Annual Report 2023
March 2024
2023 ANNUAL REPORT
I Important Notice, Table of Contents and Definitions
The board of directors (the“Board”), the supervisory committee (the“Supervisory Committee”) and the directors (the“Directors”), supervisors (the“Supervisors”) and senior management (the“Senior Management”) of the Company herebywarrant the truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no falserepresentations, misleading statements or material omissions contained in this annual report, and are jointly and severallyresponsible for the liabilities of the Company.Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Zhang Bo, head of the accountingdepartment (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial reportin the annual report.All Directors have attended the board meeting to review this report.Forward-looking statements such as future plans and operating targets contained in this annual report do not representearnings forecasts of the Company nor constitute substantive commitments to investors by the Company. Investors andrelevant persons shall maintain a sufficient risk awareness hereto and understand the differences among plans, forecasts andcommitments.The Company is exposed to various risk factors such as macro-economic fluctuation, state policies and regulations andcompetition in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factorslikely to be faced and the measures to be taken to address them as set out in the outlook on the future development of theCompany in Management Discussion and Analysis.The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capitalfrom reserves.
I Important Notice, Table of Contents and Definitions
Table of Contents
IImportant Notice, Table of Contents and Definitions ...... 1
IICompany Profile and Key Financial Indicators ...... 6IIIChairman’s Report ...... 11
IVManagement Discussion and Analysis ...... 12VDirectors’ Report ...... 42
VICorporate Governance ...... 52
VIIEnvironment and Social Responsibility ...... 95
VIIIMaterial Matters ...... 104
IXChanges in Share Capital and Shareholders ...... 139
XPreference Shares ...... 150
XIBonds ...... 151
XIIFinancial Report ...... 152
2023 ANNUAL REPORT
I Important Notice, Table of Contents and Definitions
Documents Available for InspectionI. The financial statements signed and sealed by the legal representative, financial representative and head of the financial
department of the Company.II. The original copy of the auditor’s report which is sealed by the accounting firm and signed and sealed by the certified publicaccountants.III. The original copies of the documents and announcements of the Company disclosed in the designated newspaper and onthe website as approved by the CSRC during the reporting period.IV. The annual report disclosed on the website of The Stock Exchange of Hong Kong Limited.V. Other related information.
I Important Notice, Table of Contents and Definitions
DefinitionsItemDefinitionCompany, Group, Chenming Group, ChenmingPaper or Chenming Paper Company
meansShandong Chenming Paper Holdings Limited and its subsidiariesParent Company or Shouguang HeadquartersmeansShandong Chenming Paper Holdings LimitedChenming HoldingsmeansChenming Holdings Company LimitedShenzhen Stock ExchangemeansShenzhen Stock ExchangeStock ExchangemeansThe Stock Exchange of Hong Kong LimitedCSRCmeansChina Securities Regulatory CommissionShandong CSRCmeansShandong branch of China Securities Regulatory CommissionZhanjiang ChenmingmeansZhanjiang Chenming Pulp & Paper Co., Ltd.Jiangxi ChenmingmeansJiangxi Chenming Paper Co., Ltd.Wuhan ChenmingmeansWuhan Chenming Hanyang Paper Holdings Co., Ltd.Shanghai ChenmingmeansShanghai Chenming Industry Co., Ltd.Huanggang ChenmingmeansHuanggang Chenming Pulp & Paper Co., Ltd.Chenming (HK)meansChenming (HK) LimitedJilin ChenmingmeansJilin Chenming Paper Co., Ltd.Shouguang MeilunmeansShouguang Meilun Paper Co., Ltd.Shouguang Art PapermeansShouguang Chenming Art Paper Co., Ltd.Finance CompanymeansShandong Chenming Group Finance Co., Ltd.
2023 ANNUAL REPORT
I Important Notice, Table of Contents and Definitions
ItemDefinitionChenming InvestmentmeansShandong Chenming Investment LimitedChenming LeasingmeansShandong Chenming Financial Leasing Co., Ltd. and its
subsidiariesChenrong FundmeansWeifang Chenrong Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)Jiangxi PortmeansJiangxi Chenming Port Co., Ltd.Chongqing TrustmeansChongqing International Trust Co., Ltd.Chenming Asset ManagementmeansChenming (Qingdao) Asset Management Co., Ltd.Corporate Bondsmeans18 Chenming Bond 01Perpetual Bondsmeans17 Lu Chenming MTN001the reporting period or the yearmeansThe period from 1 January 2023 to 31 December 2023the beginning of the year or the periodmeans1 January 2023the end of the year or the periodmeans31 December 2023the prior yearmeansThe period from 1 January 2022 to 31 December 2022
II Company Profile and Key Financial Indicators
I. Company profileStock abbreviationStock code000488
B200488Stock exchanges on which the shares are listedShenzhen Stock ExchangeStock abbreviationChenming PaperStock code01812Stock exchanges on which the shares are listedThe Stock Exchange of Hong Kong LimitedName in Chinese of the CompanyShort name in Chinese of the CompanyName in English of the Company (if any)SHANDONG CHENMING PAPER HOLDINGS LIMITEDShort name in English of the Company (if any)SCPHLegal representative of the CompanyChen HongguoRegistered addressNo. 595 Shengcheng Road, Shouguang City, Shandong ProvincePostal code of registered address262700Changes of the registered address of the CompanyNilOffice addressNo.2199 Nongsheng East Road, Shouguang City, Shandong ProvincePostal code of office address262705Website of the Companyhttp://www.chenmingpaper.comEmail addresschenmmingpaper@163.comII. Contact persons and contact methods
Secretary to the BoardHong Kong Company SecretaryNameYuan XikunChu Hon LeungCorrespondence AddressNo. 2199 Nongsheng East Road,
Shouguang City, Shandong Province
22nd Floor, World Wide House, Central,Hong KongTelephone0536-215800800852-21629600Facsimile0536-215897700852-25010028Email addresschenmmingpaper@163.comliamchu@li-partners.com
III. Information disclosure and places for inspection
Websites of the stock exchanges where the Company
discloses its annual report
Domestic: http://www.szse.cn; overseas: http://www.hkex.com.hkNames and websites of the media where the Company
discloses its annual report
China Securities Journal, Shanghai Securities News, Securities
Times, Securities Daily, Hong Kong Commercial Daily and
CNINFO (http://www.cinifo.com.cn)Places for inspection of the Company’s annual reportSecurities investment department of the Company
IV. Change in registration
Organisation registration code913700006135889860Change of principal activities since its listing (if any)NoChange of the controlling shareholder (if any)No
2023 ANNUAL REPORT
II Company Profile and Key Financial Indicators
V. Other relevant information
CPAs engaged by the CompanyName of CPAsGrant Thornton (Special General Partnership)CPAs’Office AddressFloor 11, Building No. 4, HuaChuang GuanLi Center, 219 Shunhai
Road, Lixia District, JinanName of the Signing Certified Public AccountantsJiang Tao and Guo DongmeiSponsors engaged by the Company to continuously perform its supervisory function during the reporting period Applicable ? Not applicableFinancial advisors engaged by the Company to continuously perform its supervisory function during the reporting period Applicable ? Not applicableVI. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company Yes ? No
20232022
Increase/decrease
for the year ascompared to theprior year2021Revenue (RMB)26,608,570,228.2032,004,367,320.91-16.86%33,019,812,294.14Net profit attributable to shareholders
of the Company (RMB)-1,281,289,649.82189,290,120.82-776.89%2,065,513,108.71Net profit after extraordinary gains or lossesattributable to shareholders of the Company (RMB)-1,942,120,184.70-361,459,377.16-437.30%1,743,876,537.12Net cash flows from operating activities (RMB)4,389,949,308.823,449,824,242.3727.25%8,581,888,192.64Basic earnings per share (RMB per share)-0.450.03-1,600.00%0.56Diluted earnings per share (RMB per share)-0.450.03-1,600.00%0.56Rate of return on weighted average net assets-7.65%0.55%
Decreased by 8.2percentage points9.56%
As at the end of 2023As at the end of 2022
Increase/decreaseas at the end ofthe year comparedto the end of the
prior yearAs at the end of 2021Total assets (RMB)79,487,052,953.5884,301,017,409.62-5.71%82,869,661,681.08Net assets attributable to shareholders of the
Company (RMB)16,692,175,196.5319,084,565,494.92-12.54%19,117,985,306.48
II Company Profile and Key Financial Indicators
Data specification: When calculating financial indicators such as earnings per share and rate of return on weighted averagenet assets, the interest on Perpetual Bonds of RMB47,430,410.96 during the reporting period is deducted.The lower of the Company’s net profit before or after extraordinary gains or losses in the last three accounting years isnegative, and the audit report for the last year shows that the Company’s ability to continue as a going concern is uncertain Yes ? NoThe lower of net profit before or after extraordinary gains or losses is negative? Yes NoItem20232022RemarkRevenue (RMB)26,608,570,228.2032,004,367,320.91Revenue from sales of
materials ofRMB900,376,053.88and other revenue of RMB85,840,912.08.Deduction to revenue (RMB)986,216,965.961,030,770,460.26Revenue after deduction (RMB)25,622,353,262.2430,973,596,860.65
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report Applicable ? Not applicableThere was no difference between the net profit and net assets disclosed in accordance with international accountingstandards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report Applicable ? Not applicableThere was no difference between the net profit and net assets disclosed in accordance with overseas accountingstandards and China accounting standards in the financial report during the reporting period.
2023 ANNUAL REPORT
II Company Profile and Key Financial Indicators
VIII. Key Financial Indicators by Quarter
Unit: RMBQ1Q2Q3Q4Revenue6,155,915,692.166,409,047,089.157,156,893,450.746,886,713,996.15Net profit attributable to shareholders of the Company-275,409,967.37-412,670,196.73-80,213,259.42-512,996,226.30Net profit after extraordinary gains or losses attributable to shareholders of the Company-327,893,189.14-483,946,028.35-439,773,872.12-690,507,095.09Net cash flows from operating activities916,852,965.06866,234,782.531,858,270,213.08748,591,348.15
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts asdisclosed in the quarterly report or interim report Yes ? NoIX. Five-year financial summary under paragraph 19 of appendix D2 of the Hong Kong ListingRules
Unit: RMB’0,000For the year ended 31 December20232022202120202019Revenue2,660,8573,200,4373,301,9813,073,6523,039,543Profit before tax-170,97018,227230,618217,227204,848Tax-38,306-13,50921,65026,60629,518Profit for the current period attributable to shareholders of the Company-128,12918,929206,551171,203165,657Minority interests-4,53512,8072,41719,4189,673Basic earnings per share (RMB/share)-0.450.030.560.360.33Rate of return on weighted average net assets (%)-7.650.55%9.56%5.84%5.57%
Unit: RMB’0,000For the year ended 31 December20232022202120202019Total assets7,948,7058,430,1028,286,9669,157,5469,795,891Total liabilities5,838,9206,057,2766,029,4636,577,5197,161,914Minority interests440,568464,369345,705152,329117,003Equity attributable to shareholders of the Company1,669,2181,908,4571,911,7992,427,6972,516,974Net current assets (liabilities)-2,121,186-1,917,930-1,766,446-1,516,398-774,633Total assets less current liabilities2,970,9313,240,2273,233,4714,052,9224,526,014
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses? Applicable Not applicable
Unit: RMBItemAmount for 2023Amount for 2022Amount for 2021DescriptionProfit or loss from disposal of non-current assets(including write-off of provision for assets impairment)431,805,592.54161,509,859.17162,163,302.50Government grants (except for the government grantsclosely related to the normal operation of the Company,granted in accordance with an established standardand having an ongoing effect on the Company’sprofit or loss in compliance with national policies andregulations) accounted for in profit or loss for thecurrent period117,211,489.25314,934,315.62261,974,874.53Except for effective hedging business conducted in theordinary course of business of the Company, gain orloss arising from the change in fair value of financialassets and financial liabilities held by a non-financialcompany, as well as gain or loss arising from disposalof its financial assets and financial liabilities58,579,398.48-35,178,162.53-54,802,461.29Reversal of provision for impairment of receivablesindividually tested for impairment99,483,459.63275,585,463.86Profit or loss from debt restructuring55,297,346.06967,464.9124,593,731.72Profit or loss from changes in the fair value of consumablebiological assets subsequently measured at fair value6,775,808.389,924,233.72-41,899.05Other non-operating income and expenses other than the
above items-11,642,079.10-37,391,130.09-15,461,704.28Less: Effect of income tax89,176,973.22137,333,913.6660,135,956.19
Effect of minority interests (after tax)7,503,507.142,268,633.02-3,346,683.65Total660,830,534.88550,749,497.98321,636,571.59
Details of other gain or loss items that fall within the definition of extraordinary gain or loss:
Applicable ? Not applicableThe Company did not have details of other gain or loss items that fall within the definition of extraordinary gain or loss.Explanation on the extraordinary gain or loss items as illustrated in the Explanatory Announcement on InformationDisclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses defined as itsrecurring gain or loss items? Applicable Not applicableItemAmount involved (RMB)ReasonOther income52,766,790.28Government grants related to assets and closely related to the normal
operation of the Company as extraordinary gain or loss due to theinclusion of their subsequent amortisation in other income and theirongoing effect on the Company’s profit or loss
2023 ANNUAL REPORT
III Chairman’s Report
Dear shareholders,The 2023 financial year has passed. On behalf of the Board of Directors, I would like to report to you what we have done, what wehave encountered and what we look forward to in the future.Tortuous road but improving momentumIn 2023, the global economic recovery was bumpy, and the pandemic, geopolitics and hyperinflation had aggravated the marketuncertainty. Under the conflict, the major economies showed clear differentiated trends, and economic development faced manychallenges. The world is an organic whole. Every internal and external policy adjustment, the changes of the regional situation andthe inflation fluctuation affect the companies as market micro-subjects. Each company as a market micro-subject is constantlyenduring and trying to adapt to the changing market environment.In 2023, papermaking enterprises suffered from both the high upstream cost squeeze and the weak downstream demand. Facingthe unprecedented complex situation, the Company further consolidated its self-pulping supply advantage, retained existingcustomers while developed new customers, improved its product system and optimised its product structure, and exploredoverseas markets and expanded sales coverage. Although the Company incurred a loss, it had a solid foundation and itsdevelopment momentum was improving.Confident about forging ahead
In recent years, the Company has followed the policy and market trend, eliminated a number of backward production capacities,built multiple new large-scale pulp and paper production lines, and gradually established a circular development model. Relyingon the market and targeting the demand, the Company has taken initial shape in the“pulp-paper integration”layout linkingnorthern and southern China. The Company has divested and reduced non-principal activities, and focused on the pulp and paperindustry. For example, the relocation of Wuhan Chenming has been completed. The Company has transferred its equity interest inGoldtrust Futures, and reduced the financial leasing business size by more than RMB20 billion compared with the peak level. TheCompany has introduced high quality strategic investors such as CCB Investment, Chuanfa Investment, BOCOM Investment andXiamen International Trade to optimise its capital structure. In addition, with a foreign trade recovery, the Company has reachedstrategic cooperation with major clients from Korea, Sweden and other countries to further expand overseas markets.Innovation is the source of corporate development, and we never stop innovation. In 2023, the Company applied for 33 patentsand obtained 42 authorised patents, which laid the foundation for its long-term development.
Keeping working for a promising futureDespite many uncertainties, China’s economy has not changed its upside trend, and its belief to make the real economy biggerand stronger never changes.I believe that as long as we keep working and make progress, we will have a promising road ahead. In the future, Chenmingwill further focus on its major operation of pulp and paper making, put greater efforts in the disposal of assets in non-majoroperations, enhance asset utilisation efficiency, consolidate its supply chain advantages, research and develop new products,develop new customers, scientifically manage operating costs, and continue to strengthen the profitability of the Company.On behalf of the Board of the Company, I would like to hereby express my sincere respect to the Company’s partners, suppliers,customers and all shareholders, and my heartfelt thanks to the departments at all levels and all employees of the Company!Chen HongguoChairman
28 March 2024
IV Management Discussion and Analysis
I. Industry Situation of the Company during the Reporting PeriodThe industry in which the Company operates is paper making and paper product industry.As an important basic raw material industry, the paper industry plays an important role in various fields of the nationaleconomy. After nearly 30 years of accelerated progress, China’s paper industry has made remarkable results and achievedlandmark development, but is also facing new challenges in its new journey.During the reporting period, the overall profitability of the paper industry improved but its momentum was slightly weakerdue to the sluggish downstream demand, raw material price fluctuation, increased supply and other factors. According tothe data of the Ministry of Industry and Information Technology, from January to December 2023, revenue of papermakingand paper product enterprises above designated size was RMB1,392.6 billion, down 2.4% year on year; their operatingcosts were RMB1,222.8 billion, down 3.1% year on year; and their total profit was RMB50.84 billion, up 4.4% year on yearOn the supply side, the domestic and overseas supply growth had a great effect on paper price fluctuation. Domestically,new paper production capacity in China had been drastically high in the past two years. Overseas, the import volumeof machine-made paper and paperboard increased year on year as a result of the“zero tariff”policy. The domestic andoverseas factors boosted the machine-made paper supply. According to the data of the National Bureau of Statistics, thenational output of machine-made paper and paperboard was 144,055,300 tonnes from January to December, 2023, whichexceeded the 140 million tonnes mark for the first time and reached a record high.During the reporting period, the prices of cultural paper and white cardboard prices were mixed. In terms of price, the whitecardboard price rebounded slightly in October and November, and showed an overall fluctuating downward trend. Thecultural paper price had a“V”-shaped trend that fluctuated downward in the first half of the year and floated upward in thesecond half.In terms of cost, the paper raw material prices and energy prices had fluctuated downward since 2023. However, due toa higher price base and the cost transmission delay, the paper enterprise production cost was still at a high level in 2023.Coupled with the weak product demand, enterprises faced a greater pressure to realise profit.In the short term, the paper product prices still face some upside resistance under the sufficient supply. However, the fiercecompetition will prompt leading enterprises to exploit the scale and cost advantages, and will facilitate the liquidation ofsmall and medium-sized enterprises to improve the industry operational efficiency, thus further enhancing the industryconcentration. In the long run, China’s paper industry concentration is still at a low level. The data shows that the CR10 inChina’s paper industry remained at about 45% in 2022, compared with about 90% for the CR10 in the United States, whichmeans much room for improvement.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
II. Principal activity of the Company during the Reporting PeriodThe Company is a large modern conglomerate principally engaged in pulp production and paper making and committeditself to implementing a pulp and paper integration strategy. At present, the Company has production bases in Shandong,Guangdong, Hubei, Jiangxi, Jilin and other places, with annual pulp and paper production capacity of 11 million tonnes,including pulp production capacity of 4.3 million tonnes. It is the first domestic paper making enterprise that achieves abalance between pulp production and paper making capacity in general. During the reporting period, the Company realisedrevenue of RMB26,609 million. The machine-made paper business is the major source of revenue of the Company. Therewas no significant change in the principal activity and the business model of the Company.
1. Products
As a leading player in the domestic paper making industry in China, the Company attaches great importance totechnology research and development and brand benefits. The Company has research institutions such as a nationalenterprise technology centre, a post-doctoral working station, a collaborative innovation center for cleaner productionand refinery of light industry bio-based products, the Shandong Pulp and Paper Making Engineering Lab and theGuangdong Pulp and Paper Production Technology Research Centre. It has introduced internationally advanced pulpand paper production technologies and equipment for the production of machine-made paper products coveringmore than 200 types in seven series, including culture paper, coated paper, white cardboard, copy paper, industrialpaper, special paper, and household paper. The Company owns“CHENMING CLOUDY MIRROR”,“CHENMINGCLOUDLY LION”,“CHENMING SNOW SHARK”,“CHENMING EAGLE”,“CHENMING GONGHAO”,“XINGZHILIAN”
and other famous brands, with each major product ranking among the highest in terms of market share in China. Itis the enterprise with the largest variety of products and the most complete products in the domestic paper makingindustry.During the reporting period, the 70g and 80g CLOUDY MIRROR, and CLOUDY LEOPARD electrostatic copy paper ofthe Company were successfully selected as the 2023“Made in Shandong ? Qilu Premium Products”. The“embossedpremium napkin”and the“high grade coated paper surface enhancement technology development”were awarded2023 Shandong Province Technology Innovation Awards. As one of the brands which were selected as the first 223“Shandong’s Good Product”brands, the Company was awarded the“Shandong’s Good Product”logo authorisation.Customers recognised the product quality of the Company. The Company built up strategic cooperation relationshipwith famous companies such as Daehan Paper, CellMark AB in Sweden, and Deli Group.
IV Management Discussion and Analysis
II. Principal activity of the Company during the Reporting Period(Continued)
1. Products
(Continued)CategoryMajor brands and typesMajor manufacturing companiesRange of applicationCulture paper series1.“BIYUNTIAN”,“CLOUDY MIRROR”,“CLOUDYLEOPARD”and“YUNJIN”all-wood pulp offset paperand electrostatic base paper2.“CLOUDY LION”and“CLOUDY CRANE”original whiteoffset paper3.“CLOUDY PINE”and“GREEN PINE” light weight paper
4. Blueprint paper, colour offset paper, pure texture paper,
non-fluorescent offset paper, PE offset paper
5. Beige and high white book paper
6. Light weight coated paper
Shouguang HeadquartersShouguang MeilunZhanjiang ChenmingJiangxi ChenmingJilin Chenming
Printing publications, textbooks, magazines, covers, illustrations,
notebooks, test papers, teaching materials, reference books, etc.
Coated paper series1.“SNOW SHARK”and“EAGLE” one-sided coated paper2.“SNOW SHARK”,“EAGLE”and“RABBIT”double-sidedcoated paper3.“EAGLE”and“RABBIT” matte coated paper
Shouguang HeadquartersShouguang Meilun
Double-sided coated paper is suitable for high quality printing, such
as high-grade picture albums, picture, magazines and so on,promotional materials such as interior pages of high-end books,wall calendars, posters and so on, and suitable for suitable forhigh-speed sheet printing and high-speed rotary printing;One-sided coated paper is suitable for upscale tobacco package
paper, adhesive sticker, shopping bags, slipcases, envelopes,gift wrapping and so on, and suitable for large format printing andcommercial printing.White cardboard series1. White cardboard of“LIYA”series, white cardboardand ivory cardboard of“LIPIN”and“POPLAR”series,high bulk cardboard and ivory cardboard of“LIZZY”
and“BAIYU”series, and super high bulk cardboard of“LIYING”and“BAIYU” series
2. Food package board of
“LIYA”and“LIZZY” series
3. Coated cattle card and LIYA book card
4. Playcard paper board
5. Chenming cigarette cardboard
Shouguang HeadquartersJiangxi ChenmingZhanjiang Chenming
High-end gift boxes, cosmetics boxes, tags, shopping bags, publicitypamphlets, high-end postcards; cigarette package printing ofmedium and high quality; milk package, beverage package,disposable paper cups, milk tea cups, and noodle bowls.
Copy paper series“GOLDEN MINGYANG”and“GOLDEN CHENMING”
copy paper,“BOYA”and“BIYUNTIAN”copy paper,“MINGYANG”,“LUCKY CLOUDS”,“BOYANG”and“SHANYIN”copy paper, and“GONGHAO”and“TIANJIAN” copy paper
Shouguang HeadquartersShouguang MeilunZhanjiang Chenming
Printing and copying business documents, training materials, and
writing.Industrial paper seriesHigh-grade yellow anti-sticking base paper, ordinary yellow/
white anti-sticking base paper and PE paper
Shouguang HeadquartersJiangxi ChenmingZhanjiang Chenming
Anti-stick base paper is mainly used for producing the paper base of
stripping paper or anti-sticking base paper;Cast coated base paper is suitable for producing adhesive paper or
playcard compound paper after coating.Special paper seriesThermal paper and glassine paperShouguang Art PaperHigh-grade adhesive backing paper for electronics, medicine, food,
washing supplies, supermarket labels, double-sided tapes, etc.Household paper seriesToilet paper, facial tissue, pocket tissue, napkin, paper
towels and“XINGZHILIAN”
Shouguang MeilunDaily toilet supplies; used in restaurants and other catering industries,
and used in public toilets in hotels, guesthouses, and office
buildings, and also suitable for home and other environment.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
II. Principal activity of the Company during the Reporting Period(Continued)
2. Operation model
(1) Purchase model
The Company has established a supply chain management centre which adopts a supply chain managementmodel of“centralised procurement by the Group, source as the first priority, hierarchical separation and one-vote veto”. Through continuous improvement of the procurement information system, the Company hasfully realised machine control management, and optimised the authorisation approval process, effectivelystandardising the procurement management system. Based on the needs of production bases, the Groupintegrates the resources of related parties and implements centralised procurement. The Company seekssources and high-quality suppliers through industry exhibitions, on-site inspections and competitive factoryresearch to strengthen procurement at source and reduce procurement costs; and introduces a suppliercompetition mechanism by establishing a three-level joint review mechanism for suppliers and implementing asystem of eliminating substandard suppliers, so as to improve supply quality. Meanwhile, the Company activelycooperates with financial institutions and third parties in the supply chain financial business, and fully utilises thefunds from contributing parties to lower procurement costs, deepen strategic cooperation and enhance supplychain competitiveness.
(2) Production model
The Company has committed itself to implementing a pulp and paper integration strategy. Adhering to theconcept of“placing green development and environmental protection as its priority”, the Company has activelypromoted clean production and vigorously carried out energy conservation and emission reduction, aiming to bea resource-saving and environmentally friendly model enterprise. It is innovating an integrated use of resourcesand a circular industrial development mode, and an“ecological chain”featuring resources, products andrecycled resources has been established. As for production process, the Company takes planned managementas the focus and implements a hierarchical planned management model for the Group, the Company,factories and workshops. Its production volume is determined based on the sales, its production is arrangedscientifically, and its inventories are under strict control. The Group has set up a production scheduling centreto monitor the operation of the production lines of each subsidiary around the clock on a real-time basis, so asto ensure normal production. It has actively built and promoted the MES management system, and realised thetimely information transfer between the management and the production control unit through bridging the gapbetween the ERP and DCS systems.
(3) Marketing model
The Company has always adhered to the marketing concept of“Good faith, Win-Win and Sharing”whilewholeheartedly serving its customers. The Company has a relatively mature sales network, and has set upspecialised sales companies responsible for the development of domestic and overseas markets, productsales, and formulation of sales policies. The sales companies’management systems are divided into productlines, product companies, management areas, and branches to achieve matrix management. The salescompanies are divided into product companies of culture paper series, coated paper series, white cardboardseries, electrostatic paper series, special paper series and household paper series according to product line.Each product company has its administrative district. A regional general manager is responsible for his/heradministrative district, under which branch companies are set up. The chief representatives of the branchcompanies have full authority to deal with branch business.
IV Management Discussion and Analysis
II. Principal activity of the Company during the Reporting Period(Continued)
2. Operation model
(Continued)
(3) Marketing model
(Continued)The Company has implemented a three-level scheduling mechanism. Branch companies, administrativedistricts, and sales companies schedule task indicators daily to ensure the effective implementation of the plans.It sticks to a“four-level visit mechanism”to gain deep market insights and meet customer needs. Meanwhile,by leveraging its comprehensive information systems, the Company has realised It-based management. It hasalso established and improved the complaint handling system and customer satisfaction system to enhance theCompany’s marketing management level.
(4) R&D Mode
The Company is market-oriented, and innovation is it driving force. It highly values technological R&D, and hasformed a variety of R&D modes such as independent R&D, technology introduction, and industry universityresearch cooperation. At present, the Company has a number of domestically leading innovative R&D platforms,including a national enterprise technology centre, a post-doctoral working station, a collaborative innovationcenter for cleaner production and refinery of light industry bio-based products, Shandong Pulp and PaperMaking Engineering Lab and the Guangdong Pulp and Paper Production Technology Research Centre, whichhave enhanced its independent innovation capabilities. Meanwhile, on the basis of introducing internationallyadvanced pulp and paper production lines and advanced technologies, the Company has made technologicalimprovements and re-innovations, and established new standards for processes and product quality, formingdistinctive core technologies. The Company also works hard on the following aspects: carrying out academicresearch with colleges and universities and R&D institutions such as Qilu University of Technology, QingdaoUniversity of Science and Technology, Tianjin University of Science and Technology, and Institute of ChemicalIndustry of Forest Products of the Chinese Academy of Forestry, introducing, digesting and absorbing scientificresearch and innovation achievements, accelerating the industrialisation of new and high technologies,optimising product mix, and improving the competitiveness of its products in the market.III. Analysis of Core Competitiveness
After innovation and development for more than 60 years, the Company has created a strong brand influence and cultivateda solid comprehensive competitiveness. It promotes product upgrades, enhances R&D strength and improves corecompetitiveness by creating competitive advantages in industry chain featured with pulp and paper integration. The corecompetitiveness of the Company did not underwent major changes during the reporting period. The details of the corecompetitiveness of the Company are as follows:
1. Advantages of pulp and paper integration
The Company has unwaveringly implemented a pulp and paper integration strategy. At present, its major productionbases located in Shouguang, Zhanjiang, and Huanggang are equipped with chemical pulp production lines, withtotal production capacity of wood pulp reaching 4.30 million tonnes. It is the first modern large-scale paper makingcompany that basically realises wood pulp self-sufficiency in China. A complete supply chain not only creates costadvantage for the Company, but also safeguards the safety, stability and quality of upstream raw materials, andrenders strong support for the Company to maintain its long-term competitiveness.
2. Scale advantages
The paper making industry is a typical capital-intensive and technology-intensive industry that follows the laws ofeconomies of scale. The Company is a leading player in the paper making industry in China. Its large-scale productionbases can be found in the major markets in Southern, Central, Northern, and Northeast China, with annual pulp andpaper production capacity reaching 11 million tonnes, where reasonable production scale creates the marginal costadvantage. Meanwhile, by leveraging the scale advantages, the Company has built an international logistics centreand railway dedicated lines and docks, and constructed a comprehensive logistics service platform covering containershipping, bonded warehousing, transfer and storage at stations and terminals, realising the improvement of logisticsefficiency and the stability of logistics costs.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
III. Analysis of Core Competitiveness(Continued)
3. Product advantages
The Company is an enterprise that offers the widest and the most complete product range in the paper makingindustry in China. The product series include culture paper, white cardboard, coated paper, copy paper, householdpaper, thermal paper, etc., with each major product ranking among the best in terms of market share. The Companyhas attached great importance to technology research and development. By introducing the most advanced pulpingand paper making technology and equipment in the world, it persists in technological innovation and work processoptimisation, so as to help improve product quality and structure upgrade, continuously improve the brand value ofChenming, and enhance brand benefits.
4. Industry layout advantages
Closely centring on the pulp and paper integration strategy, the Company has integrated resources and establishedits production bases in the core target market to promote the coordinated development of all regions. Currently, theCompany adopts the market-oriented approach and has production bases in Shandong, Guangdong, Hubei, Jiangxi,Jilin and other places. With all products sold at close distances, the Company substantially reduces transportationcosts while improving service efficiency, achieving a“win-win” between the Company and its users.
5. Advantages in technical equipment
The Company highly values the introduction and upgrades of technical equipment, actively push equipment andtechnology upgrade forward and boasts the largest and most advanced pulping and paper making productionline in the world. The Company’s major production equipment has been imported from internationally renownedmanufacturers, including Metso and Valmet of Finland, Voith of Germany, Andritz of Austria, etc. and reached theadvanced international level, thus ensuring production efficiency and product quality.
6. Advantages in research and innovation
The Company has scientific research institutions including a national enterprise technology centre, a post-doctoralworking station, and a collaborative innovation center for cleaner production and refinery of light industry bio-basedproducts. At the same time, the Company actively carries out in-depth industry-university-research cooperation withprestigious domestic universities and research institutes, continuously improves technical innovation capabilities andscientific research and development levels, and develops a series of new products with high technology contentsand high added value as well as proprietary technologies. The Company and its subsidiaries Zhanjiang Chenming,Shouguang Meilun, Jiangxi Chenming, Jilin Chenming and Huanggang Chenming are high and new technologyenterprises. As at the end of the reporting period, the Company had obtained over 400 national patents, including 41invention patents, 7 national new products, 16 scientific and technological progress awards above the provincial level,5 national scientific and technological projects and 75 provincial technological innovation projects. The Companytook the lead in obtaining the ISO9001 quality system certification, the ISO14001 environmental protection systemcertification and the FSC-COC international forest system certification among domestic peers.
7. Team management advantages
The Company possesses a complete and reasonable talent structure consisting of experienced personnel, includinghigh-end talents specialising in production, technology, sales, finance, laws, etc. In the course of business operations,the stable core team has developed a corporate culture that ties in with the Company’s development, summarisedmanagement experience with industry characteristics, and formed a team advantage integrating management andculture, allowing it to accurately grasp the industry development trend. At the same time, the Company has paidattention to the construction of a talent reserve and cultivation mechanism. With advanced business concepts andenormous development space, the Company has attracted an array of high-calibre professionals and improved thelevel of human capital construction, providing solid guarantee for the Company’s long-term sustainable development.
IV Management Discussion and Analysis
III. Analysis of Core Competitiveness(Continued)
8. Advantages in environmental governance capacity
The Company has actively upheld the concept of“lucid waters and lush mountains are invaluable assets”, adhered tothe development idea of“placing green development and environmental protection as its priority”, always regardedenvironmental protection as the“life project”, clung to the green development model of clean production and resourcerecycling, and earnestly shouldered the corporate responsibility for environmental protection. In recent years, theCompany and its subsidiaries have invested more than RMB8 billion in total in environmental protection, and haveconstructed the pollution treatment facilities including the alkali recovery system, reclaimed water treatment system,reclaimed water reuse system, white water recovery system and black liquor comprehensive utilisation system. Theenvironmental protection indicators rank high in China and in the world. At present, the Company adopts the world’smost advanced“ultrafiltration membrane + reverse osmosis membrane”technology to complete the reclaimed waterrecycling membrane treatment project, which is the largest reclaimed water reuse project in the domestic paperindustry. The reclaimed water recycle rate attains the industry-leading level. The reclaimed water quality meetsdrinking water standards, which can save hundreds of thousands cubic metres of fresh water every day. Meanwhile,in response to the“dual carbon”policy, the Company actively introduces photovoltaic power generation and biomasspower generation, continuously optimises the energy structure and improves the level of low-carbon production.IV. Analysis of principal operations
1. Overview
During the reporting period, the sales volume of the Company’s machine-made paper decreased year on year due tothe weak downstream demand in the paper industry. At the same time, the prices of machine-made paper, especiallythat of white cardboard, fell sharply year on year due to the concentration of new production capacity. The prices ofraw materials such as wood chips, raw coal and chemicals were still running at a high level, which seriously squeezedthe Company’s profitability. In 2023, the Company completed machine-made paper output of 4.78 million tonnes andsales volume of 4.74 million tonnes, realised revenue of RMB26,609 million, and net profit attributable to owners ofthe Company of RMB-1,281 million. As a typical pro-cyclical industry, the paper industry has a positive correlationwith the macroeconomic trend. At present, China economy is in a good development trend. With the continuousnational macroeconomic policy efforts, the paper industry downstream demand will gradually pick up, the short-termsupply and demand imbalance will be alleviated, and the industry prosperity is expected to improve. Meanwhile, theCompany will actively improve quality and efficiency by adjusting product structure, expanding exports, improvingproduction efficiency, controlling production costs and disposing of non-principal activities, so as to further improvethe Company’s profitability.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(1) Components of revenue
Unit: RMB20232022
Increase/decreaseAmount% of revenueAmount% of revenue
Total revenue26,608,570,228.20100%32,004,367,320.91100%-16.86%By industryMachine-made paper23,892,883,773.1089.79%28,398,850,766.5188.73%-15.87%Chemical pulp551,886,319.482.07%1,043,284,411.273.26%-47.10%Electricity and steam223,450,300.540.84%288,447,315.510.90%-22.53%Construction materials222,788,884.780.84%265,496,913.560.83%-16.09%Hotel and property rentals212,364,573.640.80%238,020,274.820.74%-10.78%Mould processing204,029,538.470.77%308,596,084.400.96%-33.88%Chemicals128,495,469.030.48%169,232,476.000.53%-24.07%Others1,172,671,369.164.41%1,292,439,078.844.04%-9.27%By productDuplex press paper7,702,426,452.7528.95%8,449,759,248.9226.40%-8.84%White cardboard5,477,558,929.5620.59%9,061,724,789.4128.31%-39.55%Electrostatic paper4,005,559,008.3615.05%4,077,351,284.3812.74%-1.76%Coated paper3,925,663,395.2314.75%4,149,820,827.4712.97%-5.40%Anti-sticking raw paper1,127,626,969.184.24%973,542,096.463.04%15.83%Thermal paper553,666,757.692.08%582,687,847.451.82%-4.98%Other machine-made paper1,100,382,260.334.14%1,103,964,672.423.45%-0.32%Chemical pulp551,886,319.482.07%1,043,284,411.273.26%-47.10%Electricity and steam223,450,300.540.84%288,447,315.510.90%-22.53%Construction materials222,788,884.780.84%265,496,913.560.83%-16.09%Hotel and property rentals212,364,573.640.80%238,020,274.820.74%-10.78%Mould processing204,029,538.470.77%308,596,084.400.96%-33.88%Chemicals128,495,469.030.48%169,232,476.000.53%-24.07%Others1,172,671,369.164.41%1,292,439,078.844.04%-9.27%By geographical segmentMainland China20,082,348,032.3675.47%23,860,251,349.9174.55%-15.83%Other countries and regions6,526,222,195.8424.53%8,144,115,971.0025.45%-19.87%By sales modeDistribution18,126,061,624.6468.12%20,430,260,632.5163.84%-11.28%Direct sales8,482,508,603.5631.88%11,574,106,688.4036.16%-26.71%
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(2) Industries, products, regions and sales model accounting for over 10% of revenue or operating profit of the
Company? Applicable Not applicable
Unit: RMB
RevenueOperating costs
Gross profit margin
Increase/decrease ofrevenue ascomparedto thecorrespondingperiod of theprior year
Increase/decrease ofoperatingcosts ascomparedto thecorrespondingperiod of theprior year
Increase/decrease ofgross profitmargin ascomparedto thecorrespondingperiod of theprior yearBy industryMachine-made paper23,892,883,773.1022,038,839,089.617.76%-15.87%-9.85%-6.15%By productDuplex press paper7,702,426,452.756,929,011,543.2410.04%-8.84%-6.46%-2.29%White cardboard5,477,558,929.565,673,086,405.12-3.57%-39.55%-27.52%-17.20%Electrostatic paper4,005,559,008.363,410,527,141.5114.86%-1.76%-2.48%0.63%Coated paper3,925,663,395.233,389,639,629.4913.65%-5.40%-1.97%-3.03%By geographical segmentMainland China20,082,348,032.3618,322,497,941.418.76%-15.83%-9.65%-6.24%Other countries and regions6,526,222,195.846,122,988,358.526.18%-19.87%-13.68%-6.72%By sales modeDistribution18,126,061,624.6416,782,843,186.057.41%-11.28%-4.69%-6.40%Direct sales8,482,508,603.567,662,643,113.889.67%-26.71%-21.53%-5.96%
Under the circumstances that the statistics specification for the Company’s principal operations dataexperienced adjustment in the reporting period, the principal activity data upon adjustment of the statisticsspecification as at the end of the reporting period in the latest year Applicable ? Not applicable
2023 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(3) Whether revenue from sales in kind is higher than revenue from services
? Yes NoBy industryItemUnit20232022
Increase/decreaseMachine-made paperSales’0,000 tonnes474515-7.96%Production output’0,000 tonnes478502-4.79%Inventories’0,000 tonnes363212.50%
Explanation on why the related data varied by more than 30% Applicable ? Not applicable
(4) Performance of material sales contracts and material procurement contracts of the Company during the
reporting period Applicable ? Not applicable
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(5) Composition of operating costs
By industry
Unit: RMB20232022By industryItemAmount
% ofoperating
costsAmount
% ofoperatingcosts
Increase/decrease
Machine-made paperRaw materials12,570,191,697.4557.04%13,880,562,601.1656.78%-9.44%
Energy and power3,035,894,899.7313.78%3,551,871,417.5414.53%-14.53%Chemicals2,971,091,082.4813.48%3,219,278,883.0713.17%-7.71%Depreciation974,858,417.494.42%1,015,882,589.524.16%-4.04%Freight879,576,446.703.99%991,532,365.834.06%-11.29%Labour costs273,486,536.001.24%300,586,979.171.23%-9.02%Other production costs1,333,740,009.766.05%1,488,310,143.036.09%-10.39%Subtotal22,038,839,089.61100.00%24,448,024,979.32100.00%-9.85%Chemical pulpRaw materials326,385,778.0159.41%483,207,371.4959.18%-32.45%
Energy and power78,827,192.3514.35%123,647,038.0115.14%-36.25%Chemicals77,144,557.3614.04%112,068,893.1613.72%-31.16%Accumulated depreciation25,312,257.024.61%35,364,701.704.33%-28.43%Labour costs7,101,094.241.29%10,463,973.851.28%-32.14%Other production costs34,630,638.996.30%51,810,755.296.34%-33.16%Subtotal549,401,517.97100.00%816,562,733.50100.00%-32.72%Electricity and heatRaw materials161,991,982.3576.38%214,274,012.4879.34%-24.40%
Depreciation16,818,943.237.93%26,624,446.179.86%-36.83%Labour costs7,859,289.013.71%8,596,817.643.18%-8.58%Energy and power4,983,704.942.35%6,245,631.232.31%-20.20%Chemicals387,301.280.18%470,492.880.17%-17.68%Other production costs20,048,349.419.45%13,862,506.915.13%44.62%Subtotal212,089,570.22100.00%270,073,907.31100.00%-21.47%Construction materialsRaw materials161,288,633.9174.50%158,431,654.7669.34%1.80%
Energy and power20,858,840.979.64%22,399,396.939.80%-6.88%Freight5,718,100.502.64%16,755,150.187.33%-65.87%Labour costs7,205,420.783.33%8,353,153.123.66%-13.74%Depreciation5,941,206.012.74%6,753,081.282.96%-12.02%Other production costs15,469,301.877.15%15,800,412.816.92%-2.10%Subtotal216,481,504.04100.00%228,492,849.08100.00%-5.26%
2023 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(6) Change of scope of consolidation during the reporting period
? Yes NoDuring the year, 1 subsidiary was newly established, namely Shouguang Kunhe Trading Co., Ltd. 1 subsidiarywas deregistered, namely Beijing Chenming Financial Leasing Co., Ltd. 2 subsidiaries were disposed of partialequity interest, namely Wuhan Chenming Hanyang Paper Holdings Co., Ltd. and Wuhan Chenming QiannengElectric Power Co., Ltd. 1 subsidiary was merged and acquired, namely Jiangxi Chenming Port Co., Ltd.
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period Applicable ? Not applicable
(8) Sales to major customers and major suppliers
Sales to major customers of the CompanyTotal sales to top 5 customers (RMB)5,966,203,769.14Total sales to top 5 customers as a percentage of the total sales for the year22.42%Sales to top 5 customers who are related parties as a percentage of the total sales for the year0.00%Information on top 5 customers of the CompanyNo.Name of customerSales (RMB)
As a percentage of thetotal sales for the year (%)1Customer A2,246,619,932.878.44%2Customer B1,223,279,810.024.60%3Customer C1,013,493,101.243.81%4Customer D854,121,755.873.21%5Customer E628,689,169.142.36%Total5,966,203,769.1422.42%
Other explanation of the major customers Applicable ? Not applicable
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(8) Sales to major customers and major suppliers
(Continued)
Major suppliers of the CompanyTotal purchases from top 5 suppliers (RMB)5,966,203,769.14Total purchases from top 5 suppliers as a percentage of the total purchases for the year22.33%Total purchases from top 5 suppliers who are related parties as a percentage of the total purchases for the year0.00%Information on top 5 suppliers of the CompanyNo.Name of supplierPurchases (RMB)
As a percentage of the totalpurchases for the year (%)1Supplier A2,489,770,843.6910.18%2Supplier B1,137,232,840.664.65%3Supplier C655,558,321.922.68%4Supplier D609,513,026.782.49%5Supplier E566,015,190.952.32%Total5,458,090,224.0022.33%
Other explanation of the major suppliers Applicable ? Not applicable
3. Expenses
Unit: RMB20232022
Increase/decreaseReasons for material changesSelling and distribution expenses230,999,637.43242,181,274.09-4.62%Wages or salaries of sales personnel
decreased year on year during thereporting period.General and administrative expenses690,319,782.01750,546,703.34-8.02%Reversal of expenses recognised
in prior period as the remainingrestricted shares unable to meetthe unlocking conditions duringthe reporting period.Finance expenses2,009,666,708.142,146,556,149.06-6.38%Interest expenses of the Company
decreased year on year during thereporting period.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
4. Research and development expenditure
? Applicable Not applicableName of major R&D projectProject purposeProject progress
Objectives to beAchieved
Expected impact on the futuredevelopment of the CompanyTechnological development of white
cardboard for handbags
Enhancing product
functionality or improvingperformance
Trial productionstage
To become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Non-fluorescent white cardboardtechnology development
Enhancing productfunctionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction withproducts and increasing marketshare.Thermal paper colour sensitivity keytechnology development
Enhancing productfunctionality or improvingperformance
Pilot testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.High bonding coating formulation
technology research and development
Enhancing product
functionality or improvingperformance
Trial production
stage
To become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Culture paper wet part filling new
technology development
Enhancing product
functionality or improvingperformance
Trial production
stage
To become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Research on low-temperature cooking
technology for sulfate pulping
Reducing energy
consumption orimproving energyefficiency
Pilot testing stageTo become
domesticallyleading
Improving product quality, lowering
production costs and improvingthe Company’s economicbenefits.Research on deep delignification
technology for broadleaf wood sulfatepulping
Saving raw materialsPilot testing stageTo become
domesticallyleading
Improving product quality, lowering
production costs and improvingthe Company’s economicbenefits.
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
4. Research and development expenditure
(Continued)
R&D personnel of the Company
20232022
Percentageof changeR&D headcount1,5021,3709.64%Ratio of R&D personnel14.16%12.62%1.54%Academic background of R&D personnelBachelor’s degree15413514.07%Master’s degree330.00%Age composition of R&D personnelUnder 303193054.59%30~40 years old85371718.97%
R&D expenditure of the Company
20232022
Percentage
of changeR&D expenditure (RMB)1,164,419,698.131,290,281,540.10-9.75%R&D expenditure to revenue4.38%4.03%0.35%Amount of R&D expenditure capitalised (RMB)0.000.000.00Capitalised R&D expenditure to R&D expenditure0.00%0.00%0.00%
Reasons for and effects of significant changes in the composition of the Company’s R&D personnel Applicable ? Not applicableReasons for significant change in total R&D expenditure to revenue Applicable ? Not applicableReasons for and reasonableness of the significant change of the capitalisation rate of R&D expenditure Applicable ? Not applicable
2023 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
5. Cash flows
Unit: RMBItem20232022
Increase/
decreaseSubtotal of cash inflows from operating activities29,165,118,764.1936,218,528,896.13-19.47%Subtotal of cash outflows from operating activities24,775,169,455.3732,768,704,653.76-24.39%Net cash flows from operating activities4,389,949,308.823,449,824,242.3727.25%Subtotal of cash inflows from investing activities377,601,853.11271,463,678.7539.10%Subtotal of cash outflows from investing activities319,310,876.892,716,434,567.72-88.25%Net cash flows from investing activities58,290,976.22-2,444,970,888.97102.38%Subtotal of cash inflows from financing activities35,277,274,955.0737,596,224,354.35-6.17%Subtotal of cash outflows from financing activities41,061,017,053.99 39,577,284,434.803.75%Net cash flows from financing activities-5,783,742,098.92-1,981,060,080.45-191.95%Net increase in cash and cash equivalents-1,395,226,406.90-1,009,455,697.51-38.22%Explanation on main effects of material changes in relevant data year on year? Applicable Not applicable
(1) Net cash flows from investment activities increased by 102.38% as compared to the same period of the prior
year mainly due to the increase in cash outflows from investing activities as a result of the participation in theestablishment of joint ventures by Jiangxi Chenming, a subsidiary, during the prior period for the purpose ofrevitalising the assets of the financial lease business, and consolidating and optimising the resource allocation.
(2) Net cash flows from financing activities decreased by 191.95% as compared to the corresponding period of the
prior year mainly due to the payment of due debts to reduce debt size during the reporting period.Explanation on reasons leading to the material difference between net cash flows from operating activities during thereporting period and net profit for the year Applicable ? Not applicable
IV Management Discussion and Analysis
V. Analysis of non-principal operations? Applicable Not applicable
Unit: RMBAmount
As a percentage
of total profitReasonIs it sustainable?Other income337,324,331.43-19.73%Receipt of government grants
related to daily business activities
Including RMB101 million whichis the annual amortisation amountof government grants received in prior periods, which is sustainable.Investment income505,067,035.78-29.54%Recognition of external investment
income and dividends, as well asincome from equity disposal andderecognition of financial assets during the reporting period
No
Gain or loss arising from the change in fair value
-25,555,304.501.49%Fluctuations of fair values of the
shares of China Bohai Bank aswell as forestry assets and other non-current financial assets
NoCredit impairment loss-319,956,249.3918.71%Bad debt provisions for receivablesNo
VI. Analysis of assets and liabilities
1. Material changes of asset items
Unit: RMBAs at the end of 2023As at the beginning of 2023Amount
As a percentageof total assetsAmount
As a percentageof total assets
PercentagechangeDescription
Monetary funds12,124,832,831.3015.25%14,000,434,986.0816.61%-1.36%Mainly due to a decrease in bank deposits as
at the end of the reporting period.Accountsreceivables
2,528,507,059.833.18%3,212,260,445.963.81%-0.63%Mainly due to a decrease in receivables from
customers as at the end of the reporting
period.Other receivables2,224,904,557.882.80%1,717,445,443.442.04%0.76%Mainly due to partial equity disposal of Wuhan
Chenming and an increase in equity
receivables during the reporting period.Inventories4,958,178,000.366.24%6,821,916,159.958.09%-1.85%Mainly due to the transfer of development
costs to fixed assets from inventories as at
the end of the reporting period.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
As at the end of 2023As at the beginning of 2023Amount
As a percentageof total assetsAmount
As a percentageof total assets
PercentagechangeDescription
Construction inprogress
859,617,965.161.08%558,866,880.360.66%0.42%Mainly due to an increase in the investment
in the Zhanjiang Chenming special paperproject during the reporting period.Short-termborrowings
33,475,479,021.6242.11%36,385,048,295.02 43.16%-1.05%Mainly due to the decrease in short-term debts
as at the end of the reporting period.Bills payable4,618,986,463.955.81%3,128,595,835.043.71%2.10%Mainly due to the increase in proportion of
payment for goods using bills during the
reporting period.Non-currentliabilities duewithin one year
3,631,937,677.824.57%4,673,505,241.865.54%-0.97%Mainly due to the repayment of long-term
borrowings due within one year and bonds
payable by the Company during the
reporting period.Long-termborrowings
4,681,014,489.645.89%3,982,236,251.084.72%1.17%Mainly due to an increase of the long-term
borrowings of the Company during the
reporting period.Long-term
payables
2,541,095,217.663.20%3,160,771,126.313.75%-0.55%Mainly due to the repayment of some
equipment finance leases by the Company
during the reporting period.A higher proportion of overseas assets Applicable ? Not applicable
VI. Analysis of assets and liabilities(Continued)
1. Material changes of asset items
(Continued)
IV Management Discussion and Analysis
VI. Analysis of assets and liabilities(Continued)
2. Assets and liabilities measured at fair value
? Applicable Not applicable
Unit: RMB
ItemOpening balance
Profit or lossfrom changein fair valueduring theperiod
Cumulativefair valuechangecharged toequity
Impairmentprovidedduring theperiod
Amountincreased/acquiredduring theperiod
Amountrecovered/disposed ofduring theperiodOther changesClosing balanceFinancial assets
1. Held-for-trading financial assets
(excluding derivative financial assets)74,708,444.88-28,740,129.26-149,716,501.53325,976.0946,294,291.71
2. Other non-current financial assets786,750,761.62-3,590,983.6259,269,016.381,598,737.43781,561,040.57
3. Consumable biological assets
measured at fair value1,496,607,818.846,775,808.3836,760,805.0326,595,279.2246,000,816.831,483,978,089.61Total2,358,067,025.34-25,555,304.50-53,686,680.1226,595,279.2247,599,554.26325,976.092,311,833,421.89
Whether there were any material changes on the measurement attributes of major assets of the Company during thereporting period Yes ? No
3. Restriction on asset rights as at the end of the reporting period
Unit: RMBAs at the end of the periodAs at the beginning of the periodItemBook balanceBook value
Type of
restrictionRestrictionBook balanceBook value
Type of
restrictionRestrictionMonetary funds11,360,599,088.6911,360,599,088.69PledgedAs deposits for bank
acceptance bills, letter ofcredit, letter of guarantee,loans, deposit reserves andinterest receivable
11,840,974,836.5711,840,974,836.57PledgedAs deposits for bank
acceptance bills, letter ofcredit, letter of guarantee,loans, deposit reserves andinterest receivableFixed assets9,411,111,670.626,303,095,864.20ChargedAs collateral for bank
borrowings and long-termpayables
15,651,057,538.8410,063,641,052.69ChargedAs collateral for bank
borrowings and long-termpayablesInvestment properties5,941,741,699.605,004,776,921.76ChargedAs collateral for bank
borrowings
5,650,386,492.304,895,514,630.65ChargedAs collateral for bank
borrowingsIntangible assets865,105,844.99665,784,045.39ChargedAs collateral for bank
borrowings and long-termpayables
1,367,006,629.881,033,897,418.27ChargedAs collateral for bank
borrowings and long-term
payablesAccounts receivable403,349,324.55398,710,807.32PledgedAs collateral for borrowings100,563,153.66100,000,000.00PledgedAs collateral for borrowingsAccounts receivable financing90,551,168.0190,551,168.01PledgedAs collateral for obtaining
letters of credit
8,497,931.308,497,931.30PledgedAs collateral for obtaining
letters of creditTotal28,072,458,796.4623,823,517,895.3734,618,486,582.5527,942,525,869.48
2023 ANNUAL REPORT
IV Management Discussion and Analysis
VII. Analysis of investments
1. Overview
? Applicable Not applicableInvestments during the reporting period (RMB)
Investments during thecorresponding period of
prior year (RMB)Change582,400,000.00 3,362,620,040.00-82.68%
2. Material equity investments acquired during the reporting period
? Applicable Not applicable
Unit: RMB
Name of investeePrincipal activities
Form ofinvestment
InvestmentAmountShareholding
Sourceof fundPartner(s)
Period ofInvestmentProduct type
Progress
as at the
date of
balance sheet
Estimatedreturn
Profit orloss frominvestmentfor the period
Involvementin lawsuit
Date ofdisclosure,if any
DisclosureIndex, if anyShouguang Kunhe Trading Co., Ltd.
Sales of pulpNewly
established
10,000,000.00100%Self-owned
funds
SubsidiaryLong-termTradingCompletedN/A-56,105.04NoN/AN/AJiangxi Chenming
Port Co., Ltd.
Cargo handling and
warehouse operations
Acquisition5,400,000.00100%Self-owned
funds
SubsidiaryLong-termFreight
transport
CompletedN/A-1,234,456.79NoN/AN/AShouguang Chenming
Import and Export Trade Co., Ltd.
Sale of paper products
and paper production materials
Capital
increase
417,000,000.00100%Self-owned
funds
Subsidiary Long-termTradingCompletedN/A10,452,698.14NoN/AN/AHainan ChenmingTechnology Co., Ltd.
Sale of paper pulp,wood and chemical products etc.
Capitalinjection
150,000,000.00100%Self-owned
funds
SubsidiaryLong-termTradingCompletedN/A1,227,492.53NoN/AN/ATotal582,400,000.0010,389,628.84
IV Management Discussion and Analysis
VII. Analysis of investments(Continued)
3. Material non-equity investments during the reporting period
Applicable ? Not applicable
4. Financial asset investment
(1) Security investments
? Applicable Not applicable
Unit: RMB
Type of securityStock code
Abbreviation ofstock name
Initialinvestment cost
Accountingmeasurementmodel
Book value atthe beginningof the reportingperiodProfit or lossfrom changes infair value in thecurrent period
Accumulatedchanges in fairvalue includedin equityAcquisitionamountduring theperiodDisposalamountduring theperiodProfit or lossduring thereporting period
Book valueas at theend of thereportingperiod
Classificationin accountSource of fundDomestic and foreign
shares
09668China Bohai Bank195,684,817.15Measured at
fair value
74,708,444.88-28,740,129.26-149,716,501.5300-28,414,153.17 46,294,291.71Held-for-trading
financial assets
Self-owned fundsTotal195,684,817.1574,708,444.88-28,740,129.26-149,716,501.530.000.00-28,414,153.17 46,294,291.71Disclosure date of announcement in relation to the
consideration and approval of securities investments bythe Board
20 June 2020Disclosure date of announcement in relation to the
consideration and approval of securities investments bythe shareholders’ general meeting (if any)
N/A
(2) Derivative investments
Applicable ? Not applicableThe Company did not have any derivative investments during the reporting period.
5. Use of proceeds
Applicable ? Not applicableThe Company did not use any proceeds during the reporting period.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
VIII. Disposal of material assets and equity interest
1. Disposal of material assets
Applicable ? Not applicableDuring the reporting period, the Company did not dispose of material assets.
2. Disposal of material equity interest
? Applicable Not applicable
Counterparty(ies)
Equity interestdisposed ofDisposal date
Transactionconsideration(RMB’0,000)
Net profitcontribution
to the
Company
from thebeginning of
the period
up to thedisposal date(RMB’0,000)Effect ofdisposal onthe Company
Net profitcontribution
to the
Company
on equitydisposal as a
percentage
of total net
profit
Pricingbasis ofdisposal ofequityinterest
Relatedpartytransactionor not
Relationship withcounterparty(ies)
Relevantequity title fullytransferredor not
Carried outon scheduleor not, if not,the reasonsand measurestaken by theCompany
DisclosureDate
DisclosureindexWuhan Yuanfeng YinhuIndustrial InvestmentPartnership (LimitedPartnership)
Wuhan Chenming
Hanyang PaperHoldings Co.,Ltd.
30 September
2023
48,000.00-950.61Partial equity disposal
of Wuhan Chenming,a subsidiary, did notaffect the normaloperation of theCompany, and thecash realised from theequity disposal alsoreplenished liquidity.
-27.07%Assessed
value
NoN/AYesYes9 September
2023
http://www.cninfo.com.cn
IX. Analysis of major subsidiaries and investees
? Applicable Not applicableMajor subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMBName of companyType of companyPrincipal activitiesRegistered capitalTotal assetsNet assetsRevenueOperating profitNet profitZhanjiang Chenming
Pulp & Paper Co.,Ltd.
SubsidiaryProduction and sale of duplex
press paper, electrostaticpaper and white cardboardetc.
6,913,572,423.0025,679,469,765.948,608,929,563.6911,000,808,231.98-671,077,694.93-541,888,245.61Shouguang Meilun
Paper Co., Ltd.
SubsidiaryProduction and sale of coated
paper, culture paper,household paper andchemical pulp
4,801,045,519.0015,630,774,179.128,460,429,693.189,084,559,413.98139,886,154.62153,008,366.72Huanggang Chenming
Pulp & Paper Co.,Ltd.
SubsidiaryProduction and sale of
chemical pulp
3,350,000,000.008,450,563,071.623,298,440,947.124,946,196,163.77-327,507,366.27-260,740,821.94
IV Management Discussion and Analysis
IX. Analysis of major subsidiaries and investees(Continued)Acquisition and disposal of subsidiaries during the reporting period? Applicable Not applicableName of company
Methods to acquire and disposeof subsidiaries during thereporting period
Impact on overall production andoperation and resultsShouguang Kunhe Trading Co., Ltd.Newly establishedNet profit decreased by RMB56,100.Jiangxi Chenming Port Co., Ltd.AcquisitionNet profit decreased by RMB1,234,500.Beijing Chenming Financial Leasing Co., Ltd.deregisteredNet profit decreased by RMB3,900.Wuhan Chenming Hanyang Paper Holdings
Co., Ltd.Loss of control due to partial
equity transfer
Net profit increased by RMB359 million.Wuhan Chenming Qianneng Electric PowerCo., Ltd.Particulars of major subsidiaries and investees
1. During the reporting period, the price of white paper board declined significantly due to an increase in supply and
insufficient demand, and profit margins of Zhanjiang Chenming were squeezed.
2. The demand for cultural paper and coated paper, the major products of Shouguang Meilun, was rigid, and they are
less affected by the macroeconomic environment during the reporting period.
