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    China's Securities and Futures Markets China's Securities and Futures Markets Document Transcript

    • CHINA’S SECURITIES AND FUTURES MARKETS China Securities Regulatory Commission April 2004 NOTE: All rights reserved by China Securities Regulatory Commission (CSRC). Unauthorized publication or use without prior consent of the CSRC is strictly prohibited. The information contained herein is for references only and subject to changes from time to time. The CSRC shall not be liable for any consequences arising from persons using this brochure in any way. 1
    • CONTENTS I. OVERVIEW....................................................................................................................5 II. STOCK MARKET..........................................................................................................9 III. OVERSEAS LISTING................................................................................................21 IV. LISTED COMPANIES..................................................................................................23 V. MARKET INTERMEDIARIES.......................................................................................27 VI. SECURITIES INVESTMENT FUNDS.......................................................................28 VII. BOND MARKET.......................................................................................................30 VIII. FUTURES MARKET...............................................................................................33 IX. LEGAL FRAMEWORK..............................................................................................37 X. CHINA SECURITIES REGULATORY COMMISSION................................................42 XI. INTERNATIONAL EXCHANGE AND COOPERATION ............................................45 XII. CHINA SECURITIES DEPOSITORY AND CLEARING CORPORATION LTD. ......46 XIII. SECURITIES ASSOCIATION OF CHINA (SAC).....................................................50 XIV. CHINA FUTURES ASSOCIATION..........................................................................52 XV. STOCK EXCHANGES.............................................................................................53 XVI. FUTURES EXCHANGES ......................................................................................55 ANNEX: CONTACT INFORMATION OF RELEVANT INSTITUTIONS............................58 2
    • DIAGRAM LIST TABLE 1-1 SUMMARY OF CHINA’S SECURITIES AND FUTURES MARKETS (1992-2003) 8 TABLE 2-1 SUMMARY OF CAPITAL RAISED BY A SHARES (1991-2003).................14 TABLE 2-2  B SHARE MARKET SUMMARY (1992-2003)...........................................17 TABLE 2-3 RATIO OF MARKET CAPITALIZATION TO GDP (1992-2003) ..................19 FIGURE 2-1   COMPARISON OF MARKET CAPITALIZATION, MARKET CAPITALIZATION OF TRADABLE SHARES AND TURNOVER (1992-2003)........................................................19 TABLE 3-1 SUMMARY OF RAISED CAPITAL BY H SHARES(1993 -2003).............22 TABLE 3-2 EQUITY STRUCTURE OF COMPANIES ISSUING H SHARES................22 (AS OF DECEMBER 2003)..............................................................................................22 TABLE 4-1 NUMBER OF LISTED COMPANIES (1990-2003)......................................23 TABLE 4-2 NUMBER OF LISTED COMPANIES BY SHARE CAPITAL IN 2003.............23 TABLE 4-3 REGIONAL AND INDUSTRIAL DISTRIBUTION OF LISTED COMPANIES 24 (AS OF THE END OF DECEMBER 2003).......................................................................24 TABLE 4-4   TRADABLE SHARES AND NON-TRADABLE SHARES OF DOMESTICALLY LISTED COMPANIES (1992-2003)............................................................................................26 TABLE 5-1 NUMBER OF SECURITIES AND FUTURES INTERMEDIARIES (1994-2003).27 TABLE 6-1  SUMMARY OF SECURITIES INVESTMENT ACCOUNTS (1993-2003). .28 TABLE 6-2  A-SHARE SECURITIES INVESTMENT ACCOUNTS COMPOSITION IN 200328 TABLE 6-3  INVESTMENT FUNDS ISSUANCE SUMMARY (1998-2003)...................29 TABLE 7-1 EXCHANGE BOND MARKET TRADING SUMMARY (1995-2003)............32 TABLE 8-1 FUTURES TRADING SUMMARY (1993-2003)...........................................34 FIGURE 8-1 FUTURES TRADING VOLUME AND TURNOVER(1993-2003)..........34 FIGURE 8-2   TRADING SUMMARY OF AGRICULTURAL PRODUCTS AND METALS FUTURES IN 2003.....................................................................................................................36 FIGURE 10-1 ORGANIZATIONAL CHART OF THE CSRC..........................................44 TABLE 11-1  LIST OF MOUS SIGNED BY THE CSRC WITH OVERSEAS AUTHORITIES. 46 3
    • ( AS OF DECEMBER 2003).............................................................................................46 FIGURE 12-1 A-SHARE CLEARING AND DELIVERY FLOW CHART ........................47 4
    • I. Overview China’s securities and futures markets1 have been developing since the 1980s, in tandem with the market reforms and the liberalization of the country’s economy. In July 1981, issuance of treasury bonds was resumed in Mainland China. Six years later, a secondary market for the trading of treasury bonds was established. By the mid-1980s, enterprises started to issue corporate bonds and shares to public. In December 1990, the Shanghai Stock Exchange and Shenzhen Stock Exchange were established. China Securities Regulatory Commission (CSRC) is the sole national securities regulatory body. It was mandated in October 1992 to regulate all of China’s securities and futures markets. At present, China’s securities market offers seven types of financial instruments, including: A shares2, B shares3, treasury bonds, treasure bond repurchases, corporate bonds, convertible bonds and securities investment funds. As of the end of December 2003, some market indicators were as follows:  1,287 listed companies (issuing A shares and/or B shares);  total market capitalization of RMB 4,245.8 billion yuan with the market capitalization of tradable shares at RMB 1,317.9 billion yuan;  total trading volume of 416.3 billion shares; total turnover of 3,211.5 billion yuan, 14.74% higher than the year 2002; the turnover per day was RMB 13.3 billion yuan, an increase of 12.84% over the year 2002;  Shanghai Composite Index and Shenzhen Component Index rose by 10.27% and 26.11% respectively on a year-on-year basis;  Issuance of RMB 628 billion yuan of treasury bonds and RMB 35.8 billion yuan of corporate bonds respectively;  Turnovers for treasury bonds trading in the spot market and bond repurchases were RMB 575.6 billion yuan and RMB 5,300 billion yuan respectively;  69.93 million securities investment accounts; 1 In this brochure China refers to the Mainland of the People’s Republic of China, excluding Hong Kong SAR, Macao SAR and Taiwan region. 2 Common shares denominated in RMB 3 Domestically listed common shares quoted in US dollars or HK dollars. 5
    •  133 securities companies with total assets of RMB 561.8 billion;  34 fund management companies running 54 closed-end funds and 56 open-end funds with net assets of RMB 169.9 billion yuan under management. Insurance companies are allowed to invest in the securities market indirectly via purchasing securities investment funds. The Social Security Fund can entrust approved asset management institutions to invest in the securities market on its behalf. The offering and trading of stocks and close-end investment fund units are dematerialized, with the trading and settlement procedures standardized across the market for all participants. Currently, there are three futures exchanges and 186 futures brokerage companies in China. Twelve types of commodity futures, mainly agricultural products and metals, are traded on the futures exchanges. In 2003, the trading volume and turnover of commodity futures amounted to 279.86 million lots and RMB 10,838.7 billion yuan respectively (in two-way calculation). As the CSRC was developing the domestic securities and futures markets, it also encouraged domestic companies to enter international capital markets. As of the end of December 2003, a total of 93 domestic companies had listed overseas, raising 27.1 billion US dollars in total. Among them, 18 companies including big companies like People's Insurance Company of China (PICC), Sinotrans, Chinalife and Avichina were newly listed in overseas stock markets in 2003. After its accession into WTO, China has been fulfilling all its commitments. As of December 2003, two joint venture securities companies and eight joint venture fund management companies had been set up and another three joint venture fund management companies were in preparatory stage. In addition, China has been making efforts to further open up and attract foreign investment to its capital market. In December 2002, China launched the Qualified Foreign Institutional Investor (QFII) scheme, which opened up China’s domestic A shares market to overseas investors. As of December 2003, twelve overseas financial institutions had obtained QFII licenses with a total investment quota of USD1.7 billion, and eleven banks (including four overseas banks) were licensed as the QFIIs’ custodians. 6
    • The CSRC has adopted a series of measures to promote the protection of investors’ interests and the development of the securities market, including: a market-oriented public offering review and approval system, i.e. the sponsor system; more rigorous corporate governance initiatives for listed companies; introduction of compulsory independent directors in listed companies; reforms on domestic accounting standards and information disclosure in order to enhance market transparency; measures to improve the performance of listed companies and measures to refine the delisting mechanism. In addition, the CSRC has carried out investor education programs to heighten retail investors’ awareness of risks, to encourage the growth of institutional investors. Efforts are put to develop bond market and futures market actively and properly, to strengthen its supervision of the markets, and to investigate and prosecute market misconducts. On February 1, 2004, China’s State Council issued the Guidelines on Promoting Reform, Opening-up and Steady Development of China’s Capital Market. The Guidelines sums up the experiences of China’s capital market in the past decade and points out the direction of future development. As a blueprint and a principle document, it is of far-reaching historical significance in ensuring the harmonized, sound and steady development of China’s capital market. The capital market in China has been developing rapidly since 1992 with remarkable progresses in market size, infrastructure buildup, legal framework and market maturity. It has now become a key component of China’s socialist market economy and played a vital role in the reform and development of state-owned enterprises (SOEs), in mobilizing resources, in facilitating structural adjustment and economic growth. 7
