Jia Xiaoliang Bureau of Enterprise Reform, SASAC May 19, 2005

1. Framework of the Supervision of SOEs by SASAC of the State Council and Its Relationship with Other Organs Jia Xiaoliang Bureau of Enterprise Reform, SASAC May 19, 2005

2. SASAC Critical SOA Mnagaement Enterprise chief Management SOA Supervisory & Administration SOEs Framework of the Supervision of SOEs by SASAC of the State Council

3. SOEs (solely state-owned companies) Supervisory targets and scope of SASAC State holding enterprises (companies) SOA in state participating companies

4. Administration of enterprise’s leaders Appointing/dismissing leaders of SOEs Suggesting the appointing/dismissing of leaders of SOEs Appointing/dismissing or suggesting the appointing/dismissing of enterprise’s leaders The mechanism of selection and employment The mechanism of encouragement and constraint Directors/supervisors sent by the holding company; recommending top managers Salary and rewards/punishments Designating directors/supervisors to the participated co. Annual assessmemt The system for assessment of operational performance Assessment of operational performance during the term of office Enterprises

5. Administration of key events Designating shareholder representatives and directors Check and approval of restructuring and system reforming schemes and corporate charter Determining the dividing, incorporation, bankruptcy and merging, dissolution, capital increase and liabilities Determining the transference of state-owned property right Approving key events relating to sub-enterprises of importance Organizing and coordinating the merging and bankruptcy and the staffing efforts Setting down the enterprise’s distribution system and adjusting the overall level of wage allocation Authorizing the operation of SOA Responsibilities for the maintenance or addition of SOA value

6. Administration of SOA Responsible for operational and administrative issues such as enterprise’s assets, definition of property right, registration of property right, assets evaluation and supervision, check-up of assets and determination of funds, assets statistics and overall evaluation etc.; reconciling dispute in property right Supervising and administrating transaction of property right, promoting reasonable circulation and preventing losses of SOA Fulfilling duties of the financer in such aspects as returns on SOA, planning of critical investment and financing, and development strategy and planning etc. according to the state’s industrial policies Other critical issues involving assets disposal which shall be approved by SASAC

7. Supervision of SOA Designating board of supervisors to the financed enterprise according to Regulations on Board of Supervisors Supervising the financial accounting of the financed enterprise to maintain the financer’s rights and benefits Establishing the systems of accounting, auditing, enterprise’s legal adviser and democratic supervision by the employees inside the enterprise The enterprise regularly reports its financial standing, production and operation and the maintenance or addition of SOA value to SASAC

8. Supervision of SOEs by SASAC of the State Council and Its Relationship with Other Organs SASAC fulfills duties of the financer with SOA The government provides administrative management and formulates the state’s industrial policies Regulations on System Reform of SOEs Measures on the Transference of State-owned Property Right Measures on the Assessment of Enterprise’s Operators Macrocontrol Special audit by National Audit Office of China SOEs