3. The price of chemical pulp, the major product of Huanggang Chenming, declined due to an increase in supply, and
Huanggang Chenming’s profitability decreased year on year.The Company enjoys the advantages of pulp and paper integration, large scale, comprehensive products, reasonableindustrial layout, and advanced technical equipment. With the gradual rise in the selling prices of machine-made paper andthe continuous optimisation of the cost side, the Company’s profitability will be effectively restored.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
X. Structured entities controlled by the Company
Applicable ? Not applicableXI. Outlook on the future development of the Company
(i) Overview and trend of the industry
Paper industry is a typical pro-cyclical industry. During the reporting period, the paper product price faced greaterdownward pressure due to the production capacity expansion, weak demand and other factors. Coupled with the rawmaterial prices and energy cost increase year on year, the paper enterprises’profit margin faced squeezing. When westep into 2024, the wood pulp price has fell, the paper product demand has recovered, and corporate profitability hasshown obvious signs of gradual improvement. Due to the strong expectation of new capacity release, the major rawmaterial prices and energy prices still have downward pressure, which may further ease the cost pressure, and theindustry is expected to continue its recovery.From an industry structure perspective, China’s paper industry is expected to increase its concentration ratio. Drivenby market competition and environmental protection policies, the mid– to low-end production capacity in the industrywill accelerate to be phased out, and the paper industry market concentration has steadily increased, but there is stilla considerable gap compared with developed countries. According to public data, the CR10 in China’s paper industryremained at about 45% in 2022, compared with about 90% for the CR10 in the United States, indicating much roomfor industry concentration improvement.According to the national“double circulation” strategy and the goal of China’s GDP per capita heading for the levelof a medium-level developed country by 2035, China’s paper market demand in the future will still grow greatly,indicating market potential. The industry has continuously improved the resource utilisation rate, and transformedtowards the use of clean, renewable, high energy density and low emission resources. It is inevitable for largecompanies to enhance their comprehensive competitiveness through the whole industrial chain development. Theleading player have the advantages such as industrial chain, scale, and production management efficiency, and willundoubtedly become long-term beneficiaries under the trend of sustainable and healthy development.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)
(ii) Development strategy of the CompanyIn the future, Chenming Group will adhere to the general tone of green, low-carbon, circular and sustainabledevelopment, take the Made in China 2025 Plan as the guide, and scientific development as the theme, quality andefficiency improvement as its focus, and the promotion of the integration of manufacturing and financial services,and the deep integration of industrialisation and intelligence as the main line. The Group will further switch its modeand adjust its structure to comprehensively improve its quality, efficiency, management level, technological contentand happiness index, and fully enhance its brand image, and advance to become stronger, better and bigger, strivingto achieve over RMB10 billion in profit before tax during the 14th Five-Year Plan period, and build a world-classenterprise group with the highest growth momentum.Transformation and upgrade strategy: The Group will comprehensively optimise the industrial structure and regionallayout, focus on developing pulp and paper industries, and build a coordinated and efficient industrial system.Green development strategy: The Group will adhere to the“forestry, pulp and paper integration”management idea,rely on technological progress, advanced equipment and stringent management to ensure clean production, anddevelop circular economy. The Group will build a resource-saving and environment-friendly enterprise benchmark,seek development while protecting the environment, improve environmental protection level in scientific development,and achieve both economic and environmental benefits.Internationalisation strategy: The Group will take root in China, expand into the world, rely on China’s“Belt and Road”
initiative, accelerate the“going out”pace, deepen international exchanges and cooperation, and gradually expandinto overseas markets.Operational excellence strategy: With the management policy of“Construct a learning atmosphere and standardiseeverything, resolutely implement to seek practical results”, the Group will continuously strengthen the whole processmanagement of production and operation, marketing, financial costs and project construction, effectively integratesystem resources, and continuously improve the management level and profitability.Talent strengthening strategy: The Group will improve the talent training, introduction, use and encouragementmechanism, and actively cultivate a high-end, compound, innovative and international talent team to support theCompany to become a world-class enterprise with the highest growth momentum;Harmonious development strategy: The Group will comprehensively strengthen the corporate culture construction,wholeheartedly care for employees, actively fulfil corporate social responsibilities, enhance the ability to createcomprehensive economic, social and environmental values, shape the image, and strive to build a harmoniousenterprise.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)(iii) Operation plans for 2024The year 2024 is a crucial year to achieve the 14th Five-Year Plan targets and tasks. In this year, opportunities andchallenges coexist. The National Development and Reform Commission proposes to pay more attention to expandingeffective demand, developing and expanding the real economy, and improving the macro policy effectiveness.Expanding domestic demand is the“highlight” of China’s economic development in 2024. The paper industry isclosely related to the national economy development. As a leading player in the industry, the Company will adhere tothe general tone of striving for progress while maintaining stability in the new year, pay close attention to the nationalmacro policy orientation, take advantage of the domestic economic recovery to expand sales channels, seize marketopportunities, adjust product structure, improve production efficiency, control production costs, optimise financingstructure, fully tap potential and increase efficiency, and improve the profitability of the Company.
1. Strengthen sales management and seize the market to increase profits
In 2024, the Company will seize market opportunities, strengthen channel construction, increase directcustomer development, reinforce overseas contract management, closely maintain customer relationships, andfurther expand domestic and overseas markets. The Company will take market orientation, actively look forprofit growth points, closely connect with production departments to develop and produce high-grade and highvalue-added new products, and ensure the promotion and increase of key products, especially liquid packagecardboard, food package board and coated cardboard. The Company will optimise business processes,increase risk control points, conduct quarterly sorting out processes, and strengthen risk management andcontrol. In addition, the Company will ensure team building, strictly implement the sales leadership contractingmechanism, and timely optimise the assessment and incentive scheme according to market changes and keywork requirements to improve work enthusiasm and build an efficient sales team.
2. Improve financial management and take multiple measures to reduce liability scale
In December 2023, the Central Working Economy Conference proposed to“continue to implement a proactivefiscal policy and a prudent monetary policy”and“implement a structural tax reduction and fee reductionpolicy, and focus on supporting scientific and technological innovation and manufacturing development”. In2024, the Company will take this as an opportunity to adjust its long-term and short-term financing structure,determine the best financing scheme, broaden financing channels, further deepen cooperation with large banks,and implement project loans, equipment financing, debt-to-equity swap financing and equity financing. TheCompany will pay close attention to the interpretation of national macroeconomic policies, make reasonable taxplanning and implement policy dividends, and continue to reduce the financial leasing business size, activelydispose of idle and inefficient assets, revitalise existing assets and increase cash inflows.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)(iii) Operation plans for 2024(Continued)
3. Optimise procurement management to stabilise supply and realise cost reduction and efficiency growth
In 2024, the Company will further broaden its raw material procurement channels, deepen the long-termcooperation in wood pulp, wood chips, coal and other bulk materials, improve the cooperation mode withsuppliers, focus on developing suppliers with solid financial strength, innovate payment methods and reducefinancial costs. The Company will continue to learn new technologies and processes, introduce highly cost-effective raw materials, and optimise the raw material structure. In addition, the Company will reasonablycontrol the inventories, arrange the procurement plans according to the monthly production scheduling plan,and reduce capital appropriation; and strengthen the management of electricity purchase and use managementon behalf of subsidiaries, and reduce the cost of electricity purchase and use.
4. Focus on safety and technological transformation to escort production and ensure quality and efficiency
In 2024, the Company will continue to adhere to the concept of safety first and prevention first, increase thepublicity and education of safety and environmentally friendly production, and standardise outsourcing units’
safety management. The Company will strengthen the safety supervision of dangerous operation processes,continue to strictly implement the mechanical control management of equipment, optimise the early warningmode of mechanical control of equipment, investigate equipment hidden dangers every ten days, reduceequipment accidents and ensure the safe and stable production. The Company will fully promote technologicalinnovation, adjust product structure according to market conditions, focus on developing and producing highvalue-added products, and improve product quality. In addition, the Company will continue to proceed with theZhanjiang Chenming Special Paper Project with annual production capacity of 180,000 tonnes, and the upgradeof some pulp and paper production lines in Shouguang, Zhanjiang and Jiangxi.
(iv) Future capital requirements and source of funds
Future capital requirements of the Company will mainly focus on: the continuous investment in existing productionfacilities due to technology upgrade or production expansion; and capital requirement for business expansion anddaily operation. The phase II whole industry chain project of Huanggang Chenming, the softwood bleached chemicalpulp project with annual production capacity of 300,000 tonnes and the special paper project with annual productioncapacity of 180,000 tonnes of Zhanjiang Chenming planned and constructed by the Company will be partly funded byself-owned funds of the Company, as well as government guide funds, policy support funds and syndicated loans.While focusing on the development of its main business of pulp and paper making, improving its operatingperformance and increasing its operating cash flow, the Company will expand its financing channels and optimisefinancing structure through well planned long and short-term bank loans, introduction of third-party strategicinvestors, refinancing and other means, thus providing stable financial support for the operation and development ofthe Company.(v) Risk factors likely to be faced and measures to be taken
1. Macroeconomic and policy risk
Paper making industry is a basic raw materials industry, thus is being supported by national industry policies.Over the years, relevant competent departments issued a series of relevant policies and regulations, includingthe Policy on the Development of Papermaking Industry, aiming to improve industry structure, enhance producttechnology standard, energy saving and emission reduction, as well as eliminate outdated production capacity.With the continuous economic development, the policies on the papermaking industry may further adjust inthe future. In addition, the fiscal and financial policies, bank interest rate, import and export policy and otherpolicies may be adjusted in the future. All the above industrial policies and related policy adjustments will havean impact on the Company’s operation and development.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)
(v) Risk factors likely to be faced and measures to be taken(Continued)
1. Macroeconomic and policy risk
(Continued)In response to the above risks, the Company will pay close attention to the national industrial policy, and focuson its principal activities of pulp production and papermaking. The Company will strive to its innovation-drivenstrategy, comprehensively optimise industrial structure and regional layout, and establish coordinated andefficient industry system, to respond to the risks arising from industrial policy adjustments. At the same time,the Company will continuously improve its lean management, broaden financing channels, control costs, andoptimise its capital structure, thus improving its operating quality to cope with the risks arising from adjustmentsof other macroeconomic policies such as fiscal and financial policies.
2. Environmental protection risk
Establishing a green paper industry is the strategic direction of industry development. In recent years,environmental protection requirements have become increasingly stringent. Relevant authorities havesuccessively issued the White Paper on Sustainable Development of Papermaking Industry in China, theGuiding Opinions on Accelerating the Establishment and Improvement of a Green, Low-Carbon and CyclicalEconomic System, the Opinions on Accelerating the High-Quality Development of the Manufacturing ServicesIndustry, the“14th Five-Year Plan”and Medium and Long-term High-quality Development Outline of thePapermaking Industry and other policies, which advocate cyclical, low-carbon, green economy to achieve high-quality development of the industry. Such higher national environmental protection standards further increasethe investment in pollution control by enterprises in the industry and increase the operating costs of theCompany in the short term.In response to the aforesaid risks, the Company actively implements the national“double carbon”policy. TheCompany adheres to the development idea of“placing green development and environmental protection as itspriority”. The Company widely adopts new technologies for energy saving and emission reduction, conductsclean production, and strives to achieve its waste emission target. At present, the Company adopts the world’smost advanced“ultrafiltration membrane+reverse osmosis membrane”technology to complete the reclaimedwater recycling membrane treatment project. The reclaimed water recycle rate reaches more than 75%. Thereclaimed water quality meets drinking water standards, which can save fresh water of hundreds of thousandsof cubic meters of per day. At the same time, the Company actively explores the comprehensive utilisationof innovative resources and industrial recycling development models, and built a circular economy ecologicalchain of“resources-products-renewable resources”.
3. Risk of price fluctuation of raw materials
The major raw materials of the papermaking industry are wood pulp and wood chips. China’s wood resourcesare relatively limited, and the dependence on wood pulp and wood chips is high, which makes the developmentof the papermaking industry subject to fluctuations in the international price of wood pulp and wood chips.If the price of raw materials fluctuates sharply, it will bring uncertainty to the control of production costs ofpapermaking enterprises, which will affect the operating performance of enterprises.In response to the aforesaid risks, the Company adheres to the strategic layout of the whole pulp and paperintegrated industry chain, and has wood pulp production lines in Shouguang, Zhanjiang, Huanggang andother production bases, ensuring the stability of upstream raw materials. At the same time, the Company hasestablished a more comprehensive supply chain management mechanism, practiced source procurement,closely followed the price trends of the raw materials market, and improved its market research and judgmentability, in order to minimise the impact of fluctuations in raw material prices on the Company.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)
(v) Risk factors likely to be faced and measures to be taken(Continued)
4. Risk of intensifying market competition
Although the papermaking industry has accelerated the elimination of outdated production capacity after severalrounds of environmental protection policies, the industry structure has been optimised with a further improvedconcentration. However, there remains the phenomena of a large number of enterprises, structural and stagedovercapacity of some products, a large number of mid- and low-end products, and product homogeneity.During the reporting period, affected by factors such as the sluggish macroeconomic environment, supplyshocks and weak demand, the prices of machine-made paper, especially white cardboard, declined year onyear, and market competition further intensified.In response to the aforesaid risks, the Company continues to promote technological innovation, andcontinuously improves its production equipment, processing design and process levels, in order to realiselean production, improve product quality, and create brand benefits. At the same time, based on the marketconditions, the Company produces marketable products to meet the diverse needs, striving to form a high-quality, refined, special, differentiated and personalised product structure, increase the added value of products,and improve the level of corporate profitability.
5. Risk of the financial leasing business
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rentalpayment on time due to any reason and there are abuses on equipment or any other short-term behaviour.Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provisionas required under its accounting policy. If such amounts cannot be recovered on time, the Company may beexposed to risk of bad debts.To this end, Chenming Leasing has comprehensive risk prevention and control measures for the financialleasing business, with strong risk resistance and low risk of default. At present, the Company focuses on thedevelopment of its principal activities, i.e. pulp production and paper making, and continues to reduce thesize of the financial leasing business. As at the end of the reporting period, the balance of financial leases ofChenming Leasing decreased to RMB4,800 million with the overall risks under control.
2023 ANNUAL REPORT
IV Management Discussion and Analysis
XII. Reception of research investigations, communications and interviews during the reportingperiod? Applicable Not applicableDate of receptionSite of receptionWay of receptionType of recipientRecipient
Major discussionpoints and informationprovided
Index of the basicparticulars of the survey10 April 2023Panorama ? Interactive
Platform for InvestorsRelationship
OthersIndividuals and
institutions
Investors participating in
the 2022 annual resultsbriefing of the Companyonline
Industry overview, theCompany’s financialposition, operatingresults and projectprogress in 2022,future prospects, etc.
For details, please refer to
the Investor RelationsActivity Record Sheet onCNINFO ( www.cninfo.com.cn)
XIII. Implementation of the“Quality and Return Enhancement” action plan
Whether the Company has disclosed its“Quality and Return Enhancement” action plan? Yes ? No
V Directors’ Report
The Directors (the“Directors”) of the Company hereby present the annual report and the audited consolidated financial statementsof the Company and the Group for the year ended 31 December 2023.I. Principal activitiesPlease refer to“II. Principal operations of the Company during the Reporting Period”and“IV. Analysis of principaloperations”under section IV“Management Discussion and Analysis” for details of principal activities of the Company.II. Results and profit distribution
Please refer to section XII“Financial Report” for the results of the Group for the year ended 31 December 2023.III. Dividends
During the reporting period, the sales volume of machine-made paper decreased year on year due to the weak downstreamdemand in the paper industry. At the same time, the prices of machine-made paper, especially that of white cardboard, fellsharply year on year due to the concentration of new production capacity. The prices of raw materials such as wood chips,raw coal and chemicals were still running at a high level, which seriously squeezed the Company’s profitability, and netprofit attributable to shareholders of the Company for 2023 was RMB-1,281 million. At the same time, considering factorssuch as the Company’s overall development planning for 2024, the Board proposed not to pay cash dividend, issue bonusshares and increase share capital from reserves for 2023 to further reduce its debt size, satisfy the capital needs for, amongother things, day-to-day production and operation, and project construction, thereby enhancing risk resistance of theCompany, realising the sustainable, steady and healthy development of the pulp production and paper making business,the principal business of the Company, and better safeguarding the interests of all shareholders in the long run, subject toapproval of shareholders at the forthcoming annual general meeting of the Company held on 14 May 2024 (the“AGM”).
IV. Closure of register of members
The register of members of the Company will be closed from 9 May 2024 (Thursday) to 14 May 2024 (Tuesday) (bothdays inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend andvote at the annual general meeting to be held on 14 May 2024 (Tuesday), all share transfer documents accompanied bythe corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s RoadEast, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 8 May 2024 (Wednesday).
2023 ANNUAL REPORT
V Directors’ Report
V. Five-year financial summaryPlease refer to“IX. Five-year financial summary under paragraph 19 of appendix D2 of the Hong Kong Listing Rules”
under section II“Company Profile and Key Financial Indicators”for the financial summary of the Company for the past fivefinancial years.VI. DonationsDuring the year, the Company donated RMB505,280.00 (2022: RMB805,000.00) to non-profit making organisations.VII. SubsidiariesPlease refer to“IX. Analysis of major subsidiaries and investees”under section IV“Management Discussion and Analysis”
and“XVII. Matters of significant of subsidiaries of the Company”under section VIII“Material Matters”for the details ofacquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to“II. Financial Statements 1. Consolidated Balance Sheet”under section XII“Financial Report”for the detailsof changes in property, plant and equipment of the Group for the year ended 31 December 2023.IX. Share capitalPlease refer to“I. Changes in shares”under section IX“Changes in Share Capital and Shareholders”for details of changesin share capital of the Company for the year ended 31 December 2023.X. Pre-emptive rightsIn accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existingshareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Company Law. As at 31December 2023, the Company’s reserves available for cash distribution and/or distribution in specie, including contributedsurplus of the Company, amounted to RMB8,492,988,611.52 (2022: RMB9,857,716,037.54) as set out in“II. FinancialStatements 1. Consolidated Balance Sheet”under section XII“Financial Report”.
V Directors’ Report
XII. DirectorsAs at 31 December 2023, the Directors of the Company were:
1. Executive Directors
Mr. Chen HongguoMr. Hu ChangqingMr. Li XingchunMr. Li FengMr. Li Weixian
2. Non-executive Directors
Mr. Han TingdeMr. Li Chuanxuan
3. Independent Non-executive Directors
Ms. Yin MeiqunMr. Yang BiaoMr. Sun JianfeiMr. Li ZhihuiAccording to the Articles of Association of the Company, all Directors, including non-executive Directors, have beenelected at the general meetings with a term of three years from June 2022 to June 2025. They may be re-elected foranother term upon expiry of tenure. The term of office of independent non-executive Directors is the same as that ofother Directors. They may be re-elected for consecutive terms, but the consecutive terms shall not be more than sixyears.XIII. Directors’ and Supervisors’ service contractsAll Directors and Supervisors have entered into service contracts with the Company for a term from 15 June 2022 to 15June 2025.None of the Directors and Supervisors who have offered themselves for re-election at the forthcoming AGM have enteredinto any service contract with the Company or any of its subsidiaries which cannot be terminated by the Group within oneyear without payment of compensation other than statutory compensation.
2023 ANNUAL REPORT
V Directors’ Report
XIV. Directors and Senior Management’s remuneration and the five highest paid individualsDetails of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/andits subsidiaries are set out in“V. Directors, Supervisors and Senior Management”in section VI“Corporate Governance”and“XIV. Related parties and related party transactions”in section XII“Financial Report”.In 2023, the Company had 23 Senior Management members in total, which included Directors, Supervisors and the SeniorManagement. The remuneration of the Senior Management falls within the following ranges:
Range of remuneration (RMB)Person(s)
4.8 million to 5.2 million
4.0 million to 4.8 million1
3.6 million to 4.0 million
3.2 million to 3.6 million
2.8 million to 3.2 million1
2.4 million to 2.8 million
2.0 million to 2.4 million2
1.6 million to 2.0 million1
1.2 million to 1.6 million4
0.8 million to 1.2 million2Below 0.8 million12
XV. Independent non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for theyear pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors tobe independent.
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and chief executivesAs at 31 December 2023, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set outas follows:
The Company
NamePosition
Number of shares(A shares) heldas at the end of
the reportingperiod (shares)
As a percentageof the total share
capital of the
CompanyDirectorsChen Hongguo (Note 1)Chairman25,080,0440.85%Hu ChangqingExecutive Director and vice chairman2,292,8570.08%Li XingchunExecutive Director and vice chairman3,500,0000.12%Li FengExecutive Director and deputy general manager2,256,0270.08%Li WeixianExecutive Director and general manager962,1000.03%Han TingdeNon-executive Director––Li ChuanxuanNon-executive Director––Sun JianfeiIndependent non-executive Director––Yin MeiqunIndependent non-executive Director––Yang BiaoIndependent non-executive Director––Li ZhihuiIndependent non-executive Director––SupervisorsLi KangChairman of the Supervisory Committee149,3000.01%Pan AilingSupervisor––Zhang HongSupervisor––Sang AilingSupervisor––Qiu LanjuSupervisor––Associated corporation(s)NamePosition
Name of associatedcorporation(s)
Number of shares held atthe beginning of thereporting period (shares)
Change duringthe period (+/-)
Number of shares held
at the end of thereporting period (shares)
As a percentage of the
total share capital ofChenming HoldingsChen HongguoChairmanShouguang Henglian Enterprise
Investment Co. Ltd. (Note 2)
231,000,000–231,000,00018.65%Note 1: Save for the 25,080,044 A shares held personally, Chen Hongguo is deemed to be interested in the 2,961,322 A shares held by his spouse, Li
Xueqin.Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 76.79% equity interests in Shouguang Henglian Enterprise Investment Co.
Ltd., (hereinafter referred to as“Shouguang Henglian”). As a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo.
Accordingly, the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by
Shouguang Henglian are also deemed to be held by Chen Hongguo.
2023 ANNUAL REPORT
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and chief executives(Continued)Save as disclosed above, as at 31 December 2023, none of the Directors, Supervisors or chief executives of the Companyhad any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associatedcorporations which were required to be filed in the register of the Company required to be maintained pursuant to section352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to theModel Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix C3 to the Rules Governingthe Listing of Securities on Hong Kong Stock Exchange (hereinafter referred to as the“Hong Kong Listing Rules”).As at 31 December 2023, none of the Directors, Supervisors or chief executives or their respective spouses or childrenunder the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or itsassociated corporations.
XVII. Interests and short position of substantial shareholders in shares and underlying sharesAs at 31 December 2023, the following shareholders (other than the Directors, Supervisors or chief executives of theCompany) had interests or short positions in the Company’s shares and underlying shares as shown in the share registermaintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Approximate shareholding asa percentage ofName
Number of sharesheld (shares)
Total sharecapital (%)
Class ofshares (%)Chenming Holdings Co., Ltd.457,322,919 A shares (L)15.4726.56Chenming Holdings (Hong Kong) Limited210,717,563 B shares (L)7.1329.83Chenming Holdings (Hong Kong) Limited153,414,000 H shares (L)5.1929.04
(L) – Long position (S) – Short position (P) – Lending poolSave as disclosed above, as at 31 December 2023, no other person had interests or short positions in the Company’sshares or underlying shares as recorded in the register maintained under section 336 of the SFO.
XVIII. Relationship with employees, customers and suppliers
Please refer to“IX. Personnel of the Company”under section VI“Corporate Governance”, and“
2. (8) Sales to major
customers and major suppliers”of“IV. Analysis of principal operations”under section IV“Management Discussion andAnalysis” for details of the relationship between the Company and its employees, customers and suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors or Supervisors hadsignificant interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during thereporting period. The Company did not have any indemnity provision in favour of any Director and Supervisor.
V Directors’ Report
XX. Interests in competing businessNone of the Directors or controlling shareholders of the Company was interested in any business which competes or islikely to compete with the businesses of the Company and any of its subsidiaries.XXI. Directors’ rights to purchase shares or debenturesAs considered and approved at the 2020 second extraordinary general meeting, the 2020 first class meeting for holdersof domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company held on15 May 2020, the Company implemented the 2020 restricted A share incentive scheme. As considered and approved atthe tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session of theSupervisory Committee of the Company held on 29 May 2020, an aggregate of 79.6 million restricted A shares were grantedto 111 participants. In particular, Mr. Chen Hongguo, Mr. Hu Changqing, Mr. Li Xingchun, Mr. Li Feng and Mr. Li Weixian,all being Directors, were granted 20 million shares, 5 million shares, 5 million shares, 3 million shares and 2 million shares,respectively. In view of the fact that the results for 2022 of the Company failed to pass the performance appraisal targets atcompany level set for the second Unlocking Period as set out in the 2020 Restricted A Share Incentive Scheme (Draft), theBoard of the Company repurchased and cancelled the Restricted Shares that had been granted to Participants but not yetunlocked for the second Unlocking Period under the authorisation. In particular, 6.00 million Restricted Shares of DirectorChen Hongguo, 1.50 million Restricted Shares of Director Hu Changqing, 1.50 million Restricted Shares of Director LiXingchun, 0.90 million Restricted Shares of Director Li Feng and 0.60 million Restricted Shares of Director Li Weixian wererepurchased and cancelled.Save for the above, neither was the Company nor any of its subsidiaries a party to any arrangements to enable any Directorto acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.XXII. Management contractsNo contracts concerning the management and administration of the whole or any substantial part of the business of theCompany were entered into or existed in 2023.XXIII. Major risk factorsPlease refer to“(V) Risk factors likely to be faced and the measures to be taken”of“XI. Outlook on the future developmentof the Company”under section IV“Management Discussion and Analysis” for details of major risk factors of the Company.
XXIV. Material matters
Please refer to section VIII“Material Matters” for details of material matters of the Company.
XXV. Future development
Please refer to (I) Overview and trends of the industry, (II) Development strategy of the Company, (III) Operating plan for2024 and (IV) Future capital requirements and source of funds of“XI. Outlook on the future development of the Company”
under section IV“Management Discussion and Analysis” for details of future development of the Company.XXVI. Environment, social and governance report and social responsibility
Please refer to section VII“Environment and social responsibility”for details of fulfilment of social responsibility. TheCompany will publish the environment, social and governance report as required by the Hong Kong Listing Rules on thewebsite of CNINFO and the website of the Hong Kong Stock Exchange on the same date as the 2023 annual report.
2023 ANNUAL REPORT
V Directors’ Report
XXVII. Purchase, sale and redemption of shares
1. Repurchase and cancellation of some restricted shares granted under the 2020 A-share Restricted
Stock Incentive SchemeOn 17 July 2023, the Company convened the ninth extraordinary meeting of the tenth session of the Board and thefifth extraordinary meeting of the tenth session of the Supervisory Committee, at which the Resolution on the FailureFulfilment of the Unlocking Conditions for the Second Unlocking Period under the 2020 Restricted A Share IncentiveScheme and Repurchase and Cancellation of Certain Restricted Shares was considered and approved. The results for2022 of the Company failed to pass the performance appraisal targets at company level set for the second unlockingperiod as set out in the 2020 Restricted A Share Incentive Scheme (Draft) and the Assessment Management Measuresfor the 2020 Restricted A Shares Incentive Scheme. Meanwhile, 5 participants lost their incentive qualification due totheir resignation. According to the authorisation granted at the 2020 second extraordinary general meeting, the 2020first class meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company, the Board of the Company repurchased and cancelled 22,929,000 restricted A shareswhich had been granted to participants but not yet unlocked for the second unlocking period at a repurchase priceof RMB2.5184172 per share (excluding the bank loan interest rate for the same term). The total amount for the fundsrequired for the repurchase amounted to RMB66.2288 million when the bank loan interest rate for the same termwas included. On 20 November 2023, the Company completed the repurchase and cancellation procedures of the22,929,000 restricted A shares at the Shenzhen Branch of China Securities Depository and Clearing CorporationLimited.Save for the above, the Company and its subsidiaries did not purchase, sell or redeem any listed securities of theCompany during the reporting period.XXVIII. Sufficiency of public floatDuring the reporting period, based on the information that is publicly available to the Company and within the knowledgeof the Directors, the Company maintained a sufficient prescribed amount of public float as required under the Hong KongListing Rules.XXIX. Review of the Audit CommitteeThe audited consolidated financial statements of the Company for the year ended 31 December 2023 have been reviewedby the Audit Committee of the Company.
XXX. Gearing ratio
As at 31 December 2023, the Company’s gearing ratio (including minority interest) was 61.70%, representing an increase of
0.82% from 60.88% for 2022.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within oneyear, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
V Directors’ Report
XXXI. Going concern basisEstablished in 1958, the Company is a leading paper making enterprise in China and one of the top 500 Chineseenterprises. It is also a modern large-scale comprehensive conglomerate mainly engaged in pulp production and papermaking. It has production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and others, which deliver annual pulp andpaper production capacity of over 11,000,000 tonnes. As the first large integrated pulp and paper enterprise in China thatachieves basically balanced pulp production and paper making capacity, the Company have maintained a leading positionamong its industry peers for over 20 consecutive years in terms of its main indicators of corporate economic efficiency.The Company has good sustainable profitability. The Company realised revenue of RMB26,609 million and net cash inflowsfrom operating activities of RMB4,390 million for 2023. In compiling the accounts for the year ended 31 December 2023,the Directors have chosen and thoroughly applied the appropriate accounting policies with due and reasonable judgementand estimates having been made, and prepared the accounts on a going concern basis. The auditor of the Company hasprepared the 2023 annual financial report on a going concern basis, and has issued a standard unqualified audit opinion(please refer to“Financial Report” in section XII).Therefore, the Board believes the Company has the ability to continue as a going concern.XXXII. Connected transactionsDuring the reporting period, the Group did not enter into any connected transaction required under the Listing Rules of theStock Exchange. The related party transactions entered into by the Group during the year ended 31 December 2023 areset out in Note XIV to the financial statements. Save as disclosed above, these related party transactions do not constituteconnected transactions or continuing connected transactions (as defined in the Listing Rules of the Stock Exchange) of theGroup.
XXXIII. Major investment, acquisition and disposalDuring the year ended 31 December 2023, the Group entered into the following major transaction agreements.
1. Agreement on the Recovery of State-owned Construction Land Use Right signed by Wuhan Chenming
On 28 April 2023, the Company convened the fifth meeting of the tenth session of the Board to consider and approvethe Proposal on Signing the Agreement on the Recovery of State-owned Construction Land Use Right by WuhanChenming. In order to further optimise resource allocation and promote industrial upgrading, the major equipment ofWuhan Chenming’s household paper production line and special paper production line were relocated to Shouguangproduction base and Zhanjiang production base respectively. Wuhan Chenming reached an agreement with theWuhan Economic & Technological Development Zone Branch of the Wuhan Land Arranging Storage Centre on landrecovery and storage, and signed the Agreement on the Recovery of State-owned Construction Land Use Right. TheWuhan Land Arranging Storage Centre proposed to recover the land parcel with an area of 368,624.21and thebuildings (structures) and ancillary facilities erected thereon from Wuhan Chenming, and pay Wuhan Chenming a totalof RMB732.0776 million as compensation for the recovery and storage.For details, please refer to the announcement disclosed by the Company on CNINFO on 29 April 2023 (announcementnumber: 2023-042) and the relevant announcement disclosed by the Company on the website of Hong Kong StockExchange on 28 April 2023.
2023 ANNUAL REPORT
V Directors’ Report
XXXIII.Major investment, acquisition and disposal(Continued)
2. Termination of asset purchase through the issuance of consideration shares and cash payments
On 27 February 2023, the Company convened the 2023 first extraordinary general meeting, the 2023 first classmeeting for holders of domestic-listed shares and the 2023 first class meeting for holders of overseas-listed shares,at which the Company considered and approved relevant resolutions including the Report on the Agreement on AssetPurchase through Issuance of Shares and Cash Payments and Connected Transactions (Draft) of the Company. TheCompany intended to acquire 1.19% equity interests in Shouguang Meilun held by Dongxing Securities InvestmentCo., Ltd., 44.44% limited partnership share in Chenrong Fund held by Chongqing International Trust Inc. throughissuance of shares. Chenming Investment, a wholly-owned subsidiary of the Company, intended to acquire 0.22%general partnership interest in Chenrong Fund held by Chenming (Qingdao) Asset Management Co., Ltd. throughcash payment. The type of shares to be issued by the Company is A shares, the price of the shares to be issued isRMB4.42 per share, and the number of shares to be issued is 71,841,345 shares.On 14 March 2023, the Company received the Notice on the Acceptance of Application Documents for AssetPurchase through the Issuance of Shares of Shandong Chenming Paper Holdings Limited (Shen Zheng Shang Shen[2023] No. 259) (([2023]259 ))from the Shenzhen Stock Exchange.On 29 June 2023, the Company convened the eighth extraordinary general meeting of the tenth session of theBoard and the fourth extraordinary general meeting of the tenth session of the Supervisory Committee, at which theCompany considered and approved the Resolution on the Termination of the Asset Purchase through Issuance ofShares and Cash Payments and Connected Transactions and Withdrawal of the Application Documents and agreedto terminate the transaction, sign the relevant termination agreement with the counterparty if needed and apply to theShenzhen Stock Exchange for relevant application documents for the withdrawal of the transaction.For details, please refer to the relevant announcements disclosed by the Company on CNINFO on 28 February2023, 16 March 2023 and 30 June 2023 (announcement number: 2023-010, 2023-014, 2023-048) and the relevantannouncements disclosed by the Company on the website of Hong Kong Stock Exchange on 27 February 2023, 15March 2023 and 29 June 2023.
XXXIV. Tax reliefThe Company is not aware of any tax relief available to shareholders as a result of holding securities of the Company.
VI Corporate Governance
I. Corporate governance in practice
The Company continuously improved its legal person governance structure, renamed the Strategic Committee as theStrategic and Sustainable Development Committee under the Board, proactively organised Directors, Supervisors andthe Senior Management of the Company to attend the special training sessions of the regulatory departments to enhancetheir competence, and continuously strengthened its information disclosure in strict compliance with the requirements ofthe Company Law (), the Securities Law (), the Code of Corporate Governance for Listed Companies (
), the Rules Governing Listing of Stocks on Shenzhen Stock Exchange (),the Listing Rules of Hong Kong Stock Exchange and the related requirements as required by the CSRC, thereby furtherenhancing the standardised operation level of the Company.As of the end of the reporting period, the actual practice of corporate governance complied with the requirements ofthe regulatory documents issued by the CSRC, the Shenzhen Stock Exchange and the Stock Exchange regarding thegovernance of listed companies.(i) Shareholders and general meetingDuring the reporting period, the Board of the Company convened and held 1 annual general meeting, 3 extraordinarygeneral meetings, 1 class meeting for holders of domestic-listed shares and 1 class meeting for holders of overseas-listed shares. The Company regulated the convening, holding and proceedings of shareholder meetings in strictcompliance with the requirements of the Rules Governing Shareholders’General Meetings of Listed Companies, theArticles of Association and the Company’s Rules of Procedure of the General Meeting of Shareholders, and both on-site voting and online voting were provided as channels to participate in each general meeting to ensure that theminority shareholders enjoyed equal status and all shareholders could exercise their rights in full. Meanwhile, theCompany proactively disclosed the voting status of minority investors on each of the resolutions considered at thegeneral meetings to effectively safeguard the legitimate rights and interests of the Company and all shareholders,especially the minority shareholders.(ii) Controlling shareholder and the Company
During the reporting period, the Company remained independent of its controlling shareholder, beneficial controllersand related parties in terms of its business, assets, finance, personnel and organisations, and the Board, theSupervisory Committee and internal departments of the Company operated independently, which complied with therelevant provisions of the CSRC on the independence of listed companies. The controlling shareholder and beneficialcontrollers strictly regulated their behaviour, and exercised their rights and performed their obligations in accordancewith the laws, and there was no appropriation of capital and assets of the Company by the controlling shareholder,beneficial controllers and their related parties.(iii) Directors and the BoardThe Board of the Company has a total of 11 Directors, of which 4 are independent Directors. They are professionalswith professional knowledge in finance, law, management, etc., ensuring the quality and level of decision-makingby the Board. During the reporting period, the Board held a total of 12 meetings, and the convening and holdingof Board meetings were in strict compliance with the Articles of Association and the Rules of Procedure of BoardMeetings and other relevant provisions. Directors of the Company were able to diligently perform their duties. Theyattended meetings on time and reviewed each proposal earnestly, which had pivotal impact on decision in corporategovernance. Independent Directors performed their duties independently and expressed their independent opinionson material matters, which solidly safeguarded the interests of the Company and the investing public.The four special committees under the Board of the Company, namely the Strategic and Sustainable DevelopmentCommittee, the Audit Committee, the Nomination Committee and the Remuneration and Assessment Committee,performed their duties normally and provided scientific and professional opinions for the decision-making of the Boardduring the reporting period.
2023 ANNUAL REPORT
VI Corporate Governance
I. Corporate governance in practice(Continued)(iv) Supervisors and the Supervisory Committee
The Supervisory Committee of the Company has a total of 5 Supervisors, including 3 shareholder representativeSupervisors and 2 employee representative Supervisors. During the reporting period, the Supervisory Committeeof the Company held a total of 7 meetings. The Supervisory Committee strictly followed the requirement of relevantlaws and regulations including the Company Law, the Articles of Associations and the Rules of Procedure of theSupervisory Committee in fulfilling its duties. In the spirit of being accountable to the shareholders and the Company,the Supervisory Committee independently and effectively exercised its supervision and inspection functions tosupervise the Company’s operation and management, decision-making procedures, financial position and the duty ofcare and diligence of the Company’s Directors and Senior Management, so as to safeguard the legitimate interests ofthe Company and the shareholders.
(v) Information disclosure and prevention and control of inside information
The Company earnestly fulfils its information disclosure obligation, safeguards the truthfulness, accuracy,completeness and timeliness of information disclosure, effectively strengthens the confidentiality of inside informationand improve the registration and management of personnel with inside information to ensure fair informationdisclosure in accordance with the requirements of the Articles of Association, Rules Governing the Listing of Stockson Shenzhen Stock Exchange, the Listing Rules of Hong Kong Stock Exchange and relevant laws and regulationsof the CSRC. During the reporting period, the Company issued a total of more than 160 periodic reports, interimannouncements, and related documents through the designated information disclosure media, and a total of morethan 190 periodic reports, interim announcements, and related documents through the website of the Hong KongStock Exchange. There was no case where the Directors, Supervisors, Senior Management and other relatedpersonnel of the Company used inside information to buy and/or sell the shares of the Company throughout thepreparation of periodic reports, temporary announcements and the planning of major events, ensuring that allshareholders had fair access to information related to the Company.Any material non-compliance of the laws, administrative regulations and the regulatory documents on the governanceof listed companies issued by the CSRC in respect of actual governance of the Company Yes ? NoThere was no material non-compliance of the laws, administrative regulations and the regulatory documents on thegovernance of listed companies issued by the CSRC in respect of the actual governance of the Company.
VI Corporate Governance
II. Particulars about the independence in terms of assets, personnel, finance, organisations,and business from the controlling shareholder and beneficial controllersThe Company was completely separated from the controlling shareholder in terms of business, personnel, assets,organisations and finance. The Company had a comprehensive internal structure, independent and complete businesses aswell as the capability of self-operation.
1. In terms of business: the Company had its own R&D, production, procurement and sales system, and was completely
independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiarieswere not competitors of the Company in the same industry.
2. In terms of personnel: the Company had an independent workforce, and had established independent departments
including the research and development department, production department, administration department, financedepartment, procurement department and sales department. The Company had also established a comprehensivemanagement system with respect to labour, personnel and salary. Personnel of the Company were independent ofthe controlling shareholder. The Company’s Chairman was elected at the general meeting, while the general manager,deputy general manager, secretary to the Board, chief financial officer and other Senior Management members allworked at and received remuneration from the Company. They did not receive remuneration from related companiesof the controlling shareholder, nor did they serve at any position therein other than a director or supervisor. Theappointment of the Company’s Directors, Supervisors and Senior Management was conducted through legalprocedures and in strict compliance with the relevant requirements of Company Law and the Articles of Association.None of the controlling shareholders interfered with the Company’s Board, or the appointment and dismissaldecisions at general meetings.
3. In terms of assets: the title relationship between the Company and the controlling shareholder was clear, and the
Company’s funds, assets and other resources were not illegally occupied or dominated by the controlling shareholder.The Company’s assets were complete, and possessed production equipment, auxiliary production equipment,patents and other assets that were in line with its production and operation scope. The Company had completecontrol and dominance over all assets.
4. In terms of organisations: the Board, Supervisory Committee, management and other internal organisations of the
Company operated independently. Each functional department was completely separated from the controllingshareholder in terms of authority, personnel, etc. There was no subordinate relationship between the controllingshareholder and its functional departments, and the Company and its functional departments. The Company’sindependence in terms of its production, operation and management was not affected by the controlling shareholder.
5. In terms of finance: the Company had its own finance department, accounting and auditing system and financial
management system, and was able to make independent financial decisions, with a standardised financial accountingsystem and financial management system for subsidiaries. None of the controlling shareholders interfered with theCompany’s finance and accounting activities. The Company had a separate account in a commercial bank and therewas no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled itstax obligations independently in accordance with the law.
2023 ANNUAL REPORT
VI Corporate Governance
III. Competition in the industry
Applicable ? Not applicableIV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
MeetingType of meeting
Attendance rateof investorsConvening dateDisclosure dateResolutions of meeting
2023 first extraordinary
general meeting
Extraordinary general
meeting
21.96%27 February 202328 February 2023http://www.cninfo.com.cn
(announcement no.: 2023-010)
2023 first class meeting for holders ofdomestic-listed shares
Class meeting24.14%27 February 202328 February 2023http://www.cninfo.com.cn
(announcement no.: 2023-010)
2023 first class meeting for holders of
overseas-listed shares
Class meeting11.72%27 February 202328 February 2023http://www.cninfo.com.cn
(announcement no.: 2023-010)
2023 second extraordinary generalmeeting
Extraordinary generalmeeting
20.53%8 May 20239 May 2023http://www.cninfo.com.cn
(announcement no.: 2023-043)
2022 annual general meetingAnnual general meeting21.60%12 May 202313 May 2023http://www.cninfo.com.cn
(announcement no.: 2023-044)
2023 third extraordinary general
meeting
Extraordinary general
meeting
20.06%26 September 202327 September 2023http://www.cninfo.com.cn
(announcement no.: 2023-073)
2. Extraordinary general meeting requested by holders of the preference shares with voting right
restored Applicable ? Not applicable
VI Corporate Governance
V. Directors, Supervisors and Senior Management
1. General information
NamePosition
Status ofOfficeGenderAge
Date of thebeginning ofthe term
Date of theend of the term
Shareholdingat thebeginning ofthe period
(shares)Increase inthe numberof sharesheld duringthe period(shares)
Decrease
in thenumberof sharesheld duringthe period
(shares)
Otherchanges(shares)
Shareholding
at the endof the period
(shares)
Reason forchangesChen HongguoChairmanIn officeM596 September
2001
15 June 202531,080,044006,000,00025,080,044Repurchase and
cancellationof restrictedsharesGeneral managerResigned15 June 20228 October 2023Hu ChangqingVice chairmanIn officeM5823 June 201815 June 20253,792,857001,500,0002,292,857Repurchase and
cancellationof restrictedsharesLi XingchunVice chairmanIn officeM5811 June 201915 June 20255,000,000001,500,0003,500,000Repurchase and
cancellationof restrictedsharesLi FengDirectorIn officeM5019 June 202015 June 20253,156,02700900,0002,256,027Repurchase and
cancellationof restrictedsharesDeputy general
manager
15 June 202215 June 2025Li WeixianDirectorIn officeM4215 June 202215 June 20251,562,10000600,000962,100Repurchase and
cancellationof restrictedsharesGeneral manager8 October 202315 June 2025Deputy general
manager
Resigned6 November
2019
8 October 2023Han TingdeDirectorIn officeM5511 June 201915 June 202500000N/ALi ChuanxuanDirectorIn officeM4611 June 201915 June 202500000N/ALi ZhihuiIndependent
Director
In officeM6515 June 202215 June 202500000N/ASun JianfeiIndependent
Director
In officeM5111 June 201915 June 202500000N/AYin MeiqunIndependent
Director
In officeF5311 June 201915 June 202500000N/AYang BiaoIndependent
Director
In officeM4411 June 201915 June 202500000N/ALi KangSupervisorIn officeF4227 July 202015 June 2025149,300000149,300N/A
Chairman of theSupervisoryCommittee
15 June 202215 June 2025Pan AilingSupervisorIn officeF5911 June 201915 June 202500000N/AZhang HongSupervisorIn officeF5911 June 201915 June 202500000N/AQiu LanjuSupervisorIn officeF5011 June 201915 June 202500000N/ASang AilingSupervisorIn officeF4519 April 202115 June 202500000N/ALi XueqinDeputy general
manager
In officeF5818 March 200315 June 20253,861,32200900,0002,961,322Repurchase and
cancellationof restrictedshares
2023 ANNUAL REPORT
VI Corporate Governance
NamePosition
Status ofOfficeGenderAge
Date of thebeginning ofthe term
Date of theend of the term
Shareholdingat thebeginning of
the period(shares)
Increase inthe numberof sharesheld duringthe period(shares)
Decreasein thenumberof sharesheld duringthe period(shares)
Otherchanges(shares)Shareholdingat the endof the period(shares)Reason forchangesLi ZhenzhongDeputy general
manager
In officeM5020 March 201115 June 20251,946,40000600,0001,346,400Repurchase and
cancellationof restrictedsharesLi MingtangDeputy general
manager
In officeM5615 June 202215 June 2025750,00000300,000450,000Repurchase and
cancellationof restrictedsharesGe GuangmingDeputy general
manager
In officeM5315 June 202215 June 202500000N/ADong LianmingFinancial controllerIn officeM4912 October 201815 June 2025859,600040,000300,000519,600Repurchase and
cancellationof restrictedshares andpersonalcapital needsYuan XikunSecretary to the
Board
In officeM3816 May 201815 June 2025344,700075,00090,000179,700Repurchase and
cancellationof restrictedshares andpersonalcapital needsChu Hon LeungCompany secretary
(Hong Kong)
In officeM4111 June 201915 June 202500000N/ATotal52,502,3500115,00012,690,00039,697,350During the reporting period, did any Director and Supervisor resign and was any member of the Senior Managementdismissed during their term of office? Yes NoOn 8 October 2023, Mr. Chen Hongguo resigned from his position as the general manager of the Company in order tobetter perform duties as the chairman and devote more energy to the strategic planning, development innovation andstandardised governance of the Company, and strengthen the construction of the Board of the Company, and Mr. LiWeixian was appointed as the general manager of the Company.
V. Directors, Supervisors and Senior Management(Continued)
1. General information
(Continued)
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
1. General information
(Continued)Changes of Directors, Supervisors and Senior Management of the Company? Applicable Not applicableNamePositionTypeDateReasonChen HongguoGeneral managerResigned8 October 2023Resignation from his position as the general
manager in order to better perform dutiesas the chairman and devote more energyto, among others, the strategic planning,development innovation and standardisedgovernance of the Company.Li WeixianDeputy general
manager
Resigned8 October 2023Mr. Li Weixian was appointed as the general
manager of the Company after theconsideration of the twelfth extraordinarymeeting of the tenth session of the Boardwith his term of office commencing fromthe date of consideration and approval ofthe Board until the expiration of the tenthsession of the Board.
General managerAppointed8 October 2023
2023 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisorsand the Senior Management
1. Brief biographies of Directors
(1) Brief biographies of executive Directors
Mr. Chen Hongguo is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He isa senior economist and holds the titles including Nationwide Light Industry Top Ten Youth Experts (
), Labour Medal on Enriching Shandong Province (), Excellent Entrepreneur of Shandong Province (), Nationwide May 1st LaborMedal (), Nationwide Excellent Entrepreneur () and USA RISICEO of the Year (“CEO”). He is vice chairman of the China National Light IndustryCouncil. He joined the Company in 1987 and had held positions including chief officer of manufacturingsection, chief officer of branch factory, deputy general manager, general manager of the Company andthe chairman of Wuhan Chenming. He is currently the chairman of Chenming Holdings, the chairman ofthe Company and a Party Committee Secretary. Mr. Chen Hongguo is the spouse of Ms. Li Xueqin, adeputy general manager of the Company.Mr. Hu Changqing is a member of the Communist Party of the PRC. He holds a bachelor’s degree. Hejoined the Company in 1987. He had held various positions in the Company such as the chief of thetechnological reform department, the chief officer of branch factory, and the deputy general manager. Heis currently a director of Chenming Holdings and a vice chairman of the Company.Mr. Li Xingchun holds a doctorate from School of Engineering Management and Engineering at NanjingUniversity and is a visiting professor of Shanghai Finance University. He has successively worked inCtrip.com, Fuyou Securities Co., Ltd. () and Western Development HoldingsCo., Ltd., accumulating more than 30 years of experience in industry, securities, trust and other fields.He is currently the chairman of Leadbank Technology Ltd., the chairman of Zhejiang Kingland Pipelineand Technologies Co., Ltd., a vice chairman of Shanghai New Huangpu Industrial Group Co., Ltd., thechairman of Kunpeng Asset Management Co., Ltd., a director of Western Leadbank Fund ManagementCo., Ltd., an independent director of Huadian International Power Co., Ltd., and a vice chairman of theCompany.Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joinedthe Company in 1992 and had held different positions including the chief officer of manufacturing sectionand assistant to the general manager of the Company, chairman, marketing director, deputy generalmanager and general manager of Wuhan Chenming. He is currently a director of Chenming Holdings, andan executive Director and deputy general manager of the Company. Mr. Li Feng is the younger brother ofMs. Li Xueqin, a deputy general manager of the Company.Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as thedeputy manager of a sales company of the Company, manager of a sales company, general manager ofJiangsu district of a sales company, chairman of a household paper company, product general manager,deputy marketing director and marketing director of a sales company, a deputy general manager of theGroup, and chairman of the financial division of a group. He is currently an executive Director and thegeneral manager of the Company.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
1. Brief biographies of Directors
(Continued)
(2) Brief biographies of non-executive Directors
Mr. Han Tingde graduated with a bachelor’s degree. He was the deputy general manager and the generalmanager of operational department of Jinan, Liaocheng and Linyi offices of Shandong Securities Co.,Ltd., the deputy general manager and the general manager of operational department of Zibo and Jinanoffices of Tiantong Securities Co., Ltd. in China, the general manager of each of the customer servicedepartment, the brokerage headquarters and the legal affairs department, as well as a deputy generalmanager of the retail headquarters of Zhongtai Securities Co., Ltd., etc. He is currently a non-executiveDirector of the Company.Mr. Li Chuanxuan holds a doctorate in law. He is a professor at Fudan University, Shanghai. From 2008to 2012, he was a lecturer in the Law School of Fudan University. From 2012 to 2013, he was a visitingscholar of the Law School of Columbia University in the United States, focusing on the research on greenfinance laws and policies. He is currently the secretary general of the Environmental and ResourcesProtection Law Society of Shanghai Law Society (), the directorof the Chinese Society of Environmental and Resources Law (), and anappraisal expert of environmental damage forensics in China. He has been selected into the ShanghaiPujiang Talent Programme. He has been in charge of and undertook over 10 national and provincialscientific research projects. Moreover, he has participated in the drafting of several laws and regulationsof different legislatures including the Standing Committee of the National People’s Congress, the Ministryof Ecology and Environment and Shanghai National People’s Congress. He concurrently serves as adirector of Jiangsu Guanlian New Material Technology Co., Ltd., and an independent director of ShanghaiLiangxin Electrical Co., Ltd., and is currently a non-executive Director of the Company.
(3) Brief biographies of independent non-executive Directors
Mr. Li Zhihui holds a doctorate degree in economics, and is a professor and advisor to doctoral students.He currently serves as the head of the Institute of Finance, the School of Economics, Nankai University,a director of the China Society for Finance and Banking, a director of the China International FinanceSociety, a member of the China Financial Publishing House’s teaching material editorial committee anda visiting professor at Tianjin Foreign Studies University. He also serves as an independent director ofShandong Gold Futures Co., Ltd., a director of Henan Anyang Shangdu Rural Commercial Bank Co., Ltd.,an independent director of Henan Yiyang Rural Commercial Bank Co. Ltd. and an external supervisor ofDezhou Bank Co., Ltd. He is currently an independent Director of the Company.
2023 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
1. Brief biographies of Directors
(Continued)
(3) Brief biographies of independent non-executive Directors
(Continued)Mr. Sun Jianfei holds a doctorate in finance, and is a professor. He was a lecturer at University of Nevada,Reno, and concurrently served as the consultant of hedge funds such as EP. From August 2010 toFebruary 2017, he was an assistant professor at Antai College of Economics & Management, ShanghaiJiao Tong University. He was selected in the National Academic Leadership Talent Programme inAccounting (Standby List) (()) organised by the Ministry of Finance, aswell as the Shanghai Pujiang Talent Programme. From February 2017 to August 2020, he was a professorat the Institute for Social and Economic Research of Nanjing Audit University, and a part-time professorat Antai College of Economics & Management and Advanced Institute of Finance, Shanghai Jiao TongUniversity. He is currently an Associate professor of Shanghai Advanced Institute of Finance of ShanghaiJiao Tong University. He has concurrently served as an independent director of Central China Land MediaCo., Ltd., Suzhou Thvow Technology Co., Ltd. and an independent director of Cubic Digital TechnologyCo., Ltd. He is currently an independent Director of the Company.Mr. Yang Biao holds a doctorate in law, and is currently a professor and advisor to doctoral students. Heis current a professor of the School of Law of Sun Yat-sen University. He has concurrently served as anindependent director of Guangdong Tianhe Agricultural Resources Co., Ltd., an independent director ofQiaoyi Logistics Co., Ltd., and a supervisor of Guangzhou Chuanwen Education Consulting Co., Ltd. He iscurrently an independent Director of the Company.Ms. Yin Meiqun holds a doctorate in accounting, and is a professor, an advisor to doctoral students, anda certified public accountant in China. She paid academic visits to Sweden, Finland, Denmark and theIowa State University in the United States. From July 2007 to August 2021, she was a professor of BeijingInternational Studies University. She is currently a professor of China University of Political Science andLaw. She has also served as a member of the 14th Chinese People’s Political Consultative Conferenceof Chaoyang District, Beijing, a managing director of China Business Accounting Institute, and a councilmember of the Accounting Society of China. She has concurrently served as an independent director ofChina Best Group Holding Limited. She is currently an independent Director of the Company.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
2. Brief biographies of Supervisors
Ms. Li Kang is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She joined theCompany in 2001. She has successively served as the section chief, deputy minister, minister, and assistant tothe general manager of the management section of purchasing department. She is currently a deputy financialcontroller of the Company and the chairman of the Supervisory Committee of the Company.Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She iscurrently a level-2 professor of the School of Management, an advisor to doctoral students, and the chief ofthe Investment and Financing Research Centre () in Shandong University and a non-practisingmember of CICPA (Chinese Institute of Certified Public Accountants). She is also a council member ofShandong Comparative Management Association, a visiting scholar at University of Connecticut in the UnitedStates and a state-level candidate for the New Century Ten Million Talents Project (“”).She is a specialist entitled to the State Council Special Allowance (), and a special expert ofthe Taishan Scholar. She is the chief expert of the Major Tender Projects of National Social and Science Fund (
). She has finished various research projects at national and provincial level.She is also an independent director of Shandong Sunway Chemical Group Co., Ltd., Qingdao Rural CommercialBank Co., Ltd. and Shandong Linglong Tire Co., Ltd. She is currently a Supervisor of the Company.Ms. Zhang Hong holds a doctoral degree in Economics, and is currently a professor and advisor to doctoralstudents at Shandong University, a non-practising member of the Chinese Institute of Certified PublicAccountants, a director of China Association of International Trade, and the managing director of the ShandongSociety of World Economics. She has concurrently served as an independent director of Hua Xia Bank Co.,Limited, an independent director of Shandong Hi-speed Road & Bridge Group Co., Ltd., an independent directorof Vosges Group Co., Ltd., and an independent director of Sinotruck Jinan Truck Co., Ltd. She is currently aSupervisor of the Company.Ms. Qiu Lanju graduated with a diploma. She joined the Company in 1995 and served as the deputy chief ofthe price audit section of the Company’s inspection department, the chief of the implementation section of theprocurement department, the chief of the general management section of the procurement department, andthe director of the procurement department. She is currently an employee representative Supervisor of theCompany, responsible for the management of the human resources department.Ms. Sang Ailing holds a bachelor’s degree and is a member of the Communist Party of the PRC. She joined theCompany in 2000 and served as the chief of the personnel management section of the marketing departmentof a sales company, the deputy director and director of the marketing department of a sales company, etc. Sheis currently a deputy director of the marketing department of the Company and an employee representativeSupervisor of the Company.
2023 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
Ms. Li Xueqin is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She wassuccessively awarded titles including“Model Worker in Shandong Province (), Model Workerin the Country () and Nationwide May 1st Labour Medal ()”and a deputy ofthe Tenth, Eleventh, Twelfth and Thirteenth National People’s Congress. She joined the Company in 1987 andhad held the positions of the chief of audit department and deputy general manager of the Company. She hasbeen a deputy general manager of the Company since March 2003. Ms. Li Xueqin is the spouse of Mr. ChenHongguo, the chairman of the Company.Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined theCompany in 1992 and had held different positions including the chief officer of manufacturing section andassistant to the general manager of the Company, chairman, marketing director, deputy general managerand general manager of Wuhan Chenming. He is currently a director of Chenming Holdings, and an executiveDirector and deputy general manager of the Company. Mr. Li Feng is the younger brother of Ms. Li Xueqin, adeputy general manager of the Company.Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as a deputymanager of a sales company of the Company, manager of a sales company, general manager of Jiangsu districtof a sales company, chairman of a household paper company, product general manager, deputy marketingdirector and marketing director of a sales company, the general manager of the Group, and chairman of thefinancial division of a group. He is currently an executive Director and the general manager of the Company.Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joinedthe Company in 1995 and had served as principal representative of the Shanghai management region of asales company, sales manager of light weight coated culture paper products, general manager of culture paperproducts of a sales company. He is currently a deputy general manager of the Company.Mr. Li Mingtang is a member of the Communist Party of the PRC. He joined the Company in 2002 and hadserved as principal representative of the Jiangsu management region and Jinan branch of a sales company,assistant to general manager and general manager of a culture paper products company, and deputy generalmanager of a coated linerboard products company. He is currently a deputy general manager of the Company.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
(Continued)Mr. Ge Guangming is a member of the Communist Party of the PRC. He joined the Company in 1995 andhad served as a deputy general project manager of the Company, deputy general manager of Jilin Chenming,assistant to general manager of the Company, and deputy general manager responsible for the ZhanjiangChenming project and the Huanggang Chenming Pulp & Paper project. He is currently a deputy generalmanager of the Company.Mr. Dong Lianming is a member of the Communist Party of the PRC and an accountant. He holds a bachelor’sdegree. He joined the Company in 1997 and had held positions as the chief of accounting and auditing sectionunder the financial department of the Company, the deputy chief and chief of the financial department, chiefaccountant of Jiangxi Chenming, chief accountant of Shandong Chenming Panels and financial controller anddeputy general manager of Zhanjiang Chenming. He is currently the financial controller of the Company.Mr. Yuan Xikun is a member of the Communist Party of the PRC. He holds a bachelor’s degree in management.He joined the Company in 2010 and had held positions as the accountant for consolidated financial statementsin the financial department of the Company, manager of disclosure department, security affairs specialist andchief of the security investment section. He is currently the secretary to the Board of the Company.Mr. Chu Hon Leung is a lawyer. He obtained a bachelor’s degree in business from Macquarie University,Sydney, Australia, and a postgraduate diploma in law from The College of Law, London, England. He graduatedfrom the City University of Hong Kong and obtained a diploma in Hong Kong law. He had been a lawyer inlocal and international law firms in Hong Kong and served and an internal consultant for leading Chinese assetmanagement companies. He has been a practicing lawyer in Hong Kong since 2009 and currently works for Li &Partners.Employment at the shareholder of the Company? Applicable Not applicable
Name of employee
Name of shareholderof the Company
Position at theshareholder ofthe Company
Date of thebeginning ofthe term
Date of the end ofthe term
Receipt of anyremuneration orallowance fromthe shareholderof the Companyor notChen HongguoChenming Holdings
Company Limited
Chairman22 September 201629 December 2026NoHu ChangqingChenming Holdings
Company Limited
director22 September 201629 December 2026NoLi XueqinChenming Holdings
Company Limited
director22 September 201629 December 2026NoLi FengChenming Holdings
Company Limited
director13 August 202129 December 2026NoExplanation of the employment
at the shareholder of theCompany
Nil
2023 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
(Continued)
Employment at other units? Applicable Not applicableName ofemployeeName of other unit(s)Position at other unit(s)
Date of thebeginning of the termDate of the end of the term
Receipt of anyremuneration orallowance fromother units or notLi ChuanxuanShanghai Liangxin Electrical Co., Ltd.Independent director17 May 202314 September 2024YesYang BiaoGuangdong Tianhe Agricultural Resources Co., Ltd.Independent director17 May 201816 May 2024YesYang BiaoQiaoyi Logistics Co., Ltd.Independent director31 March 202131 March 2024YesYang BiaoDongguan Rural Commercial Bank Co., Ltd.External supervisor1 October 20191 October 2025YesSun JianfeiNanya New Material Technology Co., Ltd.Independent director4 August 201721 September 2023YesSun JianfeiSuzhou Thvow Technology Co., Ltd.Independent director8 May 2020An announcement on resignation
was disclosed on 21 June 2023
YesSun JianfeiCubic Digital Technology Co., Ltd.Independent director18 May 202118 May 2024YesSun JianfeiCentral China Land Media Co., Ltd.Independent director19 May 202318 May 2026YesYin MeiqunShangqiu Dingfeng Wood Co., Ltd.Independent director21 April 202120 April 2024YesYin MeiqunChina Best Group Holding LimitedIndependent director1 December 202130 November 2024YesLi XingchunHuadian International Power Co., Ltd.Independent director30 June 202030 May 2026YesLi XingchunShanghai New Huangpu Industrial Group Co., Ltd.Vice chairman9 August 20228 August 2025NoLi XingchunZhejiang Kingland Pipeline and Technologies Co., Ltd.Chairman11 May 202328 December 2025NoPan AilingShinva Medical Instrument Co., Ltd.Independent director27 July 202025 July 2026YesPan AilingQingdao Rural Commercial Bank Co., Ltd.Independent director12 October 202228 May 2024YesPan AilingShandong Linglong Tire Co., Ltd.Independent director6 July 20225 July 2025YesPan AilingShandong Sunway Chemical Group Co., Ltd.Independent director15 May 202015 December 2023YesZhang HongHua Xia Bank Co., LimitedExternal supervisor31 March 2022Expiration of the eighth session of
the Supervisory Committee
YesZhang HongVosges Group Co., Ltd.Independent director15 July 201915 July 2025YesZhang HongSinotruck Jinan Truck Co., Ltd.Independent director28 April 202011 May 2026YesZhang HongCisen Pharmaceutical Co., Ltd. Independent director8 December 202028 February 2024YesZhang HongShandong Hi-speed Road & Bridge Group Co., Ltd.Independent director23 April 2019–YesSanctions against current Directors, Supervisors and Senior Management of the Company and those whoresigned during the reporting period by securities regulatory authorities in the past three years Applicable ? Not applicable
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
3. Remuneration of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors,Supervisors and the Senior Management
(1) Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual
remuneration of each of the executive Directors and the Senior Management of the Company was in theband of RMB0.20 million to RMB5.00 million and the specific amount for each of them was determinedby the remuneration committee based on the main financial indicators and operation target completed bythe Company, the scope of work and main responsibilities of the Directors and Senior Management of theCompany, the target completion of the Directors and Senior Management as assessed by the duty andperformance appraisal system, as well as business innovation capability and profit generation ability of theDirectors and the Senior Management. The annual remuneration of Supervisors assuming specific managerialduties in the Company were determined by the general manager office of the Company based on specificmanagerial duties assumed by them. Fixed annual remuneration policy was adopted on external Supervisorswho did not hold actual management positions in the Company. As approved at the 2022 first extraordinarygeneral meeting of the Company, the Company paid each of the independent non-executive Directors andnon-executive Directors of the Company allowance of RMB200,000 (before tax). The remuneration of externalSupervisors amounted to RMB100,000 (before tax). The travel expenses for attending board meetings,supervisory meetings and general meetings of the Company and fees reasonably incurred in the performance oftheir duties under the Articles of Association by independent non-executive Directors, non-executive Directorsand external supervisors are reimbursed as expensed.