    • Table 1-1 Summary of China’s Securities and Futures Markets (1992-2003)4   1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total shares issued (100 million shares) 68.87 387.73 684.54 848.42 1219.54 1942.67 2526.79 3088.95 3791.71 5218.01 5875.45 6428.46 Tradable shares (100 million shares) 21.18 107.88 226.04 301.46 429.85 671.44 861.94 1079.65 1354.26 1813.17 2036.9 2269.92 Total capital raised (RMB 100 million yuan) 94.09 375.47 326.78 150.32 425.08 1293.82 841.52 944.56 2103.08 1252.34 961.75 1357.75 Total stock market cap. (RMB 100 million 1048.1 yuan) 3531.01 3690.61 3474.28 9842.38 17529.24 19505.64 26471.17 48090.94 43522.2 38329.12 42457.72 3 Market cap. of tradable shares (RMB 100 million yuan)   861.62 968.89 938.22 2867.03 5204.42 5745.59 8213.97 16087.52 14463.17 12484.55 13178.51 Total stock trading volume (100 million shares) 37.95 234.22 2013.34 705.47 2533.14 2560.79 2154.11 2932.39 4758.4 3152.29 3016.19 4163.08 Total stock turnover (RMB 100 million yuan) 681.25 3667.02 8127.63 4036.47 21332.16 30721.84 23544.25 31319.6 60826.65 38305.18 27990.46 32115.27 Number of listed companies-A、 shares B 53 183 291 323 530 745 851 949 1088 1160 1224 1287 Number of stock investment accounts (10,000) 216.65 777.66 1058.98 1242.47 2307.23 3333.33 3911.13 4481.19 5801.14 6650.42 6881.76 6992.66 T-bonds Issued (RMB 100 million yuan) 460.78 381.31 1137.55 1510.86 1847.77 2411.79 3808.77 4015 4657 4884 5934.3 6280.1 Corporate bonds Issued (RMB 100 million yuan) 683.71 235.84 161.75 300.8 268.92 255.23 147.89 158.2 83 147 325 358 Bonds trading volume (1 million lots)       1006.61 1742.97 1617.32 2031.61 1707.16 1979.79 2047.07 3292.52 6201.94 Bonds turnover (RMB 100 million yuan)         18039.35 16476.89 21661.78 18284.12 19119.16 20417.76 33249.53 62136.36 T- bond spot turnover (RMB 100 million yuan) 7.1276 61.02 468.37 775.2 5029.24 3582.75 6059.95 5300.87 4157.49 4815.59 8708.68 5756.11 T- bond repurchase turnover (RMB 100 million yuan) 0 0.42 75.78 1248.52 13008.64 12876.06 15540.84 12890.53 14733.68 15487.63 24419.64 52999.85 Futures trading volume (1 million lots)   8.91 121.11 636.12 342.57 158.76 104.46 73.64 54.61 120.46 139.43 279.92 Futures turnover (RMB 100 million yuan)   5521.99 31601.41 100565 84119.16 61170.66 36967.24 22343.01 16082.29 30144.98 39490.28 108396.59 Number of securities investment funds             6 22 34 51 71 110 Total units of securities investment funds (100 million)             120 510 562 804.23 1318.85 1699.22 Turnover of closed-end funds(RMB 100 million yuan)             555.33 1623.12 2465.79 2561.88 1166.58 682.25 4 All data in this brochure are sourced from China Securities and Futures Statistical Yearbook (2004). Blanks in the charts represent that data are not available or existing. For the data related to shares, both A shares and B shares are covered. -8-
    • II. STOCK MARKET 1.Public Offerings of A Shares Companies applying for the public offering and listing of A shares have to meet the requirements stipulated in the Company Law, Securities Law, Provisional Regulations on the Administration of Issuing and Trading of Stocks, and all other relevant laws and regulations and submit their applications to the CSRC for scrutiny. These laws and regulations set forth in detail the requirements for both initial public offerings (IPOs) and any followup public offerings. As of December 2003, listed companies in Mainland China had issued a total of 580.8 billion A shares and raised a total of RMB 761.7 billion yuan. The market capitalization of A share companies amounted to RMB 4,152.1 billion yuan, of which the market capitalization of tradable shares was RMB 1,230.6 billion yuan. For information on summary of capital raised by A shares, please see Table 2-1. Initial Public Offerings (IPOs) A joint-stock company that applies for an offering of A shares to the public and listing on the stock exchanges shall meet the following requirements: (1) the previous issue of shares has been fully subscribed and at least one year has elapsed since that issue; (2) the company has been continuously profitable for the last three years and is able to pay dividends to its shareholders; -9-
    • (3) the projected profit of the company equals or exceeds the interest rates on bank deposits; (4) its production and operations are consistent with state industrial policy; (5) the capital contributions by promoters shall not be less than RMB 30 million, except as otherwise specified by the state; (6) the company's shares already issued to the public account for over 25% of the company's total share i.e. public float of 25%; but if the company's total share capital exceeds RMB 400 million yuan, public float may be reduced to not less than 15% of the company's total shares; (7) the company's total share capital is not less than RMB 50 million yuan; (8) during the last three years, the company has not breached any significant regulations and the company's financial statements have not been found to contain any false information; (9) the intangible assets of the company shall account for no more than 20% of its net assets before its IPO; and (10) other conditions as may be specified by the State Council or the CSRC. In accordance with laws and regulations, applications for the public offerings of shares must be submitted to the CSRC for approval. Prior to application, joint-stock companies intending to issue shares in China’s domestic market must retain a qualified sponsor to coach the companies. The coaching period shall not be less than one year. After the guidance period, with the recommendation of the sponsor, these companies may then submit the application documents to the CSRC. The Public Offering Supervision Department of the CSRC carries out detailed reviews, and in turn submits their - 10 -
    • applications to the Public Offering Review Committee for its consideration. The Public Offering Review Committee is composed of 25 members, including 5 CSRC staffs and 20 external experts (some of them are full-time members). It was established in accordance with Chapter 14 of the Securities Law and Interim Measures on the Public Offering Review Committee of the CSRC. The tenure of the committee member is one year and the consecutive tenure shall be no more than 3 terms. The Public Offering Review Committee is responsible for making a recommendation on the listing applications to the CSRC. In practice, the recommendations by the Public Offering Review Committee have, by and large, been adopted by the CSRC. Therefore, the Public Offering Review Committee is the de-facto decision making body for public offering applications. Issuers, together with their underwriters, very often conduct both real roadshows and virtual roadshows via the Internet. Generally, price discovery exercises will be conducted over the net as well. Actual subscriptions to an IPO are usually done by public subscriptions, although there were instances where placements to strategic institutional investors were allowed as part of the IPOs. In those cases, the IPOs were fairly sizable and the strategic investors agreed with lock-up periods. All public subscriptions are done electronically over the net, and there are essentially two methods: (i) straight public tender; (ii) based on the investors’ secondary market holding as a percentage of total market shares. The different methods are designed to give due regard to retail investors’ interests while balancing the needs of institutional investors. The issue price is determined by consultation between the issuer and its underwriters and then reported to the CSRC for - 11 -
    • approval. 67 companies made IPOs in 2003, raising RMB 45.4 billion yuan in total. Rights Issues and Followup Offerings by Listed Companies Listed companies can issue new shares to the public by offering rights to existing shareholders (hereinafter referred to “rights issue”) or by offering additional shares to the public (hereinafter referred to as “followup offering”). According to the Measures on the Administration of New Shares Issuance by Listed Companies, a listed company applying for new share offering shall meet the following requirements, in addition to the other relevant provisions stipulated in the Company Law and Securities Law: (1) has sound corporate governance practices, operates independently from its major shareholders (or other connected entities) in terms of management, assets and financial affairs, ensuring that the listed company’s financial affairs as well as assets are properly segregated; (2) the Articles of Association of the listed company comply with the Company Law and Guidelines for Articles of Association of Listed Companies; (3) the giving of notices for shareholders’ meetings, the convening of the meetings, the proposing of resolutions and the voting at the shareholders’ general meeting are all in accordance with the Company Law and other relevant regulations; (4) the capital raised shall be used in a manner compliant with state industrial policy; (5) in principle, the capital raised in the new issue shall not exceed the amount for - 12 -
    • investment projects approved by the shareholders at its general meeting; (6) the major shareholders and its connected parties have not misappropriated any capital or assets of the listed company. There had been no connected transactions that were prejudicial to the interests of the listed company or its minority shareholders; (7) all major purchases or sales of the company’s assets are in compliance with the CSRC’s applicable regulations; (8) other conditions as may be specified by the CSRC from time to time. In 2003, 25 listed companies completed rights issues and another 17 offered new shares by followup offerings, raising RMB 7.5 billion yuan and RMB 11.1 billion yuan respectively. - 13 -
    • Table 2-1 Summary of Capital Raised by A Shares (1991-2003) RMB 100 million yuan 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total Total capital raised by A 5.00 50.00 276.41 99.78 85.51 294.34 825.92 778.02 893.6 1527.03 1182.13 779.75 819.56 7617.05 shares via IPO 5.00 50.00 194.83 49.62 22.68 224.45 655.06 409.09 497.88 812.37 534.29 516.96 453.51 4425.74 rights issue               30.46 59.75 166.70 217.21 164.68 110.66 749.46 followup offering   81.58 50.16 62.83 69.89 170.86 334.97 320.97 519.46 430.63 56.61 74.79 2172.75 convertible bond               3.50 15.00 28.50 0.00 41.50 180.60 269.10 - 14 -
