Business Opportunities

1
Business Opportunities Challenges in China
TodayInternational IPOs of Chinese companies
legal issues that may affect foreign investors

• Co-Sponsored by China Committee and Int'l
  Development and Investment Committee of American
  Bar Association
• Washington, D.C.
• FRIDAY, APRIL 15, 2005
• 930 AM - 1100 AM

2
International Listing of Chinese Companies and
Legal Issues
An Outline Henry H. Liu HANKPACIFIC GROUP,
LLC -- a China-focused merchant banking and
advisory firm (New York Beijing) Former
General Counsel and Director-General CHINA
SECURITIES REGULATORY COMMISSION (CSRC)
3
China Business Opportunity Overview
China offers enormous international business
opportunities

• With 25 years of steady and fast growth, China
  has already become one of the worlds largest
  economies
• China has Asias 2nd largest and one of the
  worlds fastest growing capital markets with 1400
  domestic listcos and over 100 international
  (incl. Hong Kong) listcos
• For international IPOs, more than 50 billon has
  been raised, and 20 is slated for this year or
  two
• China has one of the worlds largest hard
  currency reserves (400 billion strong), and is
  becoming one of the largest players in the
  international debt and currency market
• China has consistently been ranked at the top of
  the Foreign Direct Investment Destinations, with
  600 billion FDIs invested to date
• Chinese corporations, including the state-owned
  top-tier firms, internationally listed firms, and
  private firms, are encouraged by the state to
  invest overseas, including the global equity
  markets, partly through the soon-to-be enacted
  Qualified Domestic Institutional Investor
  (QDII) scheme. Large volumes of such investment
  have already been in process without apparent
  legal challenges
• China has the worlds highest savings rate, and
  with private wealth fast accumulating China
  already has over 200 million people with
  considerable income for equity investment, a good
  portion of which are looking at overseas equity
  investments
• With Chinas joining WTO, China has already
  opened up its capital and financial markets for
  foreign entries and is obligated to open up
  further, with extensive precedents being
  established in all the following aspects
• Foreign mutual fund management firms can form
  Chinese-foreign JVs holding 33 (soon to be 49)
• Foreign securities firms are allowed to form
  Chinese-foreign JVs holding 33 (soon to be 49)
• Foreign commercial banks are allowed to hold up
  to 25 of Chinese domestic commercial banks
• Foreign insurance firms are allowed to hold up to
  49 in life and 50 in casualty insurance JVs

4
China-related stock and equity market
opportunities
Currently available or soon to be developed China
and China-related equity products and
opportunities
Chinese equity listings in New York, London and
other international exchanges
Chinese equity listing in Hong Kong
International equities with a strong China
element or China Plays
Chinese government agencies and Chinese companies
investing in global equities
Chinese equities listed on Chinese domestic
exchanges With the Chinese domestic markets
further opening up
Commercial collaborations with Chinese financial
intermediaries
Related advisory work
5
Chinese stock market regulatory mechanisms

• The Chinese stock market regulatory framework
• China Securities Regulatory Commission (CSRC)
  and its local branches
• Shanghai and Shenzhen Stock Exchanges
• China Securities Industry Association

6
Chinese stock market legal frameworks

• Legal framework regulating the stock market
• Company Law of 1992 and its amendments
• Securities Law of 1998 and its amendment
  efforts
• Administrative Regulations
• Rules and Interpretations
• Stock Exchange Rules

7
Chinese stock market future trend

• Future regulatory and industry development
  trend
• Working toward an effective regulatory
  mechanism universal regulatory body?
• Working toward a more comprehensive and
  integrated securities legal framework
• Enforcement efforts always a challenge?

8
International IPO of Chinese companies legal
regulatory challenges

• Common Problems
• Corporate governance
• Information Disclosure
• Investor Relations
• Regulatory Compliance
• Multinational Regulatory Vacuum?
• Sarbanes-Oxley Act (2002)
• NYSE Corporate Governance Rules (303A)

9
International IPO of Chinese companies recent
examples of legal and regulatory implications

• Recent Examples
• China Life Insurance
• Minsheng Bank
• China National Offshore Oil Corporation
• Construction Bank
• Semiconductor Manufacturing International
  Corporation
• Lenovos planned acquisition of IBM PC
  business
• China Aviation Oil (Singapore)s trading
  losses