(2) Decision process for remuneration of Directors, Supervisors and Senior Management: In accordance with
the relevant policies and regulations such as the Implementation Rules of the Remuneration and AssessmentCommittee under the Board, any remuneration plan for the Company’s executive Directors proposed by theremuneration and assessment committee shall be agreed on by the Board and then submitted to the generalmeeting for consideration and approval prior to implementation. Any proposal of remuneration distributionplan for the Senior Management officers of the Company shall be submitted to the Board for approval. Theremuneration of independent non-executive Directors, non-executive Directors and external Supervisors of theCompany shall be agreed on by the Board and then submitted to the general meeting for consideration andapproval prior to implementation.
(3) The remuneration and assessment committee, which was set up by the Board according to the resolution of the
general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-independent Directors and Senior Management of the Company; formulate and examine the remuneration policyand scheme of the non-independent Directors and Senior Management of the Company, and accountable tothe Board.
2023 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
3. Remuneration of Directors, Supervisors and Senior Management
(Continued)Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors,Supervisors and the Senior Management(Continued)Remuneration of Directors, Supervisors and Senior Management of the Company during the reporting period
Unit: RMB’0,000
NamePositionGenderAgeStatus
Totalremunerationbefore taxreceived fromthe Company
Receipt ofremunerationfrom relatedparties of theCompanyor notChen HongguoChairmanM59In office317.42NoHu ChangqingVice chairmanM58In office201.25NoLi XingchunVice chairmanM58In office420.00YesLi FengDirector and deputy general managerM50In office144.38NoLi WeixianDirector and general managerM42In office232.96NoHan TingdeDirectorM55In office20.00NoLi ChuanxuanDirectorM46In office20.00NoLi ZhihuiIndependent DirectorM65In office20.00NoSun JianfeiIndependent DirectorM51In office20.00NoYin MeiqunIndependent DirectorF53In office20.00NoYang BiaoIndependent DirectorM44In office20.00NoLi KangChairman of the Supervisory CommitteeF42In office84.30NoPan AilingSupervisorF59In office10.00NoZhang HongSupervisorF59In office10.00NoQiu LanjuSupervisorF50In office75.03NoSang AilingSupervisorF45In office22.09NoLi XueqinDeputy general managerF58In office169.67NoLi ZhenzhongDeputy general managerM50In office135.77NoLi MingtangDeputy general managerM56In office87.27NoGe GuangmingDeputy general managerM53In office130.35NoDong LianmingFinancial controllerM49In office145.66NoYuan XikunSecretary to the BoardM38In office55.52NoChu Hon LeungCompany secretary (Hong Kong)M41In office0.00NoTotal2,361.67
Note: The total pre-tax remuneration received by Directors, Supervisors and the Senior Management from the Company is the remunerationduring their tenure.Other explanation Applicable ? Not applicable
VI Corporate Governance
VI. Performance of Directors during the reporting period
1. Board meetings during the reporting period
MeetingConvening dateDisclosure dateResolutions of meetingThe sixth extraordinary meeting ofthe tenth session of the Board
19 January 202320 January 2023http://www.cninfo.com.cn
(announcement no.: 2023-003)The fourth meeting of the tenth
session of the Board
30 March 202331 March 2023http://www.cninfo.com.cn
(announcement no.: 2023-016)The seventh extraordinary meeting
of the tenth session of the Board
19 April 202320 April 2023http://www.cninfo.com.cn
(announcement no.: 2023-030)The fifth meeting of the tenthsession of the Board
28 April 202329 April 2023http://www.cninfo.com.cn
(announcement no.: 2023-039)The eighth extraordinary meeting of
the tenth session of the Board
29 June 202330 June 2023http://www.cninfo.com.cn
(announcement no.: 2023-046)The ninth extraordinary meeting ofthe tenth session of the Board
17 July 202318 July 2023http://www.cninfo.com.cn
(announcement no.: 2023-053)The sixth meeting of the tenthsession of the Board
30 August 202331 August 2023http://www.cninfo.com.cn
(announcement no.: 2023-064)The tenth extraordinary meeting ofthe tenth session of the Board
8 September 20239 September 2023http://www.cninfo.com.cn
(announcement no.: 2023-067)The eleventh extraordinary meetingof the tenth session of the Board
20 September 202321 September 2023http://www.cninfo.com.cn
(announcement no.: 2023-071)The twelfth extraordinary meeting
of the tenth session of the Board
8 October 20239 October 2023http://www.cninfo.com.cn
(announcement no.: 2023-074)The seventh meeting of the tenth
session of the Board
30 October 2023N/AThe Company’s 2023 Third
Quarterly Report was considered
and approved. It was exempted
from disclosure by resolution
announcement.The thirteenth extraordinary
meeting of the tenth session ofthe Board
28 November 202329 November 2023http://www.cninfo.com.cn
(announcement no.: 2023-080)
2023 ANNUAL REPORT
VI Corporate Governance
VI. Performance of Directors during the reporting period(Continued)
2. Attendance of Directors at Board meetings and general meetings
Attendance of Directors at Board meetings and general meetings
Name of Directors
Number ofattendance
requiredfor Boardmeetingsduring thereportingperiod
Attendance
at Boardmeetingsin person
Attendanceat Boardmeetings bycommunication
Attendanceat Boardmeetingsby proxy
Absencefrom Boardmeetings
Absent from
Boardmeetings twice
in a row(in person)
Attendance
at generalmeetingsChen Hongguo1201200No0Hu Changqing1201200No6Li Xingchun1201200No6Li Feng1201200No5Li Weixian1201200No5Han Tingde1201200No6Li Chuanxuan1201200No6Li Zhihui1201200No6Sun Jianfei1201200No6Yin Meiqun1201200No6Yang Biao1201200No6Explanation for absent from Board meetings twice in a row (in person)During the reporting period, none of the Directors was absent from Board meetings twice in a row (in person).
VI Corporate Governance
VI. Performance of Directors during the reporting period(Continued)
3. Objections from Directors on related issues of the Company
Were there any objections on related issues of the Company from Directors? Yes ? NoThere was no objection on related issues of the Company from Directors during the reporting period.
4. Other details about the performance of duties by Directors
Were there any suggestions from Directors adopted by the Company?? Yes NoExplanation on the adoption or non-adoption with related suggestions from the DirectorsDuring the reporting period, all Directors of the Company performed their duties with integrity and diligence, andconducted works in strict compliance with relevant rules of the CSRC, Shenzhen Stock Exchange and StockExchange, as well as the Articles of Association, the Rules of Procedures of the Board of Directors, the AdministrativeRules for Independent Directors and other systems. They actively attended the Board meetings, carefully reviewedvarious proposals, made scientific decisions and executed resolutions of the general meetings. Independent Directorsof the Company maintained good communication with other Directors, Supervisors and senior management.They focused on the operation and financial conditions and legal person governance structure of the Company,and expressed their independent opinions on matters of the Company that have significant impacts on minorityshareholders, including external guarantees, related party transactions, financial aids and change in general manageretc. They also enhanced their exchange with investors by attending general meetings and result announcementroadshows, thus actively safeguarding the legitimate rights of the Company and all shareholders, which is beneficialto the regulated operation and healthy development of the Company.
2023 ANNUAL REPORT
VI Corporate Governance
VII. Special committees under the Board during the reporting period
Name of thecommitteeMember
Number ofmeetingconvenedConvening dateDetails of the meeting
Important opinion andadviceOther performance of duty
Details ofobjectionAudit
Committee
Yin Meiqun,Li Zhihui andSun Jianfei
430 March 2023Reviewed Full Text
and Summary of theCompany’s 2022Annual Report, theCompany’s 2022Financial FinalAccounts Report,Proposal on theAppointment of Auditorfor 2023 and Proposalon Provision forImpairment of Assetsin 2022
Agreed to submit to theBoard for review
Communication with accountantson the independence,responsibilities, key auditmatters and important mattersof the audit for 2022; reviewof the 2022 audit report andfinancial report, the reasonsfor making asset impairmentprovision for 2022, assetscope and basis of provision,and ensure the rationalityand prudence of provision;review of the professionalcompetence, independence,investor protection ability, andaudit fees of the 2023 auditor.
Nil
28 April 2023Reviewed the 2023 First
Quarterly Report of theCompany
Agreed to submit to the
Board for review
Review of the 2023 first quarterly
report of the Company.
Nil30 August 2023Reviewed the Full Text
and Summary of the2023 Interim Reportof the Company andthe Proposal of AssetImpairment Provisionfor the First Half of2023
Agreed to submit to the
Board for review
Review of Capital Flows Between
Related Parties, externalguarantees and impairmentprovision of the Company forthe first half of 2023, and the2023 interim report.
Nil
30 October 2023Reviewed the 2023 Third
Quarterly Report of theCompany
Agreed to submit to the
Board for review
Review of the 2023 third quarterly
report of the Company; payingattention to reasons for theyear-on-year decrease inprofits.
Nil
VI Corporate Governance
Name of thecommitteeMember
Number ofmeetingconvenedConvening dateDetails of the meeting
Important opinion andadviceOther performance of duty
Details ofobjectionRemunerationandAssessmentCommittee
Yang Biao, LiXingchun and
Sun Jianfei
230 March 2023Reviewed the Proposal
on Determinationof Remunerationof Directors,Supervisors and SeniorManagement for 2022
Agreed to submit to the
Board for review
Review of the performance
assessment on executiveDirectors and seniormanagement and Supervisorswho assume specificmanagement positions in theCompany, and determinationof the remuneration ofDirectors, Supervisors and theSenior Management based onthe operations of the Companyin 2022.
Nil
17 July 2023Reviewed the Proposal
on Failure Fulfilmentof the UnlockingConditions for theSecond UnlockingPeriod under the 2020Restricted A ShareIncentive Schemeand Repurchase andCancellation of CertainRestricted Shares
Agreed to submit to the
Board for review
Review of each of the items
under the 2020 RestrictedA Share Incentive Schemeincluding the performanceappraisal indicators at thecompany level, resignationof employees, the list ofparticipants who do not meetthe unlocking conditions,number of shares repurchasedand cancelled, repurchaseprice and basis.
Nil
Nomination
Committee
Li Zhihui, Chen
Hongguo and
Yin Meiqun
18 October 2023Reviewed the Proposal
on Change in GeneralManager
Agreed to submit to the
Board for review
Review of the reasons forresignation of Mr. ChenHongguo, the former generalmanager, and the qualification,work experience andshareholding of Mr. Li Weixian,the candidate, to determinethat he is capable to serve assenior management.
Nil
VII. Special committees under the Board during the reporting period(Continued)
2023 ANNUAL REPORT
VI Corporate Governance
VIII. Performance of duties by the Supervisory CommitteeWere there any risks of the Company identified by the Supervisory Committee when performing its duties during thereporting period? Yes ? NoNone of those issues under the supervision was objected by the Supervisory Committee during the reporting period.IX. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) as at the end of the reporting period2,522Number of staff at major subsidiaries (person) as at the end of the reporting period7,341Total number of staff (person) as at the end of the reporting period10,604Total number of staff receiving remuneration during the period (person)10,604Number of retired/resigned staff the Company and its major subsidiaries are required tocompensate (person)0
Specialty compositionCategory of specialty composition
Number of people
(person)Production staff7,181Sales staff465Technical staff410Financial staff177Administrative staff1,198Other staff1,173Total10,604
Education levelCategory of education level
Number of people
(person)Postgraduate and above23Undergraduate879Post-secondary2,253Technical secondary and below7,449Total10,604
VI Corporate Governance
IX. Personnel of the Company(Continued)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, performance bonuses and other fringebenefits. Subject to the relevant laws and regulations, the Company adopts different standards of remuneration fordifferent employees, which are determined based on their position, skill variety, performance, etc. with reference tothe remuneration level in the labour market, the average level of salary in the society and the corporate reference lineset by the government. The Company provides various benefits to the employees, including social insurance, housingallowance and paid leaves, etc.
3. Training programmes
Adhering to the corporate spirit of“working hard and operating aggressively”, the Company has establishedcomprehensive staff promotion and incentive mechanisms to enhance the enthusiasm and creativity of employees.The Company focuses on the cooperation with quality training institutions to introduce quality training programmes,especially focusing on improving the capability of middle-level and senior management in respect of learning,management and action. The Company deep dives into front-line of production to understand the true needs ofemployees for trainings, improve the operational skills of employees and enhance our core competitiveness.
4. Labour outsourcing
Applicable ? Not applicableX. Profit distribution of the Company and conversion of capital reserves into share capital
Formulation, implementation or adjustment of profit distribution policy, especially the cash dividend during the reportingperiod Applicable ? Not applicableThe Company was profitable during the reporting period and the Parent Company’s profit available for distribution toshareholders was positive, but no cash dividend distribution plan was proposed Applicable ? Not applicableProfit distribution and conversion of capital reserves into share capital during the reporting period? Applicable Not applicableThe Company does not propose distribution of cash dividends or bonus shares for the year, and there will be no increase ofshare capital from reserves.
2023 ANNUAL REPORT
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employeeincentive measures of the Company? Applicable Not applicable
1. Equity incentives
1. On 30 March 2020, the Company convened the ninth extraordinary meeting of the ninth session of the Board, at
which the Company considered and approved the Resolution in Relation to the 2020 Restricted Share IncentiveScheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary and other resolutions. On thesame date, the fourth extraordinary meeting of the ninth session of the Supervisory Committee of the Companyconsidered and approved the above resolutions and verified the list of proposed participants of the incentivescheme. Independent Directors of the Company issued independent opinions on the incentive scheme.
2. On 3 April 2020, the Company announced the list of participants through the Company
’s internal website fora period from 3 April 2020 to 12 April 2020. During the period, the Supervisory Committee of the Companyand relevant departments did not receive any objection against the proposed participants. The SupervisoryCommittee verified the list of participants under the grant of the incentive scheme.
3. On 15 May 2020, the Company convened the 2020 second extraordinary general meeting, the 2020 first class
meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listedshares, at which the Company considered and approved the Resolution in Relation to the 2020 RestrictedShare Incentive Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary and otherresolutions. On 16 May 2020, the Company disclosed the Self-Examination Report for the Trading of Shares ofthe Company by Insiders and Participants of the 2020 Restricted A Share Incentive Scheme.
4. On 29 May 2020, the Company convened the tenth extraordinary meeting of ninth session of the Board and the
fifth extraordinary meeting of the ninth session of the Supervisory Committee, at which the Company consideredand approved the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share IncentiveScheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants,approving the issue of 79,600,000 restricted A shares to 111 participants at the price of RMB2.85 per share on29 May 2020.
5. On 15 July 2020, the 79,600,000 restricted A shares granted to the participants were listed.
6. On 18 July 2022, the Company convened the second extraordinary meeting of the tenth session of the Board
and the first extraordinary meeting of the tenth session of the Supervisory Committee, at which the Companyconsidered and approved the Resolution on the Fulfilment of the Unlocking Conditions of the RestrictedShares Granted under the 2020 Restricted A Share Incentive Scheme during the First Unlocking Period and theResolution on the Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme andRepurchase and Cancellation of Certain Restricted Shares. The independent Directors of the Company issuedindependent opinions to agree with such resolutions.96 participants fulfilled the unlocking conditions for the first unlocking period under the 2020 Restricted A ShareIncentive Scheme with 29,948,000 restricted shares being eligible for unlocking. 15 participants had resigned,had changed duty, and had removed from office, which failed to comply with the unlocking conditions. Thetotal number of restricted shares that have been granted to and held by the participants and have not yet beenunlocked is 4,466,000, with a repurchase price of RMB2.5184172 per share (excluding the bank loan interestrate for the same term). On 27 July 2022, 29,948,000 restricted A shares that were unlocked were listed fortrading. On 18 October 2022, the Company completed the procedures for the repurchase and cancellationof 4,466,000 restricted A shares with the Shenzhen Branch of China Securities Depository and ClearingCorporation Limited.
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employeeincentive measures of the Company(Continued)
1. Equity incentives
(Continued)
7. On 17 July 2023, the Company convened the ninth extraordinary meeting of the tenth session of the Board and
the fifth extraordinary meeting of the tenth session of the Supervisory Committee, at which the Resolution onthe Failure Fulfilment of the Unlocking Conditions for the Second Unlocking Period under the 2020 RestrictedA Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares was considered andapproved. The results for 2022 of the Company failed to pass the performance appraisal targets at companylevel set for the second unlocking period. Meanwhile, 5 participants lost their incentive qualification due to theirresignation. The Board of the Company repurchased and cancelled 22,929,000 restricted A shares which hadbeen granted to participants but not yet unlocked for the second unlocking period at a repurchase price ofRMB2.5184172 per share (excluding the bank loan interest rate for the same term). On 20 November 2023, theCompany completed the repurchase and cancellation procedures of the 22,929,000 restricted A shares at theShenzhen Branch of China Securities Depository and Clearing Corporation Limited.Equity incentives granted to Directors and the Senior Management of the Company?Applicable Not applicable
Unit: share
NamePosition
Numberof shareoptions held
at thebeginning ofthe period
Numberof newlygranted
shareoptionsduring thereporting
period
Numberof sharesexercisableduring thereporting
period
Numberof sharesexercisedduring thereporting
period
Exerciseprice ofthe sharesexercisedduring thereporting
period(RMB/share)
Numberof shareoptionsheld atthe end ofthe period
Marketprice at theend of thereporting
period(RMB/share)
Numberof restrictedshares held
at thebeginningof the period
Numberof unlocked
sharesduring the
current
period
Numberof newlygrantedrestricted
sharesduring thereporting
period
Grant priceof restrictedshares(RMB/share)
Numberof restrictedsharesheld at theend of the
periodChen HongguoChairman0000003.8812,000,000002.856,000,000Hu ChangqingVice chairman0000003.883,000,000002.851,500,000Li XingchunVice chairman0000003.883,000,000002.851,500,000Li FengDirector and
deputy generalmanager
0000003.881,800,000002.85900,000Li WeixianDirector and
generalmanager
0000003.881,200,000002.85600,000Li XueqinDeputy general
manager
0000003.881,800,000002.85900,000Li ZhenzhongDeputy general
manager
0000003.881,200,000002.85600,000Li MingtangDeputy general
manager
0000003.88600,000002.85300,000Dong LianmingFinancial
controller
0000003.88600,000002.85300,000Yuan XikunSecretary to the
Board
0000003.88180,000002.8590,000Total0000025,380,0000012,690,000Remarks (if any)The 2022 annual result of the Company failed to pass the performance appraisal targets at company level set for the second unlocking period. Pursuant to the 2020 Restricted A Share
Incentive Scheme (Draft) of the Company, the restricted shares held by participants under the second unlocking period shall be repurchased and cancelled. In particular, the number ofshares for Directors, Supervisors and Senior Management of the Company repurchased and cancelled was 12,690,000 during the reporting period.
2023 ANNUAL REPORT
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employeeincentive measures of the Company(Continued)
1. Equity incentives
(Continued)Assessment and incentive mechanism for the Senior ManagementThe Senior Management of the Company is assessed on monthly and annually basis. Monthly assessments wereconducted in line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators,namely the completion status of each month and the evaluation on important performance indicators. It was carriedout monthly by way of cross assessment and supervision among the related departments. The annual assessmentswere carried out by the Remuneration and Assessment Committee with reference to the results of monthlyassessments and overall performances during the year, including the integrated quality of Senior Management andinternal training of talents.
2. Implementation of employee shareholding plans
Applicable ? Not applicable
3. Other employee incentive measures
Applicable ? Not applicable
VI Corporate Governance
XII. Construction and implementation of internal control system during the reporting period
1. Construction and implementation of internal control system
During the reporting period, in accordance with the Basic Internal Control Norms for Enterprises and its supportingguidelines, taking internal and external environment, internal organisation and management requirements into account,the Company updated and improved its internal control system in a timely manner, comprehensively reviewed andrevised the daily work and business flows and internal control systems of each department and business segmentof the Company, supplemented and revised the relevant content of the Internal Control Management Manual, andestablished a scientifically designed, concise and applicable internal control system with effective operation. Theinternal control of the Company was able to cover the main aspects of the Company’s operation and management,and there were no major omissions. The units, businesses and events included in the evaluation scope and high-riskareas covered the main aspects of the Company’s operation and management, and there were no major omissions.The design of the internal control system of the Company was sound and reasonable. The implementation of internalcontrols was effective and there were no major omissions.Through the operation, analysis and evaluation of the internal control system, the Company effectively prevented risksin operation and management and promoted the realisation of internal control objectives.
2. Particulars of material deficiencies in internal control detected during the reporting period
Yes ? NoXIII. The Company’s management and control of subsidiaries during the reporting period
Name of the companyIntegration plan
Integration
progress
Issueencountered
duringintegration
Implemented
solution
Solutionprogress
Follow-up
solutionJiangxi Chenming Port
Co., Ltd.
In April 2023, Jiangxi Chenming, a
subsidiary, acquired equity interest inJiangxi Port, which is included in thescope of consolidation. The principalactivities of Jiangxi Chenming Port isgoods loading and transportation atwharf. In order to revitalise Jiangxi Portand enhance economic benefits tothe Company, Jiangxi Chenming hascontracted the businesses of Jiangxi Portto Jiangxi Yirong Investment Co., Ltd. for5 years, and receives fixed contractingfees of RMB4.00 million per year onquarterly basis.
CompletedNilN/AN/AN/A
2023 ANNUAL REPORT
VI Corporate Governance
XIV. Assessment report on internal control or auditor’s report on internal control
1. Assessment report on internal controls
Date of disclosure of assessment report on internal controls29 March 2024Index of assessment report on internal controls disclosurehttp://www.cninfo.com.cnPercentage of total assets included in assessment to total assets in consolidatedfinancial statements of the Company99.70%Percentage of revenue included in assessment to revenue in consolidated financialstatements of the Company99.40%
Basis for identifying deficienciesTypeFinancial reportingTypeQualitative criteriaIndicators of material deficiencies in the internal control of
financial reporting include: ineffective control environment,material loss to and adverse impact on the Company as aresult of misconduct by Directors, Supervisors and SeniorManagement; material misstatement of non-exceptionalincidents; ineffectiveness in supervision of internal controlof the Company by the Board, or its delegated authorities,and the internal audit department.Indicators of major deficiencies in internal control offinancial reporting include: failure in selecting andapplying accounting policies in accordance withgenerally accepted accounting principles; failure toestablish procedures and control measures to preventcorrupt practices; failure to establish correspondingcontrol mechanism for the accounting of unusual orspecial transactions or failure to implement or set upthe corresponding compensation control; failure toreasonably ensure the truthfulness and accuracy in thepreparation of financial statement, as a result of one ormore deficiencies in the control of financial reporting as ofthe end of the period.General deficiencies: other deficiencies in internal control
that do not constitute material or major deficiencies.
Indicators of material deficiencies in the internal control ofnon-financial reporting include: major failure as a resultof the decision making process; lack of control system oroccurrence of systematic failure in principal activities andlack of effective compensation control, high turnover rateof mid to senior level management and senior technicalstaff; failure to address the findings of internal controlassessment, in particular material deficiencies; and otherfactors which impose material adverse impact on theCompany.Indicators of major deficiencies in internal control of non-financial reporting include: general failure as a result of thedecision-making process; deficiencies in major businessprocedure or system; high turnover rate of key staff; failureto address the findings of internal control assessment,in particular major deficiencies; and other factors whichimpose great adverse impact to the Company.Indicators of general deficiencies in internal control of non-financial reporting include: low efficiency of decision-making process; deficiencies in general business procedureor system; high turnover rate of employees; and failure torectify general deficiencies.Quantitative criteriaGeneral deficiencies: deviation of less than or equal to 0.1%
from the target of accounting error/the total revenue;Major deficiencies: deviation of 0.1% – 0.5% from thetarget of accounting error/the total revenue; materialdeficiencies: deviation greater than 0.5%.
General deficiencies: quantitative criterion (financial loss)less than RMB5,000,000; major deficiencies: quantitativecriterion (financial loss) between RMB5,000,000 andRMB20,000,000; material deficiencies: quantitative criterion(financial loss) over RMB20,000,000.Number of material deficiencies in financial reporting0Number of material deficiencies in non-financial reporting0Number of major deficiencies in financial reporting0Number of major deficiencies in non-financial reporting0
VI Corporate Governance
XIV. Assessment report on internal control or auditor’s report on internal control(Continued)
2. Auditor
’s report on internal control
? Applicable Not applicable
Auditor’s opinion contained in the auditor’s report on internal controlWe are of the opinion that Shandong Paper Company had in all material aspects maintained effective internal controlover the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31 December2023.Disclosure of auditor’s report on internal controlDisclosedDate of disclosure of auditor’s report on internal control29 March 2024Index of auditor’s report on internal control disclosurehttp://www.cninfo.com.cnType of opinion in auditor’s report on internal controlStandard and unqualified opinionMaterial deficiencies in non-financial reportingNoAny opinions of non-standardisation set out in the auditor’s report on internal control issued by accountants Yes ? NoAuditor’s report on internal control issued by accountants was in line with Directors’ opinions contained in self-assessment report? Yes NoXV. Rectification of problems found in self-inspection under the special initiative on corporategovernance of the listed companyNot applicableXVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(i) Compliance with the Code on Corporate GovernanceThe Company maintained high standards of corporate governance through various internal controls. The Boardreviewed the corporate governance practices of the Company from time to time to enhance the corporate governancestandards of the Company.Save for the details set out in III. Board and XVII. Communications with shareholders in this section, the Companyhad fully complied with all the principles and code provisions of the Code on Corporate Governance as set out inAppendix C1 to the Hong Kong Listing Rules during the reporting period.
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(ii) Securities transactions by Directors
The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactionsby Directors of Listed Companies as set out in Appendix C3 to the Hong Kong Listing Rules. Having made adequateenquiries with all Directors and Supervisors of the Company, the Company was not aware of any information thatreasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in thiscode during the reporting period.(iii) Board
The members of the Board of the Company are elected at the general meeting and held accountable to the generalmeeting, and shall exercise the following functions and powers: (1) to be responsible for convening the generalmeeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annualfinancial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the planmaking up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capitalof the Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans formaterial acquisition and repurchase of the Company’s ordinary shares; (8) to draft plans for the merger, division ordissolution or the change of formation of the Company; (9) to decide on external investment, acquisition and disposalof assets, pledge of assets, matter in relation to external guarantee, entrusted wealth management, connectedtransactions, etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of theCompany’s internal management organisation; (11) to employ or dismiss the manager or secretary to the Board ofthe Company; to employ or dismiss the Senior Management, such as the deputy general manager(s) and personnelin charge of financial affairs, as proposed by the general manager; and to decide on their remuneration and rewardsand punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals foramending the Articles of Association; (14) to administrate matter related to information disclosure of the Company;
(15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the
Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercisethe functions and powers as conferred upon by the Articles of Association or the general meeting.As regards its corporate governance functions, the Board is responsible for: (1) formulating, reviewing and makingrecommendations on the Company’s corporate governance policies and practices; (2) reviewing and monitoringthe training and continuous professional development of the Directors and Senior Management of the Company; (3)reviewing and monitoring the Company’s policies and practices on compliance with legal and regulatory requirements;
(4) formulating, reviewing and monitoring the code of conduct and compliance manual applicable to employees and
Directors of the Company; and (5) reviewing the Company’s compliance with the Code on Corporate Governanceand disclosure in the Corporate Governance Report. During the reporting period, the Board had performed the aboveduties.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(iii) Board(Continued)
The Board comprised five executive Directors: Chen Hongguo (Chairman), Hu Changqing, Li Xingchun, Li Feng and LiWeixian; two non-executive Directors: Han Tingde and Li Chuanxuan; and four independent non-executive Directors:
Li Zhihui, Sun Jianfei, Yin Meiqun and Yang Biao. Please refer to part V of this section for their brief biographies.The management of the Company regularly report to the Board on the Company’s operations and material mattersbased on the Company’s business situation. The Board of the Company is responsible for leading and monitoring theCompany, and is wholly responsible for the administration and supervision of the Company’s businesses to facilitateits success. The Executive Director or the Senior Management is authorised to be responsible for the various divisionsand functions and management of the processing. Directors of the Company shall act objectively and make decisionsin the interests of the Company. The management and the Senior Management of the Company held regular meetingswith the Board to discuss the ordinary business operations and performance of the Company, and carried out therelevant decisions of the Board. The management and the Senior Management of the Company have to get priorapproval from, among others, the Board, before they make any decision or enter into any commitment on behalfof the Company. The Company will arrange independent legal advice upon the request from the Directors or anycommittees of the Board, if the Board or any committees of the Board consider it necessary to seek for independentprofessional advice.Pursuant to Code C.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respectof legal action against its Directors. During the reporting period, the Company arranged director liability insurance forDirectors to safeguard the rights and interests of Directors to perform their duties in compliance.During the reporting period, the Board held 12 meetings, 4 of which were regular meetings and 8 were extraordinarymeetings. None of the Directors were absent from any Board meetings.
Attendance at the relevant meetings (attention required/attended)
NamePosition
Boardmeetings
AuditCommittee
meetings
NominationCommittee
meetings
Remuneration
andAssessment
Committee
meetings
Strategic and
SustainableDevelopment
Committee
meetings
GeneralmeetingsI. Executive Directors
Chen HongguoChairman12/12N/A1/1N/AN/A6/0Hu ChangqingVice chairman12/12N/AN/AN/AN/A6/6Li XingchunVice chairman12/12N/AN/A2/2N/A6/6Li FengExecutive Director12/12N/AN/AN/AN/A6/5Li WeixianExecutive Director12/12N/AN/AN/AN/A6/5II. Non-executive DirectorsLi ChuanxuanDirector12/12N/AN/AN/AN/A6/6Han TingdeDirector12/12N/AN/AN/AN/A6/6III. Independent non-executiveDirectorsLi ZhihuiIndependent Director12/124/41/1N/AN/A6/6Sun JianfeiIndependent Director12/124/4N/A2/2N/A6/6Yin MeiqunIndependent Director12/124/41/1N/AN/A6/6Yang BiaoIndependent Director12/12N/AN/A2/2N/A6/6
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(iii) Board(Continued)Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of theBoard had any financial, business, family relations or material connections with each other.According to Article 197 of the Articles of Association, Board meetings shall be notified to all the Directors andSupervisors in writing ten (10) days in prior, and there was no objection from any director to a shorter notice period.Therefore, the Board held 4 regular meetings during the year, each by giving a 10-day notice in advance to ensurethat all Directors could participate in discussions of matters in the agenda, and could make timely and promptdecisions on transactions that are material to the Group’s business. Reasonable prior notification was given for theother meetings of the Board to ensure all Directors could take time to attend. The Board will use its best endeavoursto comply with the requirements of the code provisions.All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governingthe Board and all applicable regulations and rules were complied with.Directors’ training and professional developmentAll newly appointed Directors are provided with necessary orientation information, with an aim to ensure that they willhave a better understanding of operations and business of the Company as well as relevant laws and regulations andobligations under the Listing Rules.Directors and Supervisors of the Company were arranged by the Company to attend training courses 2023 fordirectors and supervisors held by China Securities Regulatory Commission, Shandong; and, briefing paper in respectof amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of the Company was distributedto all Directors and Supervisors, the above of which were to ensure all Directors and Supervisors to comply withrelevant laws and sound corporate governance practice, and enhance their awareness of sound corporate governancepractice.
(iv) Chairman and general manager
Mr. Chen Hongguo is the Chairman of the Company and Mr. Li Weixian is the general manager of the Company.Please refer to part V of this section for his brief biographies.According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1)presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and inspectingthe implementation of the resolutions of the Board; (3) signing the shares, the securities and bonds issued by theCompany; (4) signing important documents of the Board and other documents which are required to be signed bylegal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidatesfor general manager for the Board; (7) exercising the special right to operate the Company in accordance with thelaws and acting for the benefits of the Company in the event of emergency situation as a result of act of God ornatural disaster, and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powersauthorised by the Board.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(iv) Chairman and general manager(Continued)
The general manager of the Company exercises the duties of a chief executive officer. The general manager shallexercise the following powers: (1) in charge of the operation and management of the Company, and organising theimplementation of the resolutions of the Board; (2) organising the implementation of the Company’s annual businessplans and investment plans; (3) drafting plans for the establishment of the internal organisational structure of theCompany; (4) drafting the basic management system of the Company; (5) formulating specific rules and regulations forthe Company; (6) proposing the appointment or dismissal of the deputy general manager and chief financial officer;
(7) appointing or dismissing management personnel other than those required to be appointed or dismissed by the
Board; (8) proposing the wages, welfare, rewards, and penalties of staff and to decide the appointment or dismissalof staff of the Company; (9) proposing the convening of extraordinary meeting of the Board; and (10) exercising otherpowers conferred by the Articles of Association of the Company and the Board.(v) Independent non-executive DirectorsThere are four independent non-executive Directors in the Board, which is in compliance with the minimumrequirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Yin Meiqunand Sun Jianfei, the independent non-executive Directors of the Company, have appropriate accounting or relatedfinancial management expertise, which is compliance with the requirement of Rule 3.10 of the Hong Kong ListingRules. Please refer to part V of this section for their brief biographies. The Company has received from each of theindependent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the HongKong Listing Rules and considered all of the independent non-executive Directors to be independent during the year.(vi) Terms of DirectorsAccording to the Articles of Association of the Company, all Directors, including non-executive Directors, have beenelected at the general meetings with a term of three years from June 2022 to June 2025. They may be re-elected foranother term upon expiry of tenure. The term of office of independent non-executive Directors is the same as that ofother Directors. They may be re-elected for consecutive terms, but the consecutive terms shall not be more than sixyears.(vii) Directors’ responsibility for the financial statements
The Directors acknowledged their responsibility to prepare financial statements for each financial year which givea true and fair view of the state of affairs of the Company. The Directors believed that the Company had adoptedand applied consistently appropriate accounting policies in preparing the financial statements in compliance with allrelated accounting standards.
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(viii) Board committeesPursuant to Code on Corporate Governance, the Board has established four committees, namely, Audit Committee,Remuneration and Assessment Committee, Strategy and Sustainable Development Committee and NominationCommittee, for overseeing particular aspects of the Company’s affairs. Each Board Committee has its own definedwritten terms of reference. The written terms of reference of each Board Committee are published on websites ofstock exchange and the Company.Save for requirements of Code on Corporate Governance, the Company also set up Strategy and SustainableDevelopment Committee, for overseeing and studying long-term strategic development plan of the Company andmaking recommendations.(ix) Audit CommitteeThe Audit Committee of the Company comprises three members, including Yin Meiqun (as the chairman), Li Zhihuiand Sun Jianfei, all of whom are independent non-executive Directors. The primary duties of the Audit Committee areserving as a communication media between internal and external audit and the related review and supervision. YinMeiqun and Sun Jianfei have appropriate professional qualifications or appropriate accounting or related financialmanagement expertise, which is in compliance with the requirement of the Hong Kong Listing Rules.The primary duties of the Audit Committee of the Company are: (1) supervising and evaluating the work of theexternal auditor; (2) supervising and evaluating the internal audit; (3) reviewing the financial reports of the Companyand express opinions on them; (4) supervising and evaluating the internal control of the Company; (5) coordinatingthe communication between management, internal audit department and relevant departments and external audit;
(6) dealing with other matters as delegated by the Board and other matters involved in laws and regulations and the
regulations of Shenzhen Stock Exchange.The Audit Committee discussed with the management of the Company the accounting standards and practicesadopted by the Group and discussed and reviewed this report, including the review of the financial statements of theGroup for the year ended 31 December 2023 prepared in accordance with China Accounting Standards for BusinessEnterprises.Particulars of the meetings held by the Audit Committee during the reporting period are detailed in part VII of thissection.Risk Management and Internal ControlThe Board is responsible for the risk management and internal control systems and reviewing their effectiveness.Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and canonly provide reasonable but not absolute assurance against material misstatement or loss.The Audit Committee (on behalf of the Board) oversees management in the design, implementation and monitoring ofthe risk management and internal control systems, and the Audit Committee reviews the adequacy and effectivenessof the risk management and internal control systems at least once a year. The management has provided confirmationto the Audit Committee (and the Board) on the adequacy and effectiveness of these systems for the year ended 31December 2023. The Audit Committee (as well as the Board) was satisfied with the adequacy and effectiveness of therelated systems.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(ix) Audit Committee(Continued)Risk Management and Internal Control(Continued)
In respect of internal control system, procedures have been designed for safeguarding assets against unauthoriseduse or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financialinformation for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations.(x) Remuneration and Assessment CommitteeThe Remuneration and Assessment Committee of the Company comprises three members, including Yang Biao (asthe chairman), Li Xingchun and Sun Jianfei. Two of them, including the chairman, are independent non-executiveDirectors, which is in compliance with Code on Corporate Governance Practices. The Remuneration and AssessmentCommittee is primarily responsible for formulating the criteria of appraisal of the Directors and managers andconducting the appraisal, and studying and formulating the remuneration policy and package of the Directors and theSenior Management of the Company. The Remuneration and Assessment Committee is accountable to the Board.The primary duties of the Remuneration and Assessment Committee of the Company are: (1) formulating theremuneration plan or package based on the major scope of work, duties and importance of the Directors and themanagement and the remuneration level of other counterparts; (2) formulating the remuneration plan or packagewhich mainly includes but not limited to standards, procedures and a system for performance appraisals as wellas major plans and a system for rewards and sanctions; (3) examining the performance of the Directors, excludingthe independent non-executive Directors, and the Senior Management and conduct annual performance appraisalsfor them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with othermatters as delegated by the Board.Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period aredetailed in part VII of this section.
(xi) Nomination Committee
The Nomination Committee of the Company comprises three members, including Li Zhihui (as the chairman), ChenHongguo and Yin Meiqun. Two of them, including the chairman, are independent non-executive Directors, which isin compliance with Code on Corporate Governance Practices. The Nomination Committee is primarily responsiblefor selecting candidates for directors and the management of the Company, determining the selection criteria andprocedure and making recommendations.
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(xi) Nomination Committee(Continued)The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Boardin light of the Company’s operating activities, asset scale and shareholding structure; (2) studying the selection criteriaand procedure for Directors and the management and advising the Board on the same; (3) extensively identifyingqualified candidates for Directors and the management; (4) examining candidates for Director and the managementand advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision ontheir employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directorsand on skills, knowledge, experience, background, gender and other characteristics required in serving as a directortaking into consideration diversity, balance and efficiency of the Board and benefits thereto; (7) reviewing the Boarddiversity policy, revising thereon in a timely manner and making relevant disclosure in the corporate governance reportin the corresponding annual report; and (8) dealing with other matters as delegated by the Board.During the reporting period, the Nomination Committee studied matters in relation to the change in general manager.Upon acceptance of nomination by the nominated person, the Nomination Committee performed qualification reviewon preliminary candidates by holding meetings, review criteria include the academic qualifications, relevant experienceand specialised skills of the preliminary candidates. Prior to the appointment of new general manager, the NominationCommittee submitted recommendations and relevant materials of the candidates for the new general manager.Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VII ofthis section.(xii) Strategy and Sustainable Development CommitteeThe Company set up a Strategy and Sustainable Development Committee which comprised three members, includingChen Hongguo (as the chairman), Hu Changqing and Yang Biao. The Strategy and Sustainable DevelopmentCommittee is primarily responsible for studying the long-term strategic development, major investments, sustainabledevelopment and ESG works of the Company and making recommendations.The primary duties of the Strategy and Sustainable Development Committee are (1) conducting research andsubmitting proposals regarding the long term development strategic plan; (2) conducting research and submittingproposals regarding the financing plans for major investments which require approval from the Board as stipulatedin the Articles of Association of the Company; (3) conducting research and submitting proposals regarding majorcapital operations and assets operation projects which require approval from the Board as stipulated in the Articlesof Association of the Company; (4) supervising the Company and its subsidiaries to operate in compliance withthe national and local directions, policies, laws and regulations in respect of sustainable development; (5) makingrecommendation to the Board in respect of material matters on sustainable development and ESG of the Company;
(6) guiding sustainable development and ESG works, studying ESG-related planning, objectives, systems and material
matters of the Company, reviewing ESG-related reports and providing consultation recommendations to the Board;
(7) conducting supervision and inspection on the execution of ESG works, and providing guidance and opinions in
due course; (8) conducting research and submitting proposals regarding other material matters that may affect thedevelopment of the Company; (9) carrying out examination on the implementation of the above matters; (10) dealingwith other matters as delegated by the Board.During the reporting period, the Strategic Committee was renamed as the Strategy and Sustainable DevelopmentCommittee. The Company has formulated the Implementation Rules of the Strategy and Sustainable DevelopmentCommittee, thereby guiding sustainable development and ESG works and conducting supervision and inspection onthe execution of ESG works to ensure compliance operation of the Company in respect of environmental, social andgovernance matters.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xiii) AuditorOn 18 June 2021, the Company convened the 2020 annual general meeting, and considered and approved theResolution in relation to the Appointment of the Auditor for 2021, and continued to engage Grant Thornton (SpecialGeneral Partnership) as the domestic auditor of the Company for 2021 and be responsible for domestic auditing ofthe Company for 2021.On 11 May 2022, the Company convened the 2021 annual general meeting, and considered and approved theResolution in relation to the Appointment of the Auditor for 2022, and continued to engage Grant Thornton (SpecialGeneral Partnership) as the domestic auditor of the Company for 2022 and be responsible for domestic auditing ofthe Company for 2022.On 12 May 2023, the Company convened the 2022 annual general meeting, and considered and approved theResolution in relation to the Appointment of the Auditor for 2023, and continued to engage Grant Thornton (SpecialGeneral Partnership) as the domestic auditor of the Company for 2023 and be responsible for domestic auditing ofthe Company for 2023.(xiv) Remuneration for the AuditorThe financial statements for 2023 prepared in accordance with Accounting Standards for Business Enterprises by theGroup were audited by Grant Thornton (Special General Partnership). In 2023, the Company paid the auditor a totalof RMB2.5 million (tax inclusive; tax exclusive amount: RMB2.3585 million) in respect of financial statements auditfor 2022 and a total of RMB0.8 million (tax inclusive; tax exclusive amount: RMB0.7547 million) in respect of auditservices in relation to internal control for 2022.Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements ofthe Group in XII. Financial Report of this annual report.In addition to the aforesaid annual financial report and internal control audit fees paid to Grant Thornton (SpecialGeneral Partnership) totalling RMB3.1132 million (tax exclusive), other tax-exclusive audit expenses incurred due tothe audit of R&D expenses and the audit of income tax settlement and payment totalled RMB2.4279 million.
(xv) Supervisors and Supervisory CommitteeThe Supervisory Committee comprises three shareholder representatives and two employee representatives. Theshareholder representative Supervisors shall be elected and removed at a general meeting and the employeerepresentative Supervisors shall be elected and removed democratically by the employees of the Company. Duringthe reporting period, the Supervisory Committee of the Company convened 7 meetings, and all Supervisors attendedSupervisory Committee meetings convened during the year, and carefully reviewed the 2022 Annual Report, 2023First Quarterly Report, 2023 Interim Report and 2023 Third Quarterly Report, and issued special opinions. TheSupervisory Committee is accountable to the shareholders. It monitors the financial position of the Company andthe performance of the Directors, managers and Senior Management of the Company as to whether they are inaccordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company and theshareholders.
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(xvi) Company SecretaryDuring the year, the company secretary confirmed that he has received relevant professional training for not less than15 hours in accordance with Rule 3.29 of the Listing Rules.(xvii) Communications with ShareholdersThe Company considers effective communication with Shareholders is essential to enable them to have a clearassessment of the Group’s performance as well as accountability of the Board. Principal means of communicationwith Shareholders of the Company are as follows:
Information disclosure on the Company’s websiteThe Company endeavours to disclose all material information about the Group to all interested parties as widely andtimely as possible. The Company maintains its website at www.chenmingpaper.com where important informationabout the Group’s activities and corporate matters such as annual reports and interim reports to Shareholders,announcements, business development and operations, corporate governance practices and other information areavailable for review by Shareholders and other stakeholders.When announcements are made through the Stock Exchange, the same information will be made available on theCompany’s website.General meetingsThe Company’s annual general meeting provides a useful platform for direct communication between the Board andShareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Savefor the annual general meeting held on 12 May 2023 by the Company, three extraordinary general meetings, oneclass meeting for holders of domestic-listed shares and one class meeting for holders of overseas-listed shares wereconvened in 2023. The attendance record of Directors at each general meeting is set out below:
NameDirectors attending general meetings in person2023 first extraordinary general meetingHu Changqing, Li Chuanxuan, Li Feng, Li Weixian, Han Tingde, Li
Chuanxuan, Li Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao2023 first class meeting for holders of domestic-listed shares
Hu Changqing, Li Chuanxuan, Li Feng, Li Weixian, Han Tingde, Li
Chuanxuan, Li Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao2023 first class meeting for holders of overseas-listed shares
Hu Changqing, Li Chuanxuan, Li Feng, Li Weixian, Han Tingde, Li
Chuanxuan, Li Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao2023 second extraordinary general meetingHu Changqing, Li Chuanxuan, Han Tingde, Li Chuanxuan, Li
Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao2022 annual general meetingHu Changqing, Li Chuanxuan, Li Feng, Li Weixian, Han Tingde, Li
Chuanxuan, Li Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao2023 third extraordinary general meetingHu Changqing, Li Chuanxuan, Li Feng, Li Weixian, Han Tingde, Li
Chuanxuan, Li Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xvii) Communications with Shareholders(Continued)General meetings(Continued)The Company’s external auditor also attended the Annual General Meeting and scrutinised voting.Code F.2.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit,remuneration and nomination committees to attend the annual general meeting.Mr. Chen Hongguo, the chairman of the Company and a member of the Nomination Committee, was absent from theannual general meeting due to business commitments.Code C.1.6 of the code provisions – This code provision requires independent non-executive directors and other non-executive directors, as equal board members, should give the board of the directors and any committees on whichthey serve the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendanceand active participation. They should also attend general meetings and develop a balanced understanding of theviews of shareholders.During the year, all independent non-executive Directors and other non-executive Directors of the Company attendedthe general meetings without absence.Voting by pollResolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conductof the poll are explained to the shareholders at the commencement of each general meeting, and questions fromshareholders regarding the voting procedures are answered. The poll results are posted on the websites of the StockExchange and the Company respectively on the same day.
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xvii) Communications with Shareholders(Continued)Shareholders’ right
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 100 of the Articles of Association, Shareholder(s) alone or in aggregate holding 10% ormore of the Company’s voting shares shall be entitled to request the Board to convene extraordinary generalmeetings, provided that such request shall be made in writing. The Board shall, in accordance with provisions ofthe laws, administrative regulations and the Articles of Association, furnish a written reply stating its agreementor disagreement to the convening of an extraordinary general meeting within ten days after receiving suchproposal of the same.In the event that the Board agrees to convene an extraordinary general meeting, the notice of general meetingshall be issued within five days after the passing of the relevant resolution of the Board. Any changes in theoriginal request made in the notice shall require prior approval of Shareholders concerned.In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish anyreply within ten days after receiving such proposal, Shareholder(s) alone or in aggregate holding 10% or more ofthe Company’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinarygeneral meeting, provided that such proposal shall be made in writing.In the event that the Supervisory Committee agrees to convene an extraordinary general meeting, the notice ofgeneral meeting shall be issued within five days after receiving such request. Any changes in the original requestmade in the notice shall require prior approval of Shareholders concerned.Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated periodshall be deemed as failure of the Supervisory Committee to convene and preside over a general meeting,and Shareholder(s) alone or in aggregate holding 10% or more of the Company’s voting shares for ninetyconsecutive days or more shall be entitled to convene and preside over the meeting on a unilateral basis.Pursuant to Article 101 of the Articles of Association, if Shareholders determine to convene a general meetingon their own, they shall give a written notice to the Board and file the same with the stock exchange forrecords. The shareholding percentage of shareholders who convened shall not be lower than 10% prior to theannouncement of resolutions of the general meeting.Shareholders who convened shall submit relevant certifications to the stock exchange upon the issuance of thenotice of general meeting and the announcement of resolutions of the general meeting.Pursuant to Article 102 of the Articles of Association, the Board and its secretary shall cooperate with respectto matters relating to general meetings convened by Shareholders on their own. The Board shall provideShareholder registers as of the date of shareholding register.Pursuant to Article 103 of the Articles of Association, if a general meeting is convened by shareholders on theirown, all necessary expenses incurred shall be borne by the Company.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(xvii) Communications with Shareholders(Continued)Shareholders’right(Continued)
2. Procedures for sending shareholders
’ enquiries to the BoardShareholders may at any time send their enquiries and concerns to the Board of the Company in writing throughthe Company Secretary/Secretary to the Board whose contact details are as follows:
Secretary to the BoardHong Kong Company SecretaryNameYuan XikunChu Hon LeungAddressNo. 2199 East Nongsheng Road,
Shouguang City, Shandong Province
22/F, Universal Building, Central, Hong KongTelephone0536-215800800852-21629600Facsimile0536-215897700852-25010028Emailchenmmingpaper@163.comliamchu@li-partners.comThe Company Secretary and the secretary to the Board shall forward shareholders’enquiries and concernsto the Board and/or relevant Board Committees of the Company, where appropriate, to answer shareholders’
questions.
3. Procedures for putting forward proposals of Shareholders at general meetings
Pursuant to Article 111 of the Articles of Association, shareholders individually or jointly holding over 3% of thetotal shares of the Company are entitled to propose motions to the Company.Shareholders individually or jointly holding over 3% of the total shares of the Company may submitextraordinary motions to the convener ten days before the convening of the General Meeting. The convenershall issue supplementary notice of the General Meeting to disclose the name of the shareholders who proposethe extraordinary motions, their shareholding ratio and the specific content of the new motions within two daysafter receiving the proposed motions.Save for provided above, the convener shall not amend proposals stated in the notice of general meeting or addnew proposals therein following the notice of general meeting has been issued.No voting or resolution shall be effected or adopted at the general meeting for proposals that have not beenstated in the notice of general meeting or that do not comply with provisions of the Articles of Association.Extraordinary general meeting shall not resolve issues that are not contained in the notice.
2023 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xvii) Communications with Shareholders(Continued)Relationships with investorsThe Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond totheir questions. Investors are received and visited at appropriate times to explain the Group’s business. In addition,questions received from the general public and individual shareholders are answered promptly. In all cases, great careis taken to ensure that no price-sensitive information is disclosed selectively.The Board has reviewed the interaction with Shareholders during the reporting period, and is satisfied with theimplementation of the shareholder communications policy of the Company and its effectiveness.(xviii) Internal ControlFor details of internal control of the Company, please refer to XII. Internal control system development andimplementation during the reporting period and XIV. Self-assessment report on internal control or auditor’s report oninternal control of this section.
(xix) Articles of AssociationOn 12 May 2023 and 17 July 2023, the Company amended the new Articles of Association. The amendments wereprimarily relating to rename of the Strategy Committee of the Board to the Strategy and Sustainable DevelopmentCommittee of the Board, share capital structure after repurchase and cancellation of certain restricted shares, andchanges in registered capital etc. The Memorandum of Association and the amended version of the new Articles ofAssociation of the Company are available on websites of the Company and Stock Exchange.(xx) Board DiversityOn 21 August 2013, the Company formulated policies to diversify Board members and amended the implementingrules of the nomination committee. Pursuant to the new policies, the nomination committee shall regularly review theBoard diversity policy to improve efficiency and ensure interest thereof.Such policies are summarised as follows:
The Company recognises and embraces the benefits of having a diverse Board, and sees diversity at Board level asan essential element in maintaining a competitive advantage. A truly diverse Board will include and make good useof differences in the talents, skills, regional and industry experience, backgrounds, genders and other qualities of themembers of the Board. These differences will be considered in determining the optimum composition of the Boardand when possible should be balanced appropriately. All appointments of the members of the Board are made onmerit, and in the context of the talents, skills and experience of the Board as a whole.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(xx) Board Diversity(Continued)The Nomination Committee of the Company reviews and assesses the composition of the Board and makesrecommendations to the Board on appointment of new directors of the Company. The Nomination Committeealso oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing thecomposition of the Board, the Nomination Committee will consider the benefits of all aspects of diversity, includingwithout limitation those described above, in order to maintain an appropriate range and balance of talents, skills,experience and backgrounds on the Board. In recommending candidates for appointment to the Board, theNomination Committee will consider candidates on merit against objective criteria and with due regard for the benefitsof diversity on the Board. As at the date of the report, the Board is composed of 10 male Directors and 1 femaleDirector. The Nomination Committee and the Board will seize the opportunity to gradually increase the proportion offemale Directors in the Board when they select and recommend a suitable Director candidate.The composition of the Board of the Company is basically diversified. For details, please refer to (iii) Board of thissection.(xxi) Dividend policy
During the reporting period, as the downstream demand in papermaking industry was weak, the sales volume ofmachine-made paper decreased year on year. At the same time, as affected by the concentration of new productioncapacity, the prices of machine-made paper, especially cardboard prices, recorded significant year-on-year decline.The prices of wood chips, raw coal, chemicals and other raw materials remained at high level, which exerted greatpressure on the profitability of the Company. The net profit attributable to shareholders of the Company for 2023amounted to RMB-1.281 billion. Meanwhile, considering the overall development plan of the Company for 2024, theBoard proposed not to pay cash dividend, issue bonus shares and increase share capital from reserves for 2023 tofurther reduce its liability size and satisfy the capital needs for, among other things, day-to-day production and projectconstruction of the Company, thereby enhancing risk resistance, securing the sustainable and steady development ofthe pulp production and paper making business, the principal business of the Company, and better safeguarding thelong-term interests of all shareholders.
2023 ANNUAL REPORT
VII Environmental and Social Responsibility
I. Major environmental protection mattersAre the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental protectionauthority? Yes No
Environmental protection related policies and industry standards
1. The Company, during its own production and operation process, strictly abides by relevant environmental
protection laws and regulations as follows:
The Environmental Protection Law of the People’s Republic of China, the Law on the Prevention and Control of AirPollution of the People’s Republic of China, the Law on the Prevention and Control of Water Pollution of the People’sRepublic of China, the Law on the Prevention and Control of Environmental Pollution by Solid Waste of the People’sRepublic of China, the Law on Noise Pollution Prevention and Control of the People’s Republic of China, Regulationson the Administration of Pollutant Discharge Permit, Regulations on Groundwater Management, and the Measures forthe Emergency Administration of Environmental Contingencies.
2. The Company strictly implements national, industry and local standards for pollutant discharge as follows:
Exhaust gas: Integrated Emission Standard of Air Pollutants (GB 16297-1996), Emission Standard of Air Pollutants forThermal Power Plants (GB 13223-2011), Emission Standard for Odor Pollutants (GB 14554-93), Emission Standard ofAir Pollutants for Boilers (DB44/765-2019), Emission Standard of Air Pollutants for Thermal Power Plants (DB37/664-2019), Regional and Integrated Emission Standard of Air Pollutants (DB37/2376-2019), and Emission Standard of AirPollutants for Building Materials Industry (DB37/2373-2018).Wastewater: Integrated Wastewater Discharge Standard (GB 8978-1996), Wastewater Quality Standards for Dischargeto Municipal Sewers (GB/T 31962-2015), Discharge Standard of Water Pollutants for the Pulp and Paper Industry (GB3544-2008) and Discharge Limits of Water Pollutants (DB44/26-2001), and the wastewater influent standard of localwastewater treatment plants.Noise: Emission Standard for Industrial Enterprises Noise at Boundary (GB 12348-2008).
Environmental protection administrative licensing
Shandong Chenming Paper Holdings Limited: Issued on 2 March 2023 and valid up to 1 March 2028.Shouguang Meilun Paper Co., Ltd.: Issued on 2 March 2023 and valid up to 1 March 2028.Zhanjiang Chenming Pulp & Paper Co., Ltd.: Issued on 30 May 2022 and valid up to 29 May 2027.Jiangxi Chenming Paper Co., Ltd.: Issued on 11 June 2020 and valid up to 27 June 2025.Huanggang Chenming Pulp & Paper Co., Ltd.: Issued on 14 September 2021 and valid up to 13 September 2026.Jilin Chenming Paper Co., Ltd.: Issued on 10 December 2021 and valid up to 9 December 2026.
VII Environmental and Social Responsibility
I. Major environmental protection matters(Continued)Industry emission standards and the status of pollutant emissions involved in production and operationactivitiesName of companyor subsidiary
Category ofmajor pollutantsand specificpollutants
Name of majorpollutantsand specificpollutants
Way ofemission
Number ofemissionoutlets
Distribution of emissionoutlets
Emissionconcentration/intensity
Pollutant emissionstandards implementedTotal emissions
Approved
totalemissions
ExcessiveemissionsShandong
Chenming PaperHoldings Limited
Exhaust gasSO
Organised
emission
2Chenming Industrial ParkPower plant no. 1: 15.8mg/m
Power plant no. 2: 13.9mg/m
35mg/m
Power plant no. 1: 26.68tPower plant no. 2: 25.27t
160.32t/yearNo
NO
x
Organised
emission
2Chenming Industrial ParkPower plant no. 1: 38.6mg/m
Power plant no. 2: 38.3mg/m
50mg/m
Power plant no. 1: 67.4tPower plant no. 2: 70.92t
233.91t/yearNo
ParticulatesOrganised
emission
2Chenming Industrial ParkPower plant no. 1: 0.82mg/m
Power plant no. 2: 0.634mg/m
5mg/m
Power plant no. 1: 1.425tPower plant no. 2: 1.188t
23.39t/yearNo
WastewaterCODIndirect emission2Chenming Industrial ParkSewage outlet no. 1: 147mg/L
Sewage outlet no. 2: 197mg/L
300mg/LSewage outlet no. 1: 1,200.8t
Sewage outlet no. 2: 2611t
6,510.74t/yearNoAmmonia
nitrogen
Indirect emission2Chenming Industrial ParkSewage outlet no. 1: 4.81mg/L
Sewage outlet no. 2: 0.969mg/L
30mg/LSewage outlet no. 1: 40.44t
Sewage outlet no. 2: 12.969t
650.7t/yearNo
Total nitrogenIndirect emission2Chenming Industrial ParkSewage outlet no. 1: 18.6 mg/L
Sewage outlet no. 2: 13.4 mg/L
70mg/LSewage outlet no. 1: 150t
Sewage outlet no. 2: 183t
1,519.1t/yearNoShouguang Meilun
Paper Co., Ltd.
Exhaust gasSO
Organisedemission
4Chenming Industrial ParkPower plant no. 1: 18 mg/m
Power plant no. 2: 14.3 mg/m
Alkali recovery: 3.95 mg/m
Lime kiln: 5.23 mg/m
35mg/m
(power plant), 50mg/m
(chemical pulp)
Power plant no. 1: 23.72tPower plant no. 2: 32.98tAlkali recovery: 58.05tLime kiln: 7.25t
342.89t/yearNo
NOxOrganised
emission
4Chenming Industrial ParkPower plant no. 1: 32.8 mg/m
Power plant no. 2: 31.3 mg/m
Alkali recovery: 73.7 mg/m
Lime kiln: 17.2 mg/m
50mg/m
(power plant), 100mg/m
(chemical pulp)
Power plant no. 1: 41.86tPower plant no. 2: 69.26tAlkali recovery: 759.2tLime kiln: 26.6t
1,202.75t/yearNoParticulatesOrganised
emission
4Chenming Industrial ParkPower plant no. 1: 0.653mg/m
Power plant no. 2: 1.18 mg/m
Alkali recovery: 1.11 mg/m
Lime kiln: 1.51 mg/m
5mg/m
(power plant), 10mg/m
(chemical pulp)
Power plant no. 1: 0.766tPower plant no. 2: 2.641tAlkali recovery: 14.035tLime kiln: 1.95t
121.979t/yearNo
Jiangxi Chenming
Paper Co., Ltd.
Exhaust gasSO
Organisedemission
2Within factory area9.47mg/m?200mg/m
23.05t806t/yearNoNOxOrganisedemission
2Within factory area30.55mg/m?200mg/m
69.31t806t/yearNoParticulatesOrganised
emission
2Within factory area2.57mg/m?30mg/m
6.22t135t/yearNoWastewaterCODDirect emission1Total wastewater
discharge
36.39mg/L90mg/L142.06t1,260t/yearNoAmmonia
nitrogen
Direct emission1Total wastewater
discharge
0.97mg/L8mg/L4.77t112t/yearNoTotal nitrogenDirect emission1Total wastewater
discharge
2.87mg/L12mg/L11.66t/No
2023 ANNUAL REPORT
VII Environmental and Social Responsibility
Name of companyor subsidiary
Category ofmajor pollutantsand specificpollutants
Name of majorpollutantsand specificpollutants
Way ofemission
Number of
emission
outlets
Distribution of emissionoutlets
Emissionconcentration/intensity
Pollutant emissionstandards implementedTotal emissions
Approved
totalemissions
ExcessiveemissionsJilin Chenming
Paper Co., Ltd.