    • 2. B Shares Market B shares are shares issued by joint-stock companies registered in China and listed on the domestic stock exchanges. The face value of all B shares is denominated in RMB, but B shares are subscribed and traded in foreign currencies. Since 1992, B shares have been issued and traded on both Shanghai and Shenzhen Stock Exchanges. B shares are subscribed and traded in US dollars on Shanghai Stock Exchange and in HK dollars on Shenzhen Stock Exchange. B shares allow Chinese companies to raise foreign currency from both Chinese and overseas investors. The B-share market was China’s first step to internationalize its securities markets. In accordance with the State Council Rule Regarding the Domestic Listing of Foreign Owned Shares (25 December 1995, the State Council), B-share issuers are expected to meet the following requirements: (1) the capital raised by issuing B shares shall be used in a manner consistent with state industrial policy; (2) comply with regulations regarding fixed-asset investments; (3) comply with regulations regarding foreign investments; (4) the joint-stock company shall be set up with at least 5 promoters, with more than half of the promoters being located in China. The promoters must hold at least 35% of the issued shares at the time when the company is set up; (5) the capital contributions by promoters shall not be less than RMB 150 million yuan; (6) the company must maintain a public float in excess of 25% of the company's total shares; however, if the company's total share capital exceeds RMB 400 million yuan, the public float may be reduced to not less than 15% of the company's total shares; (7) Neither (a) any predecessor entity (entities) of which the joint-stock company was part of; nor (b) any major promoter who is also a state-owned enterprise, had committed any significant breaches against the law over the last three years; (8) both (a) and (b) in paragraph (7) above have been continuously profitable for the last - 11 – -
    • three years; (9) other requirements as stipulated by the CSRC from time to time. The CSRC vets the B-share offering applications in accordance with the Company Law, the Securities Law and the State Council Rule Regarding the Domestic Listing of Foreign Owned Shares. Domestic and overseas securities companies designated by the CSRC may trade B shares on the Shanghai Stock Exchange and Shenzhen Stock Exchange. Since 1994, B shares trading seats have been set up in both domestic stock exchanges. On 19 February 2001, the CSRC promulgated the Notice Regarding B-share Investment by Chinese Citizens , which allowed domestic individual investors to open B-share accounts and trade B shares in foreign currency. As of December 2003, 111 companies had issued a total of 19 billion B shares, raising RMB 35.6 billion yuan. For more information on B shares market, please refer to Table 2-2. - 16 -
    • Table 2-2  B Share Market Summary (1992-2003) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Number of B share 9 19 24 34 43 51 54 108 114 112 111 111 companies Market cap. of B share companies 70.06 213.86 174.58 163.70 393.83 375.04 206.36 303.55 635.19 1276.65 802.57 937.23 (RMB 100 million yuan) Market cap. of tradable B shares 51.23 178.60 155.02 147.28 353.02 348.34 195.58 276.50 563.31 1118.28 765.81 872.60 (RMB 100 million yuan) Trading volume of B shares 4.02 17.40 25.32 24.24 68.22 88.72 61.60 122.64 200.36 688.88 156.70 170.80 (100 million shares) Turnover of B shares (RMB 100 million 31.23 104.66 124.55 77.87 279.88 426.62 126.53 270.05 547.97 5063.13 848.42 845.30 yuan) - 11 – -
    • 3. Share Trading In accordance with Chapter 3 of Securities Law, securities are quoted and traded on legally established stock exchanges. An open, centralized bidding method is adopted for securities trading based on the principle of “price precedence and time precedence”. Shanghai Stock Exchange and Shenzhen Stock Exchange, together with their members, provide venues and services for the trading of securities. The registration and clearing of securities have been centralized and standardized nationwide through China Securities Depository and Clearing Corporation Ltd. (CSDCC). Before trading on a stock exchange, an investor must place all the securities into an account opened with the CSDCC. Investors purchase or sell securities through securities companies. The commissions paid to securities companies shall be no more than 3‰ of the trading value (but no less than the total amount of the trading regulatory fee and the charges by the stock exchanges). Furthermore, according to the prevailing taxation law, investors are levied a stamp duty of 2‰ of the trading value when they trade stocks. At present, Special Treatment Shares (shares of listed companies in poor financial or operating conditions) are subject to the daily price limit of ±5%, and all other shares are subject to the daily price limit of ±10%. Block trading is introduced for large-volume stock transactions of no less than 500,000 A shares. Stock exchanges can change the minimum requirements on block trading based on market conditions. As at December 31, 2003, the total market capitalization was RMB 4,245.8 billion yuan, comprising of RMB 4,152.1 billion yuan for A shares and RMB 93.7 billion yuan for B shares. This was equivalent to 36.38% of the 2003 GDP. The market capitalization of tradable shares was RMB 1,317.9 billion yuan (comprising of RMB 1,230.6 billion yuan for A shares and RMB 87.3 billion yuan for B shares), which is equivalent to 11.29% of the 2003 GDP. In 2003, the total trading volume was 416.3 billion shares, including 17.1 billion for B shares. Annual market turnover reached RMB 3,211.5 billion yuan, including RMB 84.5 billion yuan for B shares (For more detailed information, please refer to Table 2-3 and Figure 2-1). - 11 – -
    • Table 2-3 Ratio of Market Capitalization to GDP (1992-2003) RMB 100 million yuan Market Market capitalization Tradable capitalization Market of tradable shares GDP capitalization∕ capitalization∕ GDP GDP (A and B shares) (A and B shares) 1992 26638.10 1048.13 3.93% 1993 34634.40 3531.01 10.20% 1994 46759.40 3690.61 7.89% 964.82 2.06% 1995 58478.10 3474.28 5.94% 937.94 1.60% 1996 67884.60 9842.38 14.50% 2867.03 4.22% 1997 74772.40 17529.24 23.44% 5204.43 6.96% 1998 79552.80 19505.64 24.52% 5745.59 7.22% 1999 82054.00 26471.17 31.82% 8213.97 9.87% 2000 89404.00 48090.94 53.79% 16087.52 17.99% 2001 95933.00 43522.20 45.37% 14463.16 15.08% 2002 102398.00 38329.12 37.43% 12484.55 12.19% 2003 116694.00 42457.71 36.38% 13178.51 11.29% On June 12, 2001, with the approval of the CSRC, Securities Association of China (SAC) promulgated Provisional Measures on Agency Share Transfer Services by the Securities Companies, which marked the beginning of the Agency Share Transfer System (ASTS). The ASTS is an independent system where securities companies provide share transfer services for the non-listed joint-stock companies. The first company in ASTS was quoted on July 16, 2001 and share transfer of delisted companies was introduced into the ASTS since August 29, 2002. Figure 2-1 Comparison of Market Capitalization, Market Capitalization of Tradable Shares and Turnover (1992-2003) - 19 -
    • RMB 100 Million yuan 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total market capitalization Market capitalization of tradable shares Turnover - 20 -
    • III. Overseas Listing On July 15, 1993, Tsingtao Brewery Co. Ltd. was successfully listed in Hong Kong, which represented the first overseas listing by a Chinese enterprise. As of the end of December 2003, a total of 93 domestic companies5 had issued shares overseas, raising 27.1 billion US dollars in total (see Table 3-1). 76 of them were listed only on the Hong Kong Exchanges and Clearing Ltd. (including 28 listed on Growth Enterprise Market); 12 dually-listed in Hong Kong and New York; 3 dually-listed in both Hong Kong and London; 1 triply-listed in Hong Kong, New York and London; and 1 singly listed in Singapore. Table 3-2 shows the equity structure of companies listed overseas as of the end of December 31, 2003. In the past, the Chinese companies listed overseas were mostly large SOEs that were of vital importance to the national economy. Recently, with more and more small and medium-sized enterprises (SMEs), particularly privately owned enterprises, listing and issuing shares overseas, the ownership structure and industry sector of the listed Chinese companies have become truly diversified. With oversea listings, not only have Chinese companies been able to raise a significant amount of capital, but they have also optimized their capital structure and improved their corporate governance practices. These companies clearly exhibit a higher degree of transparency and compliance. 5 Including 30 companies which issued both A shares on domestic stock exchanges and H shares on overseas exchanges. - 21 -
    • Table 3-1 Summary of Raised Capital by H Shares(1993 -2003) 100 million US dollars No. of IPO No. of Followup offering No. of Convertible bond Raised Capital 1993 6     10.49 1994 11     22.34 1995 2 1   3.79 1996 6 1 1 12.12 1997 17 2 2 46.85 1998 1 2   4.57 1999 3     5.69 2000 5     67.90 2001 8 1   8.82 2002 16 1   23.23 2003 18 3 2 64.92 Total 93 11 5 270.71 Table 3-2 Equity Structure of Companies Issuing H Shares (As of December 2003) RMB 100 million yuan Companies only issuing   H shares Companies issuing both H shares and A shares Total State-owned shares 2,992.97 1,052.61 4,045.58 Other domestic 34.25 16.88 51.13 investors-owned shares H shares 608.83 378.07 986.90 A shares 98.20 98.20 Total 3,165.97 1,483.88 4,649.85 Note:For the 26 H share companies listed on Hong Kong Growth Enterprise Market, the par value per share is RMB 0.1 yuan; for all other companies, the par value per share is RMB 1 yuan. - 22 -
