5. Provisional Regulations on the Administration of Futures Trading

Issued by the State Council

Promulgated on June 2, 1999 and effective as of September 1, 1999, these Tentative Regulations give the China Securities Regulatory Commission ("CSRC"), the PRC government's securities watchdog, the authority to centralize regulation of the country's futures market. The establishment of futures exchanges is subject to the examination and approval of CSRC, subject to satisfying certain qualifications such as possessing registered capital of 30 million yuan or more. Futures exchanges are prohibited from engaging in trust investment, share trading, investment in immovable property on behalf of others, and other business not related to their official responsibilities. They are also prohibited from direct or indirect participation in futures trading.

The Tentative Regulations outline the basic rules for futures trading, including details regarding futures brokerages, futures exchanges, the deposit system, and the clearing and settlement of transactions. Futures brokerages are prohibited from offering customers guaranteed investment returns, establishing profit- or risk-sharing arrangements with customers, misappropriating customers' deposits, or engaging in futures trading outside the PRC. Financial institutions are strictly prohibited in engaging in futures trading or providing loans or security in respect of futures trading. Further, no work unit or individual may use credit capital or public funds for purposes of futures trading.