Exhaust gasSO
Organisedemission
3 (2 in use,1 spare)Within factory area24.80mg/m
100mg/m
18.85t97t/yearNoNOxOrganisedemission
3 (2 in use,1 spare)
Within factory area54.28mg/m
100mg/m
42.73t213t/yearNoParticulatesOrganised
emission
3 (2 in use,
1 spare)
Within factory area16.53mg/m
30mg/m
14.10t51.66t/yearNoWastewaterCODIndirect emission1Total wastewater
discharge
121.85mg/L120mg/L625.05t6,000t/yearNoAmmonianitrogen
Indirect emission1Total wastewater
discharge
1.47mg/L45mg/L7.59t500t/yearNoTotal nitrogenIndirect emission1Total wastewater
discharge
6.66mg/L50mg/L34.01t/NoZhanjiang
Chenming Pulp &Paper Co., Ltd.
Exhaust gasSO
Organised
emission
6Within factory areaPower plant no. 1: 2.2mg/m
Power plant no. 2: 3.5mg/m
Power plant no. 3: 2.7mg/m
Power plant no. 4: 2.1mg/m
Lime kiln: 24.5mg/m
Alkali boilers: 5.7mg/m
Power plant: 35mg/m
Lime kiln: 200mg/m
Alkali furnace: 200mg/m
100t620t/yearNo
NOxOrganised
emission
6Within factory areaPower plant no. 1: 23.5mg/m
Power plant no. 2: 26mg/m
Power plant no. 3: 22.1mg/m
Power plant no. 4: 24.6mg/m
Lime kiln: 118.9mg/m
Alkali boilers: 70.3mg/m
Power plant: 50mg/m
Lime kiln: 200mg/m
Alkali furnace 200mg/m
1,500t1,799.999t/yearNo
ParticulatesOrganised
emission
6Within factory areaPower plant no. 1: 1.3mg/m
Power plant no. 2: 1.2mg/m
Power plant no. 3: 1.2mg/m
Power plant no. 4: 1.5mg/m
Lime kiln: 17.3mg/m
Alkali boilers: 6.5mg/m
Power plant: 10mg/m
Lime kiln: 30mg/m
Alkali furnace: 30mg/m
150t195.06t/yearNo
WastewaterCODContinuous
emission
1Wastewater discharge45mg/L90mg/L750t1943t/yearNoAmmonia
nitrogen
Continuous
emission
1Wastewater discharge0.55mg/L8mg/L25t43.9t/yearNoTotal nitrogenContinuous
emission
1Wastewater discharge4.039mg/L12mg/L91.218t320.4t/yearNo
I. Major environmental protection matters(Continued)
Industry emission standards and the status of pollutant emissions involved in production and operationactivities(Continued)
VII Environmental and Social Responsibility
Name of companyor subsidiary
Category ofmajor pollutantsand specificpollutants
Name of majorpollutantsand specificpollutants
Way ofemission
Number ofemission
outletsDistribution of emissionoutlets
Emissionconcentration/intensity
Pollutant emissionstandards implementedTotal emissions
Approved
totalemissions
ExcessiveemissionsHuanggang
Chenming Pulp &Paper Co., Ltd.
Exhaust gasSO
Organised
emission
1Lime kiln chimney15.87mg/m
80mg/m
14.74t142.872t/yearNoSO
Organisedemission
1Alkali furnace chimney8.50mg/m
200mg/m
32.14t328.417t/yearNoNOXOrganisedemission
1Lime kiln chimney119.64mg/m
180mg/m
111.10t181.887t/yearNoNOXOrganisedemission
1Alkali furnace chimney157.41 mg/m
200mg/m
595.56t950.829t/yearNoParticulatesOrganised
emission
1Lime kiln chimney17.72mg/m
200mg/m
16.45t45.311t/yearNoParticulatesOrganised
emission
1Alkali furnace chimney14.38mg/m
30mg/m
54.42t83.759t/yearNoWastewaterCODIndirect emission1Total wastewater
discharge
24.75 mg/L150mg/L215.51t398.911t/yearNoAmmonia
nitrogen
Indirect emission1Total wastewater
discharge
0.12mg/L14mg/L1.01t39.891t/yearNoTotal nitrogenIndirect emission1Total wastewater
discharge
1.06mg/L29mg/L9.20t/No
Treatment of pollutants
1. Shandong Chenming Paper Holdings Limited
Its own power plant uses the exhaust gas treatment process of limestone-gypsum desulfurisation + SNCR selectivenon-catalytic reduction denitration + electric and bag composite dust removal + wet type electric dust removal.In 2023, the environmental protection exhaust gas treatment facilities operated well, and were overhauled in timeaccording to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and the exhaustgas was discharged up to the standard after treatment.Its sewage treatment plant uses the traditional activated sludge wastewater treatment process + membrane treatmentand recycle process, and the wastewater which is treated up to the standard is partially discharged into the sewagetreatment plant of Shouguang Zhongye Water Co., Ltd., and partially reused in production lines after the treatmentat the membrane treatment plant. In 2023, the wastewater treatment facilities operated well, and were overhauledin time according to the overhaul plan. The daily average wastewater indicator did not exceed the standard, and thewastewater was discharged up to the standard after treatment.
2. Shouguang Meilun Paper Co., Ltd.
Its own power plant uses the exhaust gas treatment process of limestone-gypsum desulfurisation + SNCR selectivenon-catalytic reduction denitration + electric and bag composite dust removal + wet type electric dust removal. Thechemical pulp alkali recovery furnace uses the exhaust gas treatment process of PSCR denitration + electrostatic dustremoval + wet electrostatic dust removal, and the chemical pulp lime kiln uses the exhaust gas treatment process ofozone denitration + electrostatic dust removal + wet type electric dust removal. In 2023, the environmental protectionexhaust gas treatment facilities operated well, and were overhauled in time according to the overhaul plan. The dailyaverage exhaust gas indicator did not exceed the standard, and the exhaust gas was discharged up to the standardafter treatment.
I. Major environmental protection matters(Continued)Industry emission standards and the status of pollutant emissions involved in production and operationactivities(Continued)
2023 ANNUAL REPORT
VII Environmental and Social Responsibility
I. Major environmental protection matters(Continued)Treatment of pollutants(Continued)
3. Jiangxi Chenming Paper Co., Ltd.
Its own power plant uses the exhaust gas treatment process of ammonia desulfurisation + SNCR catalytic reductiondenitrification+ electric and bag composite dust removal + 90-metre desulfurisation and denitrification tower. Theaerobic section of the sewage treatment plant is equipped with a negative pressure exhaust device to recover andtreat the exhaust gas from anaerobic and aerobic sections, and uses the process of alkali spraying + biofiltration+ water washing. In 2023, the environmental protection exhaust gas treatment facilities operated well, and wereoverhauled in time according to the overhaul plan. The daily average exhaust gas indicator did not exceed thestandard, and the exhaust gas was discharged up to the standard after treatment.Industrial wastewater is collected by a catchment well with large particles removed by grids and fibres in thewastewater recovered by inclined mesh, and then flow into the settling tank for preliminary settling and cooling infree-flowing. When the water temperature reaches 38°C, the water is pumped into a high-concentration primarysettling tank and a low-concentration primary settling tank. After the pre-acidification treatment, organic matter whichcan be easily decomposed from the polymer decomposed through a hydrolysis acidification tank. In the biochemicalprocess, the biogas produced is recovered for power generation, and the biochemical water enters into the anaerobicsection, and gets into aeration and other aerobic systems with cooled low-concentration water. A stable COD valueis achieved through the aerobic system. In order to better treat the water, the aerobic water enters into the in-depthtreatment system, and is treated up to the standard through the processes such as Fenton treatment, settling tanktreatment, inclined plate settling, and flocculation settling. In the process of wastewater treatment, the suspendedmatter in the water body is removed from the sludge produced which is treated by the processes such as plate andframe filtering and belt machine desliming, which meets the requirements of Table II of GB3544. A reclaimed waterrecycling device is in place to recycle some water which meets the requirements.
4. Jilin Chenming Paper Co., Ltd.
Its own power plant uses low-temperature combustion, staged combustion and SCR denitrification outside thefurnace, and uses bag filter for flue gas dust removal, and uses wet desulfurisation process of limestone inside thefurnace + limestone-gypsum outside the furnace, and the discharge is up to the standard.The sewage station uses the treatment process of anaerobic (IC reactor) + aerobic (jet aeration) + in-depth treatment(Fenton advanced oxidation) with wastewater being discharged to local wastewater treatment plant, and the dischargeis up to the standard.
5. Zhanjiang Chenming Pulp and Paper Co., Ltd.
The thermal power plant of Zhangjiang Chenming Pulp and Paper Co., Ltd. has three circulating fluidised bed boilersof 280t/h and one circulating fluidised bed boiler of 400t/h. In particular, the three boilers of 280t/h are equipped withSNGR denitrification and external wet (cement-plaster) desulphurisation system. The boiler of 400t/h is equipped withSNCR+SCR in combination denitrification, external wet desulphurisation and wet electrostatic dust removal system.The company has constructed wastewater treatment station in two phases. Among which, the capacity of phase Iwastewater treatment station is 86,000 m
/d (applies“primary settling tower + conditioning tower + selective aerationtank + Fenton oxidation tank + clarifier” treatment), while that of phase II wastewater treatment station is 30,000 m
/d(applies“first-class sedimentation pre-treatment + second-class biological treatment + third-class Fenton oxidationdeep treatment”).
VII Environmental and Social Responsibility
I. Major environmental protection matters(Continued)Treatment of pollutants(Continued)
6. Huanggang Chenming Pulp & Paper Co., Ltd.
The alkali furnace uses polymer denitration outside the furnace + electrostatic dust removal and alkaline melt fromthe process able to absorb sulphur dioxide. The discharge is up to the standard. The lime kiln uses limestone to fixsulphur and five electrostatic precipitators to remove dust. The discharge is up to the standard.The sewage treatment uses physical settling + aerobic biochemical treatment + Fenton in-depth treatment process.The discharge is up to the standard.The lime kiln scrubbing tower which was constructed with an investment of RMB4.2 million came into use on 1 May2022. It can effectively reduce the emission concentration of sulphur dioxide and hydrogen sulphide to below 10 mg/m
.Environmental self-monitoring programme
The Company has strictly complied with self-monitoring laws and regulations, and conducted self-monitoring in accordancewith the environmental protection requirements to establish and perfect the corporate environmental management ledgersand materials. At present, self-monitoring is a combination of manual monitoring and automatic monitoring. At the sametime, qualified units are engaged to conduct regular monitoring. Automatically monitored items include: total wastewaterdischarge (COD, ammonia nitrogen, flow rate, total phosphorus, total nitrogen and pH); power plant, alkali recovery boilersand lime kiln exhaust emissions (sulphur dioxide, nitrogen oxide and smoke). Manually monitored items include: dailymonitoring of COD, ammonia nitrogen, SS, chroma, pH, total phosphorus and total nitrogen indicators. Sewage and othermonitoring items, unorganised exhaust emission, solid waste, and noise at the plant boundary, are monitored on a monthlyor quarterly basis by qualified units engaged in accordance with the local environmental protection requirements in relationto each subsidiary.The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries arepublished on the national key pollution source information disclosure website and the provincial key pollution sourceinformation disclosure websites.Emergency plan for emergency environmental incidentsThe Company has strictly implemented emergency regulations for emergency environmental incidents, and formulatedvarious emergency plans for emergency environmental incidents according to the technical requirements in the“TechnicalGuidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the EnvironmentalProtection Bureau, and regular emergency training and emergency drills are conducted. Emergency measures in relationto dangerous chemicals are formulated in accordance with the environmental protection requirements. At the same time,necessary emergency supplies are provided with regular inspections and updates.
2023 ANNUAL REPORT
VII Environmental and Social Responsibility
I. Major environmental protection matters(Continued)Investment in environmental governance and protection and payment of environmental protection tax
The Company has always adhered to the concept of“green development, ecological Chenming”, and clung to thedevelopment model of“clean production”and resource recycling. A green ecology is incorporated in the whole process ofproduction and operation. The Company has invested more than RMB8 billion in total to construct the pollution treatmentfacilities including the alkali recovery system, reclaimed water treatment system, reclaimed water reuse system, white waterrecovery system and black liquor comprehensive utilisation system. The environmental protection indicators rank highin China. During the reporting period, the Company paid environmental protection tax according to law. The Company’senvironmental protection tax mainly results from atmospheric pollutants. According to the Environmental ProtectionTax Law of People’s Republic of China and its implementation rules, the pollutants shall be calculated according to theautomatic monitoring data of pollutants if automatic pollutant monitoring equipment which complies with national provisionsand monitoring standards is installed and used. Taxable atmospheric pollutants are determined according to the pollutionequivalent quantity converted from the amount of pollutant discharge. The taxable atmospheric pollutants dischargedfrom each outlet, or where there is no outlet, are to be ranked in decreasing order of pollution equivalent quantity, andenvironmental taxes are to be levied on the top three pollutants. In 2023, the Company paid environmental protection taxamounting to RMB13.0517 million.Measures taken to reduce its carbon emissions during the reporting period and their effectiveness
? Applicable Not applicable
1. The Group strengthened energy management, and compared and analysed the consumption of coal, electricity, on a
daily basis with strict control.
2. The Group implemented the conversion of old and new energy sources, eliminated high energy-consuming
equipment, replaced high-efficiency inverter and energy-saving motors, and reduced energy consumption.
3. According to the zero position of the air cover of the paper machine dryer, the Group reduced the frequency of the fan
appropriately to improve the drying efficiency by raising the zero position and save electricity consumption.
4. For moisture content of screening unit and squeezing unit of paper machine, the Group reduced out of the press
moisture and the amount of steam used of drying unit by adjusting the lip plate flow rate, retention rate and linepressure and other measures.
5. The Group strengthened daily energy-saving management by developing a system for temperature of air conditioning
and switching on and off of various power supplies, with tracking and inspection.
6. The Group vigorously developed clean energy and energy recycling projects to reduce carbon emissions. The
Shouguang Chenming 33 MW and Zhanjiang Chenming 24 MW photovoltaic power generation projects wereunderway.
7. The Group carried out energy saving and emission reduction at different factories, so that the amount of clean water
was under strict control, the amount of water produced by membrane treatment was increased and the amount ofwastewater recycled was increased.
VII Environmental and Social Responsibility
I. Major environmental protection matters(Continued)Administrative penalties for environmental problems during the reporting period
Name of company orsubsidiaryReasons for penaltyViolationsPenalty results
Impact on the productionand operation of thelisted company
Corrective measures of theCompanyZhanjiang ChenmingFailure in making the
payment for 2022carbon emissiontrading quota on time
According to the Interim Measuresfor Carbon Emission Managementin Guangdong Province and theNotice on Delay in Settlement of thePayment for 2022 Carbon EmissionTrading Quota of the Departmentof Ecology and Environment ofGuangdong Province, the emissioncontrol enterprise and unit shallcomplete the settlement of paymentby 20 July 2023 based on the actualcarbon emission volume for the prioryear. Zhanjiang Chenming failed tofulfil the obligation to settle carbonemission allowances for 2022 withinthe aforementioned timeframe, andreceived the Decision on Orderingfor Correction of illegal acts fromthe Department of Ecology andEnvironment of Guangdong Province.
Ordered for correctionZhanjiang Chenming
has completed thepayment for 2022carbon emissiontrading quota. Thereis no material adverseimpact on the listedcompany.
Zhanjiang Chenming has
completed the payment forcarbon emission tradingquota within the prescribedtimeframe.
Other environmental information to be disclosed
The relevant environmental protection information of the pollutant discharge permit information and the pollutant dischargepermit requirements is announced on the national sewage discharge permit management information platform.Other environmental protection related information
Other environmental protection related information is announced on the Company’s website.
2023 ANNUAL REPORT
VII Environmental and Social Responsibility
II. Social responsibilityDuring the reporting period, adhering to the corporate mission of“creating values and contributing to the society”, theCompany stayed true to original aspiration and strived to its missions, proactively assumed its social responsibilities,and paid attention to the creation of social value while pursuing economic benefits. For details, please refer to the 2023Environmental, Social and Governance Report of Shandong Chenming Paper Holdings Limited published by the Companyon CNINFO on 29 March 2024.III. Consolidate and expand the achievements of poverty alleviation and rural revitalisationThe Company adhered to the pulp and paper integration strategic layout, and brought rural forest land into the wholeindustrial chain, which directly and indirectly promoted employment, urban and rural resources flow and farmers’incomeincrease. Meanwhile, the Company spared no effort to prevent pollution to effectively protect the local rural environment,and bear fruit in the construction of beautiful countryside. Through public welfare investment, the Company helped localrural areas improve the education and infrastructure construction level, consolidate the poverty alleviation achievementsand fully support rural revitalisation. During the reporting period, the Company donated RMB500,000 to Shouguang VirtueEducation Fund to help Shouguang education development. In addition, the Group was granted the Industrial AssistanceOutstanding Case Award issued by the JRJ Organising Committee of Rural Revitalisation and Development Alliance, andwas awarded the membership unit of the Rural Revitalisation and Development Alliance. For details, please refer to theCompany’s 2023 Environment, Society and Governance Report, which was published on CNINFO on 29 March 2024. In2024, the Company will rely on its own strength, reinforce technological innovation, unswervingly take the low carbon greenpaper making road, and ensure rural ecological liveability with strong environmental protection measures while boostinglocal economic development. Through the staff mutual aid foundation, the Company will effectively help employees get ridof poverty, actively participate in charitable activities, support education, and help rural revitalisation.
VIII Material Matters
I. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period? Applicable Not applicableUndertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceUndertaking
madeduring assetrestructuring
Shandong ChenmingPaper HoldingsLimited andits Directors,Supervisors andSenior Management(Chen Hongguo,Hu Changqing, LiXingchun, Li Feng, LiWeixian, Han Tingde,Li Chuanxuan, LiZhihui, Sun Jianfei, YinMeiqun, Yang Biao,Li Kang, Qiu Lanju,Sang Ailing, PanAiling, Zhang Hong, LiXueqin, Li Zhenzhong,Li Mingtang, GeGuangming, DongLianming, Yuan Xikunand Chu Hon Leung)
Undertaking to
provide true,accurate andcompleteinformation
1. I/The Company has provided information and documents related to
the transaction (including but not limited to original written materials,duplicate materials or oral testimony). I/The Company guarantees thatthe copies or photocopies of the documents and materials providedare the same as the originals, and the signatures and seals of thesedocuments and materials are true, ensures that the relevant informationand documents provided for the transaction are true, accurate andcomplete, and there are no false records, misleading statements ormajor omissions, and bears individual and joint legal responsibilitiesfor the authenticity, accuracy and completeness of the informationprovided. 2. The Company/I guarantee that there are no false records,misleading statements or major omissions in the information disclosureand application documents of the transaction. If the informationprovided or disclosed in the transaction is suspected to contain falserecords, misleading statements or major omissions, thus causinglosses to investors, the Company/I will be jointly and severally liable forcompensation. 3. If the transaction is placed on file for investigation bythe judicial authorities or by the CSRC because of the false records,misleading statements or major omissions in the information providedor disclosed, the Directors, Supervisors and Senior Managementmembers who hold the shares of the Company will suspend thetransfer of the shares (if any) before the case investigation conclusionis clear, and submit the written application for transfer suspension andthe stock account to the Board within two trading days after receivingthe notice of filing the investigation. The Board shall apply to the stockexchange and the depository and clearing corporation for locking upon their behalf. If the lock-up application is not submitted within twotrading days, the Board is authorised to directly submit the identityand account information of the Directors, Supervisors and SeniorManagement members of the Company to the stock exchange andthe depository and clearing corporation for lock-up after verification.If the Board fails to submit the identity and account information ofthe directors, supervisors and Senior Management members to thestock exchange and the depository and clearing corporation, thestock exchange and the depository and clearing corporation shall beauthorised to directly lock up the relevant shares. If the investigationconcludes that there are violations of laws and regulations, the relevantDirectors, Supervisors and Senior Management members promiseto lock up the shares and voluntarily use them for compensation torelevant investors.
21 November2022
Until theimplementationof therestructuringplan iscompleted
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
2023 ANNUAL REPORT
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceChenming Holdings
Company Limited,Chenming Holdings(Hong Kong) Limited
Undertaking onthe principletransactionopinions andshare changesduring thereorganisationperiod
1. This reorganisation is conducive to improving the Company
’sprofitability, enhancing the sustainable operation ability, and protectingthe interests of investors and minority shareholders. We agree to thisreorganisation in principle. 2. During the period from the first disclosureof the reorganisation plan to its completion, the company will notreduce its shareholding in the Company. This commitment letter islegally binding on the company from the date of signing, and thecompany is willing to bear all the legal responsibility of the economiclosses, claims and extra expenses caused to Chenming Paper forviolating the above commitments.
21 November2022
Until the
implementationof therestructuringplan iscompleted
During thereportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.Chen Hongguo, HuChangqing, LiXingchun, Li Feng, LiWeixian, Han Tingde,Li Chuanxuan, LiZhihui, Sun Jianfei, YinMeiqun, Yang Biao,Li Kang, Qiu Lanju,Sang Ailing, PanAiling, Zhang Hong, LiXueqin, Li Zhenzhong,Li Mingtang, GeGuangming, DongLianming, Yuan Xikunand Chu Hon Leung
Undertakingon theshareholdingreductionplan duringthe assetrestructuring
On 12 August 2022, the Company published an announcement on the
preliminary disclosure of disposal of shares by certain Directorsand Senior Management members, namely Hu Changqing, Li Feng,Li Weixian, Li Zhenzhong, Li Mingtang, Dong Lianming and YuanXikun. Due to personal capital needs, the Directors and SeniorManagement members mentioned above intended to dispose of nomore than 3,753,100 shares in total by centralised bidding or bulktransaction within 6 months after 15 trading days from the date ofthe announcement of disposal of shares. For details, please referto the relevant announcement of CNINFO (www.cninfo.com.cn).Apart from the plan of disposal of shares by certain Directors andSenior Management members as disclosed above, I have no otherplan to dispose of shares from the date of the first disclosure of thereorganisation plan to its completion. This commitment letter is legallybinding on me from the date of signing, and I am willing to bear all legalresponsibilities for all economic losses, claims and extra expensescaused to Chenming Paper by violating the above commitments.
21 November
2022
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceChenming Holdings
Company Limited,Chenming Holdings(Hong Kong)Limited, ShandongChenming PaperHoldings Limitedand their directors,supervisors andsenior management(Chen Hongguo,Hu Changqing, LiXingchun, Li Feng, LiWeixian, Han Tingde,Li Chuanxuan, LiZhihui, Sun Jianfei, YinMeiqun, Yang Biao,Li Kang, Qiu Lanju,Sang Ailing, PanAiling, Zhang Hong, LiXueqin, Li Zhenzhong,Li Mingtang, GeGuangming, DongLianming, Yuan Xikunand Chu Hon Leung)
Commitment letter
on no insidertrading
1. The company, and its all directors, supervisors and senior management
members, as well as the entities controlled by the above-mentionedsubjects, have not been placed on file for investigation on suspicion ofinsider trading related to the transaction. In the last 36 months, thereis no case that the CSRC had imposed administrative punishment orthe judicial organs had lawfully investigated criminal responsibility forparticipating in insider trading related to major asset reorganisation,and there has been no case that the above personnel are notallowed to participate in the transaction according to Article 13 of theGuidelines for Supervision of Listed Companies No.7 – Supervisionof Abnormal Stock Trading Related to Major Asset Restructuring ofListed Companies. 2. The company and its directors, supervisors andsenior management members guarantee to take necessary measuresto keep the information and materials involved in the transaction strictlyconfidential.
21 November2022
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2023 ANNUAL REPORT
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceChenming HoldingsCompany Limited
Undertaking totake remedialmeasureson effects ofdilution onthe currentearnings as aresult of thetransaction
1. The company undertakes that it will not interfere the ordinary operation
of the Company, nor encroach on the interests of the Company,nor compromise the interests of the Company in any other manner;
2. The company undertakes that it will act to restrain duty-related
spending by directors and senior management of the Company; 3.The company will ensure the remuneration system formulated bythe Board or the Remuneration and Assessment Committee is in linewith implementation of the remedial measures for the returns by theCompany; 4. The company undertakes that the vesting conditionsof share incentives to be formulated by the Company will be in linewith the implementation of the remedial measures for returns if theCompany intends to make such share incentive plans in the future; 5.During the period from the date of this undertaking until the date ofcompletion of the transaction, supplementary undertakings will be givenin accordance with other new regulations of CSRC concerning remedialmeasures for returns and related undertakings, if such regulationsare announced by CSRC and the foregoing undertakings fall short ofmeeting such new regulations; 6. The company undertakes that it willpractically perform the remedial measures for returns formulated bythe Company as well as any undertaking made by the company forsuch remedial measures. The Company will be liable for indemnifyingthe Company or the investors for their losses in the event of failure toperform the undertakings. The company will be liable for relevant legalliabilities to the Company or the investors for their losses in the event offailure to perform the undertakings.
19 January
2023
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceChen Hongguo, HuChangqing, LiXingchun, Li Feng, LiWeixian, Han Tingde,Li Chuanxuan, LiZhihui, Sun Jianfei, YinMeiqun, Yang Biao,Li Kang, Qiu Lanju,Sang Ailing, PanAiling, Zhang Hong, LiXueqin, Li Zhenzhong,Li Mingtang, GeGuangming, DongLianming, Yuan Xikunand Chu Hon Leung
1. Not to transfer interests to other entities or individuals without
consideration or with unfair consideration nor otherwise damagethe Company’s interests in any other ways; 2. Restrain his/her ownduty-related spending; 3. not to use the Company’s assets forinvestments and consumption activities unrelated to the performanceof their duties; 4. the remuneration system formulated by theBoard or the Remuneration and Assessment Committee is in linewith implementation of the remedial measures for the returns bythe Company; 5. the vesting conditions of share incentives to beformulated by the Company will be in line with the implementation ofthe remedial measures for returns if the Company intends to makesuch share incentive plans in the future; 6. during the period from thedate of this undertaking until the date of completion of the transaction,supplementary undertakings will be given in accordance with other newregulations of CSRC concerning remedial measures for returns andrelated undertakings, if such regulations are announced by CSRC andthe foregoing undertakings fall short of meeting such new regulations; 7.I will practically perform the remedial measures for returns formulatedby the Company as well as any undertaking made by the Company forsuch remedial measures. I will be liable for indemnifying the Companyor the investors for their losses in the event of failure to perform theundertakings.
19 January2023
Until the completiondate of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
Chenming Holdings
Company Limited
Undertaking
to regulateand reducerelated partytransactions
Regarding the reduction and avoidance of related party transactions, thefollowing unconditional and irrevocable undertaking are hereby made:
1. The company and the companies controlled by the company will
minimise and regulate potential related party transactions with theCompany and the companies controlled by the Company; Regardingthe related party transactions between the company and othercompanies controlled by the company and the Company and thecompanies controlled by the Company that cannot be reduced or havereasonable reasons in the future, the company and other companiescontrolled by the company will follow the principle of fairness andjustice in market transactions, conduct transactions at fair andreasonable market prices, perform related party transaction decision-making procedures in accordance with relevant laws, regulations andnormative documents, and perform information disclosure obligationsaccording to law. 2. The company guarantees that the companyand other companies controlled by the company will not obtainany illegitimate benefits through related party transactions with theCompany and the companies controlled by the Company or make theCompany and the companies controlled by the Company bear anyimproper obligations. 3. The company will urge the company and othercompanies controlled by the company not to seek special intereststhrough the related relationship with the Company, and not to conductrelated party transactions that damage the interests of the Companyand its minority shareholders.
19 January
2023
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2023 ANNUAL REPORT
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceShouguang Meilun,
Chenrong Fund
Undertaking to
provide true,accurate andcompleteinformation
1. The company has provided the Company and the intermediaries
serving for the transaction with relevant information and documentsof the company (including but not limited to original written materials,duplicate materials or oral testimony). The company guarantees thatthe copies or photocopies of the documents and materials providedare consistent with the originals, and the signatures and seals of thesedocuments and materials are true, ensures that the relevant informationand documents provided for the transaction are true, accurate andcomplete, and there are no false records, misleading statements ormajor omissions, and bears individual and joint legal responsibilitiesfor the authenticity, accuracy and completeness of the informationprovided. 2. During the period of the transaction, the company willdisclose the information about the transaction to the Company ina timely manner in accordance with relevant laws, regulations andrules, and the relevant provisions of the CSRC and Shenzhen StockExchange, so as to ensure the authenticity, accuracy and completenessof such information and guarantee that there are no false records,misleading statements or major omissions in such information. If therelevant information provided by the company for the transaction doesnot meet the above requirements and causes losses to the Companyand investors, the company will bear individual and joint liability forcompensation.
21 November
2022
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
Undertaking on
absence ofinsider trading
1. The company, its controlling shareholder, all directors, supervisors
and senior management members, and the entities controlled by theabovementioned subjects have not been placed on file for investigationfor suspected insider trading related to this transaction. In the last 36months, there is no case that the CSRC has imposed administrativepunishment or the judicial organs have lawfully investigated criminalresponsibility for participating in insider trading related to major assetreorganisation, and here is no case that the above personnel are notallowed to participate in the transaction according to Article 13 of theGuidelines for Supervision of Listed Companies No.7 – Supervisionof Abnormal Stock Trading Related to Major Asset Restructuring ofListed companies. 2. The company, its controlling shareholder and itsall directors, supervisors and senior management members guaranteeto take necessary measures to keep the confidential materialsand information involved in the transaction strictly confidential inaccordance with the requirements of applicable laws and regulations.
21 November2022
Until the completion
date of theimplementationof therestructuringplan
During thereportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceUndertaking on
complianceand integrity
1. As of the date of this letter of undertaking, the party involved in
undertaking and the directors and key management personnel of theparty involved in undertaking are not being investigated by the judicialauthority for suspected crimes or being investigated by the CSRC forsuspected violations of laws and regulations; 2. The party involvedin undertaking and the directors and key management personnel ofparty involved in undertaking have been in good faith in the past fiveyears, and there has been no failure to repay large debts on schedule,fail to fulfil undertakings, or be subject to administrative supervisionmeasures by the CSRC or disciplinary action by the stock exchange;
3. The party involved in undertaking and the directors and key
management personnel of the party involved in undertaking have notbeen subject to administrative punishment (except those obviouslyirrelevant to the securities market), criminal punishment, or involved inmajor civil lawsuits or arbitrations related to economic disputes in thepast five years. As at the date of this letter of undertaking, there are nopending or foreseeable major lawsuits, arbitrations or administrativepunishment cases of the party involved in undertaking and the directorsand key management personnel of the party involved in undertaking;
4. The party involved in undertaking has not had any untrustworthy
circumstances such as failure to repay large debts on schedule, fail tofulfil undertakings, or be subject to administrative supervision measuresby the CSRC or disciplinary action by the stock exchange in the pastfive years. None of the above situation is currently in the stage ofinvestigation and has not yet formed a conclusion; 5. Directors and keymanagement personnel of the party involved in undertaking were notsubject to the circumstances listed in Article 146 of the Company Law.The content of the above undertaking is true, complete and accurate,and there are no false or misleading statements or major omissions.The party involved in undertaking is fully aware of the possibleconsequences of making a false statement, and is willing to bear alllegal consequences arising therefrom.
19 January
2023
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2023 ANNUAL REPORT
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceDongxing Securities
Investment Co.,Ltd., ChongqingInternational Trust Inc.,Chenming (Qingdao)Asset ManagementCo., Ltd.
Undertaking toprovide true,accurate andcompleteinformation
1. The company has provided the Company and the intermediaries
serving for the transaction with relevant information and documentsof the company (including but not limited to original written materials,duplicate materials or oral testimony). The company guarantees thatthe copies or photocopies of the documents and materials providedare consistent with the originals, and the signatures and seals ofthese documents and materials are true, ensures that the relevantinformation and documents provided for the transaction are true,accurate and complete, and there are no false records, misleadingstatements or major omissions, and bears individual and joint legalresponsibilities for the authenticity, accuracy and completeness ofthe information provided. 2. During the period of the transaction,the company will disclose the information about the transaction tothe Company in a timely manner in accordance with relevant laws,regulations and rules, and the relevant provisions of the CSRC andShenzhen Stock Exchange, so as to ensure the authenticity, accuracyand completeness of such information and guarantee that there areno false records, misleading statements or major omissions in suchinformation. If the relevant information provided by the company forthe transaction does not meet the above requirements and causeslosses to the Company and investors, the company will bear individualand joint liability for compensation. 3. If the information provided ordisclosed for the transaction is suspected of false records, misleadingstatements or major omissions, and is put on file for investigation bythe judicial authorities or by the CSRC, the shares of Chenming Paperwill not be transferred before the investigation conclusion is formed,and the written application for transfer suspension and the securitiesaccount will be submitted to the Board of Chenming Paper within twotrading days after receiving the notice of filing for investigation, and theBoard will apply to the stock exchange and the depository and clearingcorporation for locking up on behalf of the company. If the lockingup application is not submitted within two trading days, the companyauthorises the Board to directly submit the identity and accountinformation of the company to the stock exchange and the depositoryand clearing corporation for locking up after verification. If the Boardfails to submit the identity and account information of the companyto the stock exchange and the depository and clearing corporation,the company authorises the stock exchange and the depository andclearing corporation to directly lock up the relevant shares. If theinvestigation concludes that there is a violation of laws and regulations,the company promises to lock up the shares and voluntarily use themfor compensation to relevant investors.
21 November
2022
Until the completion
date of theimplementationof therestructuringplan
During thereportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceDongxing SecuritiesInvestment Co., Ltd.
Undertaking onshare lock-up
1. The company will not transfer the shares acquired from the transaction
within 12 months from the date when the shares acquired in thetransaction are issued. However, if the CSRC requests to adjust thelock-up period of the subject shares, it shall be adjusted accordingto relevant requirements. 2. The above-mentioned“shares acquiredin the transaction”include the shares acquired during the lock-upperiod due to the distribution of stock dividends and the increase ofcapital reserves. 3. After the shares of Chenming Paper acquired inthe transaction are unlocked, the company’s disposal of shares mustcomply with the Company Law of the People’s Republic of China,the Securities Law of the People’s Republic of China, the RulesGoverning Listing of Stocks on Shenzhen Stock Exchange, ShenzhenStock Exchange Implementation Rules on the Share Lessening by theShareholders, Directors, Supervisors and Senior Management of ListedCompanies, and the Articles of Association of Shandong ChenmingPaper Holdings Limited, and other provisions of laws, regulations, rulesand normative documents.
21 November
2022
Twelve monthsfrom the date ofcompletion ofshare issuance
The asset
restructuringended,and theundertakingwas fulfilled.
Chongqing InternationalTrust Inc.
Chongqing Trust (the“company”), as the trustee of Chongqing TrustHuiyu No. 6 Collective Fund Trust Plan (“Huiyu No. 6”or the“Plan”),represents Huiyu No. 6 as the counterparty of the Company in thetransaction, and will hold shares of the Company after the transactionis completed. The company has made the following commitmentson the lock-up period of the shares of the Company acquired in thetransaction (the“subject shares”): 1. The shares of the Companyacquired by the company (representing Huiyu No. 6) in the transactionwill not be transferred within 12 months from the date when the sharesacquired in the transaction are issued, but if the CSRC requests toadjust the lock-up period of the subject shares, it shall be adjustedaccording to relevant requirements. 2.“The shares of the Companyacquired in the transaction”as mentioned above include shares of theCompany acquired during the lock-up period due to the distributionof stock dividends by the Company and the increase of capitalreserves. 3. The company (representing Huiyu No. 6) shall abide bythe Company Law of the People’s Republic of China, the SecuritiesLaw of the People’s Republic of China, the Rules Governing Listingof Stocks on Shenzhen Stock Exchange, Shenzhen Stock ExchangeImplementation Rules on the Share Lessening by the Shareholders,Directors, Supervisors and Senior Management of Listed Companies,and the Articles of Association of Shandong Chenming Paper HoldingsLimited, and other provisions of laws, regulations, rules and normativedocuments.
21 November
2022
Twelve months
from the date ofcompletion ofshare issuance
The asset
restructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2023 ANNUAL REPORT
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceDongxing Securities
Investment Co., Ltd.,Chenming (Qingdao)Asset ManagementCo., Ltd.
Explanation andcommitmentletter of thecounterpartyon theownership ofthe underlyingassets
1. The company has a clear ownership of the subject assets, which can
be legally disposed of, and there are no rights restrictions or defectssuch as pledge, guarantee, freezing and seizure, nor major legaldisputes such as litigation and arbitration. 2. During the period from thevaluation benchmark date of the subject assets of the transaction tothe asset delivery date, the company will not set any third-party rightssuch as mortgage and pledge on the subject assets. 3. The companywaives the pre-emptive right to buy the shares transferred by othershareholders of the target company. 4. There are no legal obstacles tothe target asset transfer by the company, nor other relevant investmentagreements or other arrangements that restrict transactions.
21 November2022
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.Chongqing InternationalTrust Inc.
Chongqing Trust (the“company”), as the trustee of Chongqing TrustHuiyu No. 6 Collective Fund Trust Plan (“Huiyu No. 6”or the“Plan”),represents Huiyu No. 6 as the transaction counterparty of the Company,and hereby promises as follows: 1. The company (representing HuiyuNo. 6) has a clear ownership of the subject assets and can make legaldisposal. There are no rights restrictions or defects such as pledge,guarantee, freezing and seizure, nor major legal disputes such aslitigation and arbitration. 2. During the period from the asset valuationbenchmark date to the asset delivery date, the company (representingHuiyu No. 6) will not set any third-party rights such as mortgage andpledge on the subject assets. 3. The company (representing Huiyu No.
6) waives the pre-emptive right to buy the shares transferred by other
shareholders of the target company. 4. In addition, there are no legalobstacles to the target asset transfer by the company (representingHuiyu No. 6), nor other investment agreements or other arrangementsthat restrict transactions.
21 November
2022
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.Dongxing Securities
Investment Co.,Ltd., ChongqingInternational Trust Inc.,Chenming (Qingdao)Asset ManagementCo., Ltd.
Undertaking onabsence ofinsider trading
1. The company, its controlling shareholder, all directors, supervisors
and senior management members, and the entities controlled by theabovementioned subjects have not been placed on file for investigationfor suspected insider trading related to this transaction. In the last 36months, there is no case that the CSRC has imposed administrativepunishment or the judicial organs have lawfully investigated criminalresponsibility for participating in insider trading related to major assetreorganisation, and there is no case that the above personnel are notallowed to participate in the transaction according to Article 13 of theGuidelines for Supervision of Listed Companies No.7 – Supervisionof Abnormal Stock Trading Related to Major Asset Restructuring ofListed Companies. 2. The company, its controlling shareholder and itsall directors, supervisors and senior management members guaranteeto take necessary measures to keep the confidential materialsand information involved in the transaction strictly confidential inaccordance with the requirements of applicable laws and regulations.
21 November
2022
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceDongxing SecuritiesInvestment Co., Ltd.,Chenming (Qingdao)Asset ManagementCo., Ltd.
Commitmenton no illegalmatters in thepast five years
1. The company and its major management personnel did not receive
any criminal punishment or administrative punishment related to thesecurities market in the last five years, and there was no major civillitigation or arbitration related to economic disputes; 2. The companyand its major management personnel did not fail to repay large debtson schedule or fulfil their commitments, were not taken administrativesupervision measures by the CSRC, or were not disciplined by stockexchanges; 3. The company had no other major illegal acts thatdamaged the investors’legitimate rights and interests and social publicinterests, nor other bad records.
21 November2022
Until the completion
date of theimplementationof therestructuringplan
During thereportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.Chongqing International
Trust Inc.
Chongqing Trust (the“company”), as the trustee of Chongqing TrustHuiyu No. 6 Collective Fund Trust Plan (“Huiyu No. 6”or the“plan”),represents Huiyu No. 6 as the counterparty of the transaction, andmakes the following commitments on the plan and the relevantinformation of the company: (1) Commitments of the plan: 1. Sinceits establishment, the plan has not been subject to administrativepunishment or criminal punishment related to the securities market,and there are no major civil lawsuits or arbitrations related to economicdisputes; 2. There is no failure to repay large debts, fulfil commitments,take administrative supervision measures by the CSRC or be disciplinedby stock exchanges on the plan; 3. There are no other major illegal actsthat damage the investors’legitimate rights and interests and socialpublic interests in the plan, nor other bad records. (2) Commitments ofthe company: 1. The company and its major management personneldid not receive any criminal punishment or administrative punishmentrelated to the securities market in the last five years, and there wereno major civil lawsuits or arbitrations related to economic disputes(except for other products managed by the company as litigants);
2. On 3 January 2023, the Beijing Supervision Bureau of the CSRC
issued the Decision on the Administrative Supervisory MeasuresAgainst Chongqing International Trust Inc. for Correction ([2023] No.10), pursuant to which, due to the existing issues as a shareholder ofGuodu Securities Co., Ltd., the company was subject to administrativesupervisory measures for correction by the Beijing Regulatory Bureauof the CSRC, which required the company to“take practical andeffective corrective measures to rectify the illegal pledges, and exerciseits rights and fulfil its obligations as a shareholder in compliancewith the law, and not to become a major shareholder and a de factocontroller of a securities company without approval”. In addition to theabove, the company and its major management personnel did not failto repay large debts on schedule or fulfil their commitments, were nottaken administrative supervision measures by the CSRC, or were notdisciplined by stock exchanges; 3. The company had no other majorillegal acts that damage the investors’legitimate rights and interestsand social public interests, nor other bad records.
19 January
2023
Until the completion
date of theimplementationof therestructuringplan
During the
reportingperiod,the partiesinvolved inundertakingdid notviolate theundertaking,the assetrestructuringended,and theundertakingwas fulfilled.
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2023 ANNUAL REPORT
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceUndertaking
made on initialpublic offeringor refinancing
Chenming HoldingsCompany Limited
Non-competitiveundertaking
(1) Chenming Holdings Co., Ltd. (
“Chenming Holdings”) shall not engage,whether solely, jointly, or by representing itself or any other personsor companies, and shall not procure its associates (as defined inThe Listing Rules of Hong Kong Stock Exchange) to engage, in anybusiness which competes with the business of the Company and itssubsidiaries (“Chenming Group”or“we”) directly or indirectly, in anycountry and region which our business exists (or any part of the world ifin any form of electronics business), or in any business that directly orindirectly competes with Chenming Group’s business which we operatefrom time to time (including but not limited to any business in the formof sole proprietorship, joint ventures or acquisitions, or holding interestsdirectly or indirectly in such enterprises, or by any other means); (2)in the event that Chenming Holdings is required by its business to,whether solely, jointly, or by representing itself or any other persons orcompanies, engage in business which directly or indirectly competesagainst the business of Chenming Group, or obtain any businessopportunity which directly or indirectly competes against the businessof Chenming Group, it shall endeavour to procure that Chenming Groupshall have priority to obtain the right to operate such business or toobtain such business opportunity; (3) if Chenming Holdings is in breachof the abovementioned undertakings, it shall indemnify the Companyfor any loss caused by such breach and the Company shall have theright to acquire all businesses of Chenming Holdings, which directly orindirectly compete with the businesses of our Group, at market priceor cost price (whichever price is lower); (4) Chenming Holdings shallnot make use of its position as the controlling shareholder (as definedin The Listing Rules of Hong Kong Stock Exchange) of our Group tojeopardise the legal interests of Chenming Group and its shareholderswith other persons or companies or on their behalf.
22 May 2008During the period
when ChenmingHoldings wasthe majorshareholder ofthe Company
Implementing
as normal
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceChenming Holdings
Company Limited
Defectiveproperties
(1) According to the plan on defective properties of the Company,
Chenming Holdings Co., Ltd. (“Chenming Holdings”) has guaranteedand undertaken that: according to the application of the Company,for defective property(ies) owned by the Company and its holdingsubsidiary company which situated in the administrative area ofShouguang city, Chenming Holdings will purchase it (them) and haveit (them) being transferred to itself pursuant to the law in accordancewith the result of the related asset valuation if the Company decidesto transfer and dispose of it (them) and there is no other transferee; (2)before the Company transfers and disposes of the defective propertiespursuant to the law, if the Company suffers any economic losses due tothe defects of the title (including but not limited to damages, penaltiesand relocation costs), Chenming Holdings will bear such economiclosses; (3) during the regulatory process taken to the defectiveproperties of buildings and land of subsidiaries of the Companysituated outside the local areas (outside the administrative area ofShouguang city), the economic losses such as penalties or relocationcosts imposed by competent administrative authorities to be borne bythe subsidiaries arising from defects of insufficient title documents shallbe paid pursuant to the law by Chenming Holdings after verification.
16 January
2008
During the period
when ChenmingHoldings wasthe majorshareholder ofthe Company
Implementing
as normal
Whether undertakings performed on timeYesIf the undertakings are not performed within specified period,
details of the specific reasons for the incomplete performanceand the next steps should be provided
N/A
2. Description on the Company
’s assets and items in meeting original profit forecast and its explanationas there is profit forecast for assets and items of the Company and the reporting period is still withinthe profit forecast period
Applicable ? Not applicable
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2023 ANNUAL REPORT
VIII Material Matters
II. Appropriation of funds of the Company by the controlling shareholder and other related
parties for non-operating purposes Applicable ? Not applicableThere was no appropriation of funds of the Company by the controlling shareholder and other related parties for non-operating purposes during the reporting period.III. External guarantees against the rules and regulations Applicable ? Not applicableThere was no external guarantee provided by the Company which was against the rules and regulations during the reportingperiod.
IV. Opinions of the Board regarding the“modified auditor’s report” for the latest period Applicable ? Not applicableV. Opinions of the Board, the Supervisory Committee and independent directors (if any)regarding the“modified auditor’s report” for the reporting period issued by the accountants Applicable ? Not applicableVI. Changes in accounting policies, accounting estimates or correction of major accountingerrors as compared to the financial report for the prior year Applicable ? Not applicableThere was no changes in accounting policies, accounting estimates or correction of major accounting errors during thereporting period.VII. Reason for changes in scope of the consolidated financial statements as compared to thefinancial report for the prior year? Applicable Not applicableDuring the year, 1 subsidiary was newly established, namely Shouguang Kunwo Trading Co., Ltd., and 1 subsidiary wasderegistered, namely Beijing Chenming Financial Leasing Co., Ltd. 2 subsidiaries were disposed through the transfer of
65.21% equity interest, namely Wuhan Chenming Hanyang Paper Holdings Co., Ltd. and Wuhan Chenming Qianneng
Electric Power Co., Ltd. 1 subsidiary was acquired, namely Jiangxi Chenming Port Co., Ltd.
VIII Material Matters
VIII. Engagement or dismissal of accounting firms
Current accounting firm engagedName of the domestic accounting firm
Grant Thornton(Special General Partnership)Remuneration of the domestic accounting firm (RMB’0,000)390Continued term of service of the domestic accounting firm5Name of certified public accountants of the domestic accounting firmJiang Tao and Guo DongmeiContinued term of service of certified public accountants of the domestic accounting firm1Whether to appoint another accounting firm during the period Yes ? NoParticulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes? Applicable Not applicableDuring the year, the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal control ofthe Company for 2023. The Company paid RMB800,000 as internal control audit fees for prior year during the reportingperiod. The Company engaged Huaying Securities Co., Ltd. as its independent financial advisor in respect of the issuanceof shares and payment of cash consideration for acquisition of assets, and paid RMB2.12 million as financial advisor feesduring the reporting period.IX. Prospects of withdrawal from listing subsequent to the publication of the annual report Applicable ? Not applicableX. Matters related to bankruptcy and reorganisation
Applicable ? Not applicableThere was no matter related to bankruptcy and reorganisation during the reporting period.
2023 ANNUAL REPORT
VIII Material Matters
XI. Material litigation and arbitration? Applicable Not applicableGeneral informationon the litigation(arbitration)Amount involved
Whetherprovisions aremadeProgressTrial results and impact
Enforcement ofjudgment
Date ofdisclosureDisclosure indexStatutory demand and
winding-up petition
HK$389,112,432.44NoOn 25 October 2022, the
Company engaged HongKong legal advisers toapply for seeking thedismissal or adjournmentof the winding-up petitionpresented by HKK2 againstthe Company at the Courtof First Instance. On 25July 2023, the Court of FirstInstance held a hearing onthe aforesaid application.
On 10 August 2023, the Companyreceived the judgment made bythe Honourable Mr. Justice Harrisof the Court of First Instance. Onthe ground that the application forarbitration in respect of the jointventure agreement filed by theCompany with the HKIAC in June2022 is the basis of the cross-claimmade by the Company against HKK2under the winding-up petition, it isruled to stay the winding-up petition.The substantive hearing of thearbitration will be heard in May 2024.
N/A19 August 2023http://www.cninfo.com.cn
Summary of matters
not subject todisclosure asmaterial litigation(arbitration) in whichChenming Leasingis the plaintiff
RMB1,029.6935 millionNoThe amount involved in
ongoing cases wasRMB54.4188 million; theamount involved in resolvedcases was RMB975.2747million.
For resolved litigations, the court
ordered relevant defendant andguarantor to settle outstanding loansto the Company, in line with therequest of the Company and wouldnot have any significant impact onthe operation and financial conditionof the Company.
The amount
involved inthe resolvedand executedcases wasRMB207.5134million, andother casesare in theprogress ofexecution.
N/AN/A
Summary of matters
not subject todisclosure asmaterial litigation(arbitration) in whichChenming Leasingis the defendant
RMB8.34 millionNoAt the first instance stage.Conclusions have not yet made. It is
expected that there would not be anysignificant impact on the operationand financial condition of theCompany.
Not yet enteredthe executionstage
N/AN/A
Summary of mattersnot subject todisclosure asmaterial litigation(arbitration) in whichthe Company andother subsidiariesof the Company arethe plaintiff
RMB568.8137 millionNoThe amount involved in
ongoing cases wasRMB205.9547 million; theamount involved in resolvedcases was RMB362.8590million.
Did not have any significant impact onthe operation and financial conditionof the Company.
The amountinvolved inthe resolvedand executedcases wasRMB70.2312million, andother casesare in theprogress ofexecution.
N/AN/A
VIII Material Matters
General informationon the litigation(arbitration)Amount involved
Whetherprovisions aremadeProgressTrial results and impact
Enforcement ofjudgment
Date ofdisclosureDisclosure indexSummary of mattersnot subject todisclosure asmaterial litigation(arbitration) in whichthe Company andother subsidiariesof the Company arethe defendant
RMB220.6950 millionNoThe amount involved in
ongoing cases wasRMB134.1828 million; theamount involved in resolvedcases was RMB86.5122million.
Did not have any significant impact onthe operation and financial conditionof the Company.
All the resolved
caseshave beenexecuted.
N/AN/A
XII. Punishment and rectification? Applicable Not applicableNameTypeReason
Type of inspection
and punishmentConclusion (if any)
Date ofdisclosureDisclosure indexZhanjiang ChenmingSubsidiaryOn 18 May 2023, there was a safety accident occurred by
Shijiazhuang Kejing Waste Material Recycling Co., Ltd.(“Kejing”), a residue outsourcing entity of ZhanjiangChenming, in the factory of Zhanjiang Chenming,causing the death of four employees of Kejing. On theground that Zhanjiang Chenming’s failure in entering intosafety production management agreement with Kejing,reaching agreement on respective safety managementresponsibilities in the outsourcing contract, arranging andinitiating management over safety production accountabilityand safety production of Kejing and its inclined screenslurry residue collection spots, as well as in view of otherfailures, Zhanjiang Emergency Management Bureau ruledthat Zhanjiang Chenming had violated relevant regulationsunder the Production Safety Law of the People’s Republicof China.
General administrative
punishment
As Zhanjiang Chenming actively
cooperated with the incidentinvestigation, rectified the currentsafety production conditions,entered into specific safetyproduction agreements with allcontractors, and identified andset up clear warning signs in allpremises with confined space, itis eligible for a light penalty, thusZhanjiang Emergency ManagementBureau issued the Decision forAdministrative Penalty and imposedpenalty of RMB1.20 million onZhanjiang Chenming. ZhanjiangChenming paid the aforementionedpenalty on 27 February 2024.
25 May 2023http://www.cninfo.com.cn
Rectification? Applicable Not applicable
XI. Material litigation and arbitration(Continued)
2023 ANNUAL REPORT
VIII Material Matters
XII. Punishment and rectification(Continued)Learning from the lesson of the safety accident happened in the external slurry residue selling unit, Zhanjiang Chenming hasfurther improved its safety prevention measures, strengthened the leadership responsibility and regulatory responsibility,regulated operational procedures, enhanced safety awareness, and developed emergency handling capability. Specificmeasures are as follow:
(I) Establish sound safety production accountability system and implement safety responsibility andperformance assessment for all employees
(1) Establish safety production accountability appraisal system, organise and optimise the safety production duty
list for employees in all departments at all levels covering from key responsible personnel and on-site operators,and implement appraisal by divisions and categories in strict compliance with safety production duty list.
(2) Facilitate implementation and discover weak points through appraisal, remedy shortcomings, promote the
implementation of safety production accountability for all employees, and duly implement the“two duties forone position” policy for safety production.(II) Strengthen safety management of contractors and implement unified duty coordination andmanagement
(1) Include external contractors into the unified management of the Company, formulate respective safety
responsibilities and enter into specific safety management agreement.
(2) Further optimise factory operation of contractors, and clarify the requirements on different procedures covering
selection of contractors, in-factory notice, safety disclosure, construction approval, operation supervision,inspection and record, award and punishment.
(3) Update the safety management ledger of contractor in a timely manner, require contractor to create a post of
safety responsible personnel with key responsibility personnel and safety responsible personnel possessingcertificates, arrange contractors to convene monthly safety management meetings and special safety inspectionand safety trainings, and supervise contractors in respect of implementation, execution and correction.
(III) Enhance system on confined space operation and implement strict operation control
(1) Conduct comprehensive, scientific inspection on facilities, equipment and premises of the company with
confined space, enhance risk management on confined space for the six aspects of inspection mechanism,identification method, risk analysis, risk identification, scientific control and effective elimination, and set up alertposter and notice board in all prominent locations of facilities, equipment and premises with confined space.
(2) Firmly conduct education and training on confined space operations, especially the special safety trainings for
on-site responsible personnel, supervisors, operators and emergency personnel engaging in confined spaceoperations so as to fully enhance their safety skills and awareness.
(3) Strictly conduct confined space operation management, implement strict and detailed safety rules for confined
space operations, duly conduct identification, approval, supervision and other key procedures, and ensure safeconfined space operation.
(4) Strengthen supervision and inspection, set up part-time safety personnel in every factory and workshop to
assist head of factory to conduct safety works, arrange safety management personnel to conduct weeklybenchmark inspection on premises with confined space, rectify identified potential hazard based on theprinciple of“determination of responsible personnel, measures and terms”, and arrange special personnel tofollow up rectification progress.Through strict implementation of safety production accountability system for employees, Zhanjiang Chenmingstrictly focus on hazardous operation management, duly perform safety management works, adhere to safetybaseline and strengthen safety infrastructure construction, thereby avoiding the reoccurrence of similar issues.
VIII Material Matters
XIII. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable ? Not applicable
XIV. Significant related party transactions
1. Related party transactions associated with day-to-day operation
? Applicable Not applicableRelated partytransactions
Relationshipwith theCompany
Types of therelated partytransactions
Subject matterof therelated partytransactions
Pricing basisof therelated partytransaction
Related partytransactionprice
Amount ofrelated partytransactions(RMB’0,000)Percentage asthe amountof similartransactions
Amount oftransactionsapproved(RMB’0,000)Whetherexceedingapproved cap
Settlement of relatedparty transactions
Market price ofavailable similartransaction
Disclosure
date
Disclosure
indexWeifang Port Wood Chip Terminal Co., Ltd.
Joint ventureLabour servicePort miscellaneous
fees
Market priceMarket price7,880.338.57%N/ANoBank acceptance
and telegraphic transfer
N/AN/AN/ATotal7,880.33Particulars on refund of bulk saleNilEstimated total amount for day-to-day related party transactions to be conducted
during the period (by types of transactions) and their actual implementing during
the reporting period (if any)
NilReasons for large differences between transaction price and market reference price
(if applicable)
N/A
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable ? Not applicableThere was no related party transaction of the Company in connection with purchase or sale of assets or equity interestduring the reporting period.
3. Related party transaction connected to joint external investment
Applicable ? Not applicableThere was no related party transaction of the Company connected to joint external investment.
4. Related creditors
’ rights and debts transactions
? Applicable Not applicableWas there any non-operating related creditors’ rights and debts transaction? Yes NoCreditor’s rights receivable from any related party
2023 ANNUAL REPORT
VIII Material Matters
XIV. Significant related party transactions(Continued)
4. Related creditors
’rights and debts transactions(Continued)
Related party
Relationship
with theCompanyReason
Was there any
non-operatingcapitaloccupation
Openingbalance(RMB’0,000)
Amountincreasedduring thecurrent period(RMB’0,000)
Amountrecoveredduring thecurrent period(RMB’0,000)Interest rate
Interest forthe currentperiod(RMB’0,000)
Closingbalance(RMB’0,000)Shouguang Meite
Environmental TechnologyCo., Ltd.
A joint ventureFinancial supportNo1,829.12–870.026.00%83.621,042.72Weifang Port Area Wood
Chip Port Co., Ltd.
A joint ventureFinancial supportNo7,167.93––6.00%383.257,551.18Wuhan Chenming Hanyang
Paper Holdings Co., Ltd.
An associateFinancial supportNo22,978.30–530.004.75%276.9722,725.27Effect of related creditors’
rights on the operatingresults and financialposition of the Company
The above creditors’rights did not affect the ordinary operation of the Company. Moreover, they catered to the needs for development of existingbusinesses of the above entities.
Debts payable to any related party
Related party
Relationship
with the
CompanyReason
Openingbalance(RMB’0,000)
Amountincreasedduring thecurrent period
(RMB’0,000)
Amount repaid
during thecurrent period
(RMB’0,000)Interest rate
Interest forthe current
period(RMB’0,000)
Closing balance
(RMB’0,000)Closing balance
(RMB’0,000)Chenming Holdings
Company Limited
The controlling shareholder
Financial support–36,470.0022,970.11Market interest rate61.4013,561.29Guangdong Nanyue Bank
Co., Ltd.
An associateBorrowing190,910.00206,906.00190,910.00Market interest rate1,988.57206,906.00Effect of related debts on the operating resultsand financial position of the Company
Financial support was provided by Chenming Holdings without requiring any pledge or guarantee, which was a testamentto its support and confidence in the future development of the Company, and helped the Company promote projectconstruction and satisfy its needs for working capital.
VIII Material Matters
XIV. Significant related party transactions(Continued)
5. Deals with related financial companies
Applicable ? Not applicableThere were no deposits, loans, credits, or other financial services between the Company, its related financialcompanies and the related parties.
6. Deals between financial companies controlled by the company and related parties
Applicable ? Not applicableThere were no deposits, loans, credits, or other financial services between the financial companies controlled by theCompany and the related parties.
7. Other significant related party transactions
Applicable ? Not applicableThere was no other significant related party transaction of the Company during the reporting period.
XV. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable ? Not applicableThere was no custody of the Company during the reporting period.
(2) Contracting
? Applicable Not applicableIn April 2023, Jiangxi Chenming, a subsidiary, acquired equity interest in Jiangxi Port, which is included in thescope of consolidation. The principal activities of Jiangxi Chenming Port is goods loading and transportation atwharf. In order to revitalise Jiangxi Port and enhance economic benefits to the Company, Jiangxi Chenming hascontracted the businesses of Jiangxi Port to Jiangxi Yirong Investment Co., Ltd. for 5 years, and receives fixedcontracting fees of RMB4.00 million per year on quarterly basis.A project which generates profit or loss for the Company representing more than 10% of the Company’s totalprofit during the reporting period Applicable ? Not applicable
2023 ANNUAL REPORT
VIII Material Matters
XV. Material contracts and implementation(Continued)
1. Custody, contracting and leasing
(Continued)
(3) Leasing
? Applicable Not applicableLeasing description:
As a lesseeThe Company has simplified the treatment of short-term leases and leases of low-value assets by not recognisingright-of-use assets and lease liabilities. The charges to expense for short-term leases, low-value assets and variablelease payments not included in the measurement of lease liabilities during the current period are as follows:
Unit: RMBItem2023Low-value leases8,017,898.94Total8,017,898.94As a lessorWhere an operating lease is formed:
According to paragraph 58 of the new lease standard, the lessor shall disclose in the notes the following informationrelated to operating leases:
Lease income, and make separate disclosure of income related to variable lease payments not included in leasereceipts;
Unit: RMBItem2023Lease income205,849,883.65
VIII Material Matters
XV. Material contracts and implementation(Continued)
1. Custody, contracting and leasing
(Continued)
As a lessor(Continued)The amount of undiscounted lease receipts to be received in each of the five consecutive fiscal years after thebalance sheet date and the total amount of undiscounted lease receipts to be received in the remaining years.
Unit: RMBYear2023.12.31Within 1 year after the balance sheet date179,905,002.331 to 2 years after the balance sheet date168,651,189.372 to 3 years after the balance sheet date167,585,064.633 to 4 years after the balance sheet date162,996,827.554 to 5 years after the balance sheet date159,887,562.91More than 5 years after the balance sheet date165,396,559.34Total1,004,422,206.13Items that bring profit or loss of more than 10% of the total profit of the Company during the reporting period Applicable ? Not applicableThe Company did not have any leasing project that brought profit or loss to the Company amounting to morethan 10% of the total profit of the Company during the reporting period.
2023 ANNUAL REPORT
VIII Material Matters
XV. Material contracts and implementation(Continued)
2. Significant guarantees
? Applicable Not applicable
(1) Guarantees
During the reporting period, the Company provided guarantee to subsidiaries and the guarantee amountincurred was RMB11,918.5064 million. As at 31 December 2023, the balance of the external guarantee providedby the Company (including the guarantee to its subsidiaries by the Company and the guarantee providedto subsidiaries by subsidiaries) amounted to RMB13,270.2932 million, representing 79.50% of the equityattributable to shareholders of the Company in 2023.
Unit: RMB’0,000External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)Name of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateral
Counter-guarantee (ifany)Term
Fulfilledor not
Guaranteeto relatedpartiesor notWeifang Port Area WoodChip Port Co., Ltd.