    • IV. Listed Companies As of December 2003, 1,287 companies were listed, of which 1,146 companies issuing A shares only, 24 companies issuing B shares only, 87 companies issuing both A shares and B shares, and 30 companies issuing both A and H shares (see Table 4-1 and 4-2). Table 4-1 Number of Listed Companies (1990-2003) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Issuing A shares only 227 242 431 627 727 822 955 1025 1085 1146 Issuing A and H shares 6 11 14 17 18 19 19 23 28 30 Issuing A and B shares 54 58 69 76 80 82 86 88 87 87 Issuing B shares only 4 12 16 25 26 26 28 24 24 24 Total 291 323 530 745 851 949 1088 1160 1224 1287 Table 4-2 Number of Listed Companies by Share Capital in 2003 Share Capital Shanghai Shenzhen Total Below RMB 100 million yuan 55 19 74 RMB 100-200 million yuan 240 137 377 RMB 200-300 million yuan 164 135 299 RMB 300-500 million yuan 180 129 309 RMB 500-1,000 million yuan 85 62 147 More than RMB 1 billion yuan 56 25 81 Total 780 507 1287 Listed companies are drawn from different parts of Mainland China and industry sectors. Most of early listed companies were in real estate, general commerce, and miscellaneous businesses. Now, listed companies are drawn from different sectors of the economy: resources industry, infrastructure sector, industrial production--just to name a few. There are listed companies in machinery, metallurgy, chemicals, electronics, transportation, energy, etc. In recent years, an increasing number of commercial banks and securities companies have gone public as well. The listed companies now reflect the full spectrum of production and service industries in China’s economy (see Table 4-3). As of December 2003, a total of 642.8 billion shares were outstanding, of which 226.8 billion - 23 -
    • were tradable shares, which represented 35.38% of the total shares (see Table 4-4). According to Securities Law and other requirements released by the CSRC, listed companies shall disclose the following information: prospectus, listing announcements, quarterly report, interim report, annual report and ad hoc report, etc. Table 4-3 Regional and Industrial Distribution of Listed Companies (As of the end of December 2003) - 24 -
    •   1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Total Beijing 3 1 3 2 0 0 4 1 3 10 3 2 3 3 3 12 8 2 3 8 2 0 76 Tianjin 0 2 0 0 0 0 1 0 1 3 3 1 0 0 4 1 1 0 2 3 0 1 23 Hebei 0 1 2 2 0 0 9 2 9 3 1 0 1 0 0 0 1 0 0 0 0 1 32 Shanxi 0 4 1 0 0 0 5 0 5 1 1 0 2 0 0 1 1 0 0 0 0 0 21 Inner 20 Mongolia 0 2 4 3 0 0 4 0 3 1 0 0 2 0 0 0 1 0 0 0 0 0 Liaoning 0 1 2 2 0 1 6 2 6 8 3 1 4 2 3 1 5 1 3 2 0 4 57 Jilin 1 0 2 0 0 2 3 1 2 4 5 1 2 1 2 1 4 0 1 0 0 2 34 Heilongjiang 1 0 2 0 1 3 6 1 2 4 2 0 2 1 1 3 1 0 0 0 0 3 33 Shanghai 1 1 4 9 0 1 11 7 6 19 4 3 4 4 7 8 16 2 9 6 3 19 144 Jiangsu 1 0 2 10 0 1 13 2 3 16 5 0 0 0 3 9 6 0 4 2 0 4 81 Zhejiang 0 0 2 7 0 1 4 6 2 7 6 3 2 2 2 8 9 0 1 1 1 2 66 Anhui 1 0 3 1 0 2 2 3 5 10 1 1 1 1 2 0 1 0 0 1 0 1 36 Fujian 1 0 1 0 0 2 1 5 4 8 1 0 1 1 3 4 3 0 1 0 0 7 43 Jiangxi 1 0 0 0 0 1 4 2 4 7 1 0 1 0 2 0 0 0 0 0 0 0 23 Shandong 2 3 3 5 0 2 13 4 7 11 4 0 0 0 1 4 5 0 0 1 0 4 69 Henan 0 2 3 1 0 1 3 2 7 5 3 0 2 0 1 0 1 0 0 0 0 0 31 Hubei 1 0 1 4 0 0 12 2 6 10 2 1 4 1 0 2 7 0 0 0 1 4 58 Hunan 4 0 3 1 0 0 5 1 2 7 2 1 1 0 1 3 2 0 0 4 1 1 39 Guangdong 2 0 1 4 0 1 5 4 5 11 5 1 7 0 4 2 1 0 2 3 0 6 64 Guangxi 0 0 2 0 0 0 3 1 0 1 3 0 1 0 2 1 1 0 1 2 0 3 21 Hainan 1 0 1 2 0 0 0 0 1 1 1 0 0 1 3 0 1 0 2 1 0 6 21 Chongqing 0 0 1 0 0 0 3 1 2 5 4 0 3 1 3 1 1 0 1 0 0 0 26 Sichuan 2 0 5 3 0 3 6 5 10 7 2 0 4 3 0 3 4 0 1 1 2 1 62 Guizhou 0 1 1 0 0 0 4 2 1 3 0 0 0 0 0 0 0 0 1 0 0 1 14 Yunnan 1 0 1 0 0 1 3 0 5 2 2 0 0 0 0 1 2 0 0 0 0 1 19 Tibet 0 1 1 0 0 0 0 0 0 1 1 0 0 0 1 0 1 0 0 2 0 0 8 Shaanxi 1 0 0 0 0 1 0 3 3 5 1 1 0 0 0 1 3 1 0 3 1 1 25 Gansu 1 0 3 1 0 0 3 1 4 1 0 0 1 0 0 1 2 0 0 0 0 0 18 Qinghai 0 0 0 1 0 0 2 0 2 1 2 0 0 0 0 0 1 0 0 0 0 0 9 Ningxia 0 0 0 1 0 1 2 0 3 2 1 0 0 0 0 0 1 0 0 0 0 0 11 Xinjiang 5 0 3 1 1 1 1 1 4 0 0 0 1 2 0 0 4 1 1 0 0 0 26 Shenzhen 0 1 3 3 0 0 1 8 4 4 3 2 2 3 8 9 5 3 8 2 0 8 77 Total 30 20 60 63 2 25 139 67 121 178 72 18 51 26 56 76 99 10 41 42 11 80 1287 Sector code: 1. Agriculture/forestry/breeding/fishery 20. Social services 2. Mining 21. Broadcast and culture 3. Food/beverages 22. Miscellaneous 4. Textile/garment/fur 5. Wood/furniture 6. Paper making/ printing 7. Petroleum/chemical/rubber/plastic 8. Electronics 9. Metal and non-metals 10. Mechanical equipments/ instruments 11. Medicine and biology 12. Other manufacturing 13. Power/steam/water production and supply 14. Construction 15. Traffic/transportation/warehousing 16. IT 17. Wholesale/retail 18. Finance/insurance 19. Real estate - 25 -
    • Table 4-4 Tradable Shares and Non-tradable shares of Domestically Listed Companies (1992-2003) 100 million shares   1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 A shares 10.93 61.34 143.76 179.94 267.32 442.68 608.03 813.18 1078.16 1318.13 1509.22 1714.73 Tradable Shares B shares 10.25 24.70 41.46 56.52 78.65 117.31 133.96 141.92 151.56 163.10 167.61 175.35 H shares① 0.00 21.84 40.82 65.00 83.88 111.45 119.95 124.54 124.54 331.94 360.07 377.62 Sub Total 21.18 107.88 226.04 301.46 429.85 671.44 861.94 1079.64 1354.26 1813.17 2036.90 2267.70 State-owned 29.00 190.22 296.47 328.67 432.01 612.28 865.51 1116.07 1475.13 2410.61 2773.43 3046.53 shares Initiating legal 9.05 34.97 73.87 135.18 224.63 439.91 528.06 590.51 642.54 663.17 664.51 699.95 -person Non-tradable Shares shares Initiating legal 2.80 4.09 7.52 11.84 14.99 26.07 35.77 40.51 46.20 45.80 53.26 59.23 -person shares Social legal- person 6.49 41.06 72.82 61.93 91.82 130.48 152.34 190.10 214.20 245.25 299.70 309.71 shares Employee 0.85 9.32 6.72 3.07 14.64 39.62 51.70 36.71 24.29 23.75 15.62 10.97 shares Others② 0.00 0.19 1.10 6.27 11.60 22.87 31.47 33.20 35.07 16.28 32.02 34.36 Sub Total 48.19 279.85 458.50 546.96 789.69 1271.23 1664.85 2007.10 2437.43 3404.86 3838.54 4160.75 Total 68.87 387.73 684.54 848.42 1219.54 1942.67 2526.79 3088.95 3791.71 5218.01 5875.45 6428.46 Ratio of Tradable Shares to Total 30.75% 27.82% 33.02% 35.53% 35.25% 34.56% 34.11% 34.95% 35.72% 34.75% 34.67% 35.38% Shares Note: ① In this Table, H shares only covered the 30 overseas-listed companies which issued both A shares and H shares, excluding 47 overseas-listed companies that only issued H shares. Please see Table 3-2 of Chapter III (Overseas Listing) for more information. ② “Others” include transferred rights issues, shares placed to investment funds and strategic investors, etc. - 26 -
    • V. Market Intermediaries Together with the expanding securities and futures markets, the market intermediaries have been growing accordingly. They include: securities companies, futures brokerage houses, investment advisers, law firms, accounting firms, asset appraisal firms and credit-rating agencies. Their activities in securities and futures transactions are subject to the CSRC’s supervision. As of December 2003, there were 133 securities companies, 34 fund management companies, 186 futures brokerage houses, 111 investment advisers and 72 accounting firms licensed for securities businesses (see Table 5-1). To fully implement China’s commitments in joining World Trade Organization (WTO) and further open up China’s securities market, the CSRC promulgated the Rules on the Establishment of Securities Companies with Foreign Owned Shares on June 1, 2002. After China’s entry into the WTO, two Sino-foreign joint venture securities companies and eight fund management companies had been set up as of the end of December 2003. In order to improve the corporate governance and internal control mechanisms of securities companies, the CSRC promulgated Code of Corporate Governance for Securities Companies, Guidelines for Internal Control Mechanism of Securities Companies and Opinion Regarding Measures on Strengthening Internal Control of Business Branches of Securities Companies in 2003. Similar regulations were issued or are being drafted to strengthen the risk control and internal compliance system in fund management companies, and to enhance the supervision over their senior management. Table 5-1 Number of Securities and Futures Intermediaries (1994-2003)   1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Securities companies 91 97 94 90 90 90 100 109 127 133 Securities retail outlets 2,262   2,420 2,412 2,412 2,412 2,680 2,700 2,936 3020 Fund management companies         6 10 10 15 21 34 Futures brokerage houses     329 294 278 213 178 200 179 186 Accounting firms 82 102 105 105 107 106 78 77 71 72 Investment advisors           48 143 137 167 111 - 27 -
    • VI. Securities Investment Funds Since its inception, China’s securities market has been dominated by individual investors. As of December 2003, a total of 69.93 million securities investment accounts had been opened at the CSDCC. There were 68.35 million A share investors accounts, of which 68.02 million were individual investors accounts and only 330,000 were institutional investors6 accounts, representing 99.52% and 0.48% of the total A share investors accounts respectively (see Table 6-1 and Table 6-2). In recent years, the CSRC has put efforts to further the growth of institutional investors in order to balance out the investor’s structure. Table 6-1  Summary of Securities Investment Accounts (1993-2003) Unit: 10,000   1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total 777.67 1058.99 1242.47 2306.81 3333.34 3911.13 4481.97 5801.13 6650.41 6881.76 6992.66 accounts New 561.02 281.32 183.48 1064.34 1026.53 577.75 570.84 1319.16 840.13 231.35 142.27 accounts Ratio of new accounts to 72.14% 26.56% 14.77% 46.14% 30.80% 14.77% 12.74% 22.74% 12.63% 3.36% 2.03% the total Table 6-2  A-share Securities Investment Accounts Composition in 2003 Unit: 10,000 Shanghai Stock Shenzhen Stock Total Exchange Exchange Total accounts 3502.94 3332.24 6835.18 Institutional 18.88 13.99 32.87 Individual 3484.06 3318.25 6802.31 New accounts 75.68 62.96 138.64 Institutional 0.85 0.67 1.52 Individual 74.84 62.29 137.13 Note: A–share investment accounts refer to the trading accounts for A shares and closed-end funds. Source: CSDCC With the promulgation of the Interim Measures on the Administration of Securities 6 Here institutional investors refer to various legal entities, including enterprises, financial institutions, social welfare funds and other investment institutions. - 28 -
    • Investment Funds in October 1997, China’s securities investment fund industry entered a sound developmental stage. In 1998, five contractual closed-end funds were launched. In 2001, the first contractual open-end fund was launched. Since then, the number of funds has grown and the funds have expanded their offered product mix such as stock funds, bond funds, index funds, capital guaranteed funds, money market funds etc. On June 1, 2002, the CSRC issued Rules on the Establishment of Fund Management Companies with Foreign Owned Shares. As of December 2003, there were 34 fund management companies (including eight Sino- foreign joint ventures) managing 54 closed-end and 56 open-end securities investment funds with total net assets of RMB 169.9 billion yuan under management (see Table 6-3). In 2003, the turnover of closed-end funds quoted on the stock exchanges totaled RMB 68.3 billion yuan. On December 1, 2002, the Provisional Measures on Administration of Domestic Securities Investments of Qualified Foreign Institutional Investors (QFII) jointly promulgated by the CSRC and the People’s Bank of China took effect. As of the end of December 2003, twelve overseas financial institutions had been licensed as QFIIs with a total investment quota of USD1.7 billion, and eleven banks (including four overseas banks) were licensed as the QFIIs’ custodians. The QFII scheme will help to round out the investor structure of China’s securities market by introducing foreign investors into the domestic securities market. It is also expected that this will bring in the investment strategies and philosophies of developed markets and lead to more effective allocation of resources. Table 6-3  Investment Funds Issuance Summary (1998-2003) Number of Total Units of Net Value Ratio of Net Value to Number Open-end Funds (100 (RMB 100 million Market Capitalization of Funds Funds million) yuan) of Tradable Shares 1998 5 0 100 104 1.81% 1999 22 0 505 575 7.00% 2000 34 0 562 847 5.27% 2001 51 3 804 809 5.59% 2002 71 17 1319 1186 9.50% 2003 110 51 1615 1699 12.90% - 29 -
