Tentative Measures for the Administration of Investments in Bonds by Insurance Institutional Investors

(Issued by the China Insurance Regulatory Commission on, and effective as of, August 17 2005.)

Bao Jian Fa [2005] No.72

PART ONE: GENERAL PROVISIONS

Article 1: These Measures are formulated in accordance with the PRC Insurance Law and relevant laws and regulations, in order to strengthen the administration of insurance fund investment in bonds, enrich the categories of investments, improve the investment portfolios and effectively spread the risks.

Article 2: For the purposes of these Measures, the term 'insurance institutional investor' (Insurance Institution) means an insurance company or an insurance asset management company that is approved for establishment by the China Insurance Regulatory Commission (the CIRC), is registered in accordance with the law and conducts bond investments. These Measures shall apply to the engagement in bond investments by insurance group companies and insurance holding companies.

Article 3: For the purposes of these Measures, the term 'bonds' means renminbi bonds or foreign currency bonds issued in China by various issuers in accordance with the law.

Article 4: Bonds that may be invested in by an Insurance Institution include government bonds, financial bonds, enterprise (corporate) bonds and other bonds approved for issuance by relevant departments.

Article 5: An Insurance Institution shall, in accordance with the asset-liability matching management requirements and the regulatory standards of the CIRC, formulate an asset strategic allocation plan and investment strategies, independently allocate bond assets, independently assume risks, and be independently responsible for profits and losses.

Article 6: An Insurance Institution shall, in accordance with relevant provisions of the CIRC, entrust a third party for the independent custody of bond assets.

Article 7: The CIRC shall be responsible for formulating policies and provisions for the administration of bond investments by Insurance Institutions, modifying the bond investment categories and investment ratios when and where appropriate, and carrying out regulation over investment activities in accordance with the law.

PART TWO: INVESTMENTS IN GOVERNMENT BONDS

Article 8: An Insurance Institution investing in government bonds may, in accordance with asset allocation requirements and investment strategies, independently determine the total and individual investment ratios in government bonds, to maintain a certain ratio of government bonds.

PART THREE: INVESTMENTS IN FINANCIAL BONDS

Article 9: Financial bonds that may be invested in by an Insurance Institution include central bank bills, policy bank financial bonds, policy bank subordinated bonds, commercial bank financial bonds, commercial bank subordinated bonds, commercial bank subordinated debt with fixed term, insurance company subordinated debt with fixed term, international development organization renminbi bonds, etc.

Section One: Central Bank Bills

Article 10: An Insurance Institution investing in central bank bills may, in accordance with asset allocation requirements and investment strategies, independently determine the total and individual investment ratios in central bank bills.

Section Two: Policy Bank Financial Bonds and Subordinated Bonds

Article 11: A policy bank financial bond invested in by an Insurance Institution shall be a financial bond issued by a policy bank on the national inter-bank bond market in accordance with the Measures for the Administration of Issue of Financial Bonds on the National Inter-bank Bond Market (Administrative Measures) and subject to the approval of the People's Bank of China.

A policy bank subordinated bond invested in by an Insurance Institution shall be a subordinated bond issued by a policy bank on the national inter-bank bond market in accordance with the Measures for the Administration of Issue of Subordinated Bonds by Commercial Banks (Subordinated Bond Measures), and subject to the qualification examination of the China Banking Regulatory Commission (CBRC) and approval of the People's Bank of China.

Article 12: A policy bank financial bond or subordinated bond invested in by an Insurance Institution may be exempted from credit rating.

Article 13: An Insurance Institution investing in policy bank financial bonds or subordinated bonds may, in accordance with asset allocation requirements and investment strategies, independently determine the total and individual investment ratios in policy bank financial bonds and subordinated bonds.

Article 14: Where an Insurance Institution invests in a privately placed policy bank financial bond or subordinated bond, the qualifications of the issuer and the credit rating of the bond shall comply with Articles 11 and 12 hereof. The balance of investments in such bond shall be included in the balance of policy bank financial bonds and subordinated bonds, and the total and individual investment ratios shall comply with Article 13 hereof.

