Article 1. These Provisions are formulated in accordance with the Law of the People's Republic of China on the People's Bank of China, the Contract Law of the People's Republic of China and other relevant legal provisions in order to facilitate the further development of the bond market, regulate bonds outright repurchase agreements business, safeguard against market risks and protect the lawful rights and interests of market participants.

Article 2. For the purposes of these Provisions, the term " bonds outright repurchase agreements " (hereinafter, "outright repo") shall mean an act of trading where in time of a bond holder (positive repo party) selling bonds to a buyer (reverse repo party), the two parties at the same time agree upon that the positive repo party purchases the same class of bonds of the same quantity from the reverse repo party at an agreed price on an agreed date in the future.

Article 3. The scope of classes of bonds for outright repo shall be the same as that for cash bond transactions.

Article 4. Outright repo shall follow the principles of impartiality, faithfulness, self-discipline and self risk-taking. Market participants shall establish and work to improve the relevant internal management system and risk prevention mechanism. For the purposes of these Provisions, the term "market participants" shall carry identical meaning as the term "market participants" in the Measures for the Administration of Bond Transactions in the National Interbank Bond Market promulgated by the People's Bank of China.

Article 5. Where outright repo is conducted, market participants shall conclude the master agreement for outright repo. Such master agreement shall contain a performance guarantee clause to ensure the effective performance of the outright repo contract.

Article 6. Market participants shall conclude a written contract for each outright repo transaction in the form of a deal ticket generated by the trading system of the National Interbank Funding Center (hereinafter referred to as "CFETS"), or a written contract, letter, or digital data message etc..A complete outright repo contract for a single outright repo transaction consists of the master agreement for outright repo and a written contract in the aforementioned form. Supplementary agreements may be signed by the parties to the transaction if they deem it necessary.

Article 7. During the period of outright repo, no bond exchange, cash delivery nor early redemption is allowed between the parties to the transaction.

Article 8. Adequate bonds and funds shall be available for delivery in order to conduct the outright repo.

Article 9. An outright repo shall be transacted at net price and settled at full price.

Article 10. The net price of the first transaction, the net price of the transaction upon maturity, and quantity of bonds for repurchase under an outright repo shall be determined by the parties to the transaction, provided that the net price of the transaction upon maturity plus additional interest of the bond accrued during the repurchase term shall exceed the net price of the first transaction.

Article 11. The term of an outright repo shall be determined by the parties to the transaction, but shall not exceed a maximum of 91 days. The parties to the transaction shall not extend the repurchase term in any manner.

Article 12. The ratio of the amount of first settlement under an outright repo to the par value of the repurchased bonds shall comply with the relevant provisions of the People's Bank of China.

Article 13. Where an outright repo is conducted, parties to the transaction may agree to set up deposit or collateral bond based on the credit status of the trading counterparty. The bond shall be frozen in the custodian account of the provider thereof during the repurchase period.

Article 14. Where an outright repo is conducted, the balance of a single class of bonds to be repurchased of any market participant shall be less than 20% of such class of bonds' volume in circulation, and the total balance of bonds to be repurchased of any market participant shall be less than 200% of the total volume of self-operating bonds under the custody of China Government Securities Depository Trust & Clearing Co., Ltd (hereinafter referred to as "CDC").

Article 15. Where there is a breach of contract under an outright repo to which a dispute arises as to the facts or liabilities of the breach of contract, the parties to the transaction may refer the dispute to arbitration on the strength of their agreement or institute proceedings with a people's court, and then report the final arbitration or litigation results to CFETS and CDC. The final results shall be announced within five working days upon receipt of the report.

Article 16. CFETS and CDC shall, in accordance with the requirements and authorization of the People's Bank of China, promptly disclose the relevant outright repo information, including the ratio of the total balance of a single class of bonds to be repurchased under outright repo in the previous trading day to the bond volume in circulation of the same class.

Article 17. CFETS shall be responsible for the daily monitoring of outright repo transactions, and CDC shall be responsible for the daily monitoring of outright repo settlement. They shall promptly report to the People's Bank of China upon discovery of any abnormality in transaction and settlement.

Article 18. CFETS and CDC shall formulate the relevant trading and settlement rules for outright repo in accordance with these Provisions.

Article 19. The branches of the People's Banks of China shall be responsible for the routine supervision of outright repo carried out by market participants within their respective jurisdictions.

Article 20. Where an outright repo is conducted, these Provisions and other relevant provisions in the national interbank bond market shall be conducted.

Article 21. Where any market participant, CFETS or CDC violates these Provisions, the People's Bank of China shall impose punishment in accordance with Article 46 of the Law of the People's Republic of China on the People's Bank of China.

Where an outright repo is conducted, any market participant that has violated other relevant provisions in the national interbank bond market shall be punished by the People's Bank of China in accordance with Article 46 of the Law of the People's Republic of China on the People's Bank of China.

Article 22. The People's Bank of China shall be responsible for the interpretation of these Provisions.

Article 23. These Provisions shall come into effect as of May 20, 2004.

May 11, 2004