    • VII. Bond Market China’s bond market consists of the inter-bank bond market and the exchange-traded bond market. Most of the bonds are Treasury bonds (T-bonds), or financial bonds (bonds issued by Import and Export Bank of China, China Development Bank and other policy banks), with only a small number of corporate bonds and convertible bonds. There is a spot trading market and a repurchase (repo) market. To date, both markets are fairly active. Inter-bank Bond Market The inter-bank bond market, as a quote-driven over-the-counter (OTC) market, is the most important platform for block trading of bonds among financial institutions. It is also the platform for open market operations conducted by the People’s Bank of China (PBOC), China’s central bank. The major participants in the inter-bank bond market are: the PBOC, commercial banks, securities companies, insurance companies, securities investment funds and credit cooperatives. Non-financial institutions may entrust commercial banks to trade on their behalf in the inter-bank bond market. Certain commercial bank participants have been allowed to set up counters at their branches to target individual investors, who are allowed to buy and sell bonds at these counters. This is sometimes referred to as the “Commercial Bank OTC Market”. This market is relatively new and still in its infancy. The major products in the inter-bank bond market are: T-bonds, financial bonds and a small amount of central bank bills. As of the end of December 2003, the outstanding T- bonds, financial bonds and the central bank bills in this market amounted to RMB 1,749.1 billion, RMB 1,160.8 billion and RMB 337.7 billion yuan respectively. In 2003, spot trading reached RMB 3,084.8 billion yuan, and the turnover in repos amounted to RMB 11,720.3 billion yuan. Exchange-traded Bond Market The exchange-traded bond market refers to the bond markets on the two domestic stock exchanges. It is an order-driven market, where the major participants are comprised of securities companies, insurance companies, securities investment funds, trust and investment companies, credit cooperatives, other non-financial institutional investors and individual investors. The PBOC does not trade in this market, and the commercial banks - 30 -
    • are not allowed to access this market yet. The major products in the exchange market are T-bonds, corporate bonds and a small amount of convertible bonds. As of the end of December 2003, the T-bonds listed amounted to RMB 354.4 billion yuan, corporate bonds RMB 36.4 billion yuan, and convertible bonds RMB 20.9 billion yuan. In 2003, the spot trading volume reached RMB 870.9 billion yuan, with repos at RMB 5,300 billion yuan (see Table 7-1). - 31 -
    • Table 7-1 Exchange Bond Market Trading Summary (1995-2003)   1995 1996 1997 1998 1999 2000 2001 2002 2003 Trading volume (10,000 lots ) 100660.5 174297.17 161732.38 203161.40 170716.33 197979.00 204707.68 329480.25 620194.41 Corporate bonds 29.35 38.00 356.12 946.39 471.12 906.15 672.13 639.81 26973.4 --spot 29.35 38.00 356.12 946.39 471.12 906.15 672.13 639.81 3439.33 --repo 23534.07 Convertible bonds 70905.00 0.00 0.00 833.45 3133.54 11717.48 3684.55 688.29 5830.70 T-bonds 29726.15 174259.17 161376.26 201381.56 167111.67 185355.37 200351.00 328152.15 587390.31 T-bond spot 6105.57 44172.76 32615.2 45973.57 38206.39 38018.57 45474.64 83955.76 57391.85 T-bond futures 21151.63 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 T-bond repurchase 2468.95 130086.41 128761.06 155407.99 128905.28 147336.8 154876.36 244196.39 529998.46 Turnover (100 million yuan) 59367.61 18039.34 16476.89 21661.78 18284.12 19119.16 20417.76 33272.35 62136.36 Corporate bonds 0.84 1.46 18.08 40.69 47.99 92.92 68.84 70.33 2717.02 --spot 0.84 1.46 18.08 40.69 47.99 92.92 68.84 70.33 363.61 --repo                 2353.41 Convertible bonds 6.77 0.00 0.00 20.30 44.73 135.07 45.68 73.70 663.39 T-bond spot 775.20 5029.24 3582.75 6059.95 5300.87 4157.49 4815.6 8708.68 5756.11 T-bond futures 57336.28 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 T-bond repurchase 1248.52 13008.64 12876.06 15540.84 12890.53 14733.68 15487.64 24419.64 52999.85 - 32 -
    • VIII. Futures Market The first domestic commodity futures market was Zhengzhou Grain Wholesale Market, which introduced its first futures contract based on physical delivery in October 1990. However, due to the lack of sound legal and regulatory framework, the following 3 years (1990-1993) saw a proliferation to 50 futures exchanges in China. To put this in context, that was equivalent to all the futures exchanges in the world combined. Trading volume exploded, but the same product was often traded on a number of exchanges resulting in confusion, contracts were not standardized and were often completed on unreasonable terms, and exchanges were operating without appropriate management (in particular, risks management) systems. The market was, to say the least, disorderly. In 1994, the CSRC was mandated to completely revamp the market. Today, the futures market has three exchanges and 180 brokerage firms, compared with 50 exchanges and 1,000 brokerage firms at the peak in 1994. The traded products have been downsized from 35 to 12 products. Transactions in overseas futures contracts by Chinese parties are allowed, but have to be approved by both the State Council and the CSRC, and must be for the purposes of hedging only. To date, 17 enterprises have been approved to conduct overseas futures transactions. Since the major re-organization of the futures market in 1994, China now has a functional and orderly futures market with the three exchanges as its core. There is now a legal and regulatory framework in place, to encourage and facilitate the development of the market while ensuring there is adequate supervision at all times. The mechanism of risk control has also been greatly improved in a regulated and well-functioning market. With ongoing reforms to continuously strengthen this market, the vital role that the futures market can play in the financial world is increasingly being recognized. This can be shown in the increase in turnover and trading volume since 2001. Please refer to Table 8-1 and Figure 8-2 for details. The turnover of futures in 2003 reached a record high of RMB 10.84 trillion yuan. The three futures exchanges are: Shanghai Futures Exchange (SHFE), Zhengzhou Commodity Exchange (ZCE), and Dalian Commodity Exchange (DCE). Both ZCE and DCE trade agricultural products. ZCE has contracts on wheat, mung bean, etc., while DCE offers contracts on soybean, soybean meal etc. SHFE provides futures contracts on - 33 -
    • other commodities such as copper, aluminum, rubber etc. By and large, the trading in agricultural products tends to dominate. The most actively traded products are soybean, wheat and copper. Figure 8-2 shows the trading summary of the futures products in 2003. Table 8-1 Futures Trading Summary (1993-2003) Annual turnover Annual trading Annual delivery value Annual delivery (RMB 100 million volume (RMB 100 million yuan) volume (10,000 lots) yuan) (10,000 lots) 1993 5521.99 890.69 1994 31601.41 12110.72 1995 100565.30 63612.07 181.52 83.09 1996 84119.16 34256.77 174.13 78.33 1997 61170.66 15876.32 93.75 38.18 1998 36967.24 10445.57 48.04 20.56 1999 22343.01 7363.91 109.41 16.12 2000 16082.29 5461.07 65.11 8.40 2001 30144.98 12046.35 57.54 64.85 2002 39490.28 13943.37 101.44 141.16 2003 108386.90 27986.42 127.46 29.10 Note: The trading volume adopts bilateral calculation, while the delivery volume adopts unilateral calculation. Figure 8-1 Futures Trading Volume and Turnover(1993-2003) - 34 -
    • RMB 100 million 10000 lots 120000 70000 100000 60000 50000 80000 40000 60000 30000 40000 20000 20000 10000 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Annual turnover Annual trading volume - 35 -
    • Figure 8-2 Trading Summary of Agricultural Products and Metals Futures in 2003 77.09 % 90000 80000 70000 60000 22.91 % 50000 90.48 % 40000 30000 9.52 % 20000 10000 0 turnover(100 million yuan) transaction volume(10,000 lots) agricultural products 83561.73 25328.07 metal 24834.86 2664.36 - 36 -
    • IX. Legal Framework The development of a sound regulatory framework has been a key cornerstone in the development of China’s securities and futures market. Its aim is to ensure that the development of the market is orderly and fair. At the core of China’s legal framework of capital market are three pieces of legislation: Company Law , Securities Law, and Securities Investment Fund Law. They are supplemented by other regulations, administrative rules, departmental rules, guidelines, and codes. As of December 31, 2003, there were over 300 such regulations in force. These regulations pertain to the securities, futures, and investment funds markets. Their objectives are to protect the interests of the investors based on the principles of “transparency, fairness, and justice“ and the guidelines of “legislation, supervision, self-regulation and standardization”. Within this framework, there are regulations that govern:  the offering of securities;  securities and futures trading;  disclosure of financial and non-financial information;  supervision of market intermediaries that engage in securities and futures businesses;  supervision of securities services organizations, such as investment advisers and credit rating agencies;  regulation of securities investment funds;  the investigation of and penalties for market misconducts. For a comprehensive review of existing regulations, please visit our website at http://www.csrc.gov.cn. (I) Regulations Regarding Securities Offering, Listing, and Disclosure The regulations that govern the public offering and listing of shares issued by a joint-stock company are:  Provisional Regulations on Public Offering and Trading;  Ordinance of the CSRC Public Offering Review Committee;  The CSRC Public Offering Approval Procedures; - 37 -
