprises to operate State-owned assets, if such enterprises and companies meet the criteria therefor.

Authorized wholly State-owned enterprises and wholly State-owned companies shall operate, manage and supervise the State-owned assets arising from State investments in the enterprises that they wholly own, in which they have a controlling interest or in which they participate.

Article 29: Authorized wholly State-owned enterprises and wholly State-owned companies shall establish and improve compliant modern corporate systems and shall be responsible for maintaining and increasing the value of State-owned assets.

PART FIVE: ADMINISTRATION OF ENTERPRISE STATE-OWNED ASSETS

Article 30: State-owned asset supervision and administration authorities shall be responsible for such basic tasks related to the administration of Enterprise State-owned Assets as the delineation and registration of title, supervision and administration of asset appraisals, inventorying of assets and verification of capital, compilation of asset-related statistics, overall assessments, etc. in accordance with relevant State provisions.

State-owned asset supervision and administration authorities shall mediate in disputes between their Investee Enterprises over title to Enterprise State-owned Assets.

Article 31: State-owned asset supervision and administration authorities shall establish systems for the supervision and administration of transactions involving Enterprise State-owned Assets, strengthen supervision and administration of transactions involving Enterprise State-owned Assets, promote the rational circulation of Enterprise State-owned Assets and prevent the erosion of Enterprise State-owned Assets.

Article 32: State-owned asset supervision and administration authorities shall perform the responsibilities of the investor in respect of the returns on the Enterprise State-owned Assets of their Investee Enterprises in accordance with the law and perform the responsibilities of the investor in respect of the major investment and financing plans and development strategies and plans of their Investee Enterprises in accordance with State development plans and industrial policies.

Article 33: The disposal of major assets of wholly State-owned enterprises and wholly State-owned companies among Investee Enterprises shall require the approval of the State-owned asset supervision and administration authority and shall be effected in accordance with relevant provisions.

PART SIX: SUPERVISION OF ENTERPRISE STATE-OWNED ASSETS

Article 34: The State Council's State-owned asset supervision and administration authority shall, on behalf of the State Council, appoint the supervisory boards of the wholly State-owned enterprises and wholly State-owned companies among its Investee Enterprises. The composition, functions, powers, codes of conduct, etc. of such supervisory boards shall be handled in accordance with the Supervisory Boards of State-owned Enterprises Tentative Regulations.

The State-owned asset supervision and administration authorities of local people's governments shall, on behalf of the governments at their level, appoint the supervisory boards of the wholly State-owned enterprises and wholly State-owned companies among their Investee Enterprises with reference to the Supervisory Boards of State-owned Enterprises Tentative Regulations.

Article 35: State-owned asset supervision and administration authorities shall supervise the financial affairs of their Investee Enterprises, establish and improve the system of indicators on the maintenance and increase of the value of State-owned assets and safeguard the rights and interests of the investors of State-owned assets.

Article 36: State-owned and State-controlled enterprises shall strengthen their internal supervision and risk control and shall establish sound financial systems, audit systems, corporate legal counsel systems, systems for democratic supervision by staff and workers, etc.

Article 37: Wholly State-owned enterprises and wholly State-owned companies among Investee Enterprises shall regularly report on their financial positions, production, operations and status of the maintenance and increase of the value of State-owned assets to the State-owned asset supervision and administration authority.

PART SEVEN: LEGAL LIABILITY

Article 38: If a State-owned asset supervision and administration authority fails to appoint or dismiss or fails to propose the appointment or dismissal of the persons in charge of its Investee Enterprises in accordance with provisions, or if it illegally interferes in the production and operational activities of its Investee Enterprises, thereby infringing upon their legitimate rights and interests and causing the loss of Enterprise State-owned Assets or other serious consequences, the person directly in charge and the other persons directly responsible shall be subjected to administrative punishments in accordance with the law; if a criminal offence is constituted, their criminal liability shall be pursued in accordance with the law.

Article 39: If a wholly State-owned enterprise or wholly State-owned company among Investee Enterprises fails to report on its financial position, production and operations or the status of the maintenance and increase of the value of State-owned assets to the State-owned asset supervision and administration authority, it shall be given a warning; if the circumstances are serious, the person directly in charge and the other persons directly responsible shall be subjected to disciplinary sanctions in accordance with the law.

Article 40: If a person in charge of a State-owned or State-controlled enterprise abuses his authority or is derelict in his duties, thereby causing the loss of Enterprise State-owned Assets, he shall be liable for compensation and shall be subjected to disciplinary sanctions in accordance with the law; if a criminal offence is constituted, his criminal liability shall be pursued in accordance with the law.

Article 41: A person in charge of a State-owned or State-controlled enterprise who has been subjected to removal from office or heavier disciplinary sanction on account of his responsibility for the loss of Enterprise State-owned Assets may not serve as a person in charge of any State-owned or State-controlled enterprise for five years. If he caused a major loss of Enterprise State-owned Assets or was sentenced to criminal punishment, he may never again serve as a person in charge of any State-owned or State-controlled enterprise.

PART EIGHT: SUPPLEMENTARY PROVISIONS

Article 42: The organizational form, organizational structure, rights, obligations, etc. of enterprises owned, controlled or participated in by the State shall be handled in accordance with such laws and administrative regulations as the PRC Company Law, etc. and these Regulations.

Article 43: The establishment of grassroots organizations of the Communist Party of China and the development of socialist ideology and culture, the Party's work style and clean governance in enterprises owned, controlled or participated in by the State shall be handled in accordance with the Communist Party of China, Constitution and relevant provisions.

Labour unions in enterprises owned, controlled or participated in by the State shall be handled in accordance with the relevant provisions of the PRC Labour Union Law and the China Labour Union Charter.

Article 44: The State Council's State-owned asset supervision and administration authority and the people's governments of the provinces, autonomous regions and municipalities directly under the central government may formulate implementing procedures on the basis hereof.

Article 45: In the event of a discrepancy between administrative regulations on the supervision and administration of Enterprise State-owned Assets formulated prior to the implementation hereof and these Regulations, these Regulations shall prevail.

Article 46: Work units in which government and enterprise have not yet been separated shall accelerate reform and realize the separation of government and enterprise in accordance with the provisions of the State Council. Following such separation, the State-owned asset supervision and administration authorities shall perform the responsibilities of investor in those enterprises and supervise and administer their Enterprise State-owned Assets in accordance with the law.

Article 47: These Regulations shall be implemented as of the date of promulgation.