24 July 201717,500.0020 December 20179,560.00General guaranteeCredit guaranteeNo10 yearsNoYesZhanjiang Runbao Trading
Co., Ltd.
30 March 202216,000.0025 April 202216,000.00Pledge34.64% equity
interest in WuhanChenming
Equity transfer paymentof RMB160 million
2 yearsNoNoZhanjiang Dingjin Trading
Co., Ltd.
7 December 202213,558.197 December 202213,558.19MortgagePropertiesRemaining equity transfer
payment of RMB136million
3 yearsNoNoShanghai Shuilan Trading
Co., Ltd.
7 December 202245,700.007 December 202245,000.00Pledge100% equity interest
in ShanghaiChongmin
80% equity interest inTaixing Port held byShanghai Huahao
3 yearsNoNoTotal external guarantees approved during the
reporting period (A1)
–Total actual external guarantees during the reporting period (A2)–Total external guarantees approved at the end ofthe reporting period (A3)
92,758.19Balance of total actual guarantees at the end of the reporting period (A4)84,118.19
VIII Material Matters
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
(1) Guarantees
(Continued)
Guarantees between the Company and its subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateralCounter-guaranteeTerm
Fulfilledor notGuaranteeto relatedpartiesor notZhanjiang Chenming Pulp &
Paper Co., Ltd.
30 March 20199,800.005 January 20219,800.00General guaranteeNoNo5 yearsNoNoZhanjiang Chenming Pulp &Paper Co., Ltd.
30 March 202291,361.6131 May 202291,361.61General guaranteeNoNo1 yearNoNoZhanjiang Chenming Pulp &
Paper Co., Ltd.
30 March 20231,070,000.0025 May 2023433,385.08General guaranteeNoNo1 yearNoNoShouguang Meilun PaperCo., Ltd.
30 March 202221,000.0028 February 202321,000.00General guaranteeNoNo1 yearNoNoShouguang Meilun PaperCo., Ltd.
30 March 2023500,000.0019 June 2023163,626.92General guaranteeNoNo1 yearNoNoJiangxi Chenming Paper
Co., Ltd.
30 March 202215,421.131 July 202215,421.13General guaranteeNoNo1 yearNoNoJiangxi Chenming Paper
Co., Ltd.
30 March 2023430,000.0024 May 2023139,336.93General guaranteeNoNo1 yearNoNoHuanggang Chenming Pulp
& Paper Co., Ltd.
30 March 20222,000.0027 April 20232,000.00General guaranteeNoNo1 yearNoNoHuanggang Chenming Pulp
& Paper Co., Ltd.
30 March 2023380,000.0023 May 202340,500.00General guaranteeNoNo1 yearNoNoHuanggang Chenming
Paper Technology
Co., Ltd.
30 March 2023470,000.00General guaranteeNoNo1 yearNoNoHuanggang Chenming
Paper Technology
Co., Ltd.
15 December 2023-50,000.00General guaranteeNoNo1 yearNoNoChenming (HK) Limited30 March 2023200,000.007 December 20231,548.00General guaranteeNoNo1 yearNoNoZhanjiang Chenming
ArboricultureDevelopment Co., Ltd.
30 March 202310,000.00General guaranteeNoNo1 yearNoNoJilin Chenming Paper Co.,
Ltd.
30 March 202330,000.0027 June 202330,000.00General guaranteeNoNo1 yearNoNoJilin Chenming Paper Co.,
Ltd.
15 December 202350,000.0029 December 202314,563.93General guaranteeNoNo1 yearNoNoShouguang Chenming Art
Paper Co., Ltd.
30 March 202320,000.00General guaranteeNoNo1 yearNoNoShandong Chenming Group
Finance Co., Ltd.
30 March 202320,000.00General guaranteeNoNo1 yearNoNo
2023 ANNUAL REPORT
VIII Material Matters
Guarantees between the Company and its subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateralCounter-guaranteeTerm
Fulfilledor not
Guaranteeto related
partiesor notKunshan Tuoan Plastic
Products Co., Ltd.
30 March 20222,000.0027 February 20232,000.00General guaranteeNoNo1 yearNoNoKunshan Tuoan PlasticProducts Co., Ltd.
30 March 202310,000.009 August 20233,500.00General guaranteeNoNo1 yearNoNoChenming (Singapore) Co.,Ltd.
30 March 202350,000.00General guaranteeNoNo1 yearNoNoShandong Chenming Paper
Sales Co., Ltd.
30 March 202255,996.7119 August 202255,996.71General guaranteeNoNo5 yearsNoNoShandong Chenming PaperSales Co., Ltd.
30 March 2023350,000.009 August 2023150,245.82General guaranteeNoNo1 yearNoNoShanghai Chenming Pulp &
Paper Sales Co., Ltd.
30 March 2022975.0013 February 2023975.00General guaranteeNoNo1 yearNoNoShanghai Chenming Pulp &Paper Sales Co., Ltd.
30 March 2023150,000.0029 May 20236,450.00General guaranteeNoNo1 yearNoNoHuanggang Chenming Pulp& Fiber Trading Co., Ltd.
30 March 202330,000.0031 August 20234,000.00General guaranteeNoNo1 yearNoNoShouguang ChenmingImport and Export TradeCo., Ltd.
30 March 2023100,000.0021 December 202315,000.00General guaranteeNoNo1 yearNoNoHainan Chenming
Technology Co., Ltd.
30 March 20225,000.0030 March 20235,000.00General guaranteeNoNo1 yearNoNoHainan Chenming
Technology Co., Ltd.
30 March 2023100,000.0010 August 202337,200.00General guaranteeNoNo1 yearNoNoChenming (Overseas) Co.,
Ltd.
30 March 202330,000.00General guaranteeNoNo1 yearNoNoNanchang Chenming
ArboricultureDevelopment Co., Ltd.
30 March 202310,000.00General guaranteeNoNo1 yearNoNoShouguang Chenming
Papermaking MachineCo., Ltd.
30 March 20235,000.00General guaranteeNoNo1 yearNoNoShouguang Hongxiang
Printing and PackagingCo., Ltd
30 March 20235,000.00General guaranteeNoNo1 yearNoNoShouguang Hongyi
Decorative PackagingCo., Ltd.
30 March 20235,000.00General guaranteeNoNo1 yearNoNo
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
(1) Guarantees
(Continued)
VIII Material Matters
Guarantees between the Company and its subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateralCounter-guaranteeTerm
Fulfilledor not
Guaranteeto relatedpartiesor notShouguang Chenming
Modern Logistic Co.,Ltd.
30 March 20235,000.00General guaranteeNoNo1 yearNoNoShandong Grand ViewHotel Co., Ltd.
30 March 20235,000.00General guaranteeNoNo1 yearNoNoFoshan Chenming Import
and Export Trade Co.,Ltd.
30 March 202350,000.00General guaranteeNoNo1 yearNoNoTotal amount of guarantee provided for
subsidiaries approved during the reportingperiod (B1)
4,035,000.00Total amount of guarantee provided for subsidiaries during the reporting period (B2)1,191,850.64Total amount of guarantee provided forsubsidiaries approved as at the end of thereporting period (B3)
4,238,554.45Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4)1,242,911.13
Guarantees between subsidiariesTotal amount of guarantee provided for
subsidiaries approved during the reportingperiod (C1)
–Total amount of guarantee provided for subsidiaries during the reporting period (C2)–Total amount of guarantee provided forsubsidiaries approved as at the end of thereporting period (C3)
–Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4)–Total amount of guarantee provided (i.e. sum of the above three guarantee amount)Total amount of guarantee approved during thereporting period (A1+B1+C1)
4,035,000.00Total amount of guarantee during the reporting period (A2+B2+C2)1,191,850.64Total amount of guarantee approved as at theend of the reporting period (A3+B3+C3)
4,331,312.64Total balance of guarantee as at the end of the reporting period (A4+B4+C4)1,327,029.32The percentage of total amount of guaranteeprovided (i.e. A4+B4+C4) to the net assets ofthe Company
79.50%
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D)–Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E)334,927.53Total amount of guarantee provided in excess of 50% of net assets (F)492,420.56Sum of the above three amount of guarantee (D+E+F)827,348.09For the unexpired guarantee contract, the guarantee liability has occurred during the reporting period or there is evidence showing that it is possible to bear joint liability for repayment
(if any)
NoProviding external guarantees in violation of prescribed procedures (if any)No
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
(1) Guarantees
(Continued)
2023 ANNUAL REPORT
VIII Material Matters
XV. Material contracts and implementation(Continued)
3. Entrusted cash and asset management
(1) Entrusted wealth management
Applicable ? Not applicableThe Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
Applicable ? Not applicableThe Company did not have any entrusted loans during the reporting period.
4. Other material contracts
Applicable ? Not applicableThe Company did not have any other material contracts during the reporting period.
VIII Material Matters
XVI. Other matters of significance? Applicable Not applicable
1. Payment of corporate bonds of RMB350 million
On 3 April 2023, the Company entrusted the Shenzhen Branch of China Securities Depository & Clearing Co., Ltd. tocomplete the payment of principal and interest of“18 Chenming Bond 01”of RMB350 million in accordance with the“First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2018”. The bond was delisted from theShenzhen Stock Exchange on the same day.For details, please refer to the relevant announcement disclosed by the Company on CNINFO on 30 March 2023(announcement number: 2023-015) and the overseas regulatory announcement disclosed by the Company on thewebsite of Hong Kong Stock Exchange on 30 March 2023.
2. Redemption of perpetual bonds of RMB1 billion
On 11 July 2017, the Company issued the 2017 First Tranche of Medium-term Notes (bond abbreviation: 17 LuChenming MTN001, bond code: 101779001) amounting to RMB1 billion with a term of 3+N. According to the“Prospectus of the Company’s 2017 First Tranche of Medium-term Notes”,“17 Lu Chenming MTN001”is subjectto the issuer’s redemption option. On 11 May 2023, the Company disclosed the Announcement on Exercise ofRedemption Option of Issuer of 2017 First Tranche of Medium-term Notes of Shandong Chenming Paper HoldersLimited on Shanghai Clearing House (www.shclearing.com) and China Money (www.chinamoney.com.cn), andredeemed the RMB1 billion perpetual bonds in full on 12 July 2023, with principal and interest payment amounted toRMB1,089.70 million. To date, all the bonds of the Company have been redeemed.For details, please refer to the relevant announcement disclosed by the Company on CNINFO on 15 July 2023(announcement number: 2023-049) and the overseas regulatory announcement disclosed by the Company on thewebsite of Hong Kong Stock Exchange on 14 July 2023.
2023 ANNUAL REPORT
VIII Material Matters
XVI. Other matters of significance(Continued)
3. Termination of asset purchase through the issuance of shares and cash payments
On 27 February 2023, the Company convened the 2023 first extraordinary general meeting, the 2023 first classmeeting for holders of domestic-listed shares and the 2023 first class meeting for holders of overseas-listed shares,at which the Company considered and approved relevant resolutions including the Report on the Agreement on AssetPurchase through Issuance of Shares and Cash Payments and Connected Transactions (Draft) of the Company. TheCompany intended to acquire 1.19% equity interests in Shouguang Meilun held by Dongxing Securities InvestmentCo., Ltd., 44.44% limited partnership share in Chenrong Fund held by Chongqing International Trust Inc. throughissuance of shares. The Company’s wholly-owned subsidiary, Chenming Investment, intended to acquire 0.22%general partnership interest in Chenrong Fund held by Chenming (Qingdao) Asset Management Co., Ltd. throughcash payment. The type of shares to be issued by the Company is A shares, the price of the shares to be issued isRMB4.42 per share, and the number of shares to be issued is 71,841,345 shares.On 14 March 2023, the Company received the Notice on the Acceptance of Application Documents for AssetPurchase through the Issuance of Shares of Shandong Chenming Paper Holdings Limited (Shen Zheng Shang Shen[2023] No. 259) (([2023]259 ))from the Shenzhen Stock Exchange.On 29 June 2023, the Company convened the eighth extraordinary general meeting of the tenth session of theBoard and the fourth extraordinary general meeting of the tenth session of the Supervisory Committee, at which theCompany considered and approved the Resolution on the Termination of the Asset Purchase through Issuance ofShares and Cash Payments and Connected Transactions and Withdrawal of the Application Documents and agreedto terminate the transaction, sign the relevant termination agreement with the counterparty if needed and apply to theShenzhen Stock Exchange for relevant application documents for the withdrawal of the transaction.For details, please refer to the relevant announcements disclosed by the Company on CNINFO on 28 February2023, 16 March 2023 and 30 June 2023 (announcement number: 2023-010, 2023-014, 2023-048) and the relevantannouncements disclosed by the Company on the website of Hong Kong Stock Exchange on 27 February 2023, 15March 2023 and 29 June 2023.
VIII Material Matters
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2023 Annual Report
Announcement No.Subject matterDate of publicationPublication website and index2023-001Announcement on Receipt of Government Subsidies3 January 2023http://www.cninfo.com.cn2023-002Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
19 January 2023http://www.cninfo.com.cn2023-003Announcement on Resolutions of the Sixth Extraordinary
Meeting of the Tenth Session of the Board of Directors
20 January 2023http://www.cninfo.com.cn2023-004Announcement on Resolutions of the Third Extraordinary
Meeting of the Tenth Session of the Supervisory Committee
20 January 2023http://www.cninfo.com.cn2023-005Notice of the 2023 First Extraordinary General Meeting, 2023
First Class Meeting for Holders of Domestic-listed Shares,and 2023 First Class Meeting for Holders of Overseas-listedShares
30 January 2023http://www.cninfo.com.cn2023-006Announcement on Effects of Dilution on the Current Earnings
Per Share As a Result of the Transaction and RelevantRemedial Arrangement of the Company
20 January 2023http://www.cninfo.com.cn2023-0072022 Annual Results Forecast31 January 2023http://www.cninfo.com.cn2023-008Announcement on the Continued Pledge of Shares held by
Shareholders
11 February 2023http://www.cninfo.com.cn2023-009Reply to the Inquiry Letter on Restructuring from the Shenzhen
Stock Exchange
16 February 2023http://www.cninfo.com.cn2023-010Announcement on Resolutions of the 2023 First Extraordinary
General Meeting, 2023 First Class Meeting for Holders ofDomestic-listed Shares, and 2023 First Class Meeting forHolders of Overseas-listed Shares
28 February 2023http://www.cninfo.com.cn2023-011Self-inspection Report on the Trading of Shares by Insiders
on Asset Purchase Through Issuance of Shares and CashPayments and Related Party Transaction
28 February 2023http://www.cninfo.com.cn2023-012Supplementary Announcement on the Self-inspection Report on
the Trading of Shares by Insiders on Asset Purchase ThroughIssuance of Shares and Cash Payments and Related PartyTransaction
7 March 2023http://www.cninfo.com.cn2023-013Announcement on the Continued Pledge of Shares held by
Shareholders
11 March 2023http://www.cninfo.com.cn2023-014Announcement on the Acceptance of Asset Purchase Through
Issuance of Shares and Cash Payments and Related PartyTransaction by the Shenzhen Stock Exchange
16 March 2023http://www.cninfo.com.cn2023-015Shandong Chenming Paper Holdings Limited Announcement on
Payment of 2023 Interest and Delisting with Respect to theFirst Tranche of Corporate Bonds Publicly Issued to QualifiedInvestors in 2018
30 March 2023http://www.cninfo.com.cn2023-016Announcement on Resolutions of the Fourth Meeting of the
Tenth Session of the Board of Directors
31 March 2023http://www.cninfo.com.cn2023-017Announcement on Resolutions of the Fourth Extraordinary
Meeting of the Tenth Session of the Supervisory Committee
31 March 2023http://www.cninfo.com.cn
2023 ANNUAL REPORT
VIII Material Matters
Announcement No.Subject matterDate of publicationPublication website and index2023-0182022 Annual Report Summary31 March 2023http://www.cninfo.com.cn2023-019Notice of 2022 Annual General Meeting31 March 2023http://www.cninfo.com.cn2023-020Special Statement on Securities Investment in 202231 March 2023http://www.cninfo.com.cn2023-021Announcement on Appointment of Auditor for 202331 March 2023http://www.cninfo.com.cn2023-022Announcement on the Development of Equipment Financing
Business
31 March 2023http://www.cninfo.com.cn2023-023Announcement on Carrying out Factoring Business of Accounts
Receivable
31 March 2023http://www.cninfo.com.cn2023-024Announcement on Expected Provision of Guarantees to
Subsidiaries for 2023
31 March 2023http://www.cninfo.com.cn2023-025Special Statement on the Proposed Non-Distribution of Profit
for 2022
31 March 2023http://www.cninfo.com.cn2023-026Announcement on Changes in Accounting Policies31 March 2023http://www.cninfo.com.cn2023-027Announcement on the 2022 Annual Online Performance Briefing31 March 2023http://www.cninfo.com.cn2023-028Announcement on Receiving the Notice on Suspending the
Review of Asset Purchase Through Issuance of Shares andCash Payments and Related Party Transaction from theShenzhen Stock Exchange
1 April 2023http://www.cninfo.com.cn2023-029Supplementary Notice of 2022 Annual General Meeting1 April 2023http://www.cninfo.com.cn2023-030Announcement on Resolutions of the Seventh Extraordinary
Meeting of the Tenth Session of the Board of Directors
20 April 2023http://www.cninfo.com.cn2023-031Announcement on the Operational Property-secured Loan by a
Subsidiary and Provision of Guarantee therefor
20 April 2023http://www.cninfo.com.cn2023-032Notice of the 2023 Second Extraordinary General Meeting20 April 2023http://www.cninfo.com.cn2023-033Announcement on the Continued Pledge of Shares held by
Shareholders
22 April 2023http://www.cninfo.com.cn2023-034Announcement on Application for Resumption of Review of
Asset Purchase Through Issuance of Shares and CashPayments and Related Party Transaction
25 April 2023http://www.cninfo.com.cn2023-035Announcement on Receiving the Notice of Resumption of
Review from the Shenzhen Stock Exchange
26 April 2023http://www.cninfo.com.cn2023-036Announcement on Signing a Strategic Cooperation Agreement
with China Construction Bank Shandong Branch
26 April 2023http://www.cninfo.com.cn2023-037Announcement on the Meeting Arrangements for the Review
of Asset Purchase Through Issuance of Shares and CashPayments and Related Party Transaction by the ListingReview Center of the Shenzhen Stock Exchange
26 April 2023http://www.cninfo.com.cn2023-038Announcement on Receiving the Opinion Implementation
Letter from the Listing Review Center of the Shenzhen StockExchange
28 April 2023http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2023 Annual Report
(Continued)
VIII Material Matters
Announcement No.Subject matterDate of publicationPublication website and index2023-039Announcement on Resolutions of the Fifth Meeting of the Tenth
Session of the Board of Directors
29 April 2023http://www.cninfo.com.cn2023-040Announcement on Resolutions of the Fifth Meeting of the Tenth
Session of the Supervisory Committee
29 April 2023http://www.cninfo.com.cn2023-0412023 First Quarterly Report29 April 2023http://www.cninfo.com.cn2023-042Announcement on Signing of the Agreement on the Recovery of
State-owned Construction Land Use Right signed by WuhanChenming
29 April 2023http://www.cninfo.com.cn2023-043Announcement on Resolutions of the 2023 Second Extraordinary
General Meeting
9 May 2023http://www.cninfo.com.cn2023-044Announcement on Resolutions of 2022 Annual General Meeting13 May 2023http://www.cninfo.com.cn2023-045Announcement on Safety Accidents Occurred by the Slurry
Residue Outsourcing Entity of a Subsidiary
25 May 2023http://www.cninfo.com.cn2023-046Announcement on Resolutions of the Eighth Extraordinary
Meeting of the Tenth Session of the Board of Directors
30 June 2023http://www.cninfo.com.cn2023-047Announcement on Resolutions of the Fourth Extraordinary
Meeting of the Tenth Session of the Supervisory Committee
30 June 2023http://www.cninfo.com.cn2023-048Announcement on Termination and Withdrawal of Application
Documents for Asset Purchase Through Issuance of Sharesand Cash Payments
30 June 2023http://www.cninfo.com.cn2023-049Announcement on Completion of Payment for 2017 First
Tranche of Medium-term Notes
15 July 2023http://www.cninfo.com.cn2023-050Announcement on Self-Inspection Report of Insider Trading
in Respect of the Termination of Share Issuance and CashPayments for Asset Purchase
15 July 2023http://www.cninfo.com.cn2023-0512023 Interim Results Forecast15 July 2023http://www.cninfo.com.cn2023-052Announcement on the Continued Pledge of Shares held by
Shareholders
15 July 2023http://www.cninfo.com.cn2023-053Announcement on Resolutions of the Ninth Extraordinary
Meeting of the Tenth Session of the Board of Directors
18 July 2023http://www.cninfo.com.cn2023-054Announcement on Resolutions of the Fifth Extraordinary Meeting
of the Tenth Session of the Supervisory Committee
18 July 2023http://www.cninfo.com.cn2023-055Announcement on Failing to Fulfil the Unlocking Conditions for
the Second Unlocking Period Under the 2020 Restricted AShare Incentive Scheme and Repurchase and Cancellation ofCertain Restricted Shares
18 July 2023http://www.cninfo.com.cn2023-056Review Opinions on the Unlocking Conditions for the Second
Unlocking Period Under the 2020 Restricted A ShareIncentive Scheme and Repurchase and Cancellation ofCertain Restricted Shares of the Supervisory Committee
18 July 2023http://www.cninfo.com.cn2023-057Announcement on Repurchase and Cancellation of Certain
Restricted Shares and Notice to Creditors
18 July 2023http://www.cninfo.com.cn2023-058Announcement on Risks in Relation to the Ownership of B
Shares and H Shares Held by the Controlling Shareholder
18 July 2023http://www.cninfo.com.cn2023-059Announcement on the Release of Pledge of Shareholders’
Shares
26 July 2023http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2023 Annual Report
(Continued)
2023 ANNUAL REPORT
VIII Material Matters
Announcement No.Subject matterDate of publicationPublication website and index2023-060Announcement on Continued Pledge of Shares held by
Shareholders
29 July 2023http://www.cninfo.com.cn2023-061Announcement on Continued Pledge of Shares held by
Shareholders
11 August 2023http://www.cninfo.com.cn2023-062Announcement on the Progress of Litigation19 August 2023http://www.cninfo.com.cn2023-063Announcement on Pledge of Shareholders’ Shares29 August 2023http://www.cninfo.com.cn2023-064Announcement of Resolutions of the Board of Directors on
Interim Report
31 August 2023http://www.cninfo.com.cn2023-065Announcement of Resolutions of the Supervisory Committee on
Interim Report
31 August 2023http://www.cninfo.com.cn2023-0662023 Interim Report Summary31 August 2023http://www.cninfo.com.cn2023-067Announcement on Resolutions of the Tenth Extraordinary
Meeting of the Tenth Session of the Board of Directors
9 September 2023http://www.cninfo.com.cn2023-068Announcement on Partial Disposal of Equity Interest in Wuhan
Chenming
9 September 2023http://www.cninfo.com.cn2023-069Announcement on Provision of External Financial Assistance
upon the Disposal of Equity Interest in Wuhan Chenming
9 September 2023http://www.cninfo.com.cn2023-070Notice of 2023 Third Extraordinary General Meeting9 September 2023http://www.cninfo.com.cn2023-071Announcement on Resolutions of the Eleventh Extraordinary
Meeting of the Tenth Session of the Board of Directors
21 September 2023http://www.cninfo.com.cn2023-072Announcement on Capital Increase and Introduction of Strategic
Investors of a Majority-owned Subsidiary
21 September 2023http://www.cninfo.com.cn2023-073Announcement on Resolution of the 2023 Third Extraordinary
General Meeting
27 September 2023http://www.cninfo.com.cn2023-074Announcement on Resolutions of the Twelfth Extraordinary
Meeting of the Tenth Session of the Board of Directors
9 October 2023http://www.cninfo.com.cn2023-075Announcement on Change of General Manager of the Company9 October 2023http://www.cninfo.com.cn2023-0762023 Third Quarterly Report31 October 2023http://www.cninfo.com.cn2023-077Announcement on Continued Pledge of Shares held by
Shareholders
4 November 2023http://www.cninfo.com.cn2023-078Announcement on Completion of Repurchase and Cancellation
of Certain Restricted Shares
23 November 2023http://www.cninfo.com.cn2023-079Announcement on Continued Pledge of Shares held by
Shareholders
25 November 2023http://www.cninfo.com.cn2023-080Announcement on Resolutions of the Thirteenth Extraordinary
Meeting of the Tenth Session of the Board of Directors
29 November 2023http://www.cninfo.com.cn2023-081Announcement on the Disposal of Equity Interest in Investee29 November 2023http://www.cninfo.com.cn2023-082Announcement on Adjustment to Amount of Guarantee Between
Subsidiaries
15 December 2023http://www.cninfo.com.cn2023-083Announcement on Pledge of Shareholders’ Shares22 December 2023http://www.cninfo.com.cn2023-084Announcement on Progress of the Disposal of Equity Interest in
Investee
27 December 2023http://www.cninfo.com.cn2023-085Announcement on Pledge of Shareholders’ Shares30 December 2023http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2023 Annual Report
(Continued)
VIII Material Matters
XVII. Matters of significant of subsidiaries of the Company? Applicable Not applicable
1. Introduction of strategic investors by Zhanjiang Chenming
On 20 September 2023, the Company convened the eleventh extraordinary meeting of the tenth session of the Board,at which the Proposal on Capital Contribution and Introduction of Strategic Investors of a Controlling Subsidiarywas considered and approved. Given the promising development prospects of Zhanjiang Chenming, a controllingsubsidiary of the Company, and the high recognition of the pulp and paper integration strategic layout, ShandongCaixin Investment Co., Ltd., a wholly-owned subsidiary of Shandong key state-owned enterprise Shandong CaixinAsset Operation Co., Ltd., made capital contribution to Zhanjiang Chenming in the amount of RMB300 million.For details, please refer to the relevant announcement disclosed by the Company published on CNINFO on 21September 2023 (announcement no.: 2023-072) and the overseas regulatory announcement disclosed on the websiteof Hong Kong Stock Exchange on 20 September 2023.
2. Business status of Chenming Leasing
At present, the Company focuses on the development of its principal activities, i.e. pulp production and papermaking, and continues to reduce the size of the financial leasing business. As at the end of the reporting period, thebalance of financial leases of Chenming Leasing decreased to RMB4.8 billion. As affected by the macro-economiccondition, some clients experienced short-term operational difficulties. some financial lease receivables were overduewith the overdue principals amounting to RMB1,440 million, for which provisions of RMB430 million were made, anda provision coverage rate of 29.9%. Certain assets have been seized through litigation. The Company has resortedto, among other things, control of the underlying assets, litigation for seizure, recovery for guarantors and debtreconstruction with the overall risks under control.
2023 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: shareOpening balanceChange during the reporting period (+/-)Closing balanceAmountPercentageNew issueBonus issue
Sharesconvertedfrom reservesOthersSubtotalAmountPercentageI. Restricted shares61,489,8372.06%-24,911,250-24,911,25036,578,5871.24%
1. Shares held by other domestic
investors61,489,8372.06%-24,911,250-24,911,25036,578,5871.24%Including: Shares held by
domestic natural persons61,489,8372.06%-24,911,250-24,911,25036,578,5871.24%II. Non-restricted shares2,918,252,36397.94%1,982,2501,982,2502,920,234,61398.76%
1. RMB ordinary shares1,683,561,84756.50%1,982,2501,982,2501,685,544,09757.00%
2. Domestic listed foreign shares706,385,26623.71%706,385,26623.89%
3. Overseas listed foreign shares528,305,25017.73%528,305,25017.87%III. Total number of shares2,979,742,200100.00%-22,929,000-22,929,0002,956,813,200100.00%The reasons for such changes? Applicable Not applicableThe Shenzhen Branch of China Securities Depository and Clearing Corporation Limited recalculated the statutoryquota of transferable shares for the Directors, Supervisors and Senior Management of the Company this year at 25%on the first trading day of this year based on the shares of the Company registered under the names of its Directors,Supervisors and Senior Management on the last trading day of the previous year, resulting in a reduction of 1,982,250RMB ordinary shares in the locked shares of Senior Management and an increase of 1,982,250 RMB ordinary sharesin restricted shares. Pursuant to the 2020 Restricted A Share Incentive Scheme (Draft), a total of 22,929,000 restrictedA shares that have granted to participants but not yet unlocked were repurchased and cancelled, resulting in areduction of 22,929,000 shares in both restricted shares and total number of shares.
IX Changes in Share Capital and Shareholders
I. Changes in shares(Continued)
1. Changes in shares
(Continued)Approval of changes in shareholding? Applicable Not applicableOn 17 July 2023, the Company convened the ninth extraordinary meeting of the tenth session of the Board and thefifth extraordinary meeting of the tenth session of the Supervisory Committee, at which the Resolution on the FailureFulfilment of the Unlocking Conditions for the Second Unlocking Period under the 2020 Restricted A Share IncentiveScheme and Repurchase and Cancellation of Certain Restricted Shares was considered and approved. The results for2022 of the Company failed to pass the performance appraisal targets at company level set for the second unlockingperiod as set out in the 2020 Restricted A Share Incentive Scheme (Draft) and the Assessment Management Measuresfor the 2020 Restricted A Shares Incentive Scheme. Meanwhile, 5 participants lost their incentive qualification dueto their resignation. The Board of the Company repurchased and cancelled 22,929,000 restricted A shares of theparticipants that have been granted but not yet unlocked, representing 28.81% of the total number of shares grantedunder the 2020 Restricted A Share Incentive Scheme.On 20 November 2023, the Company completed the repurchase and cancellation of 22,929,000 restricted A shares atthe Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.Transfer of shares arising from changes in shareholding Applicable ? Not applicableThe effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earningsper share and net assets per share attributable to ordinary shareholders of the Company for the latest year andthe latest period Applicable ? Not applicableOther information considered necessary by the Company or required by the securities regulatory authorities to bedisclosed Applicable ? Not applicable
2023 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
I. Changes in shares(Continued)
2. Changes in restricted shares
? Applicable Not applicable
Unit: share
Name of shareholders
Restrictedshares at thebeginning ofperiod
Restrictedshares released
during the
period
Restrictedshares increased
during theperiod
Restrictedshares at theend of periodReason for restrictionDate of release from restrictionChen Hongguo23,310,03306,000,00017,310,033Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
20 November 2023Hu Changqing3,782,14302,250,0001,532,143Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
750,000 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 3 January 2023;1,500,000 restricted shares under the
Equity Incentive Scheme completedregistration for repurchase andcancellation on 20 November 2023.Li Xingchun3,750,00001,500,0002,250,000Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
20 November 2023Li Feng2,929,52001,350,0001,579,520Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
450,000 locked-up shares of Directors,Supervisors and Senior Managementwere released on 3 January 2023;900,000 restricted shares under theEquity Incentive Scheme completedregistration for repurchase andcancellation on 20 November 2023.Li Weixian1,560,9000957,300603,600Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
357,300 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 3 January 2023;600,000 restricted shares under the
Equity Incentive Scheme completedregistration for repurchase andcancellation on 20 November 2023.Li Kang111,97500111,975Locked-up shares of Directors,
Supervisors and Senior Management
In accordance with relevant
requirements for shares held byDirectors, Supervisors and SeniorManagementLi Xueqin2,895,9910900,0001,995,991Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
20 November 2023
IX Changes in Share Capital and Shareholders
Name of shareholders
Restrictedshares at thebeginning ofperiod
Restrictedshares released
during theperiod
Restrictedshares increased
during theperiod
Restrictedshares at theend of periodReason for restrictionDate of release from restrictionLi Zhenzhong1,584,7500724,950859,800Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
124,950 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 3 January 2023;600,000 restricted shares under the
Equity Incentive Scheme completedregistration for repurchase andcancellation on 20 November 2023.Li Mingtang750,0000450,000300,000Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
150,000 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 3 January 2023;300,000 restricted shares under the
Equity Incentive Scheme completedregistration for repurchase andcancellation on 20 November 2023.Dong Lianming750,0000450,000300,000Restricted shares of the participants of
the Share Incentive Scheme
150,000 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 3 January 2023;300,000 restricted shares under the
Equity Incentive Scheme completedregistration for repurchase andcancellation on 20 November 2023.Yuan Xikun258,525090,000168,525Restricted shares of the participants of
the Share Incentive Scheme
20 November 2023Other 88 participants
under the 2020Restricted A ShareIncentive Schemeother than theaforementioneddirectors and seniormanagement
19,806,000010,239,0009,567,000Restricted shares of the participants of
the Share Incentive Scheme
20 November 2023
Total61,489,837024,911,25036,578,587
I. Changes in shares(Continued)
2. Changes in restricted shares
(Continued)
2023 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
II. Issuance and listing of securities
1. Issuance of securities (excluding preference shares) during the reporting period
Applicable ? Not applicable
2. Changes in the total number of shares and structure of shareholders and the structure of the assets
and liabilities of the Company? Applicable Not applicableOn 17 July 2023, the Company convened the ninth extraordinary meeting of the tenth session of the Board andthe fifth extraordinary meeting of the tenth session of the Supervisory Committee, at which the Resolution on theFailure Fulfilment of the Unlocking Conditions for the Second Unlocking Period under the 2020 Restricted A ShareIncentive Scheme and Repurchase and Cancellation of Certain Restricted Shares was considered and approved. On20 November 2023, the Company completed the registration for the repurchase and cancellation of certain restrictedshares that have been granted to 98 participants but not yet unlocked under the 2020 Restricted A Share IncentiveScheme. A total of 22,929,000 A shares were repurchased and cancelled. The total number of shares of the Companychanged to 2,956,813,200 shares from 2,979,742,200, and there was no change in controlling shareholder of theCompany. Upon the repurchase and cancellation of 22,929,000 A shares, there was no change on net assets, whileboth assets and liabilities decreased by RMB66.2288 million.
3. Existing staff shares
Applicable ? Not applicable
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: shareTotal number ofordinary shareholdersas at the end of thereporting period
142,995, of which121,718 were holdersof A shares, 20,954were holders of Bshares and 323 wereholders of H shares
Total number ofordinary shareholdersas at the end of themonth prior to thepublication date ofthis annual report
140,889, of which119,803 were holdersof A shares, 20,763were holders of Bshares and 323 wereholders of H shares
Total number ofholders of preferenceshares with restorevoting right as at theend of the reportingperiod
0Total number ofholders of preferenceshares with restoredvoting right as at theend of the month priorto the disclosure dateof the annual report
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
(excluding the shares lent under refinancing business)
Name of shareholders
Nature ofshareholders
Percentage
ofshareholding
Number ofshares heldat the end ofthe reporting
period
Changes(increase or
decrease)during the
reporting
period
Number ofrestrictedshares held
Number ofnon-restricted
shares heldShare pledged or locked-up
Status of
sharesNumberCHENMING HOLDINGS COMPANY LIMITEDState-owned legal
person
15.47%457,322,91900457,322,919Pledged268,994,000HKSCC NOMINEES LIMITEDOverseas legal
person
12.63%373,461,27572,6500373,461,275CHENMING HOLDINGS (HONG KONG) LIMITED
(Note 1)
Overseas legal
person
12.32%364,131,56300364,131,563Hong ZejunDomestic natural
person
1.19%35,300,000-41,400,000035,300,000Chen HongguoDomestic natural
person
0.85%25,080,044-6,000,00017,310,0337,770,011SHANDONG SUN HOLDINGS GROUP CO., LTD.Domestic non-
state-ownedlegal person
0.85%24,987,1170024,987,117China Merchants Securities (HK) Co., LimitedOverseas legal
person
0.71%20,972,25810,432,024020,972,258VANGUARD EMERGING MARKETS STOCK INDEX
FUND
Overseas legalperson
0.50%14,852,146163,800014,852,146VANGUARD TOTAL INTERNATIONAL STOCK INDEX
FUND
Overseas legalperson
0.50%14,771,9450014,771,945HONG KONG SECURITIES CLEARING COMPANY
LIMITED
Overseas legalperson
0.38%11,251,780-6,460,301011,251,780Strategic investors or general legal persons whobecome the top ten shareholders due to theplacement of new shares
NilRelated party relationship or acting in concert among
the above shareholders
A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder,
Chenming Holdings Company Limited, which is a state-owned legal person; A shareholder, Chen Hongguo, is the legal representative and
chairman of Chenming Holdings Company Limited. Save for the above, it is not aware that any other shareholders of tradable shares are
persons acting in concert. It is also not aware that any other shareholders of tradable shares are related to each other.Explanation of the aforementioned shareholders’
entrusted/entrusted voting rights and waiver ofvoting rights
NilSpecial explanation for designated repurchase accounts
among the top ten shareholders
Nil
2023 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
Shareholdings of the top ten non-restricted shareholdersName of shareholder
Number of non-restricted shares heldas at the end of thereporting periodClass of shares
Class of sharesNumberCHENMING HOLDINGS COMPANY LIMITED457,322,919RMB ordinary shares457,322,919HKSCC NOMINEES LIMITED373,461,275Overseas listed foreign shares373,461,275CHENMING HOLDINGS (HONG KONG) LIMITED
(Note 1)
364,131,563Domestic listed foreign shares210,717,563
Overseas listed foreign shares153,414,000Hong Zejun35,300,000RMB ordinary shares35,300,000SHANDONG SUN HOLDINGS GROUP CO., LTD.24,987,117RMB ordinary shares24,987,117China Merchants Securities (HK) Co., Limited20,972,258Domestic listed foreign shares20,972,258VANGUARD EMERGING MARKETS STOCK
INDEX FUND
14,852,146Domestic listed foreign shares14,852,146VANGUARD TOTAL INTERNATIONAL STOCKINDEX FUND
14,771,945Domestic listed foreign shares14,771,945HONG KONG SECURITIES CLEARING COMPANY LIMITED11,251,780RMB ordinary shares11,251,780GUOTAI JUNAN SECURITIES (HONG KONG)LIMITED
6,252,684Domestic listed foreign shares6,252,684Related party relationship or acting in concert
among the top ten shareholders of non-restricted shares, and between the top tenshareholders of non-restricted shares and thetop ten shareholders
A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is
a wholly-owned subsidiary of a shareholder, Chenming Holdings Company Limited, which is
a state-owned legal person. Save for the above, it is not aware that any other shareholders of
tradable shares are persons acting in concert. It is also not aware that any other shareholders
of tradable shares are related to each other.Securities margin trading of top ten ordinary
Shareholders
Chenming Holdings Company Limited held 457,322,919 RMB ordinary shares, of which
326,322,919 shares were held through ordinary account and 131,000,000 shares were held
through credit guarantee security account;
Hong Zejun held 35,300,000 RMB ordinary shares, of which no share was held through
ordinary account and 35,300,000 shares were held through credit guarantee security account;
Shandong Sun Holdings Group Co., Ltd. held 24,987,117 RMB ordinary shares, of which no
share was held through ordinary account and 24,987,117 shares were held through credit
guarantee security account.
Note 1: In order to meet its own capital needs, Chenming Holdings (Hong Kong) Limited conducted share financing business with overseas
institutions, entrusting 210,717,563 B shares and 153,414,000 H shares of the Company held by it to the custody brokeragedesignated by overseas institutions. The aforesaid shares were subject to the risk of not to be recovered, which may lead to areduction in the Company’s shareholding, but does not affect Chenming Holdings’position as the largest shareholder, and does notaffect the Company’s control. For details, please refer to the announcement disclosed by the Company on CNINFO on 18 July 2023(announcement no.: 2023-058) and the insider information disclosed by the Company on the website of Hong Kong Stock Exchangeon 18 July 2023.Share lending by top 10 shareholders under refinancing business Applicable ? Not applicableChanges in top 10 shareholders as compared to prior period? Applicable Not applicable
III. Shareholders and beneficial controllers(Continued)
1. Total number of shareholders and shareholdings
(Continued)
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
1. Total number of shareholders and shareholdings
(Continued)
Changes in top 10 shareholders as compared to prior period(Continued)
Unit: shareChanges in top 10 shareholders as compared to prior period
Number of shares lent out but not
yet returned under refinancingarrangement as at the end of
the period
Shareholding under ordinary
account and credit account andthe number of shares lent out butnot yet returned under refinancingarrangement as at the end of
the periodName of shareholder (full name)
Addition/exit duringthe reporting periodTotal
Percentage oftotal share capitalTotal
Percentage oftotal share capitalGUOTAI JUNAN SECURITIES (HONG
KONG) LIMITEDExit0.000.00%6,252,6840.00%China Merchants Securities (HK)
Co., LimitedAddition0.000.00%20,972,2580.00%Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinaryshareholders and top 10 non-restricted ordinary shareholders of the Company Yes ? NoThe top 10 ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company did not enter intoany agreed repurchase transaction during the reporting period.
2023 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterpriseType of controlling shareholder: legal personName of controllingshareholders
Legalrepresentative/Person in chargeof the unitDate of establishmentEnterprise codePrincipal businessCHENMING HOLDINGS
COMPANY LIMITED
Chen Hongguo30 December 200591370783783485189QInvestment in paper
making, electricity, heatand arboriculture by itsown capital.Shareholdings of controlling shareholders whohave control or hold shares in other domestic oroverseas listed companies during the reportingperiod
Save for the Company, Chenming Holdings Company Limited is indirectlyinterested in 10.16% equity interest in Zhejiang Kingland Pipeline andTechnologies Co., Ltd.Change of controlling shareholders during the reporting period Applicable ? Not applicableThere was no change in the controlling shareholders of the Company during the reporting period.
3. Beneficial controller of the Company and persons acting in concert
Nature of the beneficial controller: Regional state-owned assets administration authorityType of the beneficial controller: legal person
Name of beneficial controller
Legalrepresentative/Person in charge ofthe unit
Date ofestablishmentEnterprise codePrincipal businessState-owned Assets Supervision and
Administration Bureau of ShouguangCity
N/A1 August 1991N/AResponsible for the management
and capital operation of the state-owned assets of enterprises andbusiness units in Shouguang city.Shareholdings of beneficial controller who
has control or holds shares in otherdomestic or overseas listed companiesduring the reporting period
Save for the Company, State-owned Assets Supervision and Administration Office of Shouguang City isalso the beneficial controller of Shandong Molong Petroleum Machinery Co. Ltd. and Zhejiang KinglandPipeline and Technologies Co., Ltd.
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
3. Beneficial controller of the Company and persons acting in concert
(Continued)Change of beneficial controller during the reporting period Applicable ? Not applicableThere was no change in the beneficial owner of the Company during the reporting period.Chart illustrating the relationship between the Company and the beneficial controller
Shandong Chenming Paper Holdings Limited
Shandong Shouguang Jinxin InvestmentDevelopment Holdings Group Co., Ltd.
State-owned Assets Supervision and Administration
Commission of Shouguang City
Chenming Holdings Company Limited
Chenming Holdings (Hong Kong)
Limited
Beneficial controller controlling the Company through trust or other asset management method Applicable ? Not applicable
2023 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
4. The number of shares pledged by the controlling shareholder or the largest shareholder of the
Company and persons acting in concert with it reaches 80% of the number of shares held by them inaggregate Applicable ? Not applicable
5. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable ? Not applicable
6. Restrictions on decrease in shareholding by controlling shareholders, beneficial controller,
reorganising party and other undertaking parties Applicable ? Not applicableIV. The implementation of share repurchase during the reporting periodProgress of share repurchase Applicable ? Not applicableProgress of decrease in the holding of repurchased shares by way of bidding
Applicable ? Not applicable
X Preference Shares
Applicable ? Not applicableThe Company had no preference shares during the reporting period.
2023 ANNUAL REPORT
XI Bonds
Applicable ? Not applicable
XII Financial Report
I. Auditors’ Report
Type of auditor’s opinionStandard and unqualified opinionsThe date of the audit report signed28 March 2024Name of the auditorGrant Thornton (Special General Partnership)Reference number of the auditor’s reportZhi Tong Shen Zi (2024) No. 371A005892Name of certified public accountantsJiang Tao and Guo DongmeiText of the auditor’s report
To all shareholders of Shandong Chenming Paper Holdings Limited:
I. Auditor’s opinion
We have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter“ChenmingPaper”), which comprise the consolidated and the Company’s balance sheets as at 31 December 2023, theconsolidated and the Company’s profit and loss statements, the consolidated and the Company’s cash flowstatements and the consolidated and the Company’s statements of changes in shareholders’equity for 2023 andnotes to the relevant financial statements.In our opinion, the accompanying financial statements were prepared in accordance with the Accounting Standardsfor Business Enterprises in all material aspects and give a true and fair view of the consolidated and the Company’sfinancial position of Chenming Paper as at 31 December 2023 and of its consolidated and the Company’s operatingresults and cash flows for 2023.
II. Basis of opinions
We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute ofCertified Public Accountants. Our responsibilities under those standards are further described in the responsibilitiesof certified public accountants for the audit of the financial statements section of the auditor’s report. We areindependent of Chenming Paper in accordance with the ethical codes of Chinese certified public accountants, andwe have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
III. Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of thefinancial statements for the current period. These matters were addressed in the context of our audit of the financialstatements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.
2023 ANNUAL REPORT
XII Financial Report
(i) Impairment provision test for inventories of machine-made paper
For detailed disclosures of relevant information, please see note V. 13 and note VII. 8 of the financial statements.
1. Details
The inventory balance of Chenming Paper as at the end of 2023 was RMB4,977,238,900, of whichthe balance of raw materials, work in progress and goods in stock related to machine-made paperbusiness was RMB3,493,260,800, with a provision for impairment of inventories of RMB19,060,900 anda carrying value of RMB3,474,199,900. As at the balance sheet date, inventories of machine-made paperare measured at the lower of cost or net realisable value by the management of Chenming Paper (the“management”), and provision for impairment of inventories is made on the basis of the excess of the costof an individual inventory over its net realisable value. The management determines the estimated sellingprice based on historical selling prices, contracted selling prices, etc., taking into account the purposefor which the inventories are held, and the net realisable value of inventories is determined by deductingthe estimated costs to be incurred to completion, estimated selling expenses and related taxes from theestimated selling price.We have identified impairment provision test for inventories of machine-made paper as a key audit matterdue to the significant amount of inventories of machine-made paper and the significant managementjudgement involved in determining the net realisable value of inventories.
2. Application for auditing
We have carried out the following audit procedures for the impairment provision test for inventories ofmachine-made paper:
(1) we identified and evaluated and tested the effectiveness of the design and operation of key internal
controls related to impairment provision for inventories of machine-made paper;
(2) we identified and evaluated whether the accounting policies and accounting estimates of Chenming
Paper for impairment provision for inventories of machine-made paper comply with the AccountingStandards for Business Enterprises and industry practices;
(3) we supervised inventory taking and monitored the status of inventories of machine-made paper,
and checked the identification of obsolete and aged inventories;
(4) we obtained an inventory ageing schedule of machine-made paper and performed a review of the
status and turnover of aged inventories; and
(5) we obtained a copy of the inventory impairment table of machine-made paper, assessed the
reasonableness of the significant estimates made by management in determining the net realisablevalue by reviewing subsequent selling prices, and performed recalculations.
XII Financial Report
(ii) Recognition of revenue from machine-made paperFor detailed disclosures of relevant information, please see note V. 30 and note VII. 48 of the financialstatements.
1. Details
For the year 2023, Chenming Paper achieved operating revenue of RMB26,608,570,200, of whichRMB23,892,883,800 was from machine-made paper and pulp, accounting for 89.79% of the operatingrevenue. For domestic machine-made paper sales business, Chenming Paper recognised the revenueafter the goods were delivered and signed by the customer for confirmation; for foreign machine-madepaper sales business, Chenming Paper recognised the revenue after the goods were loaded on board anddeclared.As revenue is one of the key performance indicators of Chenming Paper, and the revenue from the salesof machine-made paper accounts for a relatively huge proportion of the total revenue due to its enormoussales volume, there may be potential misstatement in relation to whether revenue recognition is accountedfor in the appropriate period of the financial statements, which has a significant impact on the financialstatements. Therefore, we have identified recognition of revenue from machine-made paper as a key auditmatter.
2. Application for auditing
We have carried out the following audit procedures for the recognition of revenue from machine-madepaper:
(1) we identified, evaluated and tested the effectiveness of the design and operation of key internal
controls related to machine-made paper sales business of Chenming Paper;
(2) we conducted sampling inspections on sales contracts, identified contract terms and conditions
related to the transfer of control of the goods, assessed whether the timing of recognition of salesrevenue from Chenming Paper meets the requirements of the Accounting Standards for BusinessEnterprises;
(3) we analysed revenue and gross profit by taking into account product types and identified whether
the abnormal fluctuations in the amount of revenue are reasonable in the current period;
(4) we inspected the occurrence of on-the-spot recognition of sales at the end of the inspection period
and inspected goods returns after the inspection period to determine the accuracy of revenuerecognition during the period;
(5) we collected samples from sales revenue recorded around the balance sheet date for cut-off
tests; verified delivery orders and other supporting documents to assess whether sales revenue isrecorded in the appropriate accounting period; and
(6) we sought external confirmations for clients with larger sales during the period.
2023 ANNUAL REPORT
XII Financial Report
IV. Other informationThe management of Chenming Paper is responsible for other information. Other information includes the informationcovered in the 2023 annual report of Chenming Paper, but does not include the financial statements and our auditreport.Our audit opinions published in the financial statements do not cover other information and we do not publish anyform of assurance conclusion on other information.In conjunction with our audit of the financial statements, our responsibility is to read other information, during whichwe consider whether there is significant inconsistency or other material misstatement of other information with thefinancial statements or what we have learned during the audit.Based on the work we have performed, if we determine that there is a material misstatement of other information, weshould report that fact. In this regard, we have nothing to report.V. Management and management responsibility for financial statementsThe management of Chenming Paper is responsible for the preparation of financial statements in accordance with therequirements of the Accounting Standards for Business Enterprises to enable them to achieve fair reflection, and toachieve the design, implementation and maintenance of necessary internal controls so that the financial statementsare free of material misstatements due to fraud or errors.In the preparation of the financial statements, the management is responsible for assessing the continuing operationscapabilities of Chenming Paper, disclosing issues related to going concern (if applicable), and applying the goingconcern assumption unless the management plans to liquidate Chenming Paper, terminate operations or have noother realistic options.The management is responsible for supervising the financial reporting process of Chenming Paper.
VI. Auditor’s responsibility for auditing financial statements
Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from materialmisstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance isa high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standardscan always discover a major misstatement when it exists. Misstatements may be caused by fraud or errors, and aregenerally considered to be material if it is reasonably expected that misstatements, individually or in aggregate, mayaffect the economic decision made by users of financial statements based on the financial statements.
XII Financial Report
In the process of conducting audit work in accordance with auditing standards, we use professional judgment andmaintain professional suspicion. At the same time, we also perform the following tasks:
(1) To identify and assess risks of material misstatement of financial statements due to fraud or errors, design
and implement audit procedures to address these risks, and obtain adequate and appropriate audit evidence,together perform as a basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentionalomission, misrepresentation or override of internal controls, the risk of failing to detect a material misstatementdue to fraud is higher than the risk of failing to detect a material misstatement due to an error.
(2) To understand audit-related internal controls to design appropriate audit procedures.
(3) To evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of
accounting estimates and related disclosures.
(4) To conclude on the appropriateness of management
’s use of the continuing operation assumption. At the sametime, according to the audit evidence obtained, it may lead to conclusions as to whether there are significantuncertainties in matters or circumstances that have significant doubts about the ability of Chenming Paper tocontinue its operations. If we conclude that there are significant uncertainties, the auditing standards requireus to request the users of the report to pay attention to the relevant disclosures in the financial statements inthe audit report; if the disclosure is not sufficient, we should publish modified audit report. Our conclusions arebased on the information available as of the date of the audit report. However, future events or conditions maycause Chenming Paper to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure, and content of the financial statements and evaluate whether the
financial statements fairly reflect the relevant transactions and matters.
(6) To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities
in Chenming Paper to express opinions on the financial statements. We are responsible for guiding, supervisingand executing group audits, and take full responsibility for the audit opinion.We communicate with the management on planned audit scope, time arrangements and major audit findings,including communication of the internal control deficiencies that we identified during the audit.We also provide statements to the management on compliance with ethical requirements related to independence,and communicate with the management on all relationships and other matters that may reasonably be considered toaffect our independence, as well as related preventive measures (if applicable).