Section Three: Commercial Bank Financial Bonds and Subordinated Bonds

Article 15: The issuer of a commercial bank financial bond or subordinated bond invested in by an Insurance Institution shall, in addition to complying with the Administrative Measures, the Subordinated Bond Measures and other relevant provisions of the People's Bank of China and the CBRC, meet the following conditions:

(1) have total assets of not less than Rmb200 billion;

(2) have a core capital adequacy ratio of not less than 4%;

(3) have been profitable for the most recent three consecutive years;

(4) have a long-term credit rating of A or above or the equivalent as assessed by a domestic credit rating agency;

(5) where the bond is issued offshore and exempted from domestic credit rating, have a long-term credit rating of BB or above or the equivalent as assessed by an international credit rating agency;

(6) disclose sufficient, accurate and complete information in a timely manner. Such disclosed information shall at least include total assets, total liabilities, owner's equity, operating income, net profit, average equity earnings ratio, non-performing loans ratio, bad debt provisioning ratio, capital adequacy ratio, and other indices and data; and

(7) other conditions as specified by the CIRC.

For items (4) and (5) in the preceding paragraph, if the same issuer has both a domestic credit rating and an international credit rating, the domestic credit rating shall prevail.

Article 16: A commercial bank financial bond or subordinated bond invested in by an Insurance Institution shall have a long-term credit rating of A or above or the equivalent as assessed by a domestic credit rating agency.

Article 17: Where an Insurance Institution invests in a secured financial bond or subordinated bond, the creditworthiness of the guarantor shall not be worse than the credit rating of the issuer.

Article 18: Commercial bank financial bonds and subordinated bonds invested in by an Insurance Institution shall comply with the following provisions on investment ratios:

(1) the aggregate balance of investments in commercial bank financial bonds and subordinated bonds, calculated at cost, shall not exceed 30% of the total assets of the Insurance Institution at the end of the preceding quarter;

(2) the aggregate balance of investments in financial bonds and subordinated bonds issued by the same commercial bank shall not exceed 10% of the total assets of the Insurance Institution at the end of the preceding quarter;

(3) the investment share in commercial bank financial bonds or subordinated bonds with a credit rating of AA or above or the equivalent of the same type in the same issue shall not exceed 20% of the issued amount of that type of bonds in that issue, and the balance shall not exceed 5% of the total assets of the Insurance Institution at the end of the preceding quarter; and

(4) the investment share in commercial bank financial bonds or subordinated bonds with a credit rating of A or the equivalent of the same type in the same issue shall not exceed 10% of the issued amount of that type of bonds in that issue, and the balance shall not exceed 3% of the total assets of the Insurance Institution at the end of the preceding quarter.

Article 19: Where an Insurance Institution invests in a privately placed commercial bank financial bond or subordinated bond, the qualifications of the issuer and the credit rating of the bond shall comply with Articles 15, 16 and 17 hereof. The balance of investments in such bond shall be included in the balance of commercial bank financial bonds and subordinated bonds, and the total and individual investment ratios shall comply with Article 18 hereof.

Section Four: Commercial Bank Subordinated Debt with Fixed Term

Article 20: Commercial bank subordinated debt with fixed term invested in by an Insurance Institution shall be subordinated debt with fixed term issued by a state-owned commercial bank or a national share-system commercial bank in accordance with the Circular on the Inclusion of Subordinated Debt with Fixed Term in Supplementary Capital and the Subordinated Bond Measures, and subject to the approval of the CBRC.

For commercial bank subordinated debt with fixed term invested in by an Insurance Institution, the issuer and the debt itself shall comply with Articles 15 and 16 hereof.

Article 21: Commercial bank subordinated debt with fixed term invested in by an Insurance Institution shall comply with the following provisions on investment ratios:

(1) the balance of investments in commercial bank subordinated debt with fixed term, calculated at cost, shall not exceed 8% of the total assets of the Insurance Institution at the end of the preceding quarter;

(2) the aggregate balance of investments in subordinated debt with fixed term issued by the same bank shall not exceed 5% of the total assets of the Insurance Institution at the end of the preceding quarter; and

(3) the investment share in commercial bank subordinated debt with fixed term of the same type in the same issue shall not exceed 10% of the issued amount of that type of debt in that issue, and the balance shall not exceed 3% of the total assets of the Insurance Institution at the end of the preceding quarter.

Article 22: The maturity of commercial bank subordinated debt with fixed term invested in by an Insurance Institution shall not exceed six years.

Section Five: Insurance Company Subordinated Debt with Fixed Term

Article 23: Insurance company subordinated debt with fixed term invested in by an Insurance Institution shall be subordinated debt with fixed term privately placed by an insurance company in accordance with the Tentative Measures for the Administration of Insurance Company Subordinated Debt with Fixed Term and subject to the approval of the CIRC.

