Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	In China market, securities lending / borrowing schemes are not available.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	There is no marking to market procedures for fail trades in the settlement system. However, unmatched items will be reported by the central depositories' system. CSDCC Shanghai and Shenzhen branches have set up a risk fund to cover failed settlements, which ensures the security and continuity of B-share transactions and settlements. The risk fund is contributed by clearing participants and the defaulting party will bear all the losses and a penalty will be incurred.
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	The central depositories have set up a risk fund to cover failed settlements. If the clearing participant representing the purchaser fails to remit sufficient funds to the central depositories' account on the settlement day, the central depositories will use the risk fund to settle the outstanding transaction. The risk fund is also used to cover any fund shortages resulting from forced buy-ins or sell-outs and may be drawn upon by the central depositories to complete settlement when there is an irregularity.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	CSDCC Shanghai and Shenzhen branches act as central depositories, clearing house and central registrar and share transfer are conducted in central depositories' system electronically and directly.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	There is no legal maximum time period on this. For B-share market, the settlement cycle is on T+3 basis and central depositories will transfer the shares on T+3. Normally, it is finished by noon on T+3 in Shenzhen and by 5:30 p.m. on T+3 in Shanghai.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Under the Securities Law, an investor is entitled to all benefits after settlement is completed. Non-compliance with rules would lead to exchange disciplinary action against the delinquent buying or selling broker.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Proxies are permissible and are normally be lodged by post or by physical attendance. Fax followed by the original document is also acceptable by the company according to the market practice.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	Yes, for the A-shares market. For the B-shares market, there are no written rules stating the minimum/maximum lapsed time between the announcement and completion of events. However, according to the market practice, the time interval between the announcement and completion of events are always same.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	All voluntary corporate events should be announced in the officially appointed securities related newspaper, i.e. Shanghai Securities News, Securities Times, China Securities, on a consistent basis. This information is also available on the stock exchange's website and other media.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	Information could be available electronically through stock exchange's websites. Also, the information will be announced in the press. The lapsed time to respond is adequate for all investors despite of the time difference.