2023 ANNUAL REPORT
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From the matters we communicated with the management, we determine which matters are most important for theaudit of the financial statements for the current period and thus constitute the key audit matters. We describe thesematters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rarecases, if it is reasonably expected that the negative consequences of disclosing something in the audit report willoutweigh the benefits to the public interest, we determine that the matter should not be reported in the audit report.Grant Thornton(Special General Partnership)
Chinese Certified Public Accountant(Project Partner)Chinese Certified Public AccountantBeijing, China28 March 2024
XII Financial Report
II. Financial StatementsThe unit in the notes to the financial statements is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited31 December 2023
Unit: RMBItem31 December 202331 December 2022CURRENT ASSETS:
Monetary funds12,124,832,831.3014,000,434,986.08Financial assets held for trading46,294,291.7174,708,444.88Bills receivable411,600,000.00–Accounts receivable2,528,507,059.833,212,260,445.96Accounts receivable financing215,884,249.97924,960,384.16Prepayments825,135,156.21788,191,626.82Other receivables2,224,904,557.881,717,445,443.44
Including: Interest receivable––
Dividend receivable––Inventories4,958,178,000.366,821,916,159.95Non-current assets due within one year4,161,725,935.753,998,724,415.85Other current assets1,068,826,944.781,180,807,801.62Total current assets28,565,889,027.7932,719,449,708.76
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Item31 December 202331 December 2022NON-CURRENT ASSETS:
Long-term receivables339,293,533.351,486,807,783.47Long-term equity investments4,685,199,385.734,277,013,369.56Other non-current financial assets781,561,040.57786,750,761.62Investment property6,049,242,696.366,256,723,113.15Fixed assets33,186,248,169.5633,797,738,695.30Construction in progress859,617,965.16558,866,880.36Bearer biological assets17,684,687.3613,697,336.80Right-of-use assets167,815,311.50181,614,699.25Intangible assets2,002,360,891.851,831,338,830.92Goodwill35,220,543.8026,946,905.38Long-term prepaid expenses39,979,161.4944,462,851.45Deferred income tax assets1,689,857,881.491,335,700,565.60Other non-current assets1,067,082,657.57983,905,908.00Total non-current assets50,921,163,925.7951,581,567,700.86Total assets79,487,052,953.5884,301,017,409.62
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Item31 December 202331 December 2022CURRENT LIABILITIES:
Short-term borrowings33,475,479,021.6236,385,048,295.02Bills payable4,618,986,463.953,128,595,835.04Accounts payable3,902,620,870.204,114,966,767.76Receipts in advance16,242,921.6514,261,436.67Contract liabilities1,443,680,155.621,306,029,389.80Employee benefits payable74,337,158.44144,925,887.00Taxes payable99,709,707.56261,011,669.09Other payables2,414,752,127.191,870,403,909.17
Including: Interest payable15,895,930.51
Dividend payable––Non-current liabilities due within one year3,631,937,677.824,673,505,241.86Other current liabilities100,000,000.00–Total current liabilities49,777,746,104.0551,898,748,431.41
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Item31 December 202331 December 2022NON-CURRENT LIABILITIES:
Long-term borrowings4,681,014,489.643,982,236,251.08Lease liabilities41,987,022.8553,596,047.46Long-term payables2,541,095,217.663,160,771,126.31Deferred income1,337,864,114.701,469,230,468.46Deferred income tax liabilities9,490,159.058,181,264.29Other non-current liabilities––Total non-current liabilities8,611,451,003.908,674,015,157.60Total liabilities58,389,197,107.9560,572,763,589.01
XII Financial Report
Item31 December 202331 December 2022OWNERS’ EQUITY:
Share capital2,956,813,200.002,979,742,200.00Other equity instruments–996,000,000.00
Including: Preference shares––
Perpetual Bonds–996,000,000.00Capital reserves5,328,790,899.615,361,200,522.29Less: Treasury shares63,432,450.00128,780,100.00Other comprehensive income-864,881,489.08-821,940,694.57Special reserves23,322,829.5715,791,710.95Surplus reserves1,212,009,109.971,212,009,109.97General risk provisions79,370,294.9179,900,268.71Retained profit8,020,182,801.559,390,642,477.57Total equity attributable to owners of the Company16,692,175,196.5319,084,565,494.92
Minority interest4,405,680,649.104,643,688,325.69Total owners’ equity21,097,855,845.6323,728,253,820.61Total liabilities and owners’ equity79,487,052,953.5884,301,017,409.62Legal Representative:
Chen Hongguo
Financial controller:
Dong Lianming
Head of the financial department:
Zhang Bo
2. Balance sheet of the Company
Unit: RMBItem31 December 202331 December 2022CURRENT ASSETS:
Monetary funds4,421,608,897.405,661,807,164.72Bills receivable3,024,868,267.233,482,822,426.80Accounts receivable28,216,771.01134,755,527.73Prepayments476,746,114.74375,206,833.58Other receivables9,237,241,240.869,337,019,470.13
Including: Interest receivable––
Dividend receivable––Inventories554,028,121.69692,338,698.67Non-current assets due within one year3,428,684.1913,434,710.01Other current assets62,834,527.0286,159,558.49Total current assets17,808,972,624.1419,783,544,390.13
2023 ANNUAL REPORT
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Item31 December 202331 December 2022NON-CURRENT ASSETS:
Long-term receivables12,485,720.0515,914,404.25Long-term equity investments18,298,999,830.5118,826,163,036.33Other non-current financial assets122,462,024.19123,750,761.62Fixed assets3,415,454,701.173,654,340,361.49Construction in progress38,707,761.3024,865,009.58Intangible assets476,297,197.96490,533,559.72Deferred income tax assets571,194,789.79518,171,288.92Other non-current assets12,692,260.70986,260.70Total non-current assets22,948,294,285.6723,654,724,682.61Total assets40,757,266,909.8143,438,269,072.74
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Item31 December 202331 December 2022CURRENT LIABILITIES:
Short-term borrowings13,172,491,176.1112,885,183,530.81Bills payable6,699,118,643.169,455,780,407.30Accounts payable1,817,323,321.031,288,578,359.05Contract liabilities1,454,807,158.831,503,256,921.15Employee benefits payable38,778,024.9365,349,838.50Taxes payable9,022,105.2811,729,028.39Other payables1,412,965,873.901,856,098,294.14Including: Interest payable–15,895,930.51
Dividend payable––Non-current liabilities due within one year734,311,029.421,171,869,377.78Total current liabilities25,338,817,332.6628,237,845,757.12
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Item31 December 202331 December 2022NON-CURRENT LIABILITIES:
Long-term borrowings1,795,000,000.001,698,253,561.10Long-term payables1,281,983,636.99150,911,348.00Deferred income31,530,836.2033,251,328.04Total non-current liabilities3,108,514,473.191,882,416,237.14Total liabilities28,447,331,805.8530,120,261,994.26
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Item31 December 202331 December 2022OWNERS’ EQUITY:
Share capital2,956,813,200.002,979,742,200.00Other equity instruments–996,000,000.00
Including: Preference shares––
Perpetual Bonds–996,000,000.00Capital reserves5,073,338,869.195,147,225,041.11Less: Treasury shares63,432,450.00128,780,100.00Special reserves4,612,641.992,066,138.15Surplus reserves1,199,819,528.061,199,819,528.06Retained profit3,138,783,314.723,121,934,271.16Total owners’ equity12,309,935,103.9613,318,007,078.48Total liabilities and owners’ equity40,757,266,909.8143,438,269,072.74
2023 ANNUAL REPORT
XII Financial Report
3. Consolidated Income Statement
Unit: RMBItem20232022I. Total revenue26,608,570,228.2032,004,367,320.91Including: Revenue26,608,570,228.2032,004,367,320.91II. Total operating costs28,768,694,490.7632,046,430,688.65
Including: Revenue24,445,486,299.9327,373,725,707.00
Taxes and surcharges227,802,365.12243,139,315.06Sales and distribution expenses230,999,637.43242,181,274.09General and administrative expenses690,319,782.01750,546,703.34Research and development expense1,164,419,698.131,290,281,540.10Finance expenses2,009,666,708.142,146,556,149.06Including: Interest expenses1,908,394,881.892,081,067,895.66
Interest income201,101,017.34309,987,478.19Plus: Other income337,324,331.43242,223,168.86Investment income (“-” denotes loss)505,067,035.78-76,042,787.35Including: In vestment income from associates and
joint ventures128,934,922.0024,116,757.95Ga ins on derecognition of financial
assets measured at amortised cost(“-” denotes loss)-99,744,741.95-137,464,855.58Gain on change in fair value (“-” denotes loss)-25,555,304.50-25,253,928.81Credit impairment loss (“-” denotes loss)-319,956,249.39-86,076,968.56Loss on impairment of assets (“-” denotes loss)-45,007,299.22-17,659,966.20Gain on disposal of assets (“-” denotes loss)14,607,428.91161,092,513.76III. Operating profit (“-” denotes loss)-1,693,644,319.55156,218,663.96Plus: Non-operating income2,998,769.4177,248,685.76Less: Non-operating expenses19,058,851.6751,198,001.72IV. Total profit (“-” denotes total loss)-1,709,704,401.81182,269,348.00Less: Income tax expenses-383,061,983.95-135,093,343.41
XII Financial Report
Item20232022V. Net profit (“-” denotes net loss)-1,326,642,417.86317,362,691.41(i) Classification according to the continuity of operation
1. Net profit from continuing operations
(“-” denotes net loss)-1,326,642,417.86317,362,691.41
2. Net profit from discontinued operations
(“-” denotes net loss)––(ii) Classification according to ownership
1. Net profit attributable to shareholders of the
Company-1,281,289,649.82189,290,120.82
2. Profit or loss of minority interest-45,352,768.04128,072,570.59VI. Net other comprehensive income after tax-42,940,794.51-376,357,965.21Net other comprehensive income after tax attributable to owners of the Company-42,940,794.51-376,357,965.21(i) Other comprehensive income that cannot bereclassified to profit and loss––(ii) Other comprehensive income that will be reclassified
to profit and loss-42,940,794.51-376,357,965.21
1. Exchange differences arising from translation
of financial statements denominated in foreigncurrencies-41,716,787.49-376,954,395.08
2. Other comprehensive income that may be
reclassified to profit and loss under the equitymethod-1,224,007.02596,429.87Other comprehensive income, net of tax attributable to minority interest––VII. Total comprehensive income-1,369,583,212.37-58,995,273.80
Total comprehensive income attributable to shareholders of the Company-1,324,230,444.33-187,067,844.39Total comprehensive income attributable to minority interest-45,352,768.04128,072,570.59VIII. Earnings per share
(i) Basic earnings per share-0.450.03(ii) Diluted earnings per share-0.450.03Legal Representative:
Chen Hongguo
Financial controller:
Dong Lianming
Head of the financial department:
Zhang Bo
2023 ANNUAL REPORT
XII Financial Report
4. Income statement of the Company
Unit: RMBItem20232022I. Revenue7,579,414,619.457,520,064,602.48Less: Operating costs7,176,479,930.737,046,088,687.44Taxes and surcharges37,636,362.1333,903,732.08Sales and distribution expenses8,462,782.608,097,899.53General and administrative expenses140,689,667.12143,936,740.47Research and development expense252,057,763.89269,160,568.77Finance expenses274,265,017.24775,464,172.57Including: Interest expenses469,512,534.61942,221,009.81
Interest income410,504,372.73426,232,368.25Plus: Other income59,642,240.7840,656,440.23
Investment income (“-” denotes loss)357,646,522.46673,446,949.24Including: In vestment income from associates and
joint ventures99,693,847.76-314,623.14
Ga ins on derecognition of financial
assets measured at amortised cost(“-” denotes loss)-47,421,175.71-63,403,215.00Gain on change in fair value (“-” denotes loss)310,000.005,350,000.00Credit impairment loss (“-” denotes loss)-8,773,992.6010,519,416.80Loss on impairment of assets (“-” denotes loss)-16,979,924.08-12,924,176.52Gain on disposal of assets (“-” denotes loss)-21,301,396.27151,386,962.31II. Operating profit (“-” denotes loss)60,366,546.03111,848,393.68Plus: Non-operating income541,593.3873,996,545.76Less: Non-operating expenses7,382,596.7220,105,385.25III. Total profit (“-” denotes total loss)53,525,542.69165,739,554.19Less: Income tax expenses-53,023,500.87-124,253,256.38IV. Net profit (“-” denotes net loss)106,549,043.56289,992,810.57(i) Net profit from continuing operations (“-”denotesnet loss)106,549,043.56289,992,810.57(ii) Net profit from discontinued operations (“-”denotesnet loss)––V. Total comprehensive income106,549,043.56289,992,810.57
XII Financial Report
5. Consolidated cash flow statement
Unit: RMBItem20232022I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services27,966,458,590.3734,004,940,977.95Tax rebates received167,475,052.87774,636,352.39Cash received relating to other operating activities1,031,185,120.951,438,951,565.79Subtotal of cash inflows from operating activities29,165,118,764.1936,218,528,896.13Cash paid for goods and services20,996,101,741.2527,914,460,565.12Cash paid to and for employees1,355,503,347.121,378,611,065.39Payments of taxes and surcharges866,089,499.581,181,977,144.95Cash paid relating to other operating activities1,557,474,867.422,293,655,878.30Subtotal of cash outflows from operating activities24,775,169,455.3732,768,704,653.76Net cash flows from operating activities4,389,949,308.823,449,824,242.37II. Cash flows from investing activities:
Cash received from investments1,598,737.431,526,241.63Cash received from investment income66,558,010.9937,543,374.81Net cash received from disposal of fixed assets, intangibleassets and other long-term assets210,115,150.25232,394,062.31Net cash received from disposal of subsidiaries and otherbusiness units99,329,954.44–Cash received relating to other investing activities––Subtotal of cash inflows from investing activities377,601,853.11271,463,678.75
Cash paid for purchase of fixed assets, intangible assets and other long-term assets314,376,125.86885,436,648.94Cash paid on investments–1,463,000,000.00Net cash paid for acquisition of subsidiaries and other business units4,934,751.03367,997,918.78Cash paid relating to other investing activities––Subtotal of cash outflows from investing activities319,310,876.892,716,434,567.72Net cash flows from investing activities58,290,976.22-2,444,970,888.97
2023 ANNUAL REPORT
XII Financial Report
Item20232022III. Cash flows from financing activities:
Cash received from investments300,000,000.001,400,000,000.00Including: Ca sh received from subsidiaries from minority
investment300,000,000.001,400,000,000.00Cash received from borrowings32,279,984,571.3832,477,133,959.53Cash received relating to other financing activities2,697,290,383.693,719,090,394.82Subtotal of cash inflows from financing activities35,277,274,955.0737,596,224,354.35
Cash repayments of amounts borrowed34,204,285,275.2831,525,777,100.64Cash paid for dividend and profit distribution or interest payment2,244,930,422.382,362,284,448.94Including: Di vidend and profit paid by subsidiaries to
minority shareholders254,313,617.44200,352,435.08Cash paid relating to other financing activities4,611,801,356.335,689,222,885.22Subtotal of cash outflows from financing activities41,061,017,053.9939,577,284,434.80Net cash flows from financing activities-5,783,742,098.92-1,981,060,080.45IV. Effect of foreign exchange rate changes on cash andcash equivalents-59,724,593.02-33,248,970.46V. Net increase in cash and cash equivalents-1,395,226,406.90-1,009,455,697.51
Plus: Ba lance of cash and cash equivalents as at the
beginning of the period2,159,460,149.513,168,915,847.02VI. Balance of cash and cash equivalents as at the end of the
period764,233,742.612,159,460,149.51
XII Financial Report
6. Cash flow statement of the Company
Unit: RMBItem20232022I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services8,501,405,410.349,262,082,947.68Tax rebates received10,186,261.559,335,732.78Cash received relating to other operating activities455,821,934.12546,476,129.29Subtotal of cash inflows from operating activities8,967,413,606.019,817,894,809.75Cash paid for goods and services7,495,797,116.977,950,820,408.32Cash paid to and for employees337,462,560.61298,994,477.43Payments of taxes and surcharges53,252,740.71200,234,241.01Cash paid relating to other operating activities474,578,098.99876,312,163.51Subtotal of cash outflows from operating activities8,361,090,517.289,326,361,290.27Net cash flows from operating activities606,323,088.73491,533,519.48II. Cash flows from investing activities:
Cash received from investments147,471,372.611,526,241.63Cash received from investment income112,467,060.62918,541,961.59Net cash received from disposal of fixed assets, intangible assets and other long-term assets40,668,050.26175,178,998.35Subtotal of cash inflows from investing activities300,606,483.491,095,247,201.57
Cash paid for purchase of fixed assets, intangible assets and other long-term assets20,519,612.3030,885,811.90Subtotal of cash outflows used in investing activities20,519,612.3030,885,811.90Net cash flows from investing activities280,086,871.191,064,361,389.67
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Item20232022III. Cash flows from financing activities:
Cash received from borrowings19,258,041,006.6419,328,476,282.36Cash received relating to other financing activities1,590,113,157.73771,135,279.77Subtotal of cash inflows from financing activities20,848,154,164.3720,099,611,562.13Cash repayments of amounts borrowed19,259,308,611.3420,169,398,149.54Cash paid for dividend and profit distribution or interest payment471,489,436.79612,303,611.03Cash paid relating to other financing activities1,880,449,249.461,533,109,819.21Subtotal of cash outflows from financing activities21,611,247,297.5922,314,811,579.78Net cash flows from financing activities-763,093,133.22-2,215,200,017.65IV. Effect of foreign exchange rate changes on cash and cash
equivalents-6,501,936.29-177,257.07V. Net increase in cash and cash equivalents116,814,890.41-659,482,365.57
Plus: Ba lance of cash and cash equivalents as at the
beginning of the period233,971,948.99893,454,314.56VI. Balance of cash and cash equivalents as at the end of the
period350,786,839.40233,971,948.99
XII Financial Report
7. Consolidated statement of changes in owners
’ equity
Amount for the reporting period
Unit: RMB
Item
2023
Equity attributable to owners of the Company
Minority interestTotal owners’
equityShare capital
Other equity instruments
Capital
reservesLess:
Treasury
sharesOther
comprehensive
incomeSpecial
reservesSurplusreservesGeneral risk
provisionsRetained profitOthersSubtotal
Preference
sharesPerpetual
BondsOthers
I. Balance as at the end of the
prior year2,979,742,200.00–996,000,000.00–5,361,200,522.29128,780,100.00-821,940,694.5715,791,710.951,212,009,109.9779,900,268.719,390,642,477.57–19,084,565,494.924,643,688,325.6923,728,253,820.61Others––II. Balance as at the beginning of
the year2,979,742,200.00–996,000,000.00–5,361,200,522.29128,780,100.00-821,940,694.5715,791,710.951,212,009,109.9779,900,268.719,390,642,477.57–19,084,565,494.924,643,688,325.6923,728,253,820.61III. Changes in the period(“-” denotes decrease)-22,929,000.00–-996,000,000.00–-32,409,622.68-65,347,650.00-42,940,794.517,531,118.62–-529,973.80-1,370,459,676.02–-2,392,390,298.39-238,007,676.59-2,630,397,974.98
(i) Total comprehensive income––––––-42,940,794.51–––-1,281,289,649.82-1,324,230,444.33-45,352,768.04-1,369,583,212.37(ii) Capital paid in and reduced
by owners-22,929,000.00–-996,000,000.00–-32,409,622.68-65,347,650.00––––––-985,990,972.6851,682,676.42-934,308,296.26
1. Ordinary shares paid by
owners–––––––––––––51,682,676.4251,682,676.42
2. Capital paid by holders of
other equity instruments––-996,000,000.00-4,000,000.00–––––––-1,000,000,000.00–-1,000,000,000.00
3. Amount of share-based
payments recognised inowners’ equity-22,929,000.00–––-69,886,171.92-65,347,650.00––––––-27,467,521.92–-27,467,521.92
4. Others––––41,476,549.24–––––––41,476,549.24–41,476,549.24
(iii) Profit distribution–––––––––-529,973.80-89,170,026.20–-89,700,000.00-254,313,617.44-344,013,617.44
1. Transfer to general risk
provisions–––––––––-529,973.80529,973.80––––
2. Distribution to owners (or
shareholders)––––––––––-89,700,000.00-89,700,000.00-254,313,617.44-344,013,617.44
(iv) Transfer within owners’ equity–––––––––––––9,976,032.479,976,032.47
1. Others––––––––––––9,976,032.479,976,032.47(v) Special reserves–––––––7,531,118.62––––7,531,118.62–7,531,118.62
1. Withdrew in the period–––––––31,146,275.32–––31,146,275.32–31,146,275.32
2. Used in the period–––––––-23,615,156.70––––-23,615,156.70–-23,615,156.70IV. Balance as at the end of the
period2,956,813,200.00–––5,328,790,899.6163,432,450.00-864,881,489.0823,322,829.571,212,009,109.9779,370,294.918,020,182,801.5516,692,175,196.534,405,680,649.1021,097,855,845.63
2023 ANNUAL REPORT
XII Financial Report
Amount for the prior period
Unit: RMB
Item
2022
Equity attributable to owners of the Company
Minority interestTotal owners’
Share capital
equityShare capital
Other equity instruments
Capital
reservesLess:
Treasury
sharesOther
comprehensive
incomeSpecial
reservesSurplusreservesGeneral risk
provisionsRetained profitOthersSubtotal
Preference
sharesPerpetual
BondsOthers
I. Balance as at the end of theprior year2,984,208,200.00–996,000,000.00–5,227,258,100.41226,860,000.00-445,582,729.36–1,212,009,109.9776,825,918.609,294,126,706.86–19,117,985,306.483,457,050,907.2622,575,036,213.74
II. Balance as at the beginning ofthe year2,984,208,200.00–996,000,000.00–5,227,258,100.41226,860,000.00-445,582,729.36–1,212,009,109.9776,825,918.609,294,126,706.86–19,117,985,306.483,457,050,907.2622,575,036,213.74
III. Changes in the period(“-” denotes decrease)-4,466,000.00–––133,942,421.88-98,079,900.00-376,357,965.2115,791,710.95–3,074,350.1196,515,770.71–-33,419,811.561,186,637,418.431,153,217,606.87(i) Total comprehensive income––––––-376,357,965.21–––189,290,120.82–-187,067,844.39128,072,570.59-58,995,273.80(ii) Capital paid in and reducedby owners-4,466,000.00–––133,942,421.88-98,079,900.00––––––227,556,321.881,258,917,282.921,486,473,604.80
1. Ordinary shares paid by
owners–––-8,262,100.00–––––––-8,262,100.001,258,917,282.921,250,655,182.92
2. Amount of share-based
payments recognised inowners’ equity-4,466,000.00–––1,121,804.80-98,079,900.00––––––94,735,704.80–94,735,704.80
3. Others––––141,082,717.08–––––––141,082,717.08–141,082,717.08(iii) Profit distribution–––––––––3,074,350.11-92,774,350.11–-89,700,000.00-200,352,435.08-290,052,435.08
1. Transfer to general risk
provisions–––––––––3,074,350.11-3,074,350.11––––
2. Distribution to owners (or
shareholders)––––––––––-89,700,000.00-89,700,000.00-200,352,435.08-290,052,435.08
(iv) Special reserves–––––––15,791,710.95––––15,791,710.95–15,791,710.95
1. Withdrew in the period–––––––29,147,795.17––––29,147,795.17–29,147,795.17
2. Used in the period
(denoted by“-”)–––––––-13,356,084.22––––-13,356,084.22–-13,356,084.22
IV. Balance as at the end of theperiod2,979,742,200.00996,000,000.005,361,200,522.29128,780,100.00-821,940,694.5715,791,710.951,212,009,109.9779,900,268.719,390,642,477.5719,084,565,494.924,643,688,325.6923,728,253,820.61
XII Financial Report
8. Statement of changes in equity of owners of the Company
Amount for the reporting period
Unit: RMB
Item
2023
Share capital
Other equity instruments
Capital
reserves
Less:
TreasurySharesOthercomprehensiveincomeSpecialReserves
Surplus
ReservesRetainedProfitOthers
Total owners’
equity
Preference
sharesPerpetual
BondsOthers
I. Balance as at the end of the
prior year2,979,742,200.00–996,000,000.00–5,147,225,041.11128,780,100.00–2,066,138.151,199,819,528.063,121,934,271.16–13,318,007,078.48
II. Balance as at the beginningof the year2,979,742,200.00–996,000,000.00–5,147,225,041.11128,780,100.00–2,066,138.151,199,819,528.063,121,934,271.16–13,318,007,078.48III. Changes in the period(“-” denotes decrease)-22,929,000.00–-996,000,000.00–-73,886,171.92-65,347,650.00–2,546,503.84–16,849,043.56–-1,008,071,974.52(i) Total comprehensive
income–––––––––106,549,043.56–106,549,043.56
(ii) Capital paid in and reduced
by owners-22,929,000.00–-996,000,000.00–-73,886,171.92-65,347,650.00–––––-1,027,467,521.92
1. Capital paid by
holders of other equityinstruments––-996,000,000.00–-4,000,000.00––––––-1,000,000,000.00
2. Amount of share-based
payments recognised inowners’ equity-22,929,000.00–––-69,886,171.92-65,347,650.00–––––-27,467,521.92
(iii) Profit distribution–––––––––-89,700,000.00–-89,700,000.00
1. Transfer to surplus
reserves––––––––––––
2. Distribution to owners
(or shareholders)–––––––––-89,700,000.00–-89,700,000.00
(iv) Special reserves–––––––2,546,503.84–––2,546,503.84
1. Withdrew in the period–––––––2,569,804.81–––2,569,804.81
2. Used in the period–––––––-23,300.97–––-23,300.97
IV.Balance as at the end ofthe period2,956,813,200.00–––5,073,338,869.1963,432,450.00–4,612,641.991,199,819,528.063,138,783,314.72–12,309,935,103.96
2023 ANNUAL REPORT
XII Financial Report
Amount for the prior period
Unit: RMB
Item
2022
Share capital
Other equity instruments
Capitalreserves
Less:
TreasurySharesOther
comprehensiveincomeSpecial
reservesSurplusreservesRetained
profitOthers
Total owners’
equity
Preference
sharesPerpetual
BondsOthers
I. Balance as at the end of theprior year2,984,208,200.00996,000,000.005,154,365,336.31226,860,000.001,199,819,528.062,921,641,460.5913,029,174,524.96
II. Balance as at the beginning
of the year2,984,208,200.00996,000,000.005,154,365,336.31226,860,000.001,199,819,528.062,921,641,460.5913,029,174,524.96
III. Changes in the period
(“-” denotes decrease)-4,466,000.00-7,140,295.20-98,079,900.002,066,138.15200,292,810.57288,832,553.52(i) Total comprehensiveincome289,992,810.57289,992,810.57(ii) Capital paid in and
reduced by owners-4,466,000.00-7,140,295.20-98,079,900.0086,473,604.80
1. Ordinary shares paid
by owners-8,262,100.00-8,262,100.00
2. Capital paid by
holders of other equityinstruments
3. Amount of share-based
payments recognised inowners’ equity-4,466,000.001,121,804.80-98,079,900.0094,735,704.80
(iii) Profit distribution-89,700,000.00-89,700,000.00
1. Transfer to surplus
reserves
2. Distribution to owners
(or shareholders)-89,700,000.00-89,700,000.00
(iv) Special reserves–2,066,138.152,066,138.15
1. Withdrew in the period2,677,407.092,677,407.09
2. Used in the period
(denoted by“-”)-611,268.94-611,268.94
IV.Balance as at the end ofthe period2,979,742,200.00996,000,000.005,147,225,041.11128,780,100.002,066,138.151,199,819,528.063,121,934,271.1613,318,007,078.48
XII Financial Report
III. General Information of the Company
1. Company overview
The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the“Company”, ajoint-stock company incorporated in Shouguang City, Shandong Province) was Shandong Shouguang Paper MillCorporation, which was changed as a joint stock company with limited liability through offering to specific investorsin May 1993. In December 1996, with approval by Lu Gai Zi [1996] No. 270 issued by the People’s Government ofShandong Province and Zheng Wei [1996] No. 59 of the Securities Committee of the State Council, the Company waschanged as a joint stock company with limited liability established by share offer. The Company’s headquarters islocated at No. 2199 Nongsheng East Road, Shouguang City, Shandong Province.In May 1997, with approval by Zheng Wei Fa [1997] No. 26 issued by the Securities Committee of the State Council,the Company issued 115,000,000 domestic listed foreign shares (B shares) under public offering, which were listedand traded on Shenzhen Stock Exchange from 26 May 1997.In September 2000, with approval by Zheng Jian Gong Si Zi [2000] No. 151 issued by the China Securities RegulatoryCommission, the Company issued an additional 70,000,000 RMB ordinary shares (A shares), which were listed andtraded on Shenzhen Stock Exchange from 20 November 2000.In June 2008, with approval by the Stock Exchange of Hong Kong Limited, the Company issued 355,700,000 Hshares. At the same time, 35,570,000 H shares were allocated to the National Council for Social Security Fund byour relevant state-owned shareholder and converted into overseas listed foreign shares (H shares) for the purpose ofreducing the number of state-owned shares. The additionally issued H shares were listed and traded on Hong KongStock Exchange on 18 June 2008.As at 31 December 2023, the total share capital of the Company was 2,956,813,200 shares. For details, please referto Note VII. 39.Principal business activities: the Company is principally engaged in, among other things, processing and sale of paperproducts (including machine-made paper and paper board), paper making raw materials, machinery and chemicals;generation and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timberand construction materials; manufacturing, processing and sale of wood products; and hotel service, and equipmentfinancial and operating leasing, investment properties and property service etc.The financial statements and notes thereto were approved at the eighth meeting of the tenth session of the board ofdirectors of the Company (the“Board”) on 28 March 2024.
2. Scope of consolidation
Subsidiaries of the Company included in the scope of consolidation in 2023 totalled 77. For details, please referto Note X“Interest in other entities”. The scope of consolidation of the Company during the year had two morecompanies included and three companies less compared to the prior year. For details, please refer to Note IX“Changein scope of consolidation”.
2023 ANNUAL REPORT
XII Financial Report
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
These financial statements are prepared in accordance with the accounting standards for business enterprises, theapplication guidelines thereof, interpretations and other related rules (collectively referred to as“ASBEs”) promulgatedby the Ministry of Finance. In addition, the Company also discloses relevant financial information in accordance withthe“Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 – GeneralProvisions on Financial Reports” (revised in 2023) of the CSRC.The financial statements are presented on a going concern.The Company’s financial statements have been prepared on an accrual basis. Except for certain financial instruments,the financial statements are prepared under the historical cost convention. In the event that impairment of assetsoccurs, a provision for impairment is made accordingly in accordance with the relevant regulations.
2. Going concern
No facts or circumstances comprise a material uncertainty about the Company’s going concern basis within 12months since the end of the reporting period.V. Significant Accounting Policies and Accounting EstimatesSpecific accounting policies and accounting estimates are indicated as follows:
The Company and its subsidiaries are principally engaged in machine-made paper, electricity and steam, constructionmaterials, paper making chemical products, processing of moulds, hotel management and other operations. The Companyand its subsidiaries formulated certain specific accounting policies and accounting estimates for the transactions andmatters such as revenue recognition, determination of performance progress and R&D expenses based on their actualproduction and operation characteristics pursuant to the requirements under the relevant ASBEs. For details, please refer tothis Note V. 30“Revenue”. For the critical accounting judgments and estimates made by the management, please refer toNote V. 40“Changes in significant accounting policies and accounting estimates”.
1. Statement of compliance with the Accounting Standards for Business Enterprises
These financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financialposition of the consolidated entity and the Company as at 31 December 2023 and relevant information such as theoperating results and cash flows of the consolidated entity and the Company for 2023.
2. Accounting period
The accounting period of the Company is from 1 January to 31 December of each calendar year.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
3. Operating cycle
The operating cycle of the Company lasts for 12 months.
4. Functional currency
The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiariesof the Company recognise U.S. dollar (“USD”or“US$”), Japanese yen (“JPY”), Euro (“EUR”) and South KoreanWon (“KRW”) as their respective functional currency according to the general economic environment in which thesesubsidiaries operate. The Company prepares the financial statements in RMB.
5. Determination method and selection basis of importance standards
ItemImportance standardsSignificant accounts receivable with singleprovision for bad debt reserves
Overdue accounts receivable and the amount of a single
receivable exceeds 0.5% of total assetsWrite-off of significant accounts receivable during
the period
The amount of a single write-off exceeds 0.5% of net assetsSignificant prepayments aged more than one yearAged more than one year and the single amount exceeds 0.5%
of total assetsSignificant receipts in advance aged more than
one year
Aged more than one year and the single amount exceeds 0.5%
of total assetsSignificant other payables aged more than
one year
Aged more than one year and the single amount exceeds 0.5%
of total assetsSignificant accounts payable aged more than
one year
Aged more than one year and the single amount exceeds 0.5%
of total assetsBad debt provisions with significant amounts
reversed or recovered during the current period
Individually identified or classified into the third stage, the
amount transferred or recovered exceeds 0.5% of total assetsSignificant construction in progressProjects with budgets exceeding 0.5% of total assetsSignificant non-wholly owned subsidiariesThe total assets of the subsidiary exceed 10% of the Company
on a consolidated basis and the revenue or pre-tax profit
exceeds 10%Significant investment activitiesInvestment amount exceeds 0.5% of total assetsSignificant joint ventures and associatesThe joint venture or associate operates normally with an
accounting amount exceeding 0.5% of total assetsSignificant debt restructuringThe restructuring amount exceeds 0.5% of total assets
6. Accounting treatment of business combinations under common control and not under common
control
(1) Business combination under common control
For the business combination involving entities under common control, the assets and liabilities of the partybeing merged that are obtained in the business combination by the absorbing party shall be measured at thecarrying amounts as recorded by the ultimate controlling party in the consolidated financial statements at thecombination date. The difference between the carrying amount of the consideration paid for the combinationand the carrying amount of the net assets obtained in the combination is charged to the capital reserve. If thecapital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
6. Accounting treatment of business combinations under common control and not under common
control(Continued)
(1) Business combination under common control
(Continued)
Business combinations involving entities under common control and achieved in stagesThe assets and liabilities of the party being merged that are obtained at the combination by the absorbingparty shall be measured at the carrying value as recorded by the ultimate controlling party in the consolidatedfinancial statements at combination date. The difference between the sum of the carrying value from originalshareholding portion and the new investment cost incurred at combination date and the carrying value of netassets obtained at combination date shall be adjusted to capital reserve, if the balance of capital reserve isnot sufficient to absorb the differences, any excess is adjusted to retained earnings. The long-term investmentprior to the absorbing party obtaining the control of the party being merged, the recognised profit or loss,comprehensive income and other change of owners’equity at the closer date of the acquisition date andcombination date under common control shall separately offset the opening balance of retained earnings andprofit or loss during comparative statements.
(2) Business combination not under common control
For business combinations involving entities not under common control, the cost for each combination ismeasured at the aggregate fair value at acquisition date, of assets given, liabilities incurred or assumed, andequity securities issued by the acquirer in exchange for control of the acquiree. At acquisition date, the acquiredassets, liabilities or contingent liabilities of acquiree are measured at their fair value.Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognised as goodwill, and subsequently measured on the basis of its cost minusaccumulative impairment provision; Where the cost of combination is less than the acquirer’s interest in the fairvalue of the acquiree’s identifiable net assets, the difference is recognised in profit or loss for the current periodafter reassessment.Business combinations involving entities not under common control and achieved in stagesThe combination cost is the sum of consideration paid at acquisition date and fair value of the acquiree’sequity investment held prior to acquisition date. The cost of equity of the acquiree held prior to acquisitiondate shall be remeasured at the fair value at acquisition date, and the difference between the fair value andcarrying amount shall be recognised as investment income or loss for the current period. Other comprehensiveincome and changes of other owners’ equity related with acquiree’s equity held prior to acquisition date shall betransferred to investment profit or loss for current period at acquisition date, except for the other comprehensiveincome incurred by the changes of net assets or net liabilities due to the remeasurement of defined benefitplans and the other comprehensive income related to investments in non-trading equity instruments that werepreviously designated as at fair value through other comprehensive income.
(3) Transaction fees attribution during business combination
The audit, legal, valuation advisory and other intermediary fees and other relevant administrative expensesarising from business combinations are recognised in profit or loss when incurred. Transaction costs of equityor debt securities issued as the considerations of business combination are included in the initial recognitionamounts.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
7. Judgment criteria for control and preparation of consolidated financial statements
(1) Judgment criteria for control
The scope of consolidation of the consolidated financial statements is determined on the basis of control. Theterm“control”refers to the fact that the Company has power over the investee and is entitled to variable returnsfrom its involvement with the investee and the ability to use its power over the investee to affect the amount ofthose returns. The Company will reassess when changes in relevant facts and circumstances result in changesin the relevant elements involved in the definition of control.When judging whether to include a structured entity into the scope of consolidation, the Companycomprehensively considers all facts and circumstances, including assessing the purpose and design of thestructured entity, identifying the types of variable returns, and assessing whether to control the structured entityon the basis of whether it bears part or all of the return variability by participating in its related activities.
(2) Basis for preparation of the consolidated financial statements
The consolidated financial statements are prepared by the Company based on the financial statements of theCompany and its subsidiaries and other relevant information. In preparing the consolidated financial statements,the accounting policies and accounting periods of the Company and its subsidiaries shall be consistent, andintra-company significant transactions and balances are eliminated.A subsidiary and its business acquired through a business combination involving entities under common controlduring the reporting period shall be included in the scope of the consolidation of the Company from the dateof being controlled by the ultimate controlling party, and its operating results and cash flows from the date ofbeing controlled by the ultimate controlling party are included in the consolidated income statement and theconsolidated cash flow statement, respectively.For a subsidiary and its business acquired through a business combination involving entities not under commoncontrol during the reporting period, its income, expenses and profits are included in the consolidated incomestatement, and cash flows are included in the consolidated cash flow statement from the acquisition date to theend of the reporting period.The shareholders’equity of the subsidiaries that is not attributable to the Company is presented undershareholders’equity in the consolidated balance sheet as minority interest. The portion of net profit or loss ofsubsidiaries for the period attributable to minority interest is presented in the consolidated income statementunder the“profit or loss of minority interest”. When the amount of loss attributable to the minority shareholdersof a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’equity of thesubsidiary, the excess amount shall be allocated against minority interest.
(3) Acquisition of non-controlling interests in subsidiaries
The difference between the long-term equity investments costs acquired by the acquisition of non-controllinginterests and the share of the net assets from subsidiaries from the date of acquisition or the date ofcombination based on the new shareholding ratio, as well as the difference between the proceeds from thepartial disposal of the equity investment without losing control over its subsidiary and the disposal of thelong-term equity investment corresponding to the share of the net assets of the subsidiaries from the date ofacquisition or the date of combination, is adjusted to the capital reserve. If the capital reserve is not sufficient,any excess is adjusted to retained earnings.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
7. Judgment criteria for control and preparation of consolidated financial statements
(Continued)
(4) Accounting treatment for loss of control over subsidiaries
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons,the remaining equity is measured at fair value on the date when the control is lost. The difference arising fromthe sum of consideration received for disposal of equity interest and the fair value of remaining equity interestover the sum of the share of the carrying amount of net assets of the former subsidiary calculated continuouslyfrom the purchase date based on the shareholding percentage before disposal and the goodwill is recognisedas investment income in the period when the control is lost.Other comprehensive income related to equity investment in the former subsidiary shall be accounted for onthe same basis as the former subsidiary’s direct disposal of relevant assets or liabilities when the control is lost.Other changes in owners’equity related to the former subsidiary that are accounted for using the equity methodshall be transferred to current profit or loss at the time when the control is lost
8. Classification of joint arrangements and accounting treatment for joint operations
A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of theCompany comprise joint operations and joint ventures.
(1) Joint operations
Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets andobligations of this arrangement.The Company recognises the following items in relation to its interest in a joint operation and accounts for themin accordance with the relevant ASBEs:
A. the assets held solely by it and assets held jointly according to its share;B. the liabilities assumed solely by it and liabilities assumed jointly according to its share;C. the revenue from sale of output from joint operations;D. the revenue from sale of output from joint operations according to its share;E. the fees solely incurred by it and fees incurred from joint operations according to its share.
(2) Joint ventures
Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of thisarrangement.The Company accounts for its investments in joint ventures in accordance with the requirements relating toaccounting treatment using equity method for long-term equity investments.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
9. Standards for recognising cash and cash equivalents
Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short-term and highly liquid investments held by the Company which are readily convertible into known amount of cash andwhich are subject to insignificant risk of value change.
10. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
The foreign currency operations of the Company are translated into the functional currency at the prevailingspot exchange rate on the date of exchange.On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate onthe balance sheet date. The exchange difference arising from the difference between the spot exchange rateon the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date willbe recognised in profit or loss for the period. The foreign currency non-monetary items measured at historicalcost shall still be measured by the functional currency translated at the spot exchange rate on the date of thetransaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchangerate on the date of determination of the fair value. The difference between the amounts of the functionalcurrency before and after the translation will be recognised in profit or loss or other comprehensive income forthe period based on the nature of the non-monetary items.
(2) Translation of financial statements denominated in foreign currency
When translating the financial statements denominated in foreign currency of overseas subsidiaries, assets andliabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;owner’s equity items except for“retained profit”are translated at the spot exchange rates at the dates on whichsuch items arose.Income and expenses items in the income statement are translated at the prevailing spot exchange rate on thetransaction date.All items in the cash flow statements shall be translated at the prevailing spot exchange rate on the date thatthe cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presentedseparately as the“effect of foreign exchange rate changes on cash and cash equivalents”item in the cash flowstatements.The differences arising from translation of financial statements shall be included in the“other comprehensiveincome” item in owners’ equity in the balance sheet.On disposal of foreign operations and loss of control, exchange differences arising from the translation offinancial statements denominated in foreign currencies related to the disposed foreign operations which hasbeen included in shareholders’equity in the balance sheet, shall be transferred to profit or loss in whole or inproportionate share in the period in which the disposal took place.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equityinstrument of another party.
(1) Recognition and derecognition of financial instruments
Financial asset or financial liability will be recognised when the Company became one of the parties under afinancial instrument contract.Financial asset that satisfied any of the following criteria shall be derecognised:
the contract right to receive the cash flows of the financial asset has terminated;the financial asset has been transferred and meets the derecognition criteria for the transfer of financialasset as described below.A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or inpart. If an agreement is entered between the Company (debtor) and a creditor to replace the existing financialliabilities with new financial liabilities, and the contractual terms of the new financial liabilities are substantiallydifferent from those of the existing financial liabilities, the existing financial liabilities shall be derecognised andthe new financial liabilities shall be recognised.Conventionally traded financial assets shall be recognised and derecognised at the trading date.
(2) Classification and measurement of financial assets
The Company classifies the financial assets according to the business model for managing the financial assetsand characteristics of the contractual cash flows as follows: financial assets measured at amortised cost,financial assets measured at fair value through other comprehensive income, and financial assets measured atfair value through profit or loss.Financial assets are measured at fair value upon initial recognition. For financial assets measured at fairvalue through profit or loss, relevant transaction costs are directly recognised in profit or loss for the currentperiod. For other categories of financial assets, relevant transaction costs are included in the amount initiallyrecognised. Accounts receivable arising from sales of goods or rendering services, without significant financingcomponent, are initially recognised based on the transaction price expected to be entitled by the Company.Financial assets measured at amortised costA financial asset is measured at amortised cost if it meets both of the following conditions and is not designatedat fair value through profit or loss:
The Company’s business model for managing such financial assets is to collect contractual cash flows;The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solelypayments of principal and interest on the principal amount outstanding.Subsequent to initial recognition, such financial assets are measured at amortised cost using the effectiveinterest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of ahedging relationship shall be recognised in profit or loss for the current period when the financial asset isderecognised, amortised using the effective interest method or with impairment recognised.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(2) Classification and measurement of financial assets
(Continued)
Financial assets measured at fair value through other comprehensive incomeA financial asset is classified as measured at fair value through other comprehensive income if it meets both ofthe following conditions and is not designated at fair value through profit or loss:
The Company’s business model for managing such financial assets is achieved both by collecting collectcontractual cash flows and selling such financial assets;The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solelypayments of principal and interest on the principal amount outstanding.Subsequent to initial recognition, such financial assets are subsequently measured at fair value. Interestcalculated using the effective interest method, impairment losses or gains and foreign exchange gains andlosses are recognised in profit or loss for the current period, and other gains or losses are recognised inother comprehensive income. On derecognition, the cumulative gain or loss previously recognised in othercomprehensive income is reclassified from other comprehensive income to profit or loss.Financial assets measured at fair value through profit or lossThe Company classifies the financial assets other than those measured at amortised cost and measured at fairvalue through other comprehensive income as financial assets measured at fair value through profit or loss.Upon initial recognition, the Company irrevocably designates certain financial assets that are required to bemeasured at amortised cost or at fair value through other comprehensive income as financial assets measuredat fair value through profit or loss in order to eliminate or significantly reduce accounting mismatch.Upon initial recognition, such financial assets are measured at fair value. Except for those held for hedgingpurposes, gains or losses (including interests and dividend income) arising from such financial assets arerecognised in the profit or loss for the current period.The business model for managing financial assets refers to how the Company manages its financial assetsin order to generate cash flows. That is, the Company’s business model determines whether cash flows willresult from collecting contractual cash flows, selling financial assets or both. The Company determines thebusiness model for managing financial assets on the basis of objective facts and specific business objectivesfor managing financial assets determined by key management personnel.The Company assesses the characteristics of the contractual cash flows of financial assets to determinewhether the contractual cash flows generated by the relevant financial assets on a specific date are solelypayments of principal and interest on the principal amount outstanding. The principal refers to the fair valueof the financial assets at the initial recognition. Interest includes consideration for the time value of money, forthe credit risk associated with the principal amount outstanding during a particular period of time and for otherbasic lending risks, costs and profits. In addition, the Company evaluates the contractual terms that may resultin a change in the time distribution or amount of contractual cash flows from a financial asset to determinewhether it meets the requirements of the above contractual cash flow characteristics.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(2) Classification and measurement of financial assets
(Continued)Financial assets measured at fair value through profit or loss(Continued)
All affected financial assets are reclassified on the first day of the first reporting period following the change inthe business model where the Company changes its business model for managing financial assets; otherwise,financial assets shall not be reclassified after initial recognition.Financial assets are measured at fair value upon initial recognition. For financial assets measured at fairvalue through profit or loss, relevant transaction costs are directly recognised in profit or loss for the currentperiod. For other categories of financial assets, relevant transaction costs are included in the amount initiallyrecognised. Accounts receivable arising from sales of goods or rendering services, without significant financingcomponent, are initially recognised based on the transaction price expected to be entitled by the Company.
(3) Classification and measurement of financial liabilities
At initial recognition, financial liabilities of the Company are classified as financial liabilities measured at fairvalue through profit or loss and financial liabilities measured at amortised cost. For financial liabilities notclassified as measured at fair value through profit or loss, relevant transaction costs are included in the amountinitially recognised.Financial liabilities measured at fair value through profit or lossFinancial liabilities measured at fair value through profit or loss comprise held-for-trading financial liabilities andfinancial liabilities designated at fair value through profit or loss upon initial recognition. Such financial liabilitiesare subsequently measured at fair value, and the gains or losses from the change in fair value and the dividendor interest expenses related to the financial liabilities are included in the profit or loss of the current period.Financial liabilities measured at amortised costOther financial liabilities are subsequently measured at amortised cost using the effective interest rate method,and the gains or losses arising from derecognition or amortisation are recognised in profit or loss for the currentperiod.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(3) Classification and measurement of financial liabilities
(Continued)Classification between financial liabilities and equity instrumentsA financial liability is a liability if:
it has a contractual obligation to pay in cash or other financial assets to other parties.it has a contractual obligation to exchange financial assets or financial liabilities under potential adversecondition with other parties. it is a non-derivative instrument contract which will or may be settled with the entity’s own equityinstruments, and the entity will deliver a variable number of its own equity instruments according to suchcontract. it is a derivative instrument contract which will or may be settled with the entity’s own equity instruments,except for a derivative instrument contract that exchanges a fixed amount of cash or other financial assetwith a fixed number of its own equity instruments.Equity instruments are any contract that evidences a residual interest in the assets of an entity after deductingall of its liabilities.If the Company cannot unconditionally avoid the performance of a contractual obligation by paying cash ordelivering other financial assets, the contractual obligation meets the definition of financial liabilities.Where a financial instrument must or may be settled with the Company’s own equity instruments, theCompany’s own equity instruments used to settle such instrument should be considered as to whether it is asa substitute for cash or other financial assets or for the purpose of enabling the holder of the instrument to beentitled to the remaining interest in the assets of the issuer after deducting all of its liabilities. For the former, it isa financial liability of the Company; for the latter, it is the Company’s own equity instruments.
(4) Fair value of financial instruments
The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 12.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(5) Impairment of financial assets
The Company makes provision for impairment based on expected credit losses (ECLs) on the following items:
Financial assets measured at amortised cost;Receivables and investment in debt instruments measured at fair value through other comprehensive income;Contract assets as defined in the Accounting Standards for Business Enterprises No. 14 – Revenue;Lease receivables;Financial guarantee contracts (except those measured at fair value through profit or loss or formed bycontinuing involvement of transferred financial assets or the transfer does not qualify for derecognition).Measurement of ECLsECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Creditlosses refer to the difference between all contractual cash flows receivable according to the contract anddiscounted according to the original effective interest rate and all cash flows expected to be received, i.e. thepresent value of all cash shortages.The Company takes into account reasonable and well-founded information such as past events, currentconditions and forecasts of future economic conditions, and calculates the probability-weighted amount ofthe present value of the difference between the cash flows receivable from the contract and the cash flowsexpected to be received weighted by the risk of default.The Company measures ECLs of financial instruments at different stages. If the credit risk of the financialinstrument did not increase significantly upon initial recognition, it is at the first stage, and the Company makesprovision for impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrumentincreased significantly upon initial recognition but has not yet incurred credit impairment, it is at the secondstage, and the Company makes provision for impairment based on the lifetime ECLs of the instrument; if thefinancial instrument incurred credit impairment upon initial recognition, it is at the third stage, and the Companymakes provision for impairment based on the lifetime ECLs of the instrument.For financial instruments with low credit risk on the balance sheet date, the Company assumes that the creditrisk did not increase significantly upon initial recognition, and makes provision for impairment based on theECLs within the next 12 months.Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financialinstrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrumentwithin 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) afterthe balance sheet date, and is a portion of lifetime ECLs.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Measurement of ECLs(Continued)The maximum period to be considered when estimating ECLs is the maximum contractual period over whichthe Company is exposed to credit risk, including renewal options.For the financial instruments at the first and second stages and with low credit risks, the Company calculatesthe interest income based on the book balance and the effective interest rate before deducting the impairmentprovisions. For financial instruments at the third stage, interest income is calculated based on the amortisedcost after deducting impairment provisions made from the book balance and the effective interest rate.For receivables such as bills receivable, accounts receivable, accounts receivable financing, other receivablesand contract assets, if the credit risk characteristics of a customer are significantly different from othercustomers in the portfolio, or the credit risk characteristics of such customer change significantly, the Companywill make a separate provision for bad debts for such receivables. In addition to the receivables for which baddebt provisions are made individually, the Company divides the receivables into portfolios based on credit riskcharacteristics and calculates bad debt provisions on a combined basis.Bills receivable and accounts receivableFor bills receivable and accounts receivable, regardless of whether there is a significant financing component,the Company always makes provision for impairment at an amount equal to lifetime ECLs.When the Company is unable to assess the information of ECLs for an individual financial asset at a reasonablecost, it classifies bills receivable and accounts receivable into portfolios based on the credit risk characteristics,and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
A. Bills receivable
Bills receivable portfolio 1: Bank acceptance billsBills receivable portfolio 2: Commercial acceptance billsB. Accounts receivable
Accounts receivable portfolio 1: Due from related party customersAccounts receivable portfolio 2: Due from non-related party customersAccounts receivable portfolio 3: Factoring receivables
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)
Bills receivable and accounts receivable(Continued)
For bills receivable classified as a portfolio, the Company refers to the historical credit loss experience,combined with the current situation and the forecast of future economic conditions, to calculate the ECLs basedon default risk exposure and lifetime ECL rate.For accounts receivable classified as a portfolio, the Company refers to the historical credit loss experience,combined with the current situation and the forecast of future economic conditions, to prepare a comparisontable of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs. Theaging of accounts receivable is calculated from the date of recognition.Other receivablesThe Company classifies other receivables into portfolios based on credit risk characteristics, and calculates theECLs on a portfolio basis. The basis for determining the portfolios is as follows:
Other receivables portfolio 1: Amount due from government authoritiesOther receivables portfolio 1: Amount due from related partiesOther receivables portfolio 3: Other receivablesFor other receivables classified as a portfolio, the Company calculates the ECLs based on default risk exposureand the ECL rate over the next 12 months or the entire lifetime. For other receivables grouped by aging, theaging is calculated from the date of recognition.Long-term receivablesThe Company’s long-term receivables include finance lease receivables and deposits receivable.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Long-term receivables(Continued)The Company classifies the finance lease receivables and deposits receivable into portfolios based on the creditrisk characteristics, and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is asfollows:
A. Finance lease receivablesFinance lease receivables portfolio 1: Receivables not past dueFinance lease receivables portfolio 2: Overdue receivablesB. Other long-term receivablesOther long-term receivables portfolio 1: Deposits receivableOther long-term receivables portfolio 2: Other receivablesFor accounts receivable financing and deposits receivable, the Company refers to the historical credit lossexperience, combined with the current situation and the forecast of future economic conditions, and calculatesthe ECLs based on default risk exposure and lifetime ECL rate.Except for those of finance lease receivables and deposits receivable, the ECLs of other receivables and long-term receivables classified as a portfolio are measured based on default risk exposure and ECL rate over thenext 12 months or the entire lifetime.Debt investments and other debt investmentsFor debt investments and other debt investments, the Company measures the ECLs based on the nature of theinvestment, the types of counterparty and risk exposure, and default risk exposure and ECL rate within the next12 months or the entire lifetime.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Assessment of significant increase in credit riskIn assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition,the Company compares the risk of default of the financial instrument at the balance sheet date with that at thedate of initial recognition to determine the relative change in risk of default within the expected lifetime of thefinancial instrument.In determining whether the credit risk has increased significantly upon initial recognition, the Company considersreasonable and well-founded information, including forward-looking information, which can be obtained withoutunnecessary extra costs or efforts. Information considered by the Company includes:
The debtor’s failure to make payments of principal and interest on their contractually due dates;An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any);An actual or expected significant deterioration in the operating results of the debtor;Existing or expected changes in the technological, market, economic or legal environment that have a significantadverse effect on the debtor’s ability to meet its obligation to the Company.Depending on the nature of the financial instruments, the Company assesses whether there has been asignificant increase in credit risk on either an individual basis or a collective basis. When the assessment isperformed on a collective basis, the financial instruments are grouped based on their common credit riskcharacteristics, such as past due information and credit risk ratings.The Company determines that the credit risk on a financial asset has increased significantly if it is more than 30days past due.Credit-impaired financial assetsAt balance sheet date, the Company assesses whether financial assets measured at amortised cost and debtinvestments measured at fair value through other comprehensive income are credit-impaired. A financial assetis credit-impaired when one or more events that have an adverse effect on the estimated future cash flowsof the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the followingobservable events:
Significant financial difficulty of the issuer or debtor;A breach of contract by the debtor, such as a default or delinquency in interest or principal payments;
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Credit-impaired financial assets(Continued)For economic or contractual reasons relating to the debtor’s financial difficulty, the Company having granted tothe debtor a concession that would not otherwise consider;It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;The disappearance of an active market for that financial asset because of financial difficulties of the issuer ordebtor.Presentation of provisions for ECLsECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit riskupon initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profitor loss for the current period. For financial assets measured at amortised cost, the provisions of impairment isdeducted from the carrying amount of the financial assets presented in the balance sheet; for debt investmentsat fair value through other comprehensive income, the Company makes provisions of impairment in othercomprehensive income without reducing the carrying amount of the financial asset.Write-offsThe book balance of a financial asset is directly written off to the extent that there is no realistic prospect ofrecovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutesderecognition of such financial asset. This is generally the case when the Company determines that the debtordoes not have assets or sources of income that could generate sufficient cash flows to repay the amountssubject to the write-off. However, financial assets that are written off could still be subject to enforcementactivities in order to comply with the Company’s procedures for recovery of amounts due.If a write-off of financial assets is subsequently recovered, the recovery is credited to profit or loss in the periodin which the recovery occurs.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Financial instruments
(Continued)
(6) Transfer of financial assets
Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than theissuer of such financial assets (the transferee).If the Company transfers substantially all the risks and rewards of ownership of the financial asset to thetransferee, the financial asset shall be derecognised. If the Company retains substantially all the risks andrewards of ownership of a financial asset, the financial asset shall not be derecognised.If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financialasset, it accounts for the transaction as follows: if the Company does not retain control, it derecognises thefinancial asset and recognises any resulting assets or liabilities; if the control over the financial asset is notwaived, the relevant financial asset is recognised according to the extent of its continuing involvement in thetransferred financial asset and the relevant liability is recognised accordingly.
(7) Offset of financial assets and financial liabilities
If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities,which are enforceable currently, and the Company plans to realise the financial assets or to clear off thefinancial liabilities on a net amount basis or simultaneously, the net amount of financial assets and financialliabilities shall be presented in the balance sheet upon offsetting. Otherwise, financial assets and financialliabilities are presented separately in the balance sheet without offsetting.
12. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date.The Company measures the relevant asset and liability at fair value, based on the presumption that the orderlytransaction to sell the asset or transfer the liability takes place either in the principal market for the relevant asset orliability, or in the absence of a principal market, in the most advantageous market for relevant the asset or liability. Theprincipal or the most advantageous market must be a trading market accessible by the Company at the measurementdate. The Company adopts the presumption that market participants would use when pricing the asset or liability intheir best economic interest.If there exists an active market for a financial asset or financial liability, the Company uses the quotation on the activemarket as its fair value. If the market for a financial instrument is inactive, the Company uses valuation technique torecognise its fair value.Fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economicbenefits by using the asset in its best use or by selling it to another market participant that would use the asset in itsbest use.The Company adopts valuation techniques that are appropriate in the current circumstance and for which sufficientdata and other information are available, prioritises the use of relevant observable inputs and uses unobservableinputs only under the circumstances where such relevant observable inputs cannot be obtained or practicablyobtained.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
12. Fair value measurement
(Continued)Assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised withinthe fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole.Level 1: based on quoted prices (unadjusted) in active markets for identical assets or liabilities obtainable at themeasurement date. Level 2: observable inputs for the relevant asset or liability, either directly or indirectly, except forLevel 1 input. Level 3: unobservable inputs for the relevant assets or liability.At each balance sheet date, the Company reassesses assets and liabilities measured at fair value that are recognisedin the financial statements on a recurring basis to determine whether transfers have occurred between fair valuemeasurement hierarchy levels.
13. Inventories
(1) Classification of inventories
Inventories of the Company mainly include raw materials, work in progress, goods in stock, developmentproducts and consumable biological assets, etc.
(2) Pricing of inventories dispatched
Inventories of the Company are measured at their actual cost when obtained. Cost of raw materials, goods instock and others will be calculated with weighted average method when being dispatched.Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumablebiological assets without a stock are stated at historical cost at initial recognition, and subsequently measuredat fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the currentperiod. The cost of self-planting, self-cultivating consumable biological assets is the necessary expensesdirectly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation.Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or lossfor the current period.The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carryingamount using the stock volume proportion method.
(3) Recognition of and provision for inventory impairment
At the balance sheet date, inventories are measured at the lower of cost and net realisable value. If the netrealisable value is below the cost of inventories, a provision for inventory impairment is made.Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurredupon completion, estimated sales expenses and taxes and levies. The realisable value of inventories shall bedetermined on the basis of definite evidence, purpose of holding the inventories and effect of after-balance-sheet-date events.The Company usually makes provisions for inventory impairment on the basis of individual inventory items;however, for inventories with large quantities and lower unit prices, these inventories are accrued impairmentaccording to inventory categories.At the balance sheet date, in case the factors causing inventory impairment no longer exists, the originalprovision for inventory impairment shall be reversed.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
13. Inventories
(Continued)
(4) Inventory stock taking system
The Company implements permanent inventory system as its inventory stock taking system.
(5) Amortisation of low-value consumables and packaging materials
The low-value consumables of the Company are amortised when issued for use.Packaging materials for turnover are amortised when issued for use.
14. Long-term equity investments
Long-term equity investments include the equity investments in subsidiaries, joint ventures and associates. Associatesof the Company are those investees that the Company imposes significant influence over.
(1) Determination of initial investment cost
Long-term equity investments acquired through business combinations: for a long-term equity investmentacquired through a business combination involving enterprises under common control, the investment cost shallbe the absorbing party’s share of the carrying amount of the owners’equity under the consolidated financialstatements of the ultimate controlling party on the date of combination. For a long-term equity investmentacquired through a business combination involving enterprises not under common control, the investment costof the long-term equity investment shall be the cost of combination.Long-term equity investments acquired through other means: for a long-term equity investment acquiredby cash payment, the initial investment cost shall be the purchase cost actually paid; for a long-term equityinvestment acquired by issuing equity securities, the initial investment cost shall be the fair value of equitysecurities issued.
(2) Subsequent measurement and method for profit or loss recognition
Investments in subsidiaries shall be accounted for using the cost method. Except for the investments whichmeet the conditions of holding for sale, investments in associates and joint ventures shall be accounted forusing the equity method.For a long-term equity investment accounted for using the cost method, the cash dividends or profits declaredby the investees for distribution shall be recognised as investment gains and included in profit or loss for thecurrent period, except the case of receiving the actual consideration paid for the investment or the declared butnot yet distributed cash dividends or profits which is included in the consideration.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
14. Long-term equity investments
(Continued)
(2) Subsequent measurement and method for profit or loss recognition
(Continued)For a long-term equity investment accounted for using the equity method, where the initial investment costexceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date,no adjustment shall be made to the investment cost of the long-term equity investment. Where the initialinvestment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at theacquisition date, adjustment shall be made to the carrying amount of the long-term equity investment, and thedifference shall be charged to profit or loss for the current period.Under the equity method, investment gain and other comprehensive income shall be recognised based onthe Company’s share of the net profits or losses and other comprehensive income made by the investee,respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carryingamount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividenddistributed by the investee. In respect of the other movement of net profit or loss, other comprehensive incomeand profit distribution of investee, the carrying amount of long-term equity investment shall be adjusted andincluded in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s netprofits or losses based on the fair values of the investee’s individual separately identifiable assets at the time ofacquisition, after making appropriate adjustments thereto according to the accounting policies and accountingperiods of the Company.For additional equity investment made in order to obtain significant influence or common control over investeewithout resulted in control, the initial investment cost under the equity method shall be the aggregate offair value of previously held equity investment and additional investment cost on the date of transfer. Forinvestments in non-trading equity instruments that were previously classified as at fair value through othercomprehensive income, the cumulative fair value changes associated with them that were previously includedin other comprehensive income are transferred to retained earnings upon the change to the equity method ofaccounting.In the event of loss of common control or significant influence over investee due to partial disposal of equityinvestment, the remaining equity interest after disposal shall be accounted for according to the AccountingStandard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. Thedifference between its fair value and carrying amount shall be included in profit or loss for the current period. Inrespect of other comprehensive income recognised under previous equity investment using equity method, itshall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset orliability by investee at the time when equity method was ceased to be used. Movement of other owners’equityrelated to the previous equity investment shall be transferred to profit or loss for the current period.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
14. Long-term equity investments
(Continued)
(2) Subsequent measurement and method for profit or loss recognition
(Continued)In the event of loss of control over investee due to partial disposal of equity investment, the remaining equityinterest which can apply common control or impose significant influence over the investee after disposal shallbe accounted for using equity method. Such remaining equity interest shall be treated as accounting for usingequity method since it is obtained and adjustment was made accordingly. For the remaining equity interestwhich cannot apply common control or impose significant influence over the investee after disposal, it shall beaccounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurementof Financial Instruments. The difference between its fair value and carrying amount as at the date of losingcontrol shall be included in profit or loss for the current period.If the shareholding ratio of the Company is reduced due to the capital increase of other investors, and as aresult, the Company loses the control of but still can apply common control or impose significant influence overthe investee, the net asset increase due to the capital increase of the investee attributable to the Company shallbe recognised according to the new shareholding ratio, and the difference with the original carrying amount ofthe long-term equity investment corresponding to the shareholding ratio reduction part that should be carriedforward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according tothe new shareholding ratio as if equity method is used for accounting when acquiring the investment.In respect of the transactions between the Company and its associates and joint ventures, the share ofunrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable to theCompany. Investment gain or loss shall be recognised accordingly. However, any unrealised loss arising frominternal transactions between the Company and an investee is not eliminated to the extent that the loss isimpairment loss of the transferred assets.
(3) Basis for determining the common control and significant influence on the investee
Common control is the contractually agreed sharing of control over an arrangement, which relevant activitiesof such arrangement must be decided by unanimously agreement from parties who share control. Whendetermining if there is any common control, it should first be identified if the arrangement is controlled byall the participants or the group consisting of the participants, and then determined if the decision on thearranged activity can be made only with the unanimous consent of the participants sharing the control. If all theparticipants or a group of participants can only decide the relevant activities of certain arrangement throughconcerted action, it can be considered that all the participants or a group of participants share commoncontrol on the arrangement. If there are two or more participant groups that can collectively control certainarrangement, it does not constitute common control. When determining if there is any common control, therelevant protection rights will not be taken into account.Significant influence is the power of the investor to participate in the financial and operating policy decisionsof an investee, but to fail to control or joint control the formulation of such policies together with other parties.When determining if there is any significant influence on the investee, the influence of the voting shares of theinvestee held by the investor directly and indirectly and the potential voting rights held by the investor andother parties which are exercisable in the current period and converted to the equity of the investee, includingthe warrants, stock options and convertible bonds that are issued by the investee and can be converted in thecurrent period, shall be taken into account.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
14. Long-term equity investments
(Continued)
(3) Basis for determining the common control and significant influence on the investee
(Continued)When the Company holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the votingshares of the investee, it is generally considered to have significant influence on the investee, unless there isconcrete evidence to prove that it cannot participate in the production and operation decision-making of theinvestee and cannot pose significant influence in this situation. When the Company owns less than 20% of thevoting shares of the investee, it is generally considered that it has not significantly influenced on the investee,unless there is concrete evidence to prove that it can participate in the production and operation decision-making of the investee and can impose significant influence in this situation.
(4) Impairment test method and impairment provision
For the method for making impairment provision for the investment in subsidiaries, associates and jointventures, please refer to Note V. 23.
15. Investment property
Investment property refers to real estate held to earn rentals or for capital appreciation, or both. The investmentproperty of the Company includes leased land use rights, land use rights held for sale after appreciation, and leasedbuildings.The investment property of the Company is measured initially at cost upon acquisition, and subject to depreciation oramortisation in the relevant periods according to the relevant provisions on fixed assets or intangible assets.For the method for making impairment provision for the investment property adopted cost method for subsequentmeasurement, please refer to Note V. 23.When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of theproperty net of the carrying amount and related tax and surcharges is recognised in profit or loss for the currentperiod.
16. Fixed assets
(1) Conditions for recognition
Fixed assets represent the tangible assets held by the Company using in the production of goods, rendering ofservices and for operation and administrative purposes with useful life over one year.Fixed assets are recognised when it is probable that the related economic benefits will flow to the Company andthe costs can be reliably measured.The Company’s fixed assets are initially measured at the actual cost at the time of acquisition.Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probablethat the associated economic benefits will flow to the Company and the related cost can be reliably measured.The cost of routine repairs of fixed assets that do not qualify as capitalised subsequent expenditure is chargedto current profit or loss or included in the cost of the related assets in accordance with the beneficiary objectwhen incurred. The carrying amount of the replaced part is derecognised.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
16. Fixed assets
(Continued)
(2) Depreciation method
The Company adopts the straight-line method for depreciation. Provision for depreciation will be startedwhen the fixed asset reaches its expected usable state, and stopped when the fixed asset is derecognisedor classified as a non-current asset held for sale. Without regard to the depreciation provision, the Companydetermines the annual depreciation rate by category, estimated useful lives and estimated residual value of thefixed assets as below:
Category
Year ofdepreciation
Estimated residual
value
Annual depreciation
rate
Housing and building structure20-405-102.25-4.75Machinery and equipment8-205-104.50-11.88Transportation equipment5-85-1011.25-19.00Electronic equipment and others55-1018.00-19.00Where, for the fixed assets for which impairment provision is made, to determine the depreciation rate, theaccumulated amount of the fixed asset impairment provision that has been made shall be deducted.
(3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 23.
(4) The Company will review the useful lives, estimated net residual value and depreciation method of the fixed
assets at the end of each year.When there is any difference between the useful lives estimate and the originally estimated value, the usefullives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual valueestimate and the originally estimated value, the estimated net residual value shall be adjusted.
(5) Disposal of fixed assets
A fixed asset is derecognised on disposal or when it is expected that there shall be no economic benefit arisingfrom using or after disposal. Where the fixed assets are sold, transferred, retired or damaged, the incomereceived after disposal after deducting the carrying amount and related taxes are recognised in profit or loss forthe current period.The Company regards the fixed assets that have been replaced due to technological transformation orelimination of outdated production capacity and have no subsequent plan for use, but have not reached theretirement standard, as idle fixed assets. The depreciation method for idle fixed assets remains unchanged frombefore it was idle.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
17. Construction in progress
Construction in progress of the Company is recognised based on the actual construction cost, including all necessaryexpenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before ithas reached the working condition for its intended use, and other related expenses during the construction period.A construction in progress is reclassified to fixed assets when it has reached the working condition for its intendeduse. For technological transformation or new machine-made paper projects, the projects will be put into trial operationfor a period of time (usually three months) upon completion of construction. After the internal acceptance is completedduring the trial operation period, the construction in progress will be transferred to fixed assets.The method for impairment provision of construction in progress is set out in Note V. 23.
18. Materials for project
The materials for project of the Group refer to various materials prepared for construction in progress, includingconstruction materials, equipment not yet installed and tools for production.The purchased materials for project are measured at cost, and the planning materials for project are transferred toconstruction in progress. After the completion of the project, the remaining materials for project are transferred toinventory.The method for impairment provision of materials for project is set out in Note V. 23.The closing balance of materials for project is presented as“construction in progress” item in the balance sheet.
19. Borrowing costs
(1) Recognition principle for the capitalisation of the borrowing costs
The borrowing costs incurred by the Company directly attributable to the acquisition, construction or productionof a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will berecognised as expenses when incurred according to the incurred amount, and included in the profit or loss forthe current period. When the borrowing costs meet all the following conditions, capitalisation shall be started:
The capital expenditure has been incurred, which includes the expenditure incurred by paying cash,transferring non-cash assets or undertaking interest-bearing liabilities for acquiring, constructing orproducing the qualifying assets; the borrowing costs have been incurred; andthe acquisition, construction or production activity necessary for the asset to be ready for its intended use
or sale has been started.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
19. Borrowing costs
(Continued)
(2) Capitalisation period of borrowing costs
When a qualifying asset acquired, constructed or produced by the Company is ready for its intended use orsale, the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifyingasset is ready for its intended use or sale shall be recognised as expenses when incurred according to theincurred amount, and included in the profit or loss for the current period.Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction orproduction of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period ofmore than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruptionperiod.
(3) Calculation methods for capitalisation rate and capitalised amount of the borrowing costs
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actualinterest expense incurred on that borrowing for the period less any bank interest earned from depositing theborrowed funds before being used into banks or any investment income on the temporary investment of thosefunds. Where funds are borrowed for general purpose, the Company shall determine the amount of interestto be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excessamounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings.The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purposeborrowings.During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreigncurrency shall be capitalised. Exchange differences related to general-purpose borrowings denominated inforeign currency shall be included in profit or loss for the current period.