Article 24: Insurance company subordinated debt with fixed term invested in by an Insurance Institution shall comply with the following provisions on investment ratios:

(1) the balance of investments in insurance company subordinated debt with fixed term, calculated at cost, shall not exceed 20% of the total assets of the Insurance Institution at the end of the preceding quarter;

(2) the aggregate balance of investments in subordinated debt with fixed term issued by the same insurance company shall not exceed 4% of the total assets of the Insurance Institution at the end of the preceding quarter; and

(3) the investment share in insurance company subordinated debt with fixed term in the same issue shall not exceed 20% of the issued amount of such debt in that issue, and the balance shall not exceed 1% of the total assets of the Insurance Institution at the end of the preceding quarter.

Article 25: An Insurance Institution shall not invest in subordinated debt with fixed term privately placed by an insurance company if any of the following exists between the Insurance Institution and the insurance company:

(1) the Insurance Institution is controlled by the insurance company;

(2) the Insurance Institution controls the insurance company; or

(3) the Insurance Institution and the insurance company are controlled by the same third party.

Section Six: International Development Organization Renminbi Bonds

Article 26: An international development organization renminbi bond invested in by an Insurance Institution shall be a renminbi bond issued by an international development financial organization in accordance with the Tentative Measures for the Administration of Issue of Renminbi Bonds by International Development Organizations and subject to the consent of the State Council after the examination of the relevant departments.

Article 27: An Insurance Institution investing in international development organization renminbi bonds may, in accordance with asset allocation requirements and investment strategies, independently determine the total and individual investment ratios in policy bank financial bonds and subordinated bonds.

PART FOUR: INVESTMENTS IN ENTERPRISE (CORPORATE) BONDS

Article 28: Investments in short-term financing bills and convertible corporate bonds shall be handled in accordance with the administration of investments in enterprise (corporate) bonds.

Section One: Enterprise (Corporate) Bonds

Article 29: The issuer of an enterprise (corporate) bond invested in by an Insurance Institution shall, in addition to complying with relevant state provisions, meet the following conditions:

(1) have net assets of not less than Rmb2 billion at the end of the preceding year;

(2) have been profitable for the most recent three consecutive accounting years;

(3) have been providing audited financial statements for the most recent three accounting years in a timely manner;

(4) have an outstanding balance of enterprise (corporate) bonds of not more than 40% of the net assets of the enterprise of the most recent accounting year;

(5) the creditworthiness of the guarantor shall not be worse than the credit rating of the issuer;

(6) provides in a timely manner a legal opinion issued by a practising lawyer regarding the disclosure of information;

(7) discloses financial information in a timely manner. The disclosure shall at least include total assets, total liabilities, principal operating income, asset-liability ratio, EBITDA/interest, quick ratio, shareholders' equity earnings ratio, and other indices and data; and

(8) other conditions as specified by the CIRC.

Article 30: An enterprise (corporate) bond invested in by an Insurance Institution shall have a long-term credit rating of AA or above or the equivalent as assessed by a domestic credit rating agency.

Article 31: Enterprise (corporate) bonds invested in by an Insurance Institution shall comply with the following provisions on investment ratios:

(1) the balance of investments in enterprise (corporate) bonds, calculated at cost, shall not exceed 30% of the total assets of the Insurance Institution at the end of the preceding quarter;

(2) the aggregate balance of investments in bonds issued by the same enterprise (company) shall not exceed 10% of the total assets of the Insurance Institution at the end of the preceding quarter;

(3) the investment share in enterprise (corporate) bonds of the same type in the same issue shall not exceed 20% of the issued amount of that type of bonds in that issue, and the balance shall not exceed 5% of the total assets of the Insurance Institution at the end of the preceding quarter, provided that the guarantor meets any of the following conditions and provides an irrevocable guarantee bearing joint and several liability:

i. it is a financial institution having a domestic credit rating of AA or above in the previous year;

ii. it is a special state fund such as a railway construction fund or a Three Gorges construction project fund; or

iii. it is a non-financial enterprise having net assets of Rmb20 billion or more at the end of the preceding year; and

(4) where the guarantor or the form of guarantee does not meet the conditions or provisions specified in Item (3) hereof, the investment share in enterprise (corporate) bonds of the same type in the same issue shall not exceed 10% of the issued amount of that type of bonds in that issue, and the balance shall not exceed 3% of the total assets of the Insurance Institution at the end of the preceding quarter.

Article 32: The CIRC shall formulate separate provisions for investments in unsecured enterprise (corporate) bonds by Insurance Institutions.