    •  Provisional Rules on the Administration of Companies under Tutoring;  Implementing Rules on Information Disclosure of Public Companies;  Regulations on the Administration of Initial Public Offerings;  Regulations on the Administration of Information Disclosure on Shareholding Changes of Listed Companies;  Standards for Content and Format of Information Disclosure of Public Companies (No.1 to 19).  Interim Measures on the Public Offering Review Committee of the CSRC On December 28, 2003, the CSRC promulgated Interim Measures on the Sponsor System for Securities Public Offerings, which clearly defines the sponsors’ responsibilities in the course of public offerings. Besides, it provides details on the registry of sponsoring institutions and their representatives, the working procedure, coordination, regulation and legal liabilities of sponsors, etc. (II) Regulations On Securities and Futures Trading The regulations on securities and futures trading fall into two categories: general regulations regarding trading and those on prohibited behaviors. On December 12, 2001, the CSRC re-promulgated the Measures on the Administration of Stock Exchanges, setting forth detailed provisions for the founding and dissolution of stock exchanges, functions of stock exchanges, and stock exchanges’ responsibility in supervising securities trading and securities registration and clearing houses. Specific rules were also put in place regarding the management and supervision of the exchanges themselves. The Measures on the Administration of Futures Exchanges, which defines the functions and responsibilities of futures exchanges, was amended by the CSRC and came into effect on July 1, 2002. (III) Regulations On Corporate Governance, Mergers and Acquisitions of Listed Companies - 38 -
    • On August 16, 2001, the CSRC promulgated the Guidelines for Establishing Independent Directors of Listed Companies to provide guidance with regards to the nomination, retaining, and responsibilities of independent directors in listed companies. On January 7, 2002, the CSRC and State Economic and Trade Commission jointly issued the Code of Corporate Governance for Listed Companies. The Code outlines the fundamental principles of corporate governance for listed companies, mechanisms to ensure basic investors’ protection, and codes of conduct and ethical standards for directors, supervisors, managers and other senior executives of listed companies. On December 1, 2002, the Measures on the Merger and Acquisition of Listed Companies and Measures on the Administration of Information Disclosure on Shareholding Changes of Listed Companies took effect. Both regulations contain detailed provisions regarding various disclosure requirements in mergers and acquisitions situations. They constitute the most fundamental legal requirements for listed companies engaged in mergers and acquisitions activities. On November 4, 2002, the Notice on Some Issues about Transfer of State-Owned Shares and Legal-entity Shares of Listed Companies to Foreign Entities was jointly promulgated by the CSRC, the Ministry of Finance, and the State Economic and Trade Commission. This regulates the purchase of state-owned or legal entity shares of listed companies by foreign entities. On August 28, 2003, the CSRC and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) jointly promulgated Notice on Certain Issues on the Capital Flows between Listed Companies and Related Parties and Outbound Guarantees of Listed Companies. The Notice aims to protect the interests of listed companies when capital flows between listed companies and related parties. With regards to outbound guarantees, the Notice specifies detailed requirements on guaranteed target, the percentage of the guaranteed amount to the net assets, the decision-making procedures, counter-guarantees and information disclosures, etc. (IV) Regulations of Market Intermediaries The Measures on the Administration of Securities Companies, promulgated by the CSRC, took effect on March 1, 2002. It outlines detailed requirements for the setting up of - 39 -
    • securities companies, their organizational structure, operation, reporting of material changes, cessation of business, day to day supervision and responsibilities. The Provisional Measures on the Administration of Securities and Futures Investment Consultation was promulgated on December 15 1997. It provides for the supervision of securities and futures investment advisers. On August 29, 2003, the CSRC promulgated Provisional Measures on the Administration of Securities Companies Bonds. The securities companies can issue bonds via public offering and designated offering. The Measures sets forth the issuance criteria, procedures of application and approval, information disclosure system, especially the risk control system on registration, custody and reimbursement measures, etc. Provisional Measures on Clients’ Asset Management by Securities Companies was promulgated by the CSRC on December 18, 2003. The Measures provides detailed provisions on the entry criteria, application and approval procedures, business rules, risk control and assets custody, etc. (V) Regulations Regarding Securities Investment Funds On October 28, 2003, the Securities Investment Fund Law was passed by the People’s Congress of China. The Law stipulates the provisions regarding fund managers, custodians, the placement and trading of funds, subscription and redemption of funds, operations and information disclosure, modification and termination of contracts, liquidation of funds, rights and interests of fund holders and their exercising, supervision and administration of funds, and legal liabilities, etc. (VI) Regulations Regarding Securities and Futures Markets Supervision and Legal Liabilities of Various Offenses Chapter V, IX and X of the Securities Law expressly set forth specific provisions regarding stock exchanges, securities industry association and securities regulator. The CSRC is mandated to be the regulatory authority for all of China’s securities and futures markets. The securities and futures exchanges are front-line regulators and provide trading facilities. The securities association and futures association, as self-regulatory - 40 -
    • organizations, supervise and discipline securities companies and futures brokerage houses respectively. The Securities Law, Company Law, Securities Investment Fund Law and Criminal Law expressly provide for the civil, administrative and criminal liabilities of a party guilty of securities and futures offenses and crimes, including fraudulent practices, insider dealings and market manipulations. - 41 -
    • X. China Securities Regulatory Commission The CSRC was established in October 1992. Empowered by the State Council, the CSRC is the sole regulator that supervises China’s securities and futures markets. The top executive body of the CSRC is composed of one Chairman, five Vice-Chairmen, and three Assistant Chairmen. The Commission consists of 14 functional departments and 3 affiliate institutions. Based on Article 14 of the Securities Law, The Public Offering Review Committee of the CSRC was established. It is composed of professionals from the CSRC and outside specialists. Headquartered in Beijing, the CSRC has 38 regional and local regulatory bureaus throughout the country (see Figure 10-1). As of December 2003, there were 1,511 staff in the CSRC with an average age of 36.5 years old, and 36% of the staff held master or doctor degrees. Major Functions of the CSRC The CSRC is mandated to perform the following functions:7 (1) Study and formulate policies and strategies regarding the securities and futures markets, and to draft the relevant regulations; (2) Regulate securities and futures markets, and vertically manage all local securities and futures regulatory offices across China; (3) Regulate the offering, trading, custody and settlement of equities, convertible bonds, and securities investment funds; approve the listing of corporate bonds; and supervise trading activities of listed government and corporate bonds; (4) Regulate the listing, trading and settlement of domestic futures contracts; and supervise domestic institutions engaged in overseas futures businesses; (5) Supervise the conduct of (a) listed companies and (b) the major shareholders who are liable for relevant information disclosure; (6) Supervise securities and futures exchanges and their senior executives; and supervise the Securities Association of China and the Futures Association of China; (7) Regulate the securities registrations and settlement companies and futures clearing houses; license and supervise securities and futures market intermediaries, securities 7 quoted from The Decree on Functions, Internal Framework and Staff of the CSRC (September 30, 1998, State Council). - 42 -
    • investment fund management companies, and securities and futures investment advisers; in conjunction with the PBOC license and supervise the banks for securities investment fund custodian bank business; formulate and implement rules regarding the qualification and requirements of the senior executives of the above mentioned institutions; (8) Supervise direct or indirect overseas offerings and listings by domestic enterprises; supervise the establishment of overseas securities market intermediaries operation by domestic institutions; and supervise the establishment of securities market intermediaries operation in China by overseas institutions; (9) Supervise information dissemination in relation to securities and futures, responsible for the compilation of market statistics and information resources management; (10) License, in conjunction with relevant authorities, accounting firms, asset appraisal firms and their employees to engage in certain securities and futures intermediary businesses, and to supervise such relevant businesses; (11) Investigate and take actions against persons violating the securities and futures regulations; (12) Responsible for foreign liaison and international cooperation with other regulators and industry bodies; and (13) Other functions as commissioned by the State Council. - 43 -