20. Biological assets
(1) Standards for recognising biological assets
Bearer biological assets refer to biological assets held for the purpose of producing agricultural products,providing labour services or renting, including economic forests, firewood forests, productive livestock anddraught animals. The Company’s bearer biological assets are mainly tea trees. The cost of a planted orpropagated bearer biological asset includes the expenses directly attributable to the asset and necessarilyincurred before the asset is ready for its intended production and operation, including the borrowing costs thatare eligible for capitalisation.The management, protection and feeding costs of a biological asset subsequent to crown closure or afterthe asset is ready for its intended production and operation are expensed and recognised in profit or loss asincurred. According to experience, the tea trees grown by the Company generally take 7 years to reach thecrown closure stage.Depreciation of bearer biological assets is calculated using the straight-line method over the estimated usefullife of each biological asset less its residual value as follows:
Type of bearer biologicalassetsUseful life (year)
Estimated residual
value
Annual depreciation
rate
Tea tree205%
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
20. Biological assets
(Continued)
(1) Standards for recognising biological assets
(Continued)
The Company reviews the useful life and estimated net residual value of a bearer biological asset and thedepreciation method applied at least at each financial year-end. A change in the useful life or estimatednet residual value of a fixed asset or the depreciation method used shall be accounted for as a change inaccounting estimate.The difference between the disposal income of the sale, loss, death or damage of a bearer biological asset, netof its carrying amount and related taxes, is recognised in profit or loss for the current period.The method for impairment provision of bearer biological assets is set out in Note V. 23.
21. Intangible assets
The intangible assets of the Company include land use rights, software, patents and certificates of third party right.The intangible asset is initially measured at cost, and its useful life is determined upon acquisition. If the useful lifeis finite, the intangible asset will be amortised over the estimated useful life using the amortisation method thatcan reflect the estimated realisation of the economic benefits related to the asset, starting from the time when it isavailable for use. If it is unable to reliably determine the estimated realisation, straight-line method shall be adoptedfor amortisation. The intangible assets with uncertain useful life will not be amortised.The amortisation methods for the intangible assets with finite useful life are as follows:
TypeUseful life
The basis fordetermining useful life
Method ofamortisationRemarkLand use rights50-70Years of certificateStraight-line methodSoftware5-10Estimated years for
software replacement
Straight-line methodPatents5-20Useful life of purchaseStraight-line methodCertificates of third party right3Useful life of purchaseStraight-line methodThe Company reviews the useful life and amortisation method of the intangible assets with finite useful life at the endof each year. If it is different from the previous estimates, the original estimates will be adjusted, and will be treated asa change in accounting estimate.If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic benefitto the company, the carrying amount of the intangible asset will be entirely transferred into the profit or loss for thecurrent period.The impairment method for the intangible assets is set out in Note V. 23.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
22. R&D expenses
The R&D expenses of the Company are expenses directly related to the R&D activities of the Company, including thewages R&D staff, direct investment costs, depreciation expenses and long-term prepaid expenses, design expenses,equipment testing expenses, amortisation expenses of intangible assets, and outsourced R&D expenses, and otherexpenses. Among them, the wages of R&D staff are included in R&D expenses based on working hours of relatedprojects. Equipment, production lines, and sites shared between R&D activities and other production and operationactivities are included in R&D expenses according to the proportion of working hours and the proportion of area.The Company divides the expenses on internal R&D projects into expenses in the research phase and expenses in thedevelopment phase. All R&D expenses of the Company are included in the current profits and losses when incurred.
23. Asset impairment
Impairment of long-term equity investments in subsidiaries, associates and joint ventures, asset impairment oninvestment property, fixed assets, construction in progress, bearer biological assets measured at cost, right-of-use assets, intangible assets, goodwill and others (excluding inventories, deferred tax assets and financial assets)subsequently measured at cost is determined as follows:
The Company determines if there is any indication of asset impairment as at the balance sheet date. If there is anyevidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test.Goodwill arising from business combinations, intangible assets with an indefinite useful life and intangible assets notready for use will be tested for impairment annually, regardless of whether there is any indication of impairment.The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of thefuture cash flows expected to be derived from the asset. The Company estimates the recoverable amount of anindividual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company shalldetermine the recoverable amount of the asset group to which the asset belongs. The determination of an asset groupis based on whether major cash inflows generated by the asset group are independent of the cash inflows from otherassets or asset groups.When the recoverable amount of an asset or an asset group is less than its carrying amount, the carrying amount isreduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision ismade accordingly.For the purpose of impairment test of goodwill, the carrying amount of goodwill acquired in a business combination isallocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocateto the related asset groups, it is allocated to the combination of related asset groups. The related asset groups orcombination of asset groups are those which can benefit from the synergies of the business combination and are notlarger than the reportable segments identified by the Company.In the impairment test, if there is any indication that an asset group or a combination of asset groups related togoodwill may be impaired, the Company first tests the asset group or set of asset groups excluding goodwill forimpairment, calculates the recoverable amount and recognises the corresponding impairment loss. An impairment testis then carried out on the asset group or combination of asset groups containing goodwill by comparing its carryingamount with its recoverable amount. If the recoverable amount is lower than the carrying amount, an impairment lossis recognised for goodwill.An impairment loss recognised shall not be reversed in a subsequent period.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
24. Long-term prepaid expenses
The long-term prepaid expenses incurred by the Company shall be recognised based on the actual cost, and evenlyamortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequentaccounting periods, its value after amortisation shall be entirely included in the profit or loss for the current period.
25. Contract liabilities
A contract liability represents the Company’s obligation to transfer goods to a customer for which the Company hasreceived consideration (or an amount of consideration is due) from the customer. If the customer has already paidthe contract consideration before the Company transfers goods to the customer or the Company has obtained theunconditional collection right, the Company will recognise such amount received or receivable as contract liabilitiesat earlier of the actual payment by the customer or the amount payable becoming due. Contract assets and contractliabilities under the same contract are presented on a net basis, and contract assets and contract liabilities underdifferent contracts are not offset.
26. Employee benefits
(1) Scope of employee benefits
Employee benefits are all forms of considerations or compensation given by an entity in exchange forservices rendered by employees or for the termination of employment. Employee benefits include short-termstaff remuneration, post-employment benefits, termination benefits and other long-term employee benefits.Employee benefits include benefits provided to employees’spouses, children, other dependants, survivors ofthe deceased employees or other beneficiaries.Employee benefits are presented as“employee benefits payable”and“long-term employee benefits payable”inthe balance sheet, respectively, according to liquidity.
(2) Short-term staff remuneration
Employee wages or salaries actually incurred, bonuses, and social insurance contributions such as medicalinsurance, work injury insurance, maternity insurance, and housing fund, contributed at the applicablebenchmarks and rates, are recognised as a liability as the employees provide services, with a correspondingcharge to profit or loss or included in the cost of assets where appropriate.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
26. Employee benefits
(Continued)
(3) Post-employment benefits
Post-employment benefit plans include defined contribution plans and defined benefit plans. A definedcontribution plan is a post-employment benefit plan under which the Company pays fixed contributionsinto a separate fund and the Company has no further obligations for payment. A defined benefit plan is apostemployment benefit plan other than a defined contribution plan.Defined contribution plansDefined contribution plans include basic pension insurance, unemployment insurance and enterprise annuityplan (if any).During the accounting period in which an employee provides service, the amount payable calculated accordingto the defined contribution plan is recognised as a liability and included in the profit or loss for the current periodor the cost of relevant assets.Defined benefit plansFor defined benefit plans, the actuarial valuation is carried out by an independent actuary on the annualbalance sheet date, and the cost of providing benefits is determined by the expected cumulative benefit unitmethod. The cost of staff remuneration arising from the Company’s defined benefit plans includes the followingcomponents:
Service cost, including current service cost, past service cost, and settlement gain or loss. In particular,the current service cost refers to the increase in the present value of obligations of defined benefit plansarising from the service provided by staff in the current period; the past service cost refers to the increaseor decrease in the present value of obligations of defined benefit plans related to the service of the staff inthe previous period arising from the revision of defined benefit plans.Net interest on net liabilities or net assets of defined benefit plans, including interest income from the
assets under the plans, interest expense arising from the obligations of defined benefit plans, and interestaffected by asset caps. Changes arising from the remeasurement of net liabilities or net assets of defined benefit plans.Unless other accounting standards require or allow costs of staff welfare to be included in costs of assets,the Company will include the above items and in the current profit and loss; and include item in othercomprehensive income which will not be transferred back to profit or loss in subsequent accounting periods.When the original defined benefit plan is terminated, all the part originally included in other comprehensiveincome shall be transferred to retained profit within the scope of equity.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
26. Employee benefits
(Continued)
(4) Termination benefits
When the Company provides termination benefits to employees, employee benefits liabilities arising fromtermination benefits are recognised in profit or loss for the current period at the earlier of the following dates:
when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labourrelationship plans and employee redundant proposals; the Company recognises cost and expenses related topayment of compensation for dismissal and restructuring.For the early retirement plans, economic compensations before the actual retirement date were classified astermination benefits. During the period from the date of cease of render of services to the actual retirementdate, relevant wages and contribution to social insurance for the employees proposed to be paid are recognisedin profit or loss on a one-off basis. Economic compensation after the official retirement date, such as normalpension, is accounted for as post-employment benefits.
(5) Other long-term benefits
Other long-term employee benefits provided by the Group to employees that meet the conditions for definedcontribution plans are accounted for in accordance with the relevant provisions relating to defined contributionplans as stated above. If the conditions for defined benefit plans are met, the benefits shall accounted for inaccordance with the relevant provisions relating to defined benefit plans, but the“changes arising from theremeasurement of net liabilities or net assets of defined benefit plans”in the relevant employee benefits shall beincluded in the current profit and loss or the relevant costs of assets.
27. Provisions
Obligations pertinent to the contingencies which satisfy the following conditions are recognised by the Company asprovisions:
(1) the obligation is a current obligation borne by the Company;
(2) it is likely that an outflow of economic benefits from the Company will be resulted from the performance of the
obligation;
(3) the amount of the obligation can be reliably measured.
The provisions shall be initially measured based on the best estimate for the expenditure required for the performanceof the current obligation, after taking into account relevant risks, uncertainties, time value of money and otherfactors pertinent to the contingencies. If the time value of money has significant influence, the best estimates shallbe determined after discounting the relevant future cash outflow. The Company reviews the carrying amount of theprovisions on the balance sheet date and adjust the carrying amount to reflect the current best estimates.If all or some expenses incurred for settlement of recognised provisions are expected to be borne by the third party,the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensationamount recognised shall not be more than the carrying amount of provisions.
28. Share-based payments and equity instruments
(1) Category of share-based payment
The Company’s share-based payment is either equity-settled or cash-settled.
(2) Determination of fair value of equity instruments
For the existence of an active market for options and other equity instruments granted by the Company, thefair value is determined at the quoted price in the active market. For options and other equity instruments withno active market, option pricing model shall be used to estimate the fair value of the equity instruments. Thefollowing factors shall be taken into account using option pricing models: A. the exercise price of the option; B.the validity period of the option; C. the current market price of the share; D. the expected volatility of the shareprice; E. predicted dividend of the share; and F. risk-free rate of the option within the validity period.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
28. Share-based payments and equity instruments
(Continued)
(3) Recognition of vesting of equity instruments based on the best estimate
On each balance sheet date within the vesting period, the estimated number of equity instruments expected tovest is revised based on the best estimate made by the Company according to the latest available subsequentinformation as to changes in the number of employees with exercisable rights. On the vesting date, the finalestimated number of equity instruments expected to vest should equal the actual number of equity instrumentsexpected to vest.
(4) Accounting treatment of implementation, modification and termination of share-based payment
Equity-settled share-based payment shall be measured at the fair value of the equity instruments granted toemployees. For those may immediately vest after the grant, the fair value of equity instrument at the grant dateshall be included in the relevant costs or expenses, and the capital reserve shall be increased accordingly.If the right may not be exercised until the vesting period comes to an end or until the specified performanceconditions are met, on each balance sheet date within the vesting period, the services obtained in the currentperiod shall, based on the best estimate of the number of vested equity instruments, be included in the relevantcosts or expenses and the capital reserve at the fair value of the equity instrument at the grant date. After thevesting period, relevant costs or expenses and total shareholders’equity which have been recognised will notbe adjusted.Cash-settled share-based payment shall be measured in accordance with the fair value of liability calculatedand recognised based on the shares or other equity instruments undertaken by the Company. For those mayimmediately vest after the grant, the fair value of the liability undertaken by the Company shall, on the date of thegrant, be included in the relevant costs or expenses, and the liabilities shall be increased accordingly. If the rightmay not be exercised until the vesting period comes to an end or until the specified performance conditionsare met, on each balance sheet date within the vesting period, the services obtained in the current period shall,based on the best estimate of the information about the exercisable right, be included in the relevant costs orexpenses and the corresponding liabilities at the fair value of the liability undertaken by the Company. For eachof the balance sheet date and settlement date before the settlement of the relevant liabilities, fair value of theliabilities shall be remeasured and the changes will be included in the profit or loss for the current period.When there are changes in Company’s share-based payment plans, if the modification increases the fair valueof the equity instruments granted, corresponding recognition of service increase in accordance with the increasein the fair value of the equity instruments; if the modification increases the number of equity instrumentsgranted, the increase in fair value of the equity instruments is recognised as a corresponding increase in serviceachieved. An increase in the fair value of equity instruments refers to the difference between the fair values ofthe modified date. If the modification reduces the total fair value of shares paid or not conductive to the use ofother employees share-based payment plans to modify the terms and conditions of service, it will continue tobe accounted for in the accounting treatment, as if the change had not occurred, unless the Company cancelledsome or all of the equity instruments granted.During the vesting period, if the cancelled equity instruments (except for failure to meet the conditions of thenon-market vesting conditions) granted by the Company to cancel the equity instruments granted amounttreated as accelerated vesting of the remaining period should be recognised immediately in profit or loss, whilerecognising capital reserves. If employees or other parties can choose to meet non-vesting conditions but theyare not met in the vesting period, the Company will treat them as cancelled equity instruments granted.
(5) Restricted shares
If the Company grants the restricted shares to incentive participants under an equity incentive plan, the incentiveparticipants shall subscribe for the shares first. If the unlocking conditions stipulated in the equity incentiveplan cannot be fulfilled subsequently, the Company repurchase the shares at the predetermined price. If theregistration and other capital increase procedures for the restricted shares issued to employees are completedin accordance with relevant regulations, the Company recognises share capital and capital reserve (or capitalpremium) based on the subscription money received from the employees on the grant date; and recognisestreasury shares and other payables for repurchase obligation.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. Other financial instruments such as preference shares and Perpetual Bonds
(1) Classification of financial liabilities and equity instruments
Financial instruments issued by the Company are classified into financial assets, financial liabilities or equityinstruments on the basis of the substance of the contractual arrangements and the economic nature not onlyits legal form, together with the definition of financial asset, financial liability and equity instruments on initialrecognition.
(2) Accounting treatment of other financial instruments such as preference shares and Perpetual Bonds
Financial instruments issued by the Company are initially recognised and measured in accordance with thefinancial instrument standards; thereafter, interest or dividends are accrued on each balance sheet dateand accounted for in accordance with relevant specific ASBEs, i.e. to determine the accounting treatmentfor interest expenditure or dividend distribution of the instrument based on the classification of the financialinstrument issued. For financial instruments classified as equity instruments, their interest expenses or dividenddistributions are treated as profit distribution of the Company, and their repurchases and cancellations aretreated as changes in equity; for financial instruments classified as financial liabilities, their interest expenses ordividend distribution are in principle accounted for with reference to borrowing costs, and the gains or lossesarising from their repurchases or redemption are included in the profit or loss for the current period.For the transaction costs such as fees and commissions incurred by the Company for issuing financialinstruments, if such financial instruments are classified as debt instruments and measured at amortised cost,they are included in the initial measured amount of the instruments issued; if such financial instruments areclassified as equity instruments, they are deducted from equity.
30. Revenue
(1) General principles
The Company recognises revenue when it satisfies a performance obligation in the contract, i.e. when thecustomer obtains control of the relevant goods or services.Where a contract has two or more performance obligations, the Company allocates the transaction price toeach performance obligation based on the percentage of respective unit price of goods or services guaranteedby each performance obligation, and recognises as revenue based on the transaction price that is allocated toeach performance obligation.If one of the following conditions is fulfilled, the Company performs its performance obligation within a certainperiod; otherwise, it performs its performance obligation at a point of time:
when the customer simultaneously receives and consumes the benefits provided by the Company whenthe Company performs its obligations under the contract;when the customer is able to control the goods in progress in the course of performance by the Companyunder the contract;when the goods produced by the Company under the contract are irreplaceable and the Company hasthe right to payment for performance completed to date during the whole contract term.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
30. Revenue
(Continued)
(1) General principles
(Continued)
For performance obligations performed within a certain period, the Company recognises revenue by measuringthe progress towards complete of that performance obligation within that certain period. When the progressof performance cannot be reasonably determined, if the costs incurred by the Company are expected tobe compensated, the revenue shall be recognised at the amount of costs incurred until the progress ofperformance can be reasonably determined.For performance obligation performed at a point of time, the Company recognises revenue at the point of timeat which the customer obtains control of relevant goods or services. To determine whether a customer hasobtained control of goods or services, the Company considers the following indications:
The Company has the current right to receive payment for the goods, which is when the customer has the
current payment obligations for the goods.The Company has transferred the legal title of the goods to the customer, which is when the client
possesses the legal title of the goods.The Company has transferred the physical possession of goods to the customer, which is when the
customer obtains physical possession of the goods.The Company has transferred all of the substantial risks and rewards of ownership of the goods to the
customer, which is when the customer obtain all of the substantial risks and rewards of ownership of the
goods to the customer. The customer has accepted the goods or services. Other information indicates that the customer has obtained control of the goods.
(2) Specific methods
The Company’s revenue mainly comes from the following types of business: sales of goods, provision of hoteland property services, and provision of financial leasing and factoring services.Sales of goodsThe Company produces and sells machine-made paper and raw materials, electricity and steam, constructionmaterials, papermaking chemicals, plastic automobile accessories, moulds and other products.In terms of domestic sales, revenue is recognised at a point in time when the control over the goods istransferred after the Company has delivered the goods (other than electricity and steam) sold to the location asspecified in the contract and the customer has accepted the goods.In terms of overseas sales, revenue is recognised on the day when the goods (other than electricity and steam)sold are loaded on board and declared.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
30. Revenue
(Continued)
(2) Specific methods
(Continued)Sales of goods(Continued)The sales of electricity and steam by the Company are performance obligations performed within a certainperiod. For sales of electricity, the Company recognises revenue from sales of electricity based on the quantityof electricity delivered to customers every month at a price agreed in the contract. For sales of steam, theCompany recognises revenue from sales of steam based on the amount of steam delivered to customers everymonth at a price agreed in the contract.The credit periods granted by the Company to customers in various industries are consistent with the practicesof various industries, therefore, there is no significant financing component.The Company provides product quality assurance for the sales of products and recognises correspondingprovisions. The Company does not provide any additional services or additional quality assurance, so theproduct quality assurance does not constitute a separate fulfilment obligation.The Company’s cooperation model with distributors is outright sales, and the recognition of sales revenue underthe distribution model is consistent with the direct sales model.Certain contracts between the Company and its customers contain arrangements on sales rebates which willgive rise to variable consideration. Where a contract contains variable consideration, the Company determinesthe best estimates on the variable consideration based on expected values or the most probable amount,provided that transaction prices including variable consideration shall not exceed the cumulative amount ofrecognised revenue upon the removal of relevant uncertainties in connection with which a significant reversal ishighly unlikely.For sales of machine-made paper with sales return clauses, the revenue recognised is subject to the cumulativeamount of recognised revenue in connection with which a significant reversal is highly unlikely. The Companyrecognises the liabilities according to the expected amount of refund, and recognises the carrying amount of thegoods returned at the time of transfer deducting the estimated cost of recovering the goods as an asset (includingthe loss of the value of the returned goods).Provision of hotel and property servicesThe Company provides hotel and property services to external parties. Since the customers obtain andconsume the economic benefits brought by the Company’s performance of the contract while the Companyperforms the contract, the Company recognises revenue according to the progress of the contract performance.Since the performance progress occurs evenly, the Company recognises revenue by amortising on a straight-line basis over the service period.Provision of financial leasing and factoring servicesThe Company recognises revenue from external financial leasing and factoring services according to theeffective interest rate.For assets that have not experienced credit impairment, the Company determines its interest income basedon the amount of the book balance of the financial asset (i.e. without considering the impact of impairment)multiplied by the effective interest rate.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
30. Revenue
(Continued)
(2) Specific methods
(Continued)Provision of financial leasing and factoring services(Continued)There are two cases for financial assets with credit impairment:
For financial assets that are not credit-impaired when purchased or originated, but are credit-impaired insubsequent periods, the Company shall, in the subsequent periods when impairment occurs, determine itsincome based on the amount of the amortised cost of the financial asset (i.e. the book balance minus theaccrued impairment) multiplied by the effective interest rate (the effective interest rate determined at the time ofinitial recognition, which does not change due to the occurrence of impairment).For financial assets that are credit-impaired when purchased or originated, the Company shall, upon initialrecognition, determines its income based on the amount of the amortised cost of the financial asset multipliedby the credit-adjusted effective interest rate (i.e. the interest rate at which the projected future cash flows afterimpairment are discounted to the amortised cost at the time of purchase or origination).
31. Contract costs
Contract costs are either the incremental costs of obtaining a contract with a customer or the costs to fulfil a contractwith a customer.Incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with acustomer that it would not have incurred if the contract had not been obtained e.g. sales commission. The Companyrecognises the incremental costs of obtaining a contract with a customer as an asset if it expects to recover thosecosts. Other costs of obtaining a contract are expensed when incurred.If the costs to fulfil a contract with a customer are not within the scope of inventories or other ASBEs, the Companyrecognises an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:
the costs relate directly to an existing contract or to a specifically identifiable anticipated contract, including
direct labour, direct materials, allocations of overheads (or similar costs), costs that are explicitly chargeable tothe customer and other costs that are incurred only because the Company entered into the contract;the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to
satisfy) performance obligations in the future; the costs are expected to be recovered.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
31. Contract costs
(Continued)
Assets recognised for the incremental costs of obtaining a contract and assets recognised for the costs to fulfila contract (the“assets related to contract costs”) are amortised on a systematic basis that is consistent with thetransfer to the customer of the goods or services to which the assets relate and recognised in profit or loss for thecurrent period. If the amortisation period does not exceed one year, it shall be recognised in profit or loss for thecurrent period.The Company recognises an impairment loss in profit or loss to the extent that the carrying amount of an asset relatedto contract costs exceeds:
remaining amount of consideration that the Company expects to receive in exchange for the goods or servicesto which the asset relates; the cost estimated to be happened for the transfer of related goods or services.
32. Government grants
A government grant is recognised when the grant will be received and that the Company will comply with theconditions attaching to the grant.If a government grant is in the form of a monetary asset, it is measured at the amount received or receivable. If agovernment grant is in the form of non-monetary asset, it is measured at fair value; if the fair value cannot be obtainedin a reliable way, it is measured at the nominal amount of RMB1.Government grants obtained for acquisition or construction of long-term assets or other forms of long-term assetformation are classified as government grants related to assets, while the remaining government grants are classifiedas government grants related to revenue.Regarding the government grant not clearly defined in the official documents and can form long-term assets, thepart of government grant which can be referred to the value of the assets is classified as government grant relatedto assets and the remaining part is government grant related to revenue. For the government grant that is difficult todistinguish, the entire government grant is classified as government grant related to revenue.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
32. Government grants
(Continued)A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or lossover the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue, ifthe grant is a compensation for related costs, expenses or losses incurred, the grant shall be recognised in profit orloss for the current period or used to offset related costs; if the grant is a compensation for related costs, expensesor losses to be incurred in subsequent periods, the grant shall be recognised as deferred income, and recognised inprofit or loss over the periods in which the related costs, expenses or losses are recognised, or used to offset relatedcosts. A government grant measured at nominal amount is directly included in profit or loss for the current period. TheCompany adopts a consistent approach to the same or similar government grants.A government grant related to daily activities is recognised in other gains or used to offset related costs relying onthe essence of economic business; otherwise, recognised in non-operating income or used to offset non-operatingexpenses.For the repayment of a government grant already recognised, if the carrying amount of relevant assets was written offat initial recognition, the carrying amount of the assets shall be adjusted; if there is any related deferred income, therepayment shall be offset against the carrying amount of the deferred income, and any excess shall be recognised inprofit or loss for the current period; otherwise, the repayment shall be recognised immediately in profit or loss for thecurrent period.
33. Deferred income tax assets/deferred income tax liabilities
Income tax comprises current income tax expense and deferred income tax expense, which are included in profit orloss for the current period as income tax expenses, except for deferred tax related to transactions or events that aredirectly recognised in owners’ equity which are recognised in owners’equity, and deferred tax arising from a businesscombination, which is adjusted against the carrying amount of goodwill.Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax baseat the balance sheet date of the Company shall be recognised as deferred income tax using the balance sheet liabilitymethod.All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in thefollowing transactions:
(1) The initial recognition of goodwill, and the initial recognition of an asset or liability in a transaction which is
neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when thetransaction occurs (other than a single transaction that the initially recognised assets and liabilities result in anequal amount of taxable temporary differences and deductible temporary differences);
(2) The taxable temporary differences associated with investments in subsidiaries, associates and joint ventures,
and the Company is able to control the timing of the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
33. Deferred income tax assets/deferred income tax liabilities
(Continued)
The Company recognises a deferred income tax asset for the carry forward of deductible temporary differences,deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable profitswill be available against which the deductible temporary differences, deductible losses and tax credits can be utilised,except for those incurred in the following transactions:
(1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or deductible
loss) when the transaction occurs (other than a single transaction that the initially recognised assets andliabilities result in an equal amount of taxable temporary differences and deductible temporary differences);
(2) The deductible temporary differences associated with investments in subsidiaries, associates and joint ventures,
the corresponding deferred income tax asset is recognised when both of the following conditions are satisfied:
it is probable that the temporary difference will reverse in the foreseeable future, and it is probable that taxableprofits will be available in the future, against which the temporary difference can be utilised.At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the taxrates that are expected to apply to the period when the asset is realised or the liability is settled, and their tax effect isreflected accordingly.At the balance sheet date, the Company reviews the carrying amount of a deferred income tax asset. If it is probablethat sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to beutilised, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when itbecomes probable that sufficient taxable profits will be available.At the balance sheet date, deferred income tax assets and deferred income tax liabilities are presented as the netamount after offsetting when the following conditions are met at the same time:
(1) The tax payer within the Company has the legal right to settle current income tax assets and current income tax
liabilities on a net basis;
(2) Deferred income tax assets and deferred income tax liabilities are related to income taxes levied by the same
tax collection and administration authority on the same taxpayer within the Company.
34. Lease
(1) Identification of leases
On the beginning date of the contract, the Company (as a lessee or lessor) assesses whether the customer inthe contract has the right to obtain substantially all of the economic benefits from use of the identified assetthroughout the period of use and has the right to direct the use of the identified asset throughout the period ofuse. If a contract conveys the right to control the use of an identified asset and multiple identified assets for aperiod of time in exchange for consideration, the Company identifies such contract is, or contains, a lease.
(2) The Company as lessee
On the beginning date of the lease, the Company recognises right-of-use assets and lease liabilities for allleases, except for short-term lease and low-value asset lease with simplified approach.The accounting policy for right-of-use assets is set out in Note V. 35.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
34. Lease
(Continued)
(2) The Company as lessee
(Continued)
The lease liability is initially measured at the present value of the lease payments that are not paid at thebeginning date of the lease using the interest rate implicit in the lease. Where the interest rate implicit in thelease cannot be determined, the incremental borrowing rate is used as the discount rate. Lease paymentsinclude fixed payments and in-substance fixed payments, less any lease incentives receivable; variablelease payments that are based on an index or a rate; the exercise price of a purchase option if the lessee isreasonably certain to exercise that option; payments for terminating the lease, if the lease term reflects thelessee exercising that option of terminating; and amounts expected to be payable by the lessee under residualvalue guarantees. Subsequently, the interest expense on the lease liability for each period during the lease termis calculated using a constant periodic rate of interest and is recognised in profit or loss for the current period.Variable lease payments not included in the measurement of lease liabilities are recognised in profit or loss forthe period in which they actually arise.Short-term leaseShort-term leases refer to leases with a lease term of less than 12 months from the commencement date,except for those with a purchase option.Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on astraight-line basis over the lease term.For short-term leases, the Company chooses to adopt the above simplified approach for the following types ofassets that meet the conditions of short-term lease according to the classification of leased assets.Low-value equipmentTransportation vehiclesLow-value asset leaseA low-value asset lease is a lease that the value of a single leased asset is below RMB40,000 when it is a newasset.Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term, andeither included in the cost of the related asset or charged to profit or loss for the current period.For a low-value asset lease, the Company chooses the above simplified approach based on the specificcircumstances of each lease.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
34. Lease
(Continued)
(2) The Company as lessee
(Continued)Lease modificationThe Company accounts for a lease modification as a separate lease when the modification occurs and thefollowing conditions are met: the lease modification expands the scope of lease by adding the right to useone or more of the leased assets; and the increase in consideration is equivalent to the separate price for theexpanded scope of lease adjusted for that contractual situation.Where a lease modification is not accounted for as a separate lease, at the effective date of the leasemodification, the Company reallocates the consideration of the modified contract, redetermines the lease termand remeasures the lease liability based on the present value of the lease payments after the modification andthe revised discount rate.If a lease modification results in a reduction in the scope of the lease or a shortening of the lease term, theCompany reduces the carrying amount of the right-of-use asset accordingly and includes in the profit or loss forthe period the gain or loss associated with the partial or complete termination of the lease.Where other lease modifications result in a remeasurement of the lease liability, the Company adjusts thecarrying amount of the right-of-use asset accordingly.
(3) The Company as lessor
When the Company is a lessor, a lease is classified as a finance lease whenever the terms of the lease transfersubstantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases areclassified as operating leases.Finance leasesUnder finance leases, the Company accounts for finance lease receivables at the beginning of the lease termat the net lease investment, which is the sum of the unsecured residual value and the present value of thelease receipts outstanding at the commencement date of the lease, discounted at the interest rate implicit inthe lease. The Company as lessor calculates and recognises interest income for each period of the lease termbased on a fixed periodic interest rate. Variable lease payments acquired by the Company as lessor that are notincluded in the net measurement of lease investments are included in profit or loss for the period when they areactually incurred.Derecognition and impairment of finance lease receivables are accounted for in accordance with therequirements under the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurementof Financial Instruments and the Accounting Standards for Business Enterprises No. 23 – Transfer of FinancialAssets.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
34. Lease
(Continued)
(3) The Company as lessor
(Continued)
Operating leaseLease payments under operating leases are recognised in profit or loss on a straight-line basis over the leaseterm. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease termon the same basis as rental income and recognised in profit or loss for the current period. The variable leasepayments obtained in relation to operating leases that are not included in the lease payments are recognised inprofit or loss in the period in which they actually incurred.Lease modificationThe Company accounts for a modification in an operating lease as a new lease from the effective date of themodification and the amount of lease receipts received in advance or receivable in respect of the lease prior tothe modification is treated as a receipt under the new lease.The Company accounts for a modification in a finance lease as a separate lease when the change occurs andthe following conditions are met: the modification expands the scope of lease by adding the right to use oneor more of the leased assets; and the increase in consideration is equivalent to the separate price for theexpanded scope of lease adjusted for that contractual situation.Where a finance lease is modified and not accounted for as a separate lease, the Company accounts for themodified lease in the following circumstances: If the modification takes effect on the lease commencementdate, the lease will be classified as an operating lease, the Company will account for it as a new lease from theeffective date of the lease modification, and use the net lease investment before the effective date of the leasemodification; If the modification takes effect on the lease commencement date, the lease will be classifiedas a finance lease, and the Company will conduct accounting treatment in accordance with the AccountingStandards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments onmodifying or renegotiating contracts.
(4) Sublease
When the Company is an intermediate lessor, the sublease is classified with reference to the right-of-use assetsarising from the head lease. If the head lease is a short-term lease for which the Company adopts a simplifiedapproach, then the Company classifies the sublease as an operating lease.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
34. Lease
(Continued)
(5) Sale and leaseback
The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and leasebacktransaction is a sale in accordance with the requirements of the Accounting Standard for Business EnterprisesNo. 14 – Revenue.Where asset transfer under the sale and leaseback transactions is a sale, the lessee shall measure the right-of-use assets created by the sale and leaseback based on the portion of carrying amount of the originalassets related to right of use obtained upon leaseback, and only recognise relevant profit or loss for the righttransferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicableASBEs and account for the lease of assets in accordance with this standard.Where asset transfer under the sale and leaseback transactions is not a sale, the lessee shall continue torecognise the transferred assets while recognising a financial liability equal to the transfer income and accountfor such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition andMeasurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial assetequal to the transfer income and account for such asset according to the Accounting Standard for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments.
35. Right-of-use assets
(1) Conditions for recognition of right-of-use assets
Right-of-use assets are defined as the right of underlying assets in the lease term for the Company as a lessee.Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes theamount of the initial measurement of lease liability; lease payments made at or before the inception of the leaseless any lease incentives enjoyed; initial direct costs incurred by the Company as lessee; costs to be incurredin dismantling and removing the underlying assets, restoring the site on which it is located or restoring theunderlying asset to the condition required by the terms and conditions of the lease incurred by the Companyas lessee. As a lessee, the Company recognises and measures the costs of dismantling and restoration inaccordance with the Accounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently, thelease liability is adjusted for any remeasurement of the lease liability.
(2) Depreciation method of right-of-use assets
The Company uses the straight-line method for depreciation. Where the Company, as a lessee, is reasonablycertain to obtain ownership of the leased asset at the end of the lease term, such asset is depreciated over theremaining useful life of the leased asset. Where ownership of the lease assets during the lease term cannot bereasonably determined, right-of-use assets are depreciated over the lease term or the remainder of useful livesof the lease assets, whichever is shorter.
(3) For the methods of impairment test and impairment provision of right-of-use assets, please refer to Note V. 23.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
36. Production safety expenses and maintenance costs
According to relevant provisions, the Company makes provisions for production safety expenses based on therevenue of the power plant in the previous year and the prescribed percentages. The specific provisions are asfollows: if the revenue of the previous year did not exceed RMB10 million, provisions would be made at 3%;if the revenue of the previous year exceeded RMB10 million but did not exceed RMB100 million, provisions wouldbe made at 1.5%; if the revenue of the previous year exceeded RMB100 million but did not exceed RMB1,000million, provisions would be made at 1%; if the revenue of the previous year exceeded RMB1,000 million but didnot exceed RMB5,000 million, provisions would be made at 0.8%; if the revenue of the previous year exceededRMB5,000 million but did not exceed RMB10,000 million, provisions would be made at 0.6%; if the revenue of theprevious year exceeded RMB10,000 million, provisions would be made at 0.2%.Provisions for production safety expenses are included in the cost of related products or profit or loss of the currentperiod and included in“special reserves” correspondingly.When the provisions for production safety expenses and maintenance costs are utilised within the prescribed scope,if such production safety expenses are applied and related to revenue expenditures, specific reserve is directly offset.When fixed assets are incurred, they are included in the“construction in progress”item and transferred to fixedassets when the status of the assets is ready for intended use. They are then offset against specific reserve based onthe amount included in fixed assets while corresponding amount is recognised in accumulated depreciation. Suchfixed assets are no longer depreciated in subsequent periods.
37. Repurchase of shares
Prior to cancellation or transfer of shares repurchased, the Company recognises all expenditures arising from sharerepurchase as cost of treasury shares in the treasury share account. Considerations and transaction fee incurred fromthe repurchase of shares shall lead to the elimination of owners’equity and does not recognise profit or loss whenshares of the Company are repurchased, transferred or cancelled.The difference between the actual amount received and the carrying amount of the treasury shares are recognised ascapital reserve when the treasury shares are transferred, if the capital reserve is not sufficient to be offset, the excessamount shall be recognised to offset surplus reserve and retained profit. When the treasury shares are cancelled,the capital shall be eliminated according to the number of shares and par value of cancelled shares, the differencebetween the actual amount received and the carrying amount of the treasury shares are recognised as capital reserve,if the capital reserve is not sufficient to be offset, the excess amount shall be recognised to offset surplus reserve andretained profit.
38. Debt restructuring
(1) The Company as the debtor
The debt is derecognised when the current obligation of the debt is discharged. Specifically, when theuncertainty about the execution process and results of the debt restructuring agreement is eliminated, the gainsand losses related to the debt restructuring are recognised.If debt restructuring is carried out by repaying debts with assets, the Company shall derecognise the relevantassets and the debts paid off when they meet the conditions for derecognition, and the difference between thebook value of the debts paid off and the book value of the transferred assets shall be included in the currentprofit and loss.If the debt is converted into equity instruments for debt restructuring, the Company shall derecognise thedebts paid off when they meet the conditions for derecognition. When the Company initially recognises anequity instrument, it is measured based on the fair value of the equity instrument. If the fair value of the equityinstrument cannot be measured reliably, it is measured based on the fair value of the debt paid off. Thedifference between the book value of the debts paid off and the recognised amount of the equity instrumentshall be included in the current profit and loss.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
38. Debt restructuring
(Continued)
(1) The Company as the debtor
(Continued)
When a debt restructuring involves the modification of other terms of a debt, the Company shall recognise andmeasure the restructured debts in accordance with the Accounting Standards for Business Enterprises No. 22 –Recognition and Measurement of Financial Instruments and the Accounting Standards for Business EnterprisesNo. 37 – Presentation of Financial Instruments.When a debt is settled by multiple assets or combination of various methods in a debt restructuring, theCompany shall recognise and measure the equity instruments and restructured debts in accordance with theaforementioned methods, and the difference between the book value of the debts paid off and the sum of thebook value of the transferred assets and the recognised amount of the equity instruments and restructureddebts shall be included in the current profit and loss.
(2) The Company as the creditor
The debt receivable are derecognised when the contractual rights to receive the cash flows under the debtreceivable expire. Specifically, when the uncertainty about the execution process and results of the debtrestructuring agreement is eliminated, the gains and losses related to the debt restructuring are recognised.If debt restructuring is carried out by repaying debts with assets, the Company shall initially recognise assetsother than the transferred financial assets at cost. In particular, the cost of inventories includes the fair valueof the debt receivable and any directly attributable expenditure, including taxes, transportation costs, handlingcosts, insurance and other costs, for bringing the assets to the current position and condition; the costof investment in associates or joint ventures includes the fair value of the debt receivable and any directlyattributable expenditure, including taxes; the cost of investment property includes the fair value of the debtreceivable and any directly attributable expenditure, including taxes; the cost of fixed assets includes the fairvalue of the debt receivable and any directly attributable expenditure, including taxes, transportation costs,handling costs, installation costs, professional service fees and other costs, for bringing the assets to the statusfor intended use; the cost of intangible assets includes the fair value of the debt receivable and any directlyattributable expenditure, including taxes, for bringing the assets to the status for intended use. The differencebetween the fair value and the book value of the debt receivable is included in the current profit and loss.When the debt restructuring causes the Company to convert the debt receivable to an equity investment of jointventures or associates, the Company shall measure the equity investment based on the sum of the fair value ofdebt receivable, and any directly attributable taxes and other costs of the investment. The difference betweenthe fair value and the book value of the debt receivable is recognised in the current profit and loss.When a debt restructuring involves the modification of other terms of a debt, the Company recognisesand measures the restructured debt receivable in accordance with the Accounting Standards for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments.When a debt is settled by multiple assets or combination of various methods in a debt restructuring, theCompany first recognises and measures the financial assets received and restructured debt receivable inaccordance with the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement ofFinancial Instruments, and then allocates the net value, which is the fair value of the debt receivable deductedby the recognised amount of financial assets received and restructured debt receivable, to the costs of non-financial assets received based on their relative fair value. The difference between the fair value and the bookvalue of the debt receivable is recognised in the current profit and loss.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
39. Critical accounting judgments and estimates
The Company gives continuous assessment on, among other things, the reasonable expectations of future eventsand the critical accounting estimates and key assumptions adopted according to its historical experience and otherfactors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks ofthe carrying amount of assets and liabilities for the next financial year are listed as follows:
Classification of financial assetsSignificant judgements involved in determining the classification of financial assets include the analysis of businessmodels and contractual cash flow characteristics.Factors considered by the Company in determining the business model for a group of financial assets include how theasset’s performance is evaluated and reported to key management personnel, how risks are assessed and managedand how the relevant management personnel are compensated.When the Company assesses whether the contractual cash flows of the financial assets are consistent with basiclending arrangements, the main judgements are described as below: whether the principal amount may change overthe life of the financial asset (for example, if there are repayments of principal); whether the interest includes onlyconsideration for the time value of money, credit risk, other basic lending risks and a profit margin and cost. Forexample, whether the amount repaid in advance reflects only the outstanding principal and interest thereon, as well asreasonable compensation paid for early termination of the contract.Measurement of the ECLs of accounts receivableThe Company calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accountsreceivable, and determines the ECL rate based on default probability and default loss rate. When determining theECL rate, the Company adjusts its historical data by referring to information such as historical credit loss experienceas well as current situation and forward-looking information. When considering the forward-looking information,indicators used by the Company include the risk of economic downturn, external market environment, technologyenvironment and changes in customers. The assumptions relating to the ECL calculation are monitored and reviewedby the Company on a regularly basis.Measurement of past due credit losses on finance lease receivablesThe Company calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accountsreceivable, and determines the ECL rate based on default probability and default loss rate. When determining the ECLrate, the Company takes into account the current status and repayment ability of the counterparty while consideringthe value of collateral, guarantees and other credit enhancement measures related to the lease receivables.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
39. Critical accounting judgments and estimates
(Continued)
Deferred income tax assetsDeferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profitwill be available against which the losses can be utilised. Significant management judgement is required to determinethe amount of deferred income tax assets that can be recognised, based upon the likely timing and level of futuretaxable profits together with future tax planning strategies.Impairment of goodwillThe Company assesses the impairment of goodwill at least annually, which requires estimates of the use value ofasset groups allocated with goodwill. When estimating the use value, the Company is required to estimate the futurecash flows from such asset groups while selecting the appropriate discount rate to calculate the present value offuture cash flows.Impairment of inventoriesOn the balance sheet date, the Company determines the net realisable value of its inventories based on the estimatedselling prices of the inventories, less costs estimated to be incurred upon completion, estimated selling expensesand related taxes. The determination of net realisable value of inventories is based on conclusive evidence obtained,taking into account the purpose for which the inventories are held and the effect of events after the balance sheetdate. Provision for decline in value of inventories is made when their net realisable value is lower than the cost.Impairment of fixed assets and long-term equity investmentsThe Company assesses the impairment of fixed assets and long-term equity investments at least annually. When anyevent or change in circumstances indicates that the carrying amount may not be recoverable, the carrying amountof such project is reviewed for impairment. If the carrying amount of an asset exceeds its recoverable amount,impairment loss is recognised for the difference. The recoverable amount is determined as the higher of the asset’sfair value less costs of disposal and the present value of the asset’s estimated future cash flows. A number ofassumptions are made in estimating the recoverable amount of assets, including future cash flows and discount ratesrelating to non-current assets. If future events differ from these assumptions, the recoverable amount shall be revised,which may have an impact on the operations or financial position of the Company.
2023 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
40. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
Interpretation No. 16 of the Accounting Standards for Business Enterprises
The Ministry of Finance issued Interpretation No. 16 of the Accounting Standards for Business Enterprises(Cai Kuai [2022] No. 31) (“Interpretation No. 16”) in November 2022.Interpretation No. 16 stipulates that, for a single transaction that is not a business combination, thataffects neither the accounting profits nor the taxable income (or deductible loss) upon the occurrenceof the transaction, and that the initially recognised assets and liabilities result in an equal amount oftaxable temporary differences and deductible temporary differences, the taxable temporary differencesand deductible temporary differences arising from the initial recognition of assets and liabilities in suchtransaction shall be recognised for the corresponding deferred income tax liabilities and deferred incometax assets upon the occurrence of the transaction in accordance with the Accounting Standard forBusiness Enterprises No. 18 – Income Tax and other relevant provisions. For the above transactionsthat occurred between the beginning of the earliest period for the presentation of financial statementswhen the above provisions are first implemented and the implementation date of this interpretation, theenterprise shall, in accordance with the above provisions, adjust the cumulative impact number to theopening retained earnings and other related financial statement items for the earliest period presentedin the financial statements. The above accounting treatment requirement became effective on 1 January2023.The leasing business of the Company mainly involves forestry companies. Since forestry companies donot pay corporate income tax, it is not necessary to make adjustments in accordance with InterpretationNo. 16.
(2) Changes in significant accounting estimates
The Company did not have any change in significant accounting estimates during the year.
XII Financial Report
VI. Taxation
1. Main tax types and tax rates
Tax typeTax baseTax rate (%)
Value added tax (VAT)VAT payable (VAT payable is calculated by multiplying
taxable sales amount by the applicable tax rate less current deductible input VAT)
13/9/6Property taxRental income and property price1.2/12Urban maintenance and construction taxActual turnover tax paid7Enterprise income tax (EIT)Taxable income25Disclosure of taxable entities subject to different EIT tax ratesName of taxable entityEIT tax rate (%)
Shandong Chenming Paper Holdings Limited15Shouguang Meilun Paper Co., Ltd.15Jilin Chenming Paper Co., Ltd.15Jiangxi Chenming Paper Co., Ltd.15Zhanjiang Chenming Pulp & Paper Co., Ltd.15Huanggang Chenming Pulp & Paper Co., Ltd.15Kunshan Tuoan Plastic Products Co., Ltd.15Shouguang Xinyuan Coal Co., Ltd.20Shouguang Chenming Papermaking Machine Co., Ltd.20Shouguang Wei Yuan Logistics Company Limited20Shouguang Shun Da Customs Declaration Co., Ltd.20Zhanjiang Chenming Arboriculture Development Co., Ltd.Exempt from EITNanchang Chenming Arboriculture Development Co., Ltd.Exempt from EITChenming Arboriculture Co., Ltd.Exempt from EITYangjiang Chenming Arboriculture Development Co., Ltd.Exempt from EIT
2. Tax incentives
(1) Enterprise income tax
On 15 December 2021, the Company received a high and new technology enterprise certificate with acertification number of GR202137005666. Pursuant to the requirements under the Law of the People’s Republicof China on Enterprise Income Tax and the relevant policies, the Company is subject to a corporate income taxrate of 15% of taxable income, and is entitled to the preferential treatment from 2021 to 2023.Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, received a high and new technologyenterprise certificate with a certification number of GR202137005468 on 15 December 2021. Pursuant to therequirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Shouguang Meilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitledto the preferential treatment from 2021 to 2023.Jilin Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprisecertificate with a certification number of GR202222000414 on 29 November 2022. Pursuant to the requirementsunder the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, JilinChenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to thepreferential treatment from 2022 to 2024.
2023 ANNUAL REPORT
XII Financial Report
VI. Taxation(Continued)
2. Tax incentives
(Continued)
(1) Enterprise income tax
(Continued)Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprisecertificate with a certification number of GR202236000018 on 4 November 2022. Pursuant to the requirementsunder the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, JiangxiChenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to thepreferential treatment from 2022 to 2024.Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and new technologyenterprise certificate with a certification number of GR202144001212 on 20 December 2021. Pursuant to therequirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Zhanjiang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and isentitled to the preferential treatment from 2021 to 2023.Huanggang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and newtechnology enterprise certificate with a certification number of GR202342003128 on 5 December 2023. Pursuantto the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Huanggang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and isentitled to the preferential treatment from 2023 to 2025.Kunshan Tuoan Plastic Products Co., Ltd., a subsidiary of the Company, received a high and new technologyenterprise certificate with a certification number of GR202032004526 on 1 December 2023. Pursuant to therequirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Kunshan Tuoan is subject to an enterprise income tax rate of 15% of taxable income, and is entitled tothe preferential treatment from 2023 to 2025.Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Taxand Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on EnterpriseIncome Tax, Zhanjiang Chenming Arboriculture Development Co., Ltd., Yangjiang Chenming ArboricultureDevelopment Co., Ltd., Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming ArboricultureCo., Ltd., which are the subsidiaries of the Company, have completed the filings for EIT reduction for exemptionfrom EIT.Shouguang Xinyuan Coal Co., Ltd., Shouguang Chenming Papermaking Machine Co., Ltd., ShouguangWei Yuan Logistics Company Limited and Shouguang Shun Da Customs Declaration Co, Ltd., which aresubsidiaries of the Company, are small and micro enterprises. Pursuant to the Announcement of the Ministry ofFinance and the State Administration of Taxation on Further Implementation of Preferential Income Tax Policiesfor Small and Micro Enterprises (Cai Shui [2022] No. 13) and the Announcement of the Ministry of Finance andthe State Administration of Taxation on the Implementation of Preferential Income Tax Policies for Small andMicro Enterprises and Individual Industrial and Commercial Business (Cai Shui [2023] No. 6), the annual taxableincome of a small low-profit enterprise that is less than RMB3 million shall be included in its taxable income at areduced rate of 25%, with the applicable enterprise income tax rate of 20%.
(2) Value-added Tax (
“VAT”)Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax, ZhanjiangChenming Arboriculture Development Co., Ltd., Yangjiang Chenming Arboriculture Development Co., Ltd.,Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture Co., Ltd., which aresubsidiaries of the Company, are exempt from VAT, and have completed the filings for VAT reduction forexemption from VAT.
XII Financial Report
VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMBItemClosing balanceOpening balanceTreasury cash3,674,805.363,491,219.08Bank deposit760,558,937.252,155,968,930.43Other monetary funds11,321,241,125.0511,756,140,645.56Interest accrued on deposits39,357,963.6484,834,191.01Total12,124,832,831.3014,000,434,986.08Of which: Total deposits in overseas banks261,470,228.68593,378,097.70
Other explanations:
Other monetary funds of RMB6,783,005,857.83 were the guarantee deposit for the application for acceptance bills by the Company;Other monetary funds of RMB4,165,425,137.12 were the guarantee deposit for the application for letter of credit with the banks by theCompany; Other monetary funds of RMB270,390,192.29 were the guarantee deposit for the application for loans with the banks by the Company; Other monetary funds of RMB54,020,000.00 were the Company’s statutory reserve deposits at the People’s Bank of China;Other monetary funds of RMB48,399,937.81 were locked-up due to reasons such as litigations or being unused for a long time, resultingin restriction on the use of that account’s balance.
2. Financial assets held for trading
Unit: RMBItemClosing balanceOpening balanceFinancial assets measured at fair value through profit or loss46,294,291.7174,708,444.88Of which:
Investment in equity instruments46,294,291.7174,708,444.88Total46,294,291.7174,708,444.88
Explanation: Financial assets held for trading were shares of China Bohai Bank subscribed by the Company.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Bills receivable
(1) Bills receivable by category
Unit: RMBItemClosing balanceOpening balanceBank acceptance billsCommercial acceptance bills411,600,000.00Total411,600,000.00
(2) Bills receivable endorsed or discounted by the Company but not yet due as at the balance sheet date
Unit: RMB
Item
Amountderecognisedas at the end ofthe period
Amount
not yetderecognisedas at the end ofthe periodBank acceptance billsCommercial acceptance bills409,000,000.00Total409,000,000.00
4. Accounts receivable
(1) Disclosure by ageing
Unit: RMBAgeingClosing book balanceOpening book balanceWithin 1 year (including 1 year)1,561,046,809.052,555,600,334.261 to 2 years385,112,389.04729,245,049.072 to 3 years722,669,952.0384,102,055.67Over 3 years408,747,914.19331,613,405.79Subtotal3,077,577,064.313,700,560,844.79Less: Bad debts provision549,070,004.48488,300,398.83Total2,528,507,059.833,212,260,445.96The basis used by the ageing analysis of the accounts receivable of the Company: the ageing of accountsreceivable is the length of time of the Company’s outstanding accounts receivable based on invoice date. Theclosing balance is recognised one by one from the end of the period onwards until the amounts add up to thebalance. It is also broken up by intervals of within 1 year, 1-2 years, 2-3 years and over 3 years.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
4. Accounts receivable
(Continued)
(2) Disclosure by bad debt provision method
Unit: RMB
Category
Closing balanceOpening balanceBook balanceBad debts provision
Carryingamount
Book balanceBad debts provision
CarryingamountAmountPercentage(%)Amount
Provisionpercentage(%)Amount
Percentage(%)Amount
Provisionpercentage(%)Accounts receivableassessedindividually for bad debt provision201,074,254.686.53193,132,546.6896.057,941,708.00226,667,597.476.13226,667,597.47100.00Accounts receivableassessedcollectively for bad debt provision2,876,502,809.6393.47355,937,457.8012.372,520,565,351.833,473,893,247.3293.87261,632,801.367.533,212,260,445.96Of which:
Due from related party customers2,359.0323.180.982,335.858,639,295.980.231,775,510.0120.556,863,785.97Due from non-related party customers1,545,540,409.9450.2281,008,019.205.241,464,532,390.742,081,296,530.2856.2452,357,160.252.522,028,939,370.03Factoring receivables1,330,960,040.6643.25274,929,415.4220.661,056,030,625.241,383,957,421.0637.40207,500,131.1014.991,176,457,289.96Total3,077,577,064.31100.00549,070,004.4817.842,528,507,059.833,700,560,844.79100.00488,300,398.8313.203,212,260,445.96Items assessed individually for bad debt provision:
Unit: RMBName
Closing balanceBook balance
Bad debts
provision
Provisionpercentage (%)Provision reasonHengfeng Hongyuan Real Estate Holdings Co., Ltd.45,493,811.4045,493,811.40100.00Long outstandingFoshan Shunde Xingchen Paper Co., Ltd.26,697,528.7026,697,528.70100.00Long outstandingWuhan Tianrui Paper Co., Ltd.17,600,000.009,658,292.0054.88Long outstandingShandong Bisheng Printing Materials Co., Ltd.14,813,369.2714,813,369.27100.00Long outstandingZhengzhou Hongyang Paper Products Co., Ltd.14,753,432.9314,753,432.93100.00Long outstandingHenan Yibang Technology Trading Co., Ltd.13,396,601.2213,396,601.22100.00Long outstanding49 companies including Shandong Yiming New Material Technology Corp Co., Ltd.68,319,511.1668,319,511.16100.00Long outstandingTotal201,074,254.68193,132,546.6896.05
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
4. Accounts receivable
(Continued)
(2) Disclosure by bad debt provision method
(Continued)
Unit: RMBName
Opening balanceBook balance
Bad debts
provision
Provisionpercentage (%)Provision reasonHengfeng Hongyuan Real Estate Holdings Co., Ltd.45,493,811.4045,493,811.40100.00Long outstandingNingxia Lingwu Baota Dagu Storage and Transportation Co., Ltd.27,600,000.0027,600,000.00100.00Long outstandingFoshan Shunde Xingchen Paper Co., Ltd.26,236,528.7026,236,528.70100.00Long outstandingZhengzhou Hongyang Paper Products Co., Ltd.15,113,432.9315,113,432.93100.00Long outstandingShandong Bisheng Printing Materials Co., Ltd.14,813,369.2714,813,369.27100.00Long outstandingHenan Yibang Technology Trading Co., Ltd.13,396,601.2213,396,601.22100.00Long outstanding91 companies including Shandong Yiming New Material Technology Corp Co., Ltd.84,013,853.9584,013,853.95100.00Long outstandingTotal226,667,597.47226,667,597.47100.00Explanation: Although Wuhan Tianrui Paper Co., Ltd. has not repaid the loan for a long time, it has not fully provided for bad debts
because the company has paid a deposit when the transaction occurred, and part of such deposit may offset part of thelosses.Items assessed collectively for bad debt provision: Due from related party customers
Unit: RMBName
Closing balanceBook balanceBad debts provisionProvision percentage (%)Within 1 year2,359.0323.180.98Total2,359.0323.180.98
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
4. Accounts receivable
(Continued)
(2) Disclosure by bad debt provision method
(Continued)Items assessed collectively for bad debt provision: Receivables from non-related party customer
Unit: RMBName
Closing balanceBook balanceBad debts provisionProvision percentage (%)Within 1 year1,458,683,180.6016,840,049.451.151 to 2 years27,055,122.427,706,275.2028.482 to 3 years2,653,285.391,257,903.8447.41Over 3 years57,148,821.5355,203,790.7196.60Total1,545,540,409.9481,008,019.205.24Items assessed collectively for bad debt provision: Factoring receivablesName
Closing balanceBook balanceBad debts provisionProvision percentage (%)Within 1 year102,361,269.425,889,841.555.751 to 2 years358,057,266.6262,541,844.7517.472 to 3 years720,016,666.64159,286,903.1122.12Over 3 years150,524,837.9847,210,826.0131.36Total1,330,960,040.66274,929,415.4220.66If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs:
Applicable √ Not applicable
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
4. Accounts receivable
(Continued)
(3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMBCategoryOpening balance
Changes in the period
Closing balanceProvisionRecovery or reversalWritten-offOthersBad debts provision488,300,398.83122,209,693.6825,756,340.1828,227,331.68-7,456,416.17549,070,004.48Total488,300,398.83122,209,693.6825,756,340.1828,227,331.68-7,456,416.17549,070,004.48
Explanation:
“Others”includes an increase in bad debts of RMB80,960.58 from subsidiaries newly included in the scope ofconsolidation, a decrease in bad debts of RMB7,553,635.68 from disposal of subsidiaries, and an increase in bad debtsof RMB16,258.93 due to changes in exchange rates.
(4) Actual write-off of accounts receivable for the period
Unit: RMBItemWrite-off amountActual write-off of accounts receivable28,227,331.68
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
4. Accounts receivable
(Continued)
(5) Top five accounts receivable and contract assets based on closing balance of debtors
The total amount of top five accounts receivable and contract assets based on closing balance of debtorsfor the period amounted to RMB1,128,033,226.63 in total, accounting for 36.65% of the total closing balanceof accounts receivable and contract assets. The closing balance of the corresponding bad debt provisionamounted to RMB234,168,549.51 in total.
Unit: RMB
Name of entity
Closing balance ofaccounts receivable
As a percentage ofthe closing balanceof the total accountsreceivable (%)
Closing balance ofbad debt provision of
accounts receivableCustomer 1481,810,233.3315.6689,484,999.34Customer 2222,656,666.647.2346,862,597.55Customer 3198,805,660.006.4636,107,859.62Customer 4121,908,333.333.9626,743,299.67Customer 5102,852,333.333.3434,969,793.33Total1,128,033,226.6336.65234,168,549.51
5. Accounts receivable financing
(1) Accounts receivable financing by category
Unit: RMBItemClosing balanceOpening balanceBills receivable215,884,249.97924,960,384.16Total215,884,249.97924,960,384.16
Explanation: All the accounts receivable financing of the Company were bank acceptance bills. Since the terms of the bank
acceptance bills did not exceed one year, and both parties to the endorsement of the bills agreed to offset equal amountsof accounts receivable and payable based on the face value of the bills, fair value equalled amortised cost.Certain subsidiaries of the Company discount and endorse part of the bank acceptance bills based on theirdaily capital management needs. Therefore, the bank acceptance bills of the subsidiaries are classified asfinancial assets measured at fair value through other comprehensive income.The Company has no bank acceptance bill assessed individually for impairment provision. At the end of theperiod, the Company believed that there is no significant credit risk in the bank acceptance bills held and nomajor losses will be incurred due to default of banks.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
5. Accounts receivable financing
(Continued)
(2) Accounts receivable financing pledged by the Company as at the end of the period
Unit: RMBItem
Amount pledged as at
the end of the periodBank acceptance bills90,551,168.01Total90,551,168.01
(3) Accounts receivable financing endorsed or discounted but not yet due as at the balance sheet date
Unit: RMB
Item
Amountderecognisedas at the end ofthe period
Amountnot yet derecognised
as at the end of
the periodBank acceptance bills8,682,068,295.36Total8,682,068,295.36
Explanation: The credit risk and deferred payment risk of bank acceptance bills used for discounting were very small, and the interest
rate risk related to the bills had been transferred to the banks. It was determined that the major risks and rewards of theownership of the bills had been transferred, so these bills were derecognised.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
Unit: RMBItemClosing balanceOpening balanceOther receivables2,224,904,557.881,717,445,443.44Total2,224,904,557.881,717,445,443.44
(1) Other receivables
1) Classification of other receivables by nature
Unit: RMBNatureClosing book balanceOpening book balanceOpen credit2,691,372,170.612,108,991,172.35Reserve and borrowings27,444,170.9226,270,269.00Guarantee deposit and deposit12,578,821.5412,230,367.80Others3,445,072.6852,332,819.95Subtotal2,734,840,235.752,199,824,629.10Bad debts provision509,935,677.87482,379,185.66Total2,224,904,557.881,717,445,443.44
2) Disclosure by ageing
Unit: RMBAgeingClosing book balanceOpening book balanceWithin 1 year (including 1 year)1,052,737,595.00617,314,987.001 to 2 years291,207,253.53257,038,289.932 to 3 years204,348,508.24702,427,199.71Over 3 years1,186,546,878.98623,044,152.46Subtotal2,734,840,235.752,199,824,629.10Bad debts provision509,935,677.87482,379,185.66Total2,224,904,557.881,717,445,443.44The basis used by the ageing analysis: the ageing of other receivables is the length of time of theCompany’s outstanding other receivables based on invoice date. The closing balance is recognised oneby one from the end of the period onwards until the amounts add up to the balance. It is also broken upby intervals of within 1 year, 1-2 years, 2-3 years and over 3 years.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
3) Particulars of bad debt provision
When one or more of the following circumstances occurs, it is considered as“a significant increase incredit risk upon initial recognition”and shall be assigned to stage 2: the payment has been overdue formore than 30 days but not more than 90 days; the debtor encountered an adverse event that affectedits solvency; significant adverse changes in the value of collateral or the quality of guarantees or creditenhancements provided by third parties.When one or more of the following circumstances occurs, it is considered as“credit impairment hasoccurred”and shall be assigned to stage 3: the payment has been overdue for more than 90 days; thedebtor encountered major financial difficulties or was likely to go bankrupt or undergo other financialrestructuring; other situations that violate contractual agreements and indicate that there is objectiveevidence of impairment of financial assets.Closing bad debt provision at stage 1:
CategoryBook balance
ECL rate (%) forthe next 12 monthsBad debts provisionCarrying amountReasonBad debt provision assessed collectively978,497,901.518.9587,540,266.28890,957,635.23Amount due from government agencies15,932,733.7895.7015,247,340.04685,393.74Amount due from related parties313,234,651.443.5411,094,651.84302,139,999.60Other receivables649,330,516.299.4261,198,274.40588,132,241.89Total978,497,901.518.9587,540,266.28890,957,635.23As at the end of the period, the Group did not have interest receivables, dividends receivables and otherreceivables in phase 2As at the end of the period, closing bad debt provision at stage 3:
CategoryBook balance
ECL rate (%) over
the entire lifeBad debts provisionCarrying amountReasonBad debt provision assessed individually1,756,342,334.2424.05422,395,411.591,333,946,922.65Total1,756,342,334.2424.05422,395,411.591,333,946,922.65
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
3) Particulars of bad debt provision
(Continued)
Bad debt provision assessed individually:
CategoryBook balance
ECL rate (%)over theentire life
Bad debtsprovisionCarrying amountReasonCustomer 1472,854,783.5616.0075,656,765.37397,198,018.19Uncertain recovery to a certain extentCustomer 2453,002,316.8532.00144,960,741.39308,041,575.46Uncertain recovery to a certain extentCustomer 3390,000,000.002.007,800,000.00382,200,000.00Uncertain recovery to a certain extentCustomer 4143,940,305.6350.0071,970,152.8271,970,152.81Uncertain recovery to a certain extentCustomer 5114,840,000.0015.3017,569,808.6697,270,191.34Uncertain recovery to a certain extentCustomer 638,198,114.7551.0719,506,495.1018,691,619.65Uncertain recovery to a certain extent137 customers including customer 7143,506,813.4559.1884,931,448.2558,575,365.20Uncertain recovery to a certain extentTotal1,756,342,334.2424.05422,395,411.591,333,946,922.65Bad debt provision based on the general model of ECLs:
Unit: RMBBad debts provision
Stage 1Stage 2Stage 3
TotalECLs for thenext 12 months
Lifetime ECLs(not credit-impaired)
Lifetime ECLs(credit-impaired)Balance as at 1 January 202373,559,281.09408,819,904.57482,379,185.66Balance as at 1 January 2023 for the period – Transferred to stage 2 – Transferred to stage 3 – Reversed to stage 2 – Reversed to stage 1Provision for the period27,532,494.1160,200,321.8487,732,815.95Reversal for the period13,599,712.0426,769,796.2240,369,508.26Transfer for the periodWrite-off for the periodOther changes48,203.12-19,855,018.60-19,806,815.48Balance as at 30 June 202387,540,266.28422,395,411.59509,935,677.87
Explanation:
“Other changes”includes an increase in bad debts of RMB48,557.76 from subsidiaries newly included in the scopeof consolidation, and a decrease in bad debts of RMB19,855,373.24 from disposal of subsidiaries.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
3) Particulars of bad debt provision
(Continued)Changes in carrying book balances with significant changes in loss provision for the period
Applicable √ Not applicable
4) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMBCategory
Openingbalance
Changes in the period
ClosingbalanceProvisionRecovery orreversal
Transfer or
write-offOthers
Bad debts provision482,379,185.6687,732,815.9540,369,508.26-19,806,815.48509,935,677.87Total482,379,185.6687,732,815.9540,369,508.26-19,806,815.48509,935,677.87Explanation:
“Other changes”includes an increase in bad debts of RMB48,557.76 from subsidiaries newly included in the scopeof consolidation, and a decrease in bad debts of RMB19,855,373.24 from disposal of subsidiaries.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
5) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five other receivables based on closing balance of debtors for theyear was RMB1,923,109,802.01, which accounted for 70.32% of the closing balance of the total otherreceivables. The closing balance of corresponding bad debt provision amounted to RMB228,417,506.76.