Section Two: Convertible Corporate Bonds

Article 33: The issuer of a convertible corporate bond invested in by an Insurance Institution shall, in addition to complying with relevant state provisions, meet the following conditions:

(1) the creditworthiness of the guarantor shall not be worse than the credit rating of the bond issuer; and

(2) it shall provide a clear debt repayment plan and a guarantee contract.

Article 34: Convertible corporate bonds invested in by an Insurance Institution shall comply with the following provisions on investment ratios:

(1) the balance of investments in convertible corporate bonds shall be included in the balance of enterprise (corporate) bonds and the aggregate balance, calculated at cost, shall not exceed 30% of the total assets of the Insurance Institution at the end of the preceding quarter;

(2) the balance of investments in convertible corporate bonds issued by one company shall be included in the balance of bonds of the same enterprise (company) and the aggregate balance shall not exceed 10% of the total assets of the Insurance Institution at the end of the preceding quarter, of which the balance of convertible corporate bonds, calculated at cost, shall not exceed 5% of the total assets of the Insurance Institution at the end of the preceding quarter;

(3) the investment share in convertible corporate bonds in the same issue shall not exceed 20% of the issued amount in that issue, and the balance shall not exceed 3% of the total assets of the Insurance Institution at the end of the preceding quarter, provided that the guarantor meets any of the following conditions:

i. it is a financial institution with a credit rating of AA or above as assessed by a domestic credit rating agency in the previous year; or

ii. it is an enterprise with net assets of Rmb20 billion or more at the end of the preceding year, and

(4) where the guarantor does not meet the conditions specified in Item (3) hereof, the investment share in convertible corporate bonds in the same issue shall not exceed 10% of the issued amount in that issue, and the balance shall not exceed 1% of the total assets of the Insurance Institution at the end of the preceding quarter.

Article 35: Where a convertible corporate bond invested in by an Insurance Institution is converted into a stock, it shall be handled in accordance with the Tentative Measures for the Administration of Stock Investments by Insurance Institutional Investors (Stock Investment Measures).

Section Three: Short-term Financing Bills

Article 36: A short-term financing bill invested in by an Insurance Institution shall be a short-term financing bill issued by a non-financial enterprise on the national inter-bank bond market in accordance with the Measures for the Administration of Short-term Financing Bills and subject to recording filing with the People's Bank of China.

Article 37: The issuer of a short-term financing bill invested in by an Insurance Institution shall, in addition to complying with the conditions specified in the Measures for the Administration of Short-term Financing Bills, meet the following conditions:

(1) have net assets of not less than Rmb2 billion at the end of the preceding year;

(2) have been profitable for the most recent two consecutive accounting years;

(3) have an outstanding balance of short-term financing bills of not more than 40% of the net assets of the enterprise of the most recent accounting year;

(4) disclose financial information in a timely manner. The disclosure shall at least include total assets, total liabilities, principal operating income, asset-liability ratio, EBITDA/interest, quick ratio, shareholders' equity earnings ratio, and other indices and data; and

(5) other conditions as specified by the CIRC.

Article 38: The credit rating of a short-term financing bill invested in by an Insurance Institution shall meet the following conditions:

(1) have a short-term credit rating of A-1 or the equivalent as assessed by a domestic credit rating agency; or

(2) the credit rating and follow-up credit rating of the most recent three years of a listed company that is exempted from credit rating in accordance with the Measures for the Administration of Short-term Financing Bills, shall meet one of the following conditions:

i. have a long-term credit rating of AA or above or the equivalent as assessed by a domestic credit rating agency; or

ii. have a long-term credit rating of BBB or above or the equivalent as assessed by an international credit rating agency.

If an issuer has both a domestic credit rating and international credit rating, the domestic credit rating shall prevail.

Article 39: Short-term financing bills invested in by an Insurance Institution shall comply with the following provisions on investment ratios:

(1) the balance of investments in short-term financing bills shall be included in the balance of enterprise (corporate) bonds and the aggregate balance, calculated at cost, shall not exceed 30% of the total assets of the Insurance Institution at the end of the preceding quarter, of which the balance of short-term financing bills, calculated at cost, shall not exceed 10% of the total assets of the Insurance Institution at the end of the preceding quarter;

(2) the balance of investments in short-term financing bills issued by one enterprise (company) shall be included in the balance of bonds of the same enterprise (company) and the aggregate balance shall not exceed 10% of the total assets of the Insurance Institution at the end of the preceding quarter, of which the balance of short-term financing bills shall not exceed 3% of the total assets of the Insurance Institution at the end of the preceding quarter; and

(3) the investment share in short-term enterprise (corporate) financing bills of the same type in the same issue shall not exceed 10% of the issued amount in that issue, and the balance shall not exceed 3% of the total assets of the Insurance Institution at the end of the preceding quarter.

