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SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES

SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES
FOR PURPOSES OF SECTION 303A.11 OF
THE NEW YORK STOCK EXCHANGE LISTED COMPANY MANUAL

We are incorporated under the laws of the PRC, with A Shares publicly traded on the Shanghai Stock Exchange, or the SSE, and H Shares publicly traded on the Hong Kong Stock Exchange, or the HKSE, and American Deposit Shares representing H Shares on the NYSE.  As a result, our corporate governance framework is subject to the mandatory provisions of the PRC Company Law and the Corporate Governance Rules as well as the securities laws, regulations and the listing rules of Hong Kong and the United States.

The following discussion summarizes the significant differences between our corporate governance practices and those that would apply to a U.S. domestic issuer under the NYSE corporate governance rules.

Director Independence

Under the NYSE corporate governance rule 303A.01, a listed company must have a majority of independent directors on its board of directors.  A company of which more than 50% of the voting power is held by an individual, a group or another company, or a controlled company, is not required to comply with this requirement.  We are not required under the PRC Company Law and the HKSE Listing Rules to have a majority of independent directors on our board of directors.  As of the date of this report, five of our 13 directors were independent non executive directors.

Under the NYSE corporate governance rule 303A.03, the non management directors of a listed company must meet at regularly scheduled executive sessions without management.  There are no mandatory requirements under the PRC Company Law and the HKSE Listing Rules that a listed company should hold, and we currently do not hold, such executive sessions.

Nominating/Corporate Governance Committee

Under the NYSE corporate governance rule 303A.04, a listed company must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties, but a controlled company is not required to comply with this requirement.  The Corporate Governance Code as amended by the Stock Exchange of Hong Kong provides that issuers shall establish a nominating committee, and a majority of which should be independent non executive directors and the chairman shall be served by an independent non executive director or the board chairman.  We are not required under the PRC Company Law to have a nominating/corporate governance committee.  We set up a nominating committee in August 2015, which consists of the chairman of our board of directors and two independent directors.

Compensation Committee

Under the NYSE corporate governance rule 303A.05, a listed company must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties.  A controlled company is not required to comply with this requirement.  We are not required under the PRC Company Law to have a compensation committee.  Under the Corporate Governance Code of the HKSE Listing Rules, a listed company must have a remuneration committee composed of a majority of independent non executive directors, with a written term of references that covers certain minimum specified duties.

We currently do not have a compensation committee composed entirely of independent directors.  However, we have an evaluation and remuneration committee including a majority of independent non executive directors.

Corporate Governance Guidelines

Under the NYSE corporate governance rule 303A.09, a listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects.  We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, formal corporate governance guidelines.  However, we have the Articles of Association, the Rules and Procedures of Board of Directors and the Trial Implementation Rules for Compensation of Senior Management that address the following subjects:

? director qualification standards and responsibilities;

? key board committee responsibilities;

? director compensation; and

? director orientation and continuing education.

In addition, under the HKSE Listing Rules, we are expected to comply with, but may choose to deviate from, certain code provisions in the Corporate Governance Code of the Listing Rules which sets forth the principles and standards of corporate governance for listed companies.  Pursuant to the HKSE Listing Rules, if we choose to deviate from any code provisions of the Corporate Governance Code, we must disclose such deviations in our annual report.

In 2009, we formulated the Administrative Measures on Independent Directors, the Administrative Rules on Holding of Company Shares by Directors, Supervisors and Senior Management, the Administrative Measures on Investor’s Relationship and the rules and procedures of the Audit Committee, the Performance Review and Compensation Committee, the Investment and Development Committee, and the Safety and Environmental Protection Committee.  All these policies have further enhanced our corporate governance system and can ensure the better performance of duties of directors, supervisors, senior managers and committee members.  In 2015, we set up a nominating committee and formulated the Rules of Procedures of the Nominating Committee.

In 2017, we revised our articles of association according to relevant regulatory requirements.  We added the cumulative voting provisions, and defined the role of the Party’s core leadership in the articles of association.  Our by-laws with respect to general meeting, board of directors and board of supervisors were also amended in line with the amendment to the articles.

Code of Business Conduct and Ethics

Under the NYSE corporate governance rule 303A.10, a listed company must adopt and disclose its code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.  See “Item 16B – Code of Ethics”.  We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, a code of business conduct and ethics for directors.  However, pursuant to the HKSE Listing Rules, all of our directors must comply with the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) as set out in the Listing Rules.  The Model Code sets forth required standards with which the directors of a listed company must comply in securities transactions of the listed company.

CEO Certification Requirements

Under the NYSE corporate governance rule 303A.12(a), each listed company’s CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.  Our CEO is not required under the PRC Company Law and the HKSE Listing Rules to submit, and our CEO does not currently submit, such certification.  Instead, our chairman, who performs the duties of the CEO, does the certification.

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