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SASAC Procedure

From July 1 2006, any enterprise invested directly by the State-Owned Assets Supervision and Administration Commission (Sasac) will be supervised and managed by Sasac in connection with its investment activities, including fixed assets investment in China, acquisition of property rights and long-term equity investment. This is pursuant to the Supervision and Administration of Investment of Enterprises Invested Directly by Sasac Tentative Procedure (the Procedure), which has been promulgated to lower investment risk and standardize investment activities by state-invested enterprises with the aim to maintain and increase the value of state-owned assets.

Pursuant to the Procedure, an enterprise invested directly by Sasac must prepare an annual investment plan in accordance with its own development strategy and plans. The main investment activities must be outlined in the annual investment plan, including: (i) total investment scale, source and structure of the fund; (ii) the investment scale of the core business and non-core business; and (iii) the content of the investment project, the amount of investment, fund structure, anticipated benefits of investment and the term of implementation. Enterprises must submit the investment plan to Sasac within the prescribed time limit.

Sasac will supervise and manage the enterprises systematically. For wholly state-owned enterprises with a standard board of directors, the investment project should be registered for the record with Sasac according to the annual investment plan. For those without a standard board of directors, the investment projects of the core business should be registered for the record with Sasac according to the annual investment plan, and the investment projects of the none-core business will be approved by Sasac within 20 working days. State-controlled companies must submit their annual investment plan to Sasac.

Zeng Xianwu

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