PART FIVE: RISK CONTROL

Article 40: An Insurance Institution shall, in accordance with the requirements of the Risk Control Guidelines for Utilization of Insurance Funds, establish a sound bond investment risk control system, formulate a scientific, precise and effective business operation flow, and report the same to the CIRC for the record.

Article 41: The bond asset custodian selected by an Insurance Institution shall be a commercial bank or another professional financial institution that meets the conditions specified by the Stock Investment Measures

Article 42: The contents of the bond custody agreement signed between an Insurance Institution and a custodian, the responsibilities and obligations of the custodian, and the regulation of the custodian shall comply with the relevant provisions of the Guidelines for the Custody of Insurance Company Stock Assets (Trial Implementation).

Article 43: An Insurance Institution shall strengthen the risk management of its bond investments; make reasonable arrangements in respect of the term structure, category allocation, credit distribution and liquidity requirements, etc. of its bond investment portfolio; and carry out follow-up management in respect of the asset quality, earnings standard, risk attributes, risk consequence and frequency, etc. of its bond investments. The Insurance Institution shall periodically analyze and evaluate policy risk, credit risk, market risk, liquidity risk and operational risk, and control the overall risk of its bond investments within the bearable range.

Article 44: An Insurance Institution shall establish a credit risk evaluation system for bond issuers and bonds to carry out continuous follow-up evaluation of the creditworthiness of bond issuers and bonds, and such evaluation shall serve as an important basis for making bond investment decisions.

Article 45: An Insurance Institution shall, according to the creditworthiness of a bond issuer and the risk level of the bond, as well as the regulatory standards of the CIRC, set investment limits and adjust the investment limits periodically or when there are changes to the creditworthiness of the bond issuer or the bond.

Article 46: The aggregate balance of investments, calculated at cost, of an Insurance Institution in various bonds (not including government bonds, central bank bills, policy bank financial bonds and policy bank subordinated bonds) issued or secured by the same issuer shall not exceed 20% of the total assets of the Insurance Institution at the end of the preceding quarter.

Article 47: The ratio of investments in commercial bank financial bonds and subordinated bonds and enterprise (corporate) bonds with the investment account established by an Insurance Institution for investment-linked insurance products may be 100% of the total assets of such account at the end of the preceding quarter.

The ratio of investments in commercial bank financial bonds and subordinated bonds and enterprise (corporate) bonds with the investment account established by an Insurance Institution for universal life insurance products may not exceed 80% of the total assets of such account at the end of the preceding quarter.

The ratio of investments in commercial bank financial bonds and subordinated bonds and enterprise (corporate) bonds with the independent account established by an Insurance Institution for other insurance products may not exceed the specific ratios stipulated in the insurance clauses and the relevant provisions of the CIRC.

Article 48: Where the most recent follow-up credit rating of a bond invested in by an Insurance Institution falls, the Insurance Institution shall, in accordance with the relevant provisions of the CIRC, formulate adjustment measures to adjust the investments in such bond to fit the specified ratios within the prescribed time limit.

Article 49: An Insurance Institution shall stop investing in newly or previously issued bonds of an issuer whose bonds it has invested in and shall appropriately dispose of the bonds already held if such issuer:

(1) does not meet the conditions set forth in these Measures as shown by the most recent information;

(2) is unable to repay its principal or interest on time;

(3) is unable to disclose sufficient, accurate and complete relevant information in a timely manner in accordance with provisions;

(4) is unable to carry out follow-up credit rating in accordance with provisions; or

(5) does not meet other conditions specified by the CIRC.

Article 50: When conducting bond repurchase transactions, an Insurance Institution shall effectively control the scale of the repurchase and circumvent liquidity risk.

When conducting bond transactions and repurchase transactions through the seat of a securities institution, an Insurance Institution shall check daily the balance of standard bonds and the repurchase of bonds that have not yet matured to prevent the improper holding and misappropriation of bonds and funds.

When conducting bond repurchase transactions on the inter-bank bond market, an Insurance Institution shall, in accordance with the relevant provisions of the CIRC, establish standards for selecting counterparties. The amount financed from a repurchase shall not be more than the fair market price of the mortgaged bond to prevent credit risk, market risk and moral risk.