    • Figure 10-1 Organizational Chart of the CSRC Chairman Vice Chairmen Assistant Chairmen Direct Affiliates Functional Departments Regional Bureaus 1. General Office Beijing Tianjin Hebei 2. Public Offering Supervision Shanxi Inner Mongolia Liaoning Internal Service Center (Administration Center) Public Offering Review Committee 3. Market Supervision Jilin Heilongjiang Dalian Planning and Development Center 4. Intermediary Supervision Shanghai Jiangsu Zhejiang 5. Listed Company Supervision Ningbo Shandong Anhui 6. Investment Funds Supervision Information Center 7. Futures Supervision Henan Qingdao Hubei 8. Enforcement Bureau I Hunan Jiangxi Guangdong ) (Office of Chief Enforcement Officer) Fujian Guangxi Xiamen 9. Enforcement Bureau II Shenzhen Hainan Sichuan 10. Legal Affairs (Office of General Counsel) Chongqing Guizhou Yunnan 11. Accounting (Office of Chief Accountant) 12. International Cooperation Tibet Shaanxi Gansu 13. Personnel and Education Qinghai Ningxia Xinjiang 14. Office of Coordination Committee for Shanghai Supervisory Office Regional Bureaus Shenzhen Supervisory Office - 44 -
    • XI. International Exchange and Cooperation The CSRC has always attached great importance to the communication and cooperation with overseas securities and futures regulatory authorities, the International Organization of Securities Commissions (IOSCO) and other international institutions. Through bilateral MOUs, exchange of visits, training programs, hosting or participating in international seminars, etc., the CSRC has enhanced information exchange and regulatory cooperation with overseas regulatory authorities. As of December 2003, the CSRC had signed 24 MOUs with securities regulatory authorities from 22 jurisdictions including the Hong Kong and the United States (please refer to Table 11-1). The MOUs facilitate information exchange, investigative assistance, and dialogue about policies and regulation. The MOUs establish channels of communications that improve mutual understanding, regulatory co-operation and technology transfer, which in turn helps strengthen investor protection and put forward the sound development of the securities and futures markets in respective jurisdictions. Pursuant to the above MOUs, the CSRC has co-operated extensively with overseas regulatory authorities in the areas of investigation and technical assistance. The MOUs also lay down the foundation for the listing of Chinese enterprises in overseas markets, participation by qualified foreign institutional investors in China’s securities market, and the establishment of joint-venture securities companies and fund management companies in China. The CSRC formally became an ordinary member of IOSCO at the 20th Annual Conference on July 11, 1995. In September 1998, the CSRC became a member of the IOSCO’s Executive Committee, and was elected for three consecutive terms (1998-2004). - 45 -
    • Table 11-1  List of MOUs Signed by the CSRC with Overseas Authorities ( As of December 2003) Date Overseas Authorities MOU Titles 1993.6.19 Memorandum of Regulatory Cooperation Hong Kong Securities and Futures Commission Memorandum of Regulatory Cooperation Concerning 1995.7.4 Futures MOU Regarding Cooperation, Consultation and the 1994.4.28 U.S. Securities and Exchange Commission Provision of Technical Assistance MOU on Cooperation and Exchange of Information on 1995.11.30 Monetary Authority of Singapore Regulation of Securities and Futures Activities MOU Regarding Securities and Futures Regulatory 1996.5.23 Australian Securities Commission Cooperation MOU on Mutual Assistance and the Exchange of 1996.10.7 UK HM Treasury, Securities and Investments Board Information Concerning Regulatory Cooperation in Securities and Futures Matters 1997.3.18 Ministry of Finance, Japan Memorandum of Understanding MOU Regarding Securities and Futures Regulatory 1997.4.18 Securities Commission of Malaysia Cooperation 1997.11.13 Comissao de Valores Mobiliarios, Brazil Memorandum of Understanding Ukraine Securities and Stock Market State 1997.12.22 MOU Regarding Securities Regulatory Cooperation Commission MOU Regarding Securities and Futures Regulatory 1998.3.4 Commission des opérations de bourse, France Cooperation MOU Regarding Securities and Futures Regulatory 1998.5.18 Commissariat aux Bourses, Luxemburg Cooperation Bundesaufsichtsamt für den Wertpapierhandel, 1998.10.8 MOU Regarding Securities Regulatory Cooperation Germany Commissione Nazionale per le Societả e la Borsa, MOU Regarding Securities and Futures Regulatory 1999.11.3 Italy Cooperation 2000.6.22 Capital Market Authority of Egypt MOU Regarding Securities Regulatory Cooperation Arrangement Regarding Securities and Futures Regulatory 2001.6.19 Financial Supervisory Commission, Korea Cooperation 2002.1.18 U.S. Commodity Futures Trading Commission Futures regulatory cooperation MOU MOU Regarding Securities and Futures Regulatory 2002.6.27 Romania National Securities Commission Cooperation MOU Regarding Securities and Futures Regulatory 2002.10.29 Financial Services Board, South Africa Cooperation 2002.11.1 Netherlands Authority for the Financial Markets MOU on the Exchange of Information MOU Regarding Securities and Futures Regulatory 2002.11.26 Belgium Banking and Finance Commission Cooperation The Participating Members of Canadian Securities MOU Regarding Securities and Futures Regulatory 2003.3.21 Administrators Cooperation MOU Regarding Securities and Futures Regulatory 2003.5.22 Swiss Federal Banking Commission Cooperation Indonesian Capital Market Supervisory Agency MOU In Relation to Mutual Assistance and Exchange of 2003.12.9 (BAPEPAM) Information XII. China Securities Depository and Clearing Corporation Ltd. In over a decade after the inception of China’s securities market, the securities depository and clearing system has been constantly evolving. From the initial physical, manual - 46 -
    • clearing to the present day dematerialized, centralized electronic depository and clearing, the technology has been constantly advancing (see Figure 12-1 for the depository and clearing procedures). In March 2001, China Securities Depository and Clearing Corporation Ltd (CSDCC) was established according to the Securities Law and Company Law, to take charge of the depository and clearing of listed securities. It is under the CSRC’s supervision. The General Manager, who reports to the Board of Directors, is responsible for the operation of the company. Headquartered in Beijing, the CSDCC has two subsidiaries: one in Shanghai and the other in Shenzhen. Its business scope covers the opening and management of securities accounts and settlement accounts, securities registration and transfer, securities depository, securities/payment clearing and delivery, acting as the agent for securities interests distribution as entrusted by the issuers, internet information services, and any other businesses as authorized by the CSRC. At present, the settlement is T+1 for A shares, and T+3 for B shares. Figure 12-1 A-share Clearing and Delivery Flow Chart Transaction data Transaction report - 47 -
    • Account data Confirm ( Exchange) Clearing data CSDCC Clearing participants Payment instruction Payment CSDCC Payment Reconcile Settlement Account Reconcile Clearing Participant Settlement Accounts ( Clearing bank) - 48 -
    • - 49 -
    • XIII. Securities Association of China (SAC) The SAC, established on August 28, 1991, is registered and headquartered in Beijing. It is a non-profit-making self-regulatory organization incorporated according to the Securities Law and the Regulations on Social Organization Registration and Management. The SAC is subject to guidance, supervision and administration by the CSRC and the Ministry of Civil Affairs. The ultimate authority of the SAC rests with its members, with the Board of Directors as its executive body to oversee the daily operations of the Association. As of the December 2003, the SAC had a total of 229 members, including 116 securities companies, 2 asset management companies, 19 securities investment fund management companies, 83 securities investment advisers and 9 special members. Under the guidance and supervision of the CSRC, the SAC’s missions include:  acting as the self-regulatory body in China’s securities industry;  acting as the bridge between the government and securities industry;  safeguarding the legal rights of its members;  maintaining orderly competition in the securities market;  facilitate the sound and stable development of the securities market. The SAC performs the following duties: • Trains its members in the understanding of and compliance with the securities laws and regulations, and reflects to the CSRC its members’ problems, suggestions and needs; • Formulates self-regulatory rules, industry standards and business practices for the securities industry and supervises their compliance; • Supervises and inspects the business activities of its members, takes disciplinary actions against members who have violated the articles of associations of the SAC - 50 -
    • or other self-regulatory rules; • Mediates disputes among its members, or among members and their clients; • Collects and processes securities information, maintains database on firms and practitioners regarding their integrity; • Facilitates communications among its members and promotes innovations; • Organizes industry knowledge examination for individuals and grants licenses to individual applicants who fulfill all the stipulated criteria; • Organizes training programs for securities professionals to improve their business skills and competence; • Organizes international exchange and cooperation programs for the securities industry; • Undertakes certain duties as delegated by the CSRC, including: accepts filing by securities firms to act as the lead underwriters in public offerings; supervises the disclosure requirements for the securities companies, securities investment fund management companies, and securities investment advisers; sets up standards, discussions forum, training programs for securities IT professionals; supervises the Stock Transfer System for shares of delisted companies; and investigates and disciplines securities market practitioners. - 51 -
    • XIV. China Futures Association The CFA, established on December 29, 2000, is registered and headquartered in Beijing. It is a non-profit-making self-regulatory organization incorporated according to the Regulations of Social Organization Registration and Management. Like the SAC, it is subject to the guidance, supervision and administration of the CSRC and the Ministry of Civil Affairs. The CFA members consist of the futures brokerage firms, futures exchange special members and licensed individual futures traders. As of the end of December 2003, it had 191 institutional members including 3 futures exchanges and 188 futures brokerage companies. Its members, who collectively represent the ultimate authority of the CFA, meet every 3 years. The Board of Directors, the executive body, reports to the Members at its meeting. The CFA is committed to implementing laws, regulations and policies related to the futures market, acting as the bridge between the government and the futures market, exercising self-regulation, safeguarding the legitimate interests of its members, maintaining the transparency, fairness and equality in the futures market, providing training on professional ethics, and boosting standards, in order to further the sound and stable development of China’s futures market. Ever since its inception, the CFA has been working hard to promote industry self-regulation, membership services, and supervision, publicity, education and better internal organizational structure. Its work has laid a solid foundation for effective self-regulation within the futures industry and has contributed to the sound development of the futures market. - 52 -
