Guiding Opinion on Further Reform and Enhancement of the System for Offering of New Shares

(1) Reform principles: adhering to a market orientation, promoting greater market determination of the pricing of new shares, placing emphasis on nurturing the market constraint mechanism, spurring offerors, investors, underwriters and other such market entities to fully discharge their duties and placing importance on small and medium investors' desire to participate.

(2) Basic details: with respect to the pricing of new shares, the quote constraint mechanism for price inquiry and subscription is to be improved and administrative guidance is to be diminished so as to further give rise to a market pricing mechanism. With respect to underwriting of offerings, the flexibility of underwriting and private placement is to be increased, the underwriting mechanism is to be rationalised and the constraint on the buyer by the seller and responsibility of the underwriter in offering activities is to be strengthened so as to gradually change over to private placement based entirely on fund amount. Share offering policies are to be revised as appropriate and the volume of tradable shares is to be increased. The online offering mechanism is to be optimised, allocation of shares is to be appropriately tilted toward small and medium investors who intend to subscribe, and situations where subscriptions of new shares are made with huge fund amounts are to be attenuated. The clawback mechanism and the offering suspension mechanism are to be improved. Additionally, risk alerts for new share subscriptions are to be strengthened and the risks of the offering market are to be made clear.

(3) Expected objectives: (i) optimisation of the market price discovery function, and strengthening of the intrinsic mechanism of checks and balances between buyers and sellers; (ii) enhancement of the effectiveness of the private placement mechanism, attenuation of situations where subscriptions of new shares are made with huge fund amounts and enhancement of the quality and efficiency of offers; (iii) subject to the clarification of risks, placement of importance on the desire of small and medium investors to participate and an appropriate tilt toward small and medium investors who intend to subscribe new shares; and (iv) intensification of risk alerts and enhancement of the awareness of the risks of the primary markets.

2. Near-term reform measures

The system for offering of new shares is wide in reach and has a great impact. In order to ensure the steady advance of the reform, we intend to put forward the various reform measures in stages, by a method that involves step by step implementation and gradual improvement. At present, we principally put forward the following four measures:

(1) Enhancement of the quote constraint mechanism for price inquiry and subscription so as to give rise to a more market-oriented pricing mechanism: price inquiry subjects shall give true quotes, price inquiry quotes and subscription quotes shall be logically consistent and the lead underwriters shall take measures to prevent phenomena such as high quotes without buying and low quotes with buying high. An offeror and its lead underwriter shall reasonably set the minimum subscription quantity for each subscription based on the size of the offering and market conditions. The use of any proceeds exceeding those required for the project that result from the final price exceeding the anticipated price shall be disclosed by the offeror in advance in the prospectus.

(2) Optimisation of the online offering mechanism and separation of the participants in offline and online subscriptions: for each stock offering, any one private placement target may opt to subscribe the new shares either offline or online, but not both. All private placement targets that participated in the offline offering of a quote, subscription or private placement of said stock may not participate in the online subscription thereof.

(3) Setting of a ceiling on individual online subscription accounts: an offeror and its lead underwriter shall reasonably set the subscription ceiling on individual online subscription accounts based on the size of an offering and market conditions, which, in principle, shall not exceed one-thousandth of the number of shares to be offered online. A single investor may use only one qualified account to subscribe for new shares.

(4) Strengthening of risk alerts for new share subscriptions and alerting all participants to be aware of the market risks: the offeror and its lead underwriter shall publish a special announcement on the risks involved in the investment in the new shares that fully discloses the risks of the primary market and reminds investors to rationally assess the feasibility of investing in the company. Securities dealing organisations shall take measures to alert investors as to the risks involved in subscribing for the new shares.

Other reform measures will be put forward as appropriate based on a full account being taken of the speed of market development, the force of reform and the bearing capacity of the market.

3. Due implementation of the reform measures

The reform of the system for offering of new shares requires the close co-operation of all market participants, and the market parties shall improve their familiarity therewith, formulate appropriate programmes, plan carefully, and duly implement the various reform requirements.

Offerors shall form a correct conception of offerings and listings, actively perform their information disclosure obligations, strengthen management of proceeds, enhance the level of business operations of listed companies and safeguard the lawful rights and interests of shareholders.

Underwriters (sponsors) and other securities companies shall act with due diligence and in good faith and, in their business activities, safeguard the long-term interests and fundamental interests of the buyers and sellers. In their specific work they shall improve and make appropriate their organisations, personnel, systems and technology and continuously enhance their professional service capabilities.

Price inquiry subjects shall perform their function as professional organisations; carefully, prudently and professionally understand the information; analyse, study, arrive at a determination and rationally set prices; and thereby give rise to a rational guide for the market.

Investors shall pay close attention to the risk factors inherent in market determination of prices, be aware that, after listing, certain shares may drop below the offering price, duly raise their risk awareness, strengthen their conception of value investment and avoid blind speculation.

Relevant self-regulation organisations shall actively take measures to duly strengthen self-regulatory management of, and services to, underwriters, price inquiry subjects, private placement targets and securities companies that participate in offerings of new shares.