Article 51: Where an insurance company entrusts a number of investment management institutions to conduct bond investments, the aggregate balance of such bond investments shall not exceed the investment ratio specified by the CIRC.

Article 52: An insurance asset management company entrusted with the management of the bond assets of a number of insurance companies and other institutions shall, in accordance with the asset allocation requirements of such insurance companies and other institutions, manage the bond assets fairly and impartially.

The total investment ratios in one channel and the investment ratios in a single investment of an insurance asset management company's own funds and funds entrusted to it for management shall be calculated separately.

Article 53: An Insurance Institution shall select a seat of a securities institution that meets the conditions specified in the Stock Investment Measures to conduct bond transactions.

Article 54: An Insurance Institution shall sign a brokerage agreement with the head company of the securities institution. The agreement shall at least specify the obligations of a securities institution as prescribed in the Stock Investment Measures. Where the securities institution violates the relevant obligations and the CIRC requires the Insurance Institution to change the securities institution, the Insurance Institution has the right to terminate the agreement early.

Article 55: The transfer of funds between an Insurance Institution and a bond asset custodian, and the payment of expenses between an Insurance Institution and a securities institution shall be done via transfer between accounts.

Article 56: The following are not allowed between an Insurance Institution and a securities institution or other non-insurance institutions:

(1) lease or lend the various bonds under custody;

(2) sign a bond investment agency agreement;

(3) unlawfully transfer profits, or use other means to transfer benefits, in a direct or disguised manner to seek improper benefits; or

(4) other acts prohibited by laws, administrative regulations or the CIRC.

PART SIX: REGULATION

Article 57: A securities institution that leases a trading seat to an Insurance Institution shall provide to the CIRC materials evidencing its compliance with the conditions set forth in the Stock Investment Measures and a letter of undertaking on the performance of its responsibilities. The CIRC shall, from the aspects of asset scale, corporate governance, internal control, good faith, research capability, market position, etc., carry out an evaluation of the securities institution and issue an examination opinion thereof.

Article 58: An Insurance Institution that opens a securities account or leases a trading seat shall submit to the CIRC a Securities Account Application Form and a Trading Seat Application Form, and after receiving a confirmation letter from the Funds Utilization Regulatory Department of the CIRC, complete the relevant procedures.

Article 59: An Insurance Institution shall, in accordance with provisions, submit to the CIRC the following forms, reports or other items:

(1) forms relevant to bond investments;

(2) methods for calculating risk indices and an explanation of the use thereof;

(3) duplicates of the bond custody agreement and the bond brokerage agreement signed with the custodian and the securities institution; and

(4) other reporting items as required by the CIRC.

Article 60: The CIRC shall, periodically and non-periodically, carry out inspections of the bond investment risk control system, operation flow and credit risk assessment system, etc. of an Insurance Institution, and may appoint an accounting firm and other intermediary organizations to carry out inspections of the bond investments of the Insurance Institution.

Article 61: The CIRC shall formulate separate provisions for the verification of credit rating agencies of bonds that can be invested in by Insurance Institutions. Before the promulgation of such new provisions, the term 'credit rating agency' referred to in these Measures shall mean an enterprise bond credit rating agency approved by the CIRC.

Article 62: The CIRC shall formulate separate provisions for the investment by Insurance Institutions in asset-backed securities, financial bonds issued by non-bank financial institutions, short-term financing bills issued by financial institutions, and other financial products.

Article 63: The CIRC shall formulate separate provisions for the trading by Insurance Institutions in bond forwards and other derivative products.

Article 64: Where an Insurance Institution violates laws, administrative regulations or these Measures in its bond investments, the CIRC shall hold a regulatory discussion with or question the relevant senior management personnel and the principal operation personnel, and may, in serious circumstances, impose administrative penalties in accordance with the law.

Article 65: Where an Insurance Institution violates laws, administrative regulations or these Measures in its bond investments, the CIRC shall restrict the scope of bond investments or suspend the bond investment qualifications of the institution, and impose corresponding penalties in accordance with the relevant regulations.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 66: For the purposes of these Measures, a branch established in China by a foreign insurance company shall be governed as a domestic Insurance Institution legal person.

Article 67: These Measures shall be interpreted by the CIRC. Where prior provisions are inconsistent with these Measures, these Measures shall prevail.

Article 68: These Measures shall be effective as of the date of promulgation.

* Translation provided by Boss & Young, Attorneys at Law, Shanghai. All rights reserved.