    • XV. Stock Exchanges According to the Securities Law and Measures on the Administration of Stock Exchanges, stock exchanges in China are non-profit-making and self-regulatory legal entities. The exchanges provide the forum for the centralized trading of securities and enforce applicable laws and regulations. At present, there are two stock exchanges in China: Shanghai Stock Exchange and Shenzhen Stock Exchange. Both are supervised by the CSRC. Shanghai Stock Exchange Shanghai Stock Exchange was founded on November 26, 1990. It started operation on December 19 the same year as a non-profit-making institution based on membership. It endeavors to provide a transparent, open, safe and efficient marketplace and performs the following major functions: provide securities trading venue and facilities; formulate business rules; accept and arrange for listings; conduct market surveillance and monitor securities trading; regulate members and listed companies; manage and disseminate market information. As of December 2003, a total of 780 companies were listed in Shanghai Stock Exchange. The total market capitalization amounted to RMB 2,980.5 billion yuan, including RMB 2,940.1 yuan of A shares and RMB 40.4 billion yuan of B shares. Shanghai Stock Exchange had 180 members, including 135 domestic securities firms, 42 domestic securities-related companies and 3 overseas special members. In addition, special B-share trading seats were granted to 40 overseas securities companies. The Exchange has a modern paperless trading system. Orders are matched automatically by the computer system according to the principle of “price precedence and time precedence”. The trading system has a maximum daily capacity of executing 28 million trades and settling 60 million transactions at a speed of more than 10,000 transactions per second. There is now a 10% price band that limits the price changes of individual stocks or funds in daily trading (the band is 5% for Special Treatment stocks). Orders can be sent to the Exchange trading system through terminals either on the floor or from member firms’ offices. The Exchange is on a 3,600-square-meter trading floor, the largest of its kind in the Asian-Pacific region. Backed by a satellite and optical communication network, the Exchange can disseminate real-time transaction information nationwide and overseas. - 53 -
    • Shenzhen Stock Exchange Shenzhen Stock Exchange was established on December 1, 1990 as a non-profit-making membership institution. It is committed to create a transparent, open, safe and efficient marketplace and fulfill the following key functions: providing securities trading venue and facilities, formulating business rules, accepting and arranging for listings, conduct market surveillance and monitoring securities trading, regulating members and listed companies, managing and disseminating market information. As of December 2003, a total of 507 companies were listed on Shenzhen Stock Exchange. The total market capitalization registered RMB 1,265.3 billion yuan, including RMB 1,212 billion yuan of A shares and RMB 53.3 billion yuan of B shares. Shenzhen Stock Exchange had 205 members, including 135 domestic securities firms, 67 domestic securities-related companies and 3 overseas special members. In addition, special B-share trading seats were granted to 46 overseas securities companies. Shenzhen Stock Exchange adopts dematerialized delivery, and processes orders from off- site terminals in member firms’ offices directly. Tandem computers, which are supported by a back-up system, are used for trading. The daily capacity of the system stands at 20 million trades. Real-time stock quotations and transaction confirmations are disseminated to the offices of member firms via satellite and optical communication network. To ensure timely detection, reporting and investigation of trading irregularities, the Exchange is now performing real-time monitoring of market activities. A comprehensive and multi-level information system composed of the trading network, Internet and Reuter terminals assure prompt dissemination of news regarding the market or listed companies. - 54 -
    • XVI. Futures Exchanges According to the Provisional Rules on the Administration of Futures Trading and the Measures on the Administration of Futures Exchanges, futures exchanges in China are self- regulatory legal entities that perform functions as stipulated in their articles of association. At present, there are three futures exchanges in China: Shanghai Futures Exchange (SHFE), Zhengzhou Commodity Exchange (ZCE) and Dalian Commodity Exchange (DCE). All of them are under the CSRC’s supervision. Shanghai Futures Exchange (SHFE) Shanghai Futures Exchange (SHFE), which resulted from the merging of Shanghai Metal Exchange, Shanghai Cereal and Oils Exchange and Shanghai Commodity Exchange, started its operation officially in December 1999. As of December 2003, the SHFE had a total of 219 members, of which 185 were brokerage firms (85%) and 34 were proprietary traders (15%) in 29 provincial areas around China. It had set up 220 trading terminals in 28 provincial areas across the country. The SHFE joined the Futures Industry Association (FIA) in November 2002 and the Futures and Options Association (FOA) in 2003. At present, copper, aluminum and natural rubber are traded on the SHFE. In 2003, the trading volume hit 80.16 million lots, up 229% annually, and the turnover registered RMB 6,054 billion yuan (56% of the national total), representing a year-on-year increase of 269%. Dalian Commodity Exchange (DCE) Dalian Commodity Exchange (DCE) was established on February 28, 1993. As of December 2003, it boasted a total of 197 members in 27 domestic provinces, municipalities and autonomous regions. There were 185 brokers and 12 proprietary trading members. The DCE had 113,876 registered clients, up 65% over the previous year, including 4,509 legal- entity clients (40% were grain-related enterprises) and 109,367 individual clients. - 55 -
    • The DCE joined the Futures Industry Association (FIA) in September 2003. The DCE primarily trades soybean, bean meal. Among them, the soybean (which is the staple grain in China) is the most actively traded product. In 2003, the soybean futures transactions in the DCE were equivalent to 25.3% of those in Chicago Board of Trade (CBOT) in the same period, and 5 times of those at the Tokyo Grain Exchange (TGE). The DEC is the world’s second largest soybean futures market as well as the largest futures market for non-transgenic soybeans. The soybean futures price in the DCE has become an important reference price for China’s soybean production and distribution, and importers and exporters from all over the world pay much attention to the DEC soybean price as a benchmark. In 2003, the trading volume at the DCE amounted to 149.95 million lots (53% of the national total volume) with turnover at RMB 3,989.6 billion yuan (37% of the national total turnover). The trading volume and turnover gained year-on-year growth rates of 55% and 91% respectively. Zhengzhou Commodity Exchange (ZCE) Zhengzhou Commodity Exchange (ZCE), the first futures market in China, was established in October 1990. As of December 2003, it had 218 members, including 176 futures brokers and 42 non-brokerage traders from 27 provinces, municipalities and autonomous regions. The ZCE has an advanced settlement, delivery, risk monitoring, information dissemination and member service system, and its offsite trading terminals are in cities all across China. The ZCE joined International Option Market Association (IOMA) in 1996 and has a trading cooperation arrangement with Japanese Kansai Agricultural Commodities Exchange and Canadian Winnipeg Commodity Exchange. The listed products on the ZCE include wheat (ordinary national-standard wheat and quality-enhanced wheat), mung bean, small red bean and peanut kernel. In 2003, The ZCE registered a trading volume of 49.82 million lots with the turnover at RMB 796.1 billion yuan. The trading volume and turnover showed year-on-year growth rate of 172.6% and 253.4% respectively. The ZCE’s development goals are to: gradually move from a wheat-dominant futures market towards a universal grain futures market; then from grain futures market towards - 56 -
    • agricultural products futures market; and finally develop into a comprehensive modern futures market trading agricultural product futures and financial futures. - 57 -
    • Annex: Contact Information of Relevant Institutions - 58 -
    • Name Address Website Telephone Fax Email Jinyang Plaza, 16 Jin Rong csrcweb@publicf.bta.net 8610-880610 8610-66210 .cn CSRC Street, Xicheng District, www.csrc.gov.cn 00 119 Beijing 100032, China intl@csrc.gov.cn F22-23 Investment Plaza, 27 Jin Rong Street, Xicheng www.chinaclear.co 8610-662109 8610-66210 webmaster@chinaclear.co CSDCC m.cn District, Beijing 100032, m.cn 88 938 China 10/F Building B, Tongtai Plaza, 33 Jin Rong Street, 8610-880619 8610-88061 sac@public.bta.net.c SAC www.sac.net.cn Xicheng District, Beijing 27 121 n 100032, China 7th Floor, Taiyang Securities Building, No. 34, Fu Wai Da 8610-685731 8610-68571 CFA www.cfachina.org cfa@cfachina.org Jie Street, Xicheng District, 09 529 Beijing 100037, China Shanghai 528 Pudongnan Road, Pudong, Shanghai 200120, 8621-688088 8621-68804 webmaster@secure.sse.co Stock www.sse.com.cn m.cn China 88 868 Exchange Shenzhen 5045 Shennan East Road, Shenzhen 518010, China 86755-82083 86755-8208 Stock www..szse..cn cis@sse.org.cn 333 3947 Exchange Shanghai 500 Pudian Road, Pudong New Zone, Shanghai 8621-684000 8621-68401 Futures www.shfe.com.cn info@shfe.com.cn 200122, China 00 198 Exchange Dalian No. 18, Huizhan Road, 86411-48088 86411-4808 dce@mail.dce.com.c Commodity Dalian 116023, China www.dce.com.cn 88 588 n Exchange Zhengzhou 69 Weilai Avenue, 86371-56100 86371-5613 zhanglei@czce.com. Commodity Zhengzhou 450008, China www.czce.com.cn 69 068 cn Exchange - 59 -