Unit: RMB
Name of entityNatureClosing balanceAgeing
As apercentage ofthe closingbalance of totalother receivables
(%)Closing balance
of bad debtprovisionCustomer 1Consideration for
debt transfer
472,854,783.563 to 4 years17.2975,656,765.37Customer 2Consideration for
debt transfer
453,002,316.854 to 5 years16.56144,960,741.39Customer 3Consideration for
debt transfer
390,000,000.00Within 1 year14.267,800,000.00Customer 4Consideration for
equity transfer
380,000,000.00Within 1 year13.90Customer 5Financial support227,252,701.60Within 1 year8.31Total1,923,109,802.0170.32228,417,506.76
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
7. Prepayments
(1) Prepayments by ageing
Unit: RMBAgeing
Closing balanceOpening balanceAmountPercentage (%)AmountPercentage (%)Within 1 year790,687,918.6195.83749,904,460.4595.141 to 2 years34,447,237.604.1738,287,166.374.86Total825,135,156.21100.00788,191,626.82100.00
(2) Top five prepayments based on closing balance of prepaid parties
The total amount of top five prepayments based on closing balance of prepaid parties for the period amountedto RMB274,254,687.28, accounting for 33.24% of the closing balance of the total prepayments.
Unit: RMB
Name of entity
Closing balanceof prepayments
As a percentageof the closingbalance of the totalprepayments (%)Customer 186,127,651.3610.44Customer 258,175,348.477.05Customer 345,563,144.135.52Customer 445,025,905.825.46Customer 539,362,637.504.77Total274,254,687.2833.24
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
8. Inventories
Whether the Company needs to comply with the disclosure requirements for real estate industriesNo
(1) Categories of inventories
Unit: RMB
Item
Closing balanceOpening balance
Book balance
Impairmentprovision for
inventoriesor performancecostsCarrying amountBook balance
Impairmentprovision for
inventoriesor performance
costsCarrying amountRaw materials1,977,478,797.8518,030,837.141,959,447,960.712,488,652,200.1518,096,641.642,470,555,558.51Work-in-process products102,415,558.33102,415,558.33111,248,779.69111,248,779.69Goods in stock1,413,366,440.571,030,048.861,412,336,391.711,622,062,893.5516,737,849.961,605,325,043.59Developing costs1,138,178,959.321,138,178,959.32Consumable biological assets1,483,978,089.611,483,978,089.611,496,607,818.841,496,607,818.84Total4,977,238,886.3619,060,886.004,958,178,000.366,856,750,651.5534,834,491.606,821,916,159.95
Note: Consumable biological assets are forestry assets.
(2) Impairment provision for inventories
Unit: RMBItemOpening balance
Increase during the periodDecrease during the period
Closing balanceProvisionOthersReversal or transferOthersRaw materials18,096,641.6465,804.5018,030,837.14Goods in stock16,737,849.9628,276,760.9143,984,562.011,030,048.86Total34,834,491.6028,276,760.9144,050,366.5119,060,886.00Impairment provision for inventories or performance costs (continued)Item
Basis for recognition of net realisable value/residual consideration with future cost
Reason for reversal or written-off of impairmentprovision for inventories/performance costs during
the periodRaw materialsThe cost of raw materials is higher than
their net realisable value
Written-off of impairment provision for inventoriesdue to sales of impaired spare parts during the periodGoods in stockThe cost of goods in stock is higher than
their net realisable value
Written-off of impairment provision for inventoriesdue to sales of impaired goods in stock during the period
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
9. Non-current assets due within one year
Unit: RMBItemClosing balanceOpening balanceLong-term receivables due within one year4,161,725,935.753,998,724,415.85Total4,161,725,935.753,998,724,415.85Explanations: Long-term receivables due within one year amounting to RMB4,054,545,080.32 (amount for the beginning of the period:
RMB3,920,915,510.01) were financial lease receivables;Long-term receivables due within one year amounting to RMB107,180,855.43 (amount for the beginning of the period:
RMB77,808,905.84) were deposits receivable.Significant receivables assessed individually for bad debt provision in financial lease receivablesCategoryBook balance
Lifetime ECLrate (%)
Bad debtsprovision
CarryingamountReasonCustomer 11,556,962,582.2016.90263,126,676.391,293,835,905.81Uncertain recovery to a certain extentCustomer 2922,513,485.8825.00230,628,375.00691,885,110.88Uncertain recovery to a certain extentCustomer 3485,296,142.9042.00203,824,380.02281,471,762.88Uncertain recovery to a certain extentTotal2,964,772,210.9823.53697,579,431.412,267,192,779.57
10. Other current assets
Unit: RMBItemClosing balanceOpening balanceInput tax amount to be deducted119,271,427.68141,038,575.79Prepaid tax47,645,192.3792,806,690.76Receivables under financial lease due within one year400,411,532.31340,546,803.50Factoring receivables due within one year261,871,191.52298,446,276.63Prepaid expenses201,963,827.62241,313,507.50Other payments37,663,773.2866,655,947.44Total1,068,826,944.781,180,807,801.62
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
11. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMBItem
Closing balanceOpening balance
Discountrate rangeBook balanceBad debtsprovision
CarryingamountBook balance
Bad debtsprovision
Carryingamount
Finance lease payments5,329,611,463.141,070,429,664.014,259,181,799.136,739,718,184.271,302,116,713.905,437,601,470.374%-12%Less: Unrealised
financing income66,941,274.3666,941,274.36271,455,622.37271,455,622.37Deposits for equipmentlease financing329,246,696.64329,246,696.64351,446,696.64351,446,696.64Less: Unrealised
financing income20,467,752.3120,467,752.3132,060,345.3232,060,345.32Subtotal5,571,449,133.111,070,429,664.014,501,019,469.106,787,648,913.221,302,116,713.905,485,532,199.32Less: Long-term
receivables due
within one year5,229,345,488.651,067,619,552.904,161,725,935.755,075,152,713.361,076,428,297.513,998,724,415.85Total342,103,644.462,810,111.11339,293,533.351,712,496,199.86225,688,416.391,486,807,783.47
(2) Disclosure based on bad debt provision
Unit: RMB
Category
Closing balanceOpening balanceBook balanceBad debts provision
Carryingamount
Book balanceBad debts provision
CarryingamountAmountPercentage
(%)Amount
Provisionpercentage
(%)Amount
Percentage
(%)Amount
Provisionpercentage
(%)Accounts receivableassessed individually for impairment1,147,177,668.7466.99222,451,005.5419.39924,726,663.20Of which:
Financial lease payments1,147,177,668.7466.99222,451,005.5419.39924,726,663.20Accounts receivableassessed collectively for impairment342,103,644.46100.002,810,111.110.82339,293,533.35565,318,531.1233.013,237,410.850.57562,081,120.27Of which:
Receivables not past due140,505,555.5641.072,810,111.112.00137,695,444.45323,741,085.6418.903,237,410.851.00320,503,674.79Deposits receivable201,598,088.9058.93201,598,088.90241,577,445.4814.11241,577,445.48Total342,103,644.46100.002,810,111.110.82339,293,533.351,712,496,199.86100.00225,688,416.3913.181,486,807,783.47
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
11. Long-term receivables
(Continued)
(2) Disclosure based on bad debt provision
(Continued)
Accounts receivable assessed individually for bad debt provisionName
Closing balance for prior yearBook balanceBad debts provisionECL rate (%)Provision reasonCustomer 1958,754,877.25184,502,697.1819.24Uncertain to a certain extent in
respect of repaymentCustomer 2100,094,782.7825,000,000.0024.98Uncertain to a certain extent in
respect of repaymentCustomer 388,328,008.7112,948,308.3614.66Uncertain to a certain extent in
respect of repaymentTotal1,147,177,668.74222,451,005.5419.39\Accounts receivable assessed collectively for bad debt provisionCollectively assessed item: receivables not past due
Closing balanceClosing balance for prior yearLong-termreceivables
Bad debts
provision
ECL rate
(%)
Long-termreceivables
Bad debts
provision
ECL rate
(%)Within 1 year1 to 2 years140,505,555.562,810,111.112.00183,235,530.081,832,355.301.002 to 3 years140,505,555.561,405,055.551.00Total140,505,555.562,810,111.112.00323,741,085.643,237,410.851.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
11. Long-term receivables
(Continued)
(2) Disclosure based on bad debt provision
(Continued)
Collectively assessed item: Deposits receivable
Closing balanceClosing balance for prior yearLong-termreceivables
Bad debtsprovision
ECL rate(%)
Long-termreceivables
Bad debtsprovision
ECL rate(%)Within 1 year1 to 2 years136,426,669.75108,284,310.812 to 3 years38,434,359.53113,937,377.76Over 3 years26,737,059.6219,355,756.91Total201,598,088.90241,577,445.48
(3) Provision, recovery or reversal of bad debt provision for the period
Unit: RMBCategoryOpening balance
Changes in the period
Closing balanceProvisionRecovery or
reversal
Transfer or
write-offOthersBad debts provision225,688,416.3952,530,733.3812,948,308.36-262,460,730.302,810,111.11Total225,688,416.3952,530,733.3812,948,308.36-262,460,730.302,810,111.11
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
12. Long-term equity investments
Unit: RMB
Investee
Opening balance(carrying amount)
Openingbalance ofimpairment
provision
Change for the period
Closing balance(carrying amount)
Closingbalance ofimpairmentprovisionAdditionalcontribution
Withdrawncontribution
Investmentgain or lossrecognisedunder equitymethodAdjustmentof othercomprehensiveincome
Otherchange inequityinterestDistributionof cashdividendor profitdeclared
Impairment
provisionOthersI. Joint venturesShouguang Chenming Huisen
New-style ConstructionMaterials Co., Ltd.7,892,659.422,107,624.172,600,000.007,400,283.59Weifang Port Wood Chip Terminal
Co., Ltd.74,848,570.734,293,509.8379,142,080.56Shouguang Meite Environmental
Technology Co., Ltd.8,921,843.8810,144,679.9119,066,523.79Shouguang Jintou Industrial
Investment Partnership
(Limited Partnership)2,359,998,661.67-15,428,414.122,344,570,247.55Weifang Xingxing United
Chemical Co., Ltd.91,874,385.1291,874,385.12Subtotal2,543,536,120.821,117,399.792,600,000.002,542,053,520.61II. Associates
Zhuhai Dechen New Third
Board Equity Investment
Fund Company (Limited
Partnership)36,776,710.91487,093.4510,000,000.0027,263,804.36Ningbo Kaichen Huamei Equity
Investment Fund Partnership
(Limited Partnership)197,218,318.7790,910,511.3610,000,000.00278,128,830.13Nanchang Tianchen Port Co.,
Ltd.59,345,429.053,230,480.644,428,403.3058,147,506.39Goldtrust Futures Co., Ltd.178,389,182.839,397,443.45187,786,626.28Xuchang Chenming Paper Co.,
Ltd.5,994,545.965,994,545.96Chenming (Qingdao) Asset
Management Co., Ltd.6,482,035.691,895,108.968,377,144.65Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 254,998,849.78-3,079,947.47251,918,902.31Guangdong Nanyue Bank Co.,
Ltd.1,314,611,000.5424,976,831.82-1,224,007.02-6,840,774.341,331,523,051.00Subtotal1,733,477,248.745,994,545.96314,344,278.83127,817,522.21-1,224,007.02-6,840,774.3424,428,403.302,143,145,865.125,994,545.96Total4,277,013,369.565,994,545.96314,344,278.83128,934,922.00-1,224,007.02-6,840,774.3427,028,403.304,685,199,385.735,994,545.96Explanation:
As the Company disposed part of its equity interest in Wuhan Chenming Hanyang Paper Holdings Co., Ltd., the Company lost its
control over Wuhan Chenming Hanyang Paper Holdings Co., Ltd. but still exert its significant influence on Wuhan Chenming HanyangPaper Holdings Co., Ltd., which has been accounted for using equity method from the date of loss of control.Weifang Xingxing United Chemical Co., Ltd. was completely shut down due to demolition and relocation, and each of the shareholdersplanned to withdraw their investments. The Company ceased to account for Weifang Xingxing United Chemical Co., Ltd. using theequity method, and the carrying amount as at the end of the period was basically in line with the expected recoverable amount.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
12. Long-term equity investments
(Continued)Determination of net amount of recoverable amount measure at fair value after deducting disposal expenses Applicable √ Not applicableDetermination of present value of recoverable amount based on expected cash flows Applicable √ Not applicable
13. Other non-current financial assets
Unit: RMBItemClosing balanceOpening balanceInvestment in debt instruments659,099,016.38663,000,000.00Investment in equity instruments122,462,024.19123,750,761.62Total781,561,040.57786,750,761.62
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Investment property
(1) Investment property under the cost method
√ Applicable Not applicable
Unit: RMBItem
Housing andbuilding structure
Land userights
Constructionin progressTotalI. Original carrying amount
1. Opening balance7,160,214,568.837,160,214,568.83
2. Increase during the period
3. Decrease during the period17,293,354.9617,293,354.96
(1) Disposal17,293,354.9617,293,354.96
4. Closing balance7,142,921,213.877,142,921,213.87II. Accumulated depreciation andaccumulated amortisation
1. Opening balance903,491,455.68903,491,455.68
2. Increase during the period198,074,211.59198,074,211.59
(1) Provision or amortisation198,074,211.59198,074,211.59
3. Decrease during the period7,887,149.767,887,149.76
(1) Disposal7,887,149.767,887,149.76
4. Closing balance1,093,678,517.511,093,678,517.51III. Impairment provisionIV. Carrying amount
1. Closing carrying amount6,049,242,696.366,049,242,696.36
2. Opening carrying amount6,256,723,113.156,256,723,113.15
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Investment property
(Continued)
(1) Investment property under the cost method
(Continued)
Note: Investment properties under the Company primarily include:
Pujiang International Finance Plaza, located at No. 1098, Dongdaming Road, Hongkou District, Shanghai, is a long-term
held office property of Shanghai Hongtai Real Estate Co., Ltd., a subsidiary of the Company, and leasehold land mainlyused for external rental or office purposes;Jinan Chenming Finance Building (), located in No. 7 Zone, Hanyu Financial Business Center, No. 7000,
Jingshi Road, Jinan Innovation Zone, is a long-term held office property of Shandong Chenming Investment Limited, asubsidiary of the Company, and leasehold land mainly used for external rental or office purposes;Fatum Apartment (), located at No. 463, Anbo Road, No. 22, Lane 467, Anbo Road, Yangpu District, Shanghai, is
a long-term held apartment property of Shanghai Herui Investment Co., Ltd., a subsidiary of the Company, and leaseholdland mainly used for external rental purposes;Guangzhou Zhengjia Plaza (), located at Room 3901-3926, No. 372, Huanshi East Road, Yuexiu District,
Guangzhou, is a long-term held office property of Guangzhou Chenming Property Management Co., Ltd., a subsidiary ofthe Company, and leasehold land mainly used for external rental purposes;Shenzhen Zhuoyue Baozhong Times Square (), located at Room 3201-3210, Building C, ZhuoyueBaozhong Times Square (Phase 2), Xin’an Sub-district, Bao’an District, Shenzhen, is a long-term held office property ofGuangzhou Chenming Property Management Co., Ltd., a subsidiary of the Company, and leasehold land mainly used forexternal rental purposes.Shanghai Xizang South Road shop, located at No. 518-528 Xizang South Road, Shanghai, is a long-term store held byWuhan Junheng Property Management Co. Ltd., a subsidiary, and leasehold land mainly for external rental purposes.Determination of net amount of recoverable amount measure at fair value after deducting disposal expenses Applicable √ Not applicableDetermination of present value of recoverable amount based on expected cash flows Applicable √ Not applicable
15. Fixed assets
Unit: RMBItemClosing balanceOpening balanceFixed assets33,186,248,169.5633,527,978,754.73Disposal of fixed assets269,759,940.57Total33,186,248,169.5633,797,738,695.30
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Fixed assets
(Continued)
(1) Particulars of fixed assets
Unit: RMBItem
Housing andbuilding structure
Machinery and
equipmentVehicles
Electronicequipmentand othersTotalI. Original carrying amount:
1. Opening balance10,286,809,124.8943,106,182,009.60288,801,665.32400,465,471.7554,082,258,271.56
2. Increase during the period1,547,575,077.33373,389,718.697,782,054.096,209,501.781,934,956,351.89
(1) Acquisition30,905,046.40249,956,542.066,181,518.125,780,797.31292,823,903.89
(2) Transferred from construction
in progress20,992,423.25118,922,052.86139,914,476.11
(3) Debt restructuring188,209,727.081,532,574.49189,742,301.57
(4) Transferred to development
costs1,158,940,672.861,158,940,672.86
(5) Increase due to business
combination148,527,207.742,978,549.281,600,535.97428,704.47153,534,997.46
3. Decrease during the period111,431,095.81345,835,134.141,771,393.417,800,454.92466,838,078.28
(1) Disposal or retirement111,431,095.81345,835,134.141,771,393.417,800,454.92466,838,078.28
(2) Other decrease
4. Closing balance11,722,953,106.4143,133,736,594.15294,812,326.00398,874,518.6155,550,376,545.17II. Accumulated depreciation
1. Opening balance2,329,752,339.5717,561,160,193.98200,474,107.77258,849,412.2020,350,236,053.52
2. Increase during the period308,572,377.431,763,232,299.2522,205,873.2311,213,814.612,105,224,364.52
(1) Provision264,930,957.461,762,561,992.5721,496,925.0111,008,850.972,059,998,726.01
(2) Increase due to business
combination43,641,419.97670,306.68708,948.22204,963.6445,225,638.51
3. Decrease during the period14,059,134.79273,890,699.14674,877.676,750,794.14295,375,505.74
(1) Disposal or retirement14,059,134.79273,890,699.14674,877.676,750,794.14295,375,505.74
(2) Other decrease
4. Closing balance2,624,265,582.2119,050,501,794.09222,005,103.33263,312,432.6722,160,084,912.30III. Provision for impairment
1. Opening balance27,808,852.79168,785,487.4713,889.137,435,233.92204,043,463.31
2. Increase during the period
(1) Provision
(2) Other increase
3. Decrease during the period
(1) Disposal or retirement
(2) Other decrease
4. Closing balance27,808,852.79168,785,487.4713,889.137,435,233.92204,043,463.31IV. Carrying amount
1. Closing carrying amount9,070,878,671.4123,914,449,312.5972,793,333.54128,126,852.0233,186,248,169.56
2. Opening carrying amount7,929,247,932.5325,376,236,328.1588,313,668.42134,180,825.6333,527,978,754.73
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Fixed assets
(Continued)
(2) Particulars of temporarily idle fixed assets
Unit: RMBItem
Original carrying
amount
Accumulateddepreciation
Provision forimpairment
CarryingamountRemarkHousing and building structure72,585,434.3733,948,818.803,093,008.6435,543,606.93Machinery and equipment893,315,387.76572,845,720.42147,850,636.46172,619,030.88Electronic equipment478,399.18430,559.497,187.2740,652.42Total966,379,221.31607,225,098.71150,950,832.37208,203,290.23
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMBItem
Carryingamount
Reason for not yetobtaining property rightcertificatesHousing and building structure (Zhanjiang Chenming Pulp & Paper Co., Ltd.)980,913,613.30Under applicationHousing and building structure (Huanggang Chenming Pulp & Paper Co., Ltd.)546,905,052.22Under applicationHousing and building structure (Shouguang Meilun Paper Co., Ltd.)481,677,913.32Under applicationHousing and building structure (Jilin Chenming Paper Co., Ltd.)363,470,359.61Under applicationHousing and building structure (Jiangxi Chenming Paper Co., Ltd.)194,225,965.02Under applicationHousing and building structure (Shandong Chenming Paper Holdings Limited)110,999,633.48Under applicationTotal2,678,192,536.95
(5) Impairment test on fixed assets
Applicable √ Not applicable
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Fixed assets
(Continued)
(6) Disposal of fixed assets
Unit: RMBItemClosing balanceOpening balanceMachinery equipment, electronic and other equipment in
production workshop of Wuhan Chenming3,457,743.88Housing and office equipment of Wuhan Chenming
management integrated office168,170,645.13Generator machinery equipment of Qianneng Electric
Power factory area59,225,154.99Boiler room and other structures of Qianneng Electric
Power factory area38,801,269.05Transportation and others of Qianneng Electric Power
factory area105,127.52Total269,759,940.57
16. Construction in progress
Unit: RMBItemClosing balanceOpening balanceConstruction in progress852,139,418.48551,020,785.44Materials for project7,478,546.687,846,094.92Total859,617,965.16558,866,880.36
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
16. Construction in progress
(Continued)
(1) Particulars of construction in progress
Unit: RMBItem
Closing balanceOpening balanceBook balance
Impairment
provisionCarrying amountBook balance
ImpairmentprovisionCarrying amountRelocation of Wuhan 4800 papermaking machine project (Zhanjiang)533,417,722.83533,417,722.83303,942,703.51303,942,703.51Technological transformation project130,674,807.30662,764.60130,012,042.70121,193,391.56121,193,391.56Integrated forestry, pulp and paper project (Huanggang Pulp & Paper)156,604,031.76156,604,031.7645,538,442.7845,538,442.78300,000 tonnes softwood pulp project (Shandong Chenming)8,941,631.088,941,631.08Others44,302,661.8721,138,671.7623,163,990.11101,484,919.3521,138,671.7680,346,247.59Total873,940,854.8421,801,436.36852,139,418.48572,159,457.2021,138,671.76551,020,785.44
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
16. Construction in progress
(Continued)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Project nameBudget
Openingbalance
Increaseduring the period
Transfer tofixed assetduring the
period
Otherdeductionsduring the
period
ClosingbalanceAccumulatedinvestment tobudgetConstructionprogressAccumulatedcapitalisedinterest
Of which:
Capitalisedinterestamount duringthe periodCapitalisationrate of the
interestamount forthe period
Source offundRelocation of Wuhan4800 papermakingmachine project (Zhanjiang)800,000,000.00303,942,703.51229,475,019.32533,417,722.8366.68%70.00%
Self-ownedfunds and borrowings300,000 tonnessoftwood pulp project (Shandong Chenming)1,488,980,000.008,941,631.088,941,631.080.60%0.60%
Self-ownedfunds and borrowingsTotal2,288,980,000.00303,942,703.51238,416,650.40542,359,353.91
(3) Impairment provision for construction in progress for the period
Unit: RMBItem
Openingbalance
Increase for
the period
Decrease for
the periodClosing balance
Reason for
provisionClosed deodorisation project atwastewater treatment plant (Shandong Chenming)5,061,399.695,061,399.69Automation upgrade for water treatment (Jilin Chenming)662,764.60662,764.60Differentiated viscose fibre andspinning and chemical project (Huanggang Pulp & Paper)12,609,724.8912,609,724.89Others3,467,547.183,467,547.18Total21,138,671.76662,764.6021,801,436.36
Explanation: Projects with impairment provision made are suspended projects that have not been put into operation for long-term.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
16. Construction in progress
(Continued)
(4) Impairment test on construction in progress
√ Applicable Not applicable
Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses
√ Applicable Not applicable
Unit: RMB
ItemBook value
RecoverableamountImpairment
Determination of fair value anddisposal expenses
Keyparameters
Basis ofdeterminationof keyparametersAutomationupgrade forwater treatment
662,764.600.00662,764.60As the project has been
abandoned and no longer be used, the fair value is zeroTotal662,764.600.00662,764.60
(5) Materials for project
Unit: RMBItem
Closing balanceOpening balanceBookbalance
Impairmentprovision
Carryingamount
Bookbalance
Impairment
provision
CarryingamountSpecial materials7,478,546.687,478,546.687,846,094.927,846,094.92Total7,478,546.687,478,546.687,846,094.927,846,094.92
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
17. Bearer biological assets
(1) Bearer biological assets under the cost method
√ Applicable Not applicable
Unit: RMBItemTea treesTotalI. Original carrying amount
1. Opening balance13,697,336.8013,697,336.80
2. Increase during the period3,987,350.563,987,350.56
(1) Planting3,987,350.563,987,350.56
3. Decrease during the period
4. Closing balance17,684,687.3617,684,687.36II. Accumulated depreciationIII. Impairment provisionIV. Carrying amount
1. Closing carrying amount17,684,687.3617,684,687.36
2. Opening carrying amount13,697,336.8013,697,336.80
(2) Impairment test on bearer biological assets under the cost method
Applicable √ Not applicable
(3) Bearer biological assets measured at fair value
Applicable √ Not applicable
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
18. Right-of-use assets
(1) Particulars of right-of-use assets
Unit: RMBItemLand use rights
Housingand buildingstructureTotalI. Original carrying amount
1. Opening balance205,820,222.415,546,607.90211,366,830.31
2. Increase during the period
3. Decrease during the period7,731,015.4024,770.647,755,786.04
(1) Transfer or held for sale7,483,309.007,483,309.00
(2) Other decreases247,706.4024,770.64272,477.04
4. Closing balance198,089,207.015,521,837.26203,611,044.27II. Accumulated depreciation
1. Opening balance28,702,609.311,049,521.7529,752,131.06
2. Increase during the period7,399,535.57275,452.757,674,988.32
(1) Provision7,399,535.57275,452.757,674,988.32
3. Decrease during the period1,631,386.611,631,386.61
(1) Transfer or held for sale1,631,386.611,631,386.61
4. Closing balance34,470,758.271,324,974.5035,795,732.77III. Impairment provisionIV. Carrying amount
1. Closing carrying amount163,618,448.744,196,862.76167,815,311.50
2. Opening carrying amount177,117,613.104,497,086.15181,614,699.25Explanation: The reason for other decreases is that the original recognised amount of right-of-use assets was tax included, and as theinvoices for leasing have been received, the input tax amount offset the original carrying amount of the right-of-use assets.
(2) Impairment test on right-of-use assets
Applicable √ Not applicable
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
19. Intangible assets
(1) Particulars of intangible assets
Unit: RMBItemLand use rightsSoftwarePatents
Certificatesof thirdparty rightTotalI. Original carrying amount
1. Opening balance2,317,286,177.5722,054,431.7327,493,613.0515,908,674.872,382,742,897.22
2. Increase during the period242,900,438.531,278,301.89244,178,740.42
(1) Acquisition148,906,631.361,278,301.89150,184,933.25
(2) Increase due to business
combination11,046,650.6711,046,650.67
(3) Increase due to debt
restructuring82,947,156.5082,947,156.50
3. Decrease during the period35,028,784.2823,584.9135,052,369.19
(1) Disposal
(2) Disposal of subsidiary35,028,784.2823,584.9135,052,369.19
4. Closing balance2,525,157,831.8223,309,148.7127,493,613.0515,908,674.872,591,869,268.45II. Accumulated amortisation
1. Opening balance512,384,814.2622,054,431.731,056,145.4415,908,674.87551,404,066.30
2. Increase during the period55,399,655.46969,137.5294,950.0056,463,742.98
(1) Provision52,839,764.79969,137.5294,950.0053,903,852.31
(2) Increase due to business
combination2,559,890.672,559,890.67
3. Decrease during the period18,335,847.7723,584.9118,359,432.68
(1) Disposal
(2) Disposal of subsidiary18,335,847.7723,584.9118,359,432.68
4. Closing balance549,448,621.9522,999,984.341,151,095.4415,908,674.87589,508,376.60III. Impairment provisionIV. Carrying amount
1. Closing carrying amount1,975,709,209.87309,164.3726,342,517.612,002,360,891.85
2. Opening carrying amount1,804,901,363.3126,437,467.611,831,338,830.92
Explanation: (1) For details of restricted ownership, please refer to note VII. 24.
(2) Impairment test on intangible assets
Applicable √ Not applicable
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
20. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Name of investee or eventgenerating goodwill
Openingbalance
Increase during
the period
Decrease during
the period
Closing balanceArising frombusinesscombinationsDisposalJilin Chenming Paper Co., Ltd.14,314,160.6014,314,160.60Kunshan Tuoan Plastic Products
Co., Ltd.26,946,905.3826,946,905.38Jiangxi Chenming Port Co., Ltd.8,273,638.428,273,638.42Total41,261,065.988,273,638.4249,534,704.40
(2) Provision for impairment of goodwill
Unit: RMBName of investee or eventgenerating goodwill
Openingbalance
Increase duringthe period
Decrease during
the period
Closing balanceProvisionDisposalJilin Chenming Paper Co., Ltd.14,314,160.6014,314,160.60Total14,314,160.6014,314,160.60
Explanation: Goodwill for Kunshan Tuoan Plastic Products Co., Ltd. was arose from the acquisition of Kunshan Tuoan Plastic Products
Co., Ltd. by the Company on 31 August 2020. With the category of the principal activities as the basis for determining thereporting segments, the Company regarded Kunshan Tuoan Plastic Products Co., Ltd. and Jiangxi Chenming Port Co.,Ltd. as an asset group.Goodwill for Jiangxi Chenming Port Co., Ltd. was arose from the acquisition of Jiangxi Chenming Port Co., Ltd. bythe Company on 30 April 2023. With the category of the principal activities as the basis for determining the reportingsegments, the Company regarded Jiangxi Chenming Port Co., Ltd. as an asset group.The Company intends to dispose of Kunshan Tuoan Plastic Products Co., Ltd. According to the transfer consideration ofRMB143.73 million determined in the valuation report as of 31 December 2023, the transfer consideration is higher thanthe book value of the corresponding asset group (including goodwill). The management is of the view that no impairmentprovision shall be made by the Company for such asset group. An equity transfer agreement was entered into in January2024 for the transfer.The Company conducted profit forecast on Jiangxi Chenming Port Co., Ltd. in general. The recoverable amount wasdetermined based on the present value of the estimated future cash flows. Future cash flows were determined basedon the financial budget for 2024 to 2028, with weighted average asset cost of 6.23%. Other key assumptions used inestimating future cash flows included the estimated sales and gross profit based on the performance of such assetgroup in the past and the expectation to market development by the management. The management believed that anyreasonable change in the above assumptions will not result in the total book value of the asset group Jiangxi ChenmingPort Co., Ltd. exceeding its recoverable amount. Upon assessment, the management is of the view that no impairmentprovision shall be made by the Company for such asset group.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
20. Goodwill
(Continued)
(3) Relevant information on goodwill for asset group or combination of asset groups
Name
Composition and basis of asset group orcombination of asset groups
Operating segmentand basis
Whether itis consistentwith prior yearKunshan TuoanPlasticProducts Co., Ltd.
The related asset groups or combination ofasset groups are those which can benefitfrom the synergies of the businesscombination and are not larger than thereportable segments identified by the Company.
Other segment, withthe Companyclassified operatingsegments basedon financial performance
Yes
Jiangxi Chenming Port Co., Ltd.
The related asset groups or combination ofasset groups are those which can benefitfrom the synergies of the businesscombination and are not larger than thereportable segments identified by the Company.
Other segment,with the Companyclassified operatingsegments basedon financial performance
N/A
Jilin Chenming Paper Co., Ltd.
The related asset groups or combination ofasset groups are those which can benefitfrom the synergies of the businesscombination and are not larger than thereportable segments identified by the Company.
Machine-made papersegment, with theCompany classifiedoperating segmentsbased on financial performance
Yes
(4) Specific determination of recoverable amount
Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses
√ Applicable Not applicable
Unit: RMB
ItemBook value
Recoverable
amountImpairment
Determination of fairvalue and disposalexpenses
Keyparameter
Basis ofdetermination
of keyparameterKunshan Tuoan Plastic Products Co., Ltd.134,612,042.38143,730,000.00
Contract price for the proposed disposalTotal134,612,042.38143,730,000.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
20. Goodwill
(Continued)
(4) Specific determination of recoverable amount
(Continued)Determination of present value of recoverable amount based on expected cash flows
√ Applicable Not applicable
Unit: RMB
ItemBook value
Recoverable
amountImpairment
Term offorecast
period
Key parameter
for forecast
period
Key parameterfor stabilisationperiod
Basis ofdeterminationof keyparameterfor stabilisationperiodJiangxi Chenming Port Co., Ltd.
17,490,391.2134,244,524.415Interest rate
ranged from
26.05%-26.26%
Revenue growth
rate of 0%
EstimationTotal17,490,391.2134,244,524.41
21. Long-term prepaid expenses
Unit: RMBItem
Openingbalance
Increase during
the period
Amortisationduring the period
Otherdeductions
ClosingbalanceWoodland expenses7,233,827.751,281,727.985,952,099.77Others37,229,023.7096,528.963,298,490.9434,027,061.72Total44,462,851.4596,528.964,580,218.9239,979,161.49
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
22. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB
Item
Closing balanceOpening balanceDeductibletemporarydifference
Deferred
incometax assets
Deductibletemporarydifference
Deferredincometax assetsProvision for impairment of assets2,170,702,373.93509,035,457.402,344,419,524.10549,431,097.40Unrealised profit arising from intra-group transactions7,605,345.401,901,336.3547,231,691.3211,807,922.83Outstanding payables121,528,026.2018,553,482.43169,723,942.8826,380,462.69Deferred income144,721,508.4321,708,225.98193,822,821.6529,673,699.36Deductible loss7,008,265,437.961,138,659,379.334,578,592,243.20716,030,918.97Debt restructuring30,831.057,707.76Special reserves15,791,710.952,368,756.59Total9,452,822,691.921,689,857,881.497,349,612,765.151,335,700,565.60
(2) Deferred income tax liabilities before offsetting
Unit: RMB
Item
Closing balanceOpening balanceTaxabletemporarydifferences
Deferredincome tax
liabilities
Taxabletemporarydifferences
Deferredincome tax
liabilitiesAsset valuation increment frombusiness combinations involving entities not under common control37,960,636.209,490,159.0519,104,051.044,776,012.76Debt restructuring13,621,006.123,405,251.53Total37,960,636.209,490,159.0532,725,057.168,181,264.29
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
22. Deferred income tax assets/deferred income tax liabilities
(Continued)
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMBItemClosing balanceOpening balanceDeductible temporary difference53,265,395.0510,365,962.12Deductible loss721,381,744.55808,569,643.83Total774,647,139.60818,935,605.95
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the years as follows
Unit: RMBYearClosing balanceOpening balanceRemark2023189,187,446.572024158,265,081.51178,453,991.842025226,672,646.51251,671,920.26202661,481,717.71119,959,990.04202777,967,748.7369,296,295.122028196,994,550.09Total721,381,744.55808,569,643.83
23. Other non-current assets
Unit: RMBItem
Closing balanceOpening balanceBookbalance
Impairment
provision
Carryingamount
Bookbalance
Impairment
provision
CarryingamountPayments for engineering and equipment1,055,195,141.001,055,195,141.00981,293,657.32981,293,657.32Others11,887,516.5711,887,516.572,612,250.682,612,250.68Total1,067,082,657.571,067,082,657.57983,905,908.00983,905,908.00
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
24. Assets with restricted ownerships or right to use
Unit: RMBItem
Closing balanceOpening balanceBook balanceCarrying amount
Type ofrestrictionRestrictionBook balanceCarrying amount
Type ofrestrictionRestrictionMonetary funds
11,360,599,088.69 11,360,599,088.69 PledgedAs deposits for bank
acceptance bills andletters of credit, depositsfor letter of guarantee,security deposits forloans, deposit reserves,interest receivable, etc. (Note VII. 1)
11,840,974,836.5711,840,974,836.57PledgedAs deposits for bank
acceptance bills andletters of credit, depositsfor letter of guarantee,security deposits forloans, deposit reserves,interest receivable, etc. (Note VII. 1)Fixed assets9,411,111,670.626,303,095,864.20PledgedAs collateral for bank
borrowings andlong-term payables (Note VII. 15)
15,651,057,538.8410,063,641,052.69PledgedAs collateral for bank
borrowings andlong-term payables (Note VII. 14)Investment property
5,941,741,699.605,004,776,921.76PledgedAs collateral for bank
borrowings (Note VII. 14)
5,650,386,492.304,895,514,630.65PledgedAs collateral for bank
borrowings (Note VII. 13)Intangible assets
865,105,844.99665,784,045.39PledgedAs collateral for bank
borrowings andlong-term payables (Note VII. 19)
1,367,006,629.881,033,897,418.27PledgedAs collateral for bank
borrowings and
long-term payables
(Note VII. 18)Accounts receivable
403,349,324.55398,710,807.32PledgedAs collateral for borrowings
(Note VII. 4)
100,563,153.66100,000,000.00PledgedAs collateral for
borrowings (Note VII. 3)Accountsreceivable financing
90,551,168.0190,551,168.01PledgedAs collateral for letters of
credit (Note VII. 5)
8,497,931.308,497,931.30PledgedAs collateral for letters of
credit (Note VII. 4)Total28,072,458,796.46 23,823,517,895.37 34,618,486,582.5527,942,525,869.48
Other explanation:
As at 31 December 2023, housing, building structure and equipment with the carrying amount of RMB6,303,095,864.20 (31 December 2022:
carrying amount of RMB10,063,641,052.69), investment properties with the carrying amount of RMB5,004,776,921.76 (31 December 2022:
carrying amount of RMB4,895,514,630.65) and intangible assets with the carrying amount of RMB665,784,045.39 (31 December 2022:
carrying amount of RMB1,033,897,418.27) were pledged as collateral for long-term borrowings of RMB4,262,800,469.08 (31 December 2022:
RMB3,118,508,092.17) and short-term borrowings of RMB85,000,000.00 (31 December 2022: RMB65,000,000.00).
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
25. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMBItemClosing balanceOpening balanceDiscounted borrowings12,270,872,000.0016,207,640,000.00Credit borrowings9,908,287,425.279,613,884,197.48Guaranteed borrowings9,785,629,371.419,757,184,167.65Pledged borrowings1,425,690,224.94741,339,929.89Mortgage borrowings85,000,000.0065,000,000.00Total33,475,479,021.6236,385,048,295.02
Explanation of the classification of short-term borrowings:
For classification and amount of mortgage borrowings and mortgage assets, please see 1. Monetary funds and 24. Assets with
restricted ownerships or right to use in Note VII.For classification and amount of pledged borrowings and mortgage assets, please see 1. Monetary funds and 24. Assets withrestricted ownerships or right to use in Note VII.Overdue outstanding short-term borrowings: total outstanding short-term borrowings overdue as at the end of the year
amounted to RMB0.00. Short-term borrowings included accrued interest of RMB27,736,656.82.
26. Bills payable
Unit: RMBCategoryClosing balanceOpening balanceCommercial acceptance bills3,604,737,193.921,206,234,201.21Bank acceptance bills1,014,249,270.031,922,361,633.83Total4,618,986,463.953,128,595,835.04Total overdue bills payable by counterparties as at the end of the period amounted to RMB205,710.00.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
27. Accounts payable
(1) Particulars of accounts payable
Unit: RMBItemClosing balanceOpening balancePayment for goods3,329,807,929.613,619,549,023.04Payment for engineering222,541,200.98146,144,102.25Payment for equipment107,663,951.56100,493,461.51Others242,607,788.05248,780,180.96Total3,902,620,870.204,114,966,767.76
(2) Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year (including 1 year)3,361,203,746.723,746,315,716.201 to 2 years267,905,274.7698,287,651.122 to 3 years30,677,976.1552,080,919.33Over 3 years242,833,872.57218,282,481.11Total3,902,620,870.204,114,966,767.76The basis used by the ageing analysis of the accounts payable of the Company: the ageing of accounts payableis the length of time of the Company’s outstanding accounts payable based on invoice date. The closingbalance is recognised one by one from the end of the period onwards until the amounts add up to the balance.It is also broken up by intervals of within 1 year, 1-2 years, 2-3 years and over 3 years.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
28. Other payables
Unit: RMBItemClosing balanceOpening balanceOther payables2,414,752,127.191,854,507,978.66Interest payable15,895,930.51Total2,414,752,127.191,870,403,909.17
(1) Interest payable
Unit: RMBItemClosing balanceOpening balanceInterest of corporate bonds15,895,930.51Total15,895,930.51
(2) Other payables
1) Other payables by nature
Unit: RMBItemClosing balanceOpening balanceOpen credit1,090,141,993.83490,279,690.52Deposit785,572,067.82788,792,126.26Accrued expenses381,781,932.14355,492,234.45The obligation to repurchase shares under the share incentive scheme63,764,745.74129,112,395.74Others93,491,387.6690,831,531.69Total2,414,752,127.191,854,507,978.66
2) Significant other payables aged over 1 year
Unit: RMBItemClosing balance
Reason for outstandingor not transferMCC Fujian Investment Construction Co., Ltd.570,000,000.00Project deposits
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
29. Receipts in advance
(1) Particulars of receipts in advance
Unit: RMBItemClosing balanceOpening balancePrepaid rents and property fees16,242,921.6514,261,436.67Total16,242,921.6514,261,436.67
30. Contract liabilities
Unit: RMBItemClosing balanceOpening balancePayment for goods in advance1,443,680,155.621,306,029,389.80Total1,443,680,155.621,306,029,389.80
31. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMBItem
Openingbalance
Increaseduring the
period
Decreaseduring theperiodClosing balanceI. Short-term remuneration99,353,543.411,082,596,707.911,108,043,017.5073,907,233.82II. Retirement benefit plan-definedcontribution scheme45,572,343.59203,505,721.08248,648,140.05429,924.62III. Termination benefits152,351.89152,351.89Total144,925,887.001,286,254,780.881,356,843,509.4474,337,158.44
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
31. Staff remuneration payables
(Continued)
(2) Particulars of short-term remuneration
Unit: RMBItem
Openingbalance
Increaseduring theperiod
Decreaseduring the
period
Closingbalance
1. Salaries, bonuses, allowance and
subsidies84,374,864.77823,172,363.65853,121,590.7154,425,637.71
2. Staff welfare58,944,163.8858,944,163.88
3. Social insurance premium4,072,690.5098,996,593.54101,670,060.721,399,223.32
Of which: Medical insurance premium669,598.5589,789,715.1489,964,841.01494,472.68
Work-related injuryinsurance premium2,514,203.467,549,514.5010,048,082.2215,635.74Maternity insurancepremium888,888.491,657,363.901,657,137.49889,114.90
4. Housing provident funds7,500,937.8077,494,674.7978,063,498.296,932,114.30
5. Union funds and workers
’
education463,017.4719,910,718.3312,559,977.027,813,758.78
6. Other short-term remuneration2,942,032.874,078,193.723,683,726.883,336,499.71Total99,353,543.411,082,596,707.911,108,043,017.5073,907,233.82
(3) Defined contribution plan
Unit: RMBItem
Openingbalance
Increaseduring the
period
Decreaseduring the
period
Closingbalance
1. Basic pension insurance premiums43,615,129.42195,522,255.19238,722,102.34415,282.27
2. Unemployment insurance
premiums1,957,214.177,983,465.899,926,037.7114,642.35Total45,572,343.59203,505,721.08248,648,140.05429,924.62
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
32. Tax payables
Unit: RMBItemClosing balanceOpening balanceValue added tax40,076,417.59128,305,607.36Property tax15,486,094.6734,531,806.76Land use tax11,149,858.8010,659,878.19Stamp duty10,875,401.1712,987,679.08Enterprise income tax6,720,397.4951,538,384.55Environmental protection tax3,698,248.003,674,817.23Resource tax3,000,000.003,500,000.00Urban maintenance and construction tax2,396,420.765,069,014.46Individual income tax2,184,712.314,765,040.27Educational surcharges and others2,062,463.523,955,412.99Land appreciation tax2,059,693.252,024,028.20Total99,709,707.56261,011,669.09
33. Non-current liabilities due within one year
Unit: RMBItemClosing balanceOpening balanceLong-term payables due within one year2,354,342,454.512,398,150,298.72Long-term borrowings due within one year1,273,902,656.061,920,748,225.56Lease liabilities due within one year3,692,567.254,606,717.58Bonds payable due within one year350,000,000.00Total3,631,937,677.824,673,505,241.86
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
34. Other non-current liabilities
Unit: RMBItemClosing balanceOpening balanceShort-term financial leasing borrowings100,000,000.00Total100,000,000.00
35. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMBItemClosing balanceOpening balanceMortgage borrowings4,262,800,469.083,118,508,092.17Guaranteed borrowings857,571,273.741,378,621,266.53Credit borrowings834,545,402.881,405,855,117.94Less: Long-term borrowings due within one year1,273,902,656.061,920,748,225.56Total4,681,014,489.643,982,236,251.08
Explanation of the types of long-term borrowings:
For classification and amount of mortgage assets of mortgage borrowings, please see 1. Monetary funds and 24. Assets withrestricted ownerships or right to use in Note VII. Long-term borrowings included accrued interest of RMB0.00.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
36. Lease liabilities
Unit: RMBItemClosing balanceOpening balanceLease payments payable64,264,374.6876,929,509.38Less: Unrecognised financing expenses18,584,784.5818,726,744.34Less: Lease liabilities due within one year3,692,567.254,606,717.58Total41,987,022.8553,596,047.46
37. Long-term payables
Unit: RMBItemClosing balanceOpening balanceLong-term payables2,541,095,217.663,160,771,126.31Total2,541,095,217.663,160,771,126.31
(1) By nature
Unit: RMBItemClosing balanceOpening balanceFinancial leasing borrowings4,345,793,513.954,928,891,190.81China Development Bank Special Fund343,750,000.00412,500,000.00Contributions by other partners199,894,158.22211,530,234.22Retention for the financial leasing operations6,000,000.006,000,000.00Less: Long-term payables due within one year2,354,342,454.512,398,150,298.72Total2,541,095,217.663,160,771,126.31
Other explanation:
Contributions by other partners refer to the contributions made by other partners to Weifang Chenming Growth Driver ReplacementEquity Investment Fund Partnership (Limited Partnership) and Weifang Chendu Equity Investment Partnership (Limited Partnership), andsuch contributions are reclassified as financial liabilities on a consolidation basis.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
38. Deferred income
Unit: RMBItemOpening balance
Increase duringthe period
Decrease during
the periodClosing balanceReason
Government grants1,469,230,468.461,730,000.00133,096,353.761,337,864,114.70Financial provisionTotal1,469,230,468.461,730,000.00133,096,353.761,337,864,114.70Items in respect of government grants:
Unit: RMB
Liability item
Openingbalance
New grantsduring theperiod
Include innon-operatingincome forthe period
Include inother incomefor the period
Amountchargedagainstcost expensesOther changesClosing balance
Asset-related/income-related
Funding for environmental protection576,455,283.8051,761,248.56524,694,035.24Asset-relatedHuanggang forestry-pulp-paperproject470,994,523.0525,026,217.80445,968,305.25Asset-relatedInfrastructure and environmental
protection engineering208,320,966.6911,517,589.44196,803,377.25Asset-relatedFinancial subsidies for technological
transformation project132,614,525.641,730,000.0039,238,509.9695,106,015.68Asset-relatedZhanjiang forestry-pulp-paper project46,711,964.274,094,632.9242,617,331.35Asset-relatedProject fund for National Key
Technology Research and
Development Program958,425.00164,700.00793,725.00Asset-relatedOthers33,174,780.011,293,455.0831,881,324.93Asset-relatedTotal1,469,230,468.461,730,000.00133,096,353.761,337,864,114.70
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
39. Share capital
Unit: RMB
Opening balance
Increase/decrease during the year (+/-)
Closing balanceRepurchaseof restrictedsharesBonus issue
Sharesconvertedfrom reservesOthersSubtotal
Total number of shares2,979,742,200.00-22,929,000.00-22,929,000.002,956,813,200.00
Explanation: On 17 July 2023, the Company convened the ninth extraordinary meeting of the tenth session of the Board and the fifth
extraordinary meeting of the tenth session of the Supervisory Committee, at which the Resolution on the Failure Fulfilment of theUnlocking Conditions for the Second Unlocking Period under the 2020 Restricted A Share Incentive Scheme and Repurchaseand Cancellation of Certain Restricted Shares was considered and approved. Grant Thornton (Special General Partnership)issued a Capital Verification Report (Zhi Tong Yan Zi (2023) No. 371C000518) for the repurchase of restricted shares during theperiod. Upon the completion of share repurchase, the total number of shares of the Company changed from 2,979,742,200 to2,956,813,200.
40. Other equity instruments
(1) Changes in preference shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period
Unit: RMBOutstanding financial instruments
Beginning of the periodIncrease during the periodDecrease during the periodEnd of the periodNumber
CarryingamountNumber
CarryingamountNumber
CarryingamountNumber
Carryingamount17 Lu Chenming MTN00110,000,000.00996,000,000.0010,000,000.00996,000,000.00Total10,000,000.00996,000,000.0010,000,000.00996,000,000.00Explanation: Repayment for Perpetual Bonds, which are accounted for as equity instruments, was made during the year.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
41. Capital reserves
Unit: RMBItemOpening balance
Increase duringthe period
Decrease duringthe periodClosing balanceShare premium4,604,712,413.1648,955,941.2253,898,041.984,599,770,312.40Other capital reserves756,488,109.1327,467,521.92729,020,587.21Total5,361,200,522.2948,955,941.2281,365,563.905,328,790,899.61Explanation:
Perpetual bonds, being the equity instruments, were repaid during the year, resulting in a decrease in capital reserves ofRMB4,000,000.00;Strategic investors made capital injection to Zhanjiang Chenming Pulp & Paper Co., Ltd., resulting in decrease in shareholding of theCompany but without loss in control, and an increase in capital reserves of RMB48,955,941.22;The shareholding of Guangdong Nanyue Bank Co., Ltd., an associate of the Company, in the Company was diluted as othershareholders had made investment, resulting in decrease in capital reserves of RMB6,840,774.34;Due to the failure to fulfil the unlocking conditions for restricted shares in prior years, the Company had made repurchase during theyear, resulting in a corresponding decrease in capital reserves of RMB42,418,650.00;As the management estimated that the remaining restricted shares will not be able to fulfil the unlocking conditions, the capital reservesrecognised in prior period were reversed, resulting in a decrease in capital reserves of RMB27,467,521.92;The Company acquired partial equity interest in Shouguang Meilun Paper Co., Ltd., a subsidiary, from minority shareholders, resulting ina decrease in capital reserves of RMB638,617.64.
42. Treasury shares
Unit: RMBItemOpening balance
Increase duringthe period
Decrease during
the periodClosing balanceShare incentive128,780,100.0065,347,650.0063,432,450.00Total128,780,100.0065,347,650.0063,432,450.00
Explanation: Due to failure in fulfilling the unlocking conditions, the Company repurchased certain restricted shares, with a reduction ofRMB65,347,650.00 in treasury shares.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
43. Other comprehensive income
Other comprehensive income attributable to the Company in the balance sheet is as follows:
Unit: RMB
Item
Openingbalance
During the period
ClosingbalanceAttributable to
the parentcompanyafter tax
Less: Transferredfrom othercomprehensiveincome inprior periods toretained earningsduring the periodI. Other comprehensive income that cannot bereclassified to profit or loss in subsequentperiodsII. Other comprehensive income that will bereclassified to profit and loss in subsequentperiods-821,940,694.57-42,940,794.51-864,881,489.08
1. Other comprehensive income that may be
reclassified to profit and loss under theequity method-9,916,102.69-1,224,007.02-11,140,109.71
2. Translation differences of financial
statements denominated in foreigncurrency-812,024,591.88-41,716,787.49-853,741,379.37Total other comprehensive income-821,940,694.57-42,940,794.51-864,881,489.08
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
43. Other comprehensive income
(Continued)Other comprehensive income attributable to the parent company in the income statement:
Unit: RMB
Item
During the period
Incurred beforeincome tax forthe period
Less: Transferredfrom othercomprehensiveincome in priorperiods to profitor loss during
the period
Less: Incometax expenses
Less: Attributableto minorityshareholders
after tax
Attributable toparent companyafter taxI. Other comprehensive income thatcannot be reclassified to profit or loss insubsequent periodsII. Other comprehensive income that willbe reclassified to profit and loss insubsequent periods-42,940,794.51-42,940,794.51
1. Other comprehensive income that may
be reclassified to profit and loss underthe equity method-1,224,007.02-1,224,007.02
2. Translation differences of financial
statements denominated in foreigncurrency-41,716,787.49-41,716,787.49Total other comprehensive income-42,940,794.51-42,940,794.51
44. Special reserves
Unit: RMBItemOpening balance
Increase duringthe period
Decrease during
the periodClosing balanceProduction safety expenses15,791,710.9531,146,275.3223,615,156.7023,322,829.57Total15,791,710.9531,146,275.3223,615,156.7023,322,829.57
45. Surplus reserves
Unit: RMBItemOpening balance
Increase duringthe period
Decrease during
the periodClosing balanceStatutory surplus reserves1,212,009,109.971,212,009,109.97Total1,212,009,109.971,212,009,109.97
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
46. General risk provisions
Unit: RMBItemOpening balance
Increase duringthe period
Decrease during
the periodClosing balanceGeneral risk provisions79,900,268.71529,973.8079,370,294.91Total79,900,268.71529,973.8079,370,294.91
Explanation: The general risk provisions are accrued by the Company’s subsidiaries Shandong Chenming Group Finance Co., Ltd. andShandong Chenming Commercial Factoring Co., Ltd. based on 1% of the receivables. Accordingly, the balance of the generalrisk provisions was adjusted based on the balance of the receivables.
47. Retained profit
Unit: RMBItemThe periodThe prior periodRetained profit as at the end of the prior year before adjustment9,390,642,477.579,294,126,706.86Adjustment to opening balance of retained earnings (increase +, decrease -)Opening balance of retained profit after adjustment9,390,642,477.579,294,126,706.86Plus: Net profit for the period attributable to shareholders of the parent company-1,281,289,649.82189,290,120.82Less: Transfer of general risk provisions-529,973.803,074,350.11 Perpetual Bonds interest payable89,700,000.0089,700,000.00Retained profit as at the end of the period8,020,182,801.559,390,642,477.57
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
48. Revenue and operating costs
Unit: RMBItem
Amount for the yearAmount for the prior yearRevenueCostsRevenueCostsPrincipal activities26,368,633,225.4824,241,469,338.1531,425,116,857.8326,878,943,649.28Other activities239,937,002.72204,016,961.78579,250,463.08494,782,057.72Total26,608,570,228.2024,445,486,299.9332,004,367,320.9127,373,725,707.00Whether the lower of the audited net profit before or after deducting extraordinary gains or losses is a negativenumber
√ Yes No
Unit: RMBItemCurrent yearSpecific deductionsPrior yearSpecific deductionsRevenue26,608,570,228.2032,004,367,320.91Total deductions from revenue986,216,965.96Revenue from sales of materials of
RMB900,376,053.88 and otherrevenue of RMB85,840,912.08.
1,030,770,460.26Revenue from sales of materials
of RMB903,160,256.93and other revenue ofRMB127,610,203.33.Proportion of total deductions from revenue to
revenue
3.71%3.22%I. Revenue from operations not related to
principal operations
1. Revenue from operations other than
normal operation, such as revenuerealised from leasing fixed assets,intangible assets, packaging materials,sales of materials, exchanges for non-monetary assets with materials, engagingin entrusted management business, andrevenue included in revenue from principaloperations but generated from operationsother than normal operation of theCompany.
986,216,965.96Revenue from sales of materials of
RMB900,376,053.88 and otherrevenue of RMB85,840,912.08.
1,030,770,460.26Revenue from sales of materials
of RMB903,160,256.93and other revenue ofRMB127,610,203.33.
Subtotal of revenue from operations not related
to principal operations
986,216,965.96Revenue from sales of materials of
RMB900,376,053.88 and otherrevenue of RMB85,840,912.08.
1,030,770,460.26Revenue from sales of materials
of RMB903,160,256.93and other revenue ofRMB127,610,203.33.Revenue after deductions25,622,353,262.24Revenue from sales of materials of
RMB900,376,053.88 and otherrevenue of RMB85,840,912.08.
30,973,596,860.65Revenue from sales of materials
of RMB903,160,256.93and other revenue ofRMB127,610,203.33.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
48. Revenue and operating costs
(Continued)Breakdown of revenue and operating costs:
Unit: RMB
Category of contract
Machine-made paperFinancial servicesHotel and property rentalsOthersTotalRevenueOperating costsRevenueOperating costsRevenueOperating costsRevenueOperating costsRevenueOperating costsType of business25,702,327,302.6023,725,017,263.15164,338,689.661,346,144.03219,640,822.73225,430,819.61522,263,413.21493,692,073.1426,608,570,228.2024,445,486,299.93Including:
Machine-made paper23,892,883,773.1022,038,839,089.6123,892,883,773.1022,038,839,089.61Chemical pulp551,886,319.48549,401,517.97551,886,319.48549,401,517.97Processing of moulds204,029,538.47198,297,579.81204,029,538.47198,297,579.81Electricity and steam223,450,300.54212,089,570.22223,450,300.54212,089,570.22Construction materials222,788,884.78216,481,504.04222,788,884.78216,481,504.04Hotel and property rentals212,364,573.64202,364,469.60212,364,573.64202,364,469.60Paper chemicals128,495,469.03118,581,502.40128,495,469.03118,581,502.40Others905,611,440.45806,105,582.95164,338,689.661,346,144.03 7,276,249.0923,066,350.0195,444,989.9678,912,989.29 1,172,671,369.16909,431,066.28By geographical area25,702,327,302.6023,725,017,263.15164,338,689.661,346,144.03 219,640,822.73225,430,819.61522,263,413.21493,692,073.14 26,608,570,228.2024,445,486,299.93Including:
Mainland China19,176,105,106.7617,602,028,904.63164,338,689.661,346,144.03 219,640,822.73225,430,819.61522,263,413.21493,692,073.14 20,082,348,032.3618,322,497,941.41Other countries and regions6,526,222,195.846,122,988,358.526,526,222,195.846,122,988,358.52By the timing of delivery25,702,327,302.6023,725,017,263.15164,338,689.661,346,144.03219,640,822.73225,430,819.61522,263,413.21493,692,073.14 26,608,570,228.2024,445,486,299.93Including:
Goods (at a point in time)25,473,285,738.8523,511,944,280.4519,828,475.288,894,628.69522,040,076.01493,692,073.1426,015,154,290.1424,014,530,982.28Services (within a certainperiod)229,041,563.75213,072,982.70164,338,689.661,346,144.03 199,812,347.45216,536,190.92223,337.20593,415,938.06430,955,317.65By sales channel25,702,327,302.6023,725,017,263.15164,338,689.661,346,144.03 219,640,822.73225,430,819.61522,263,413.21493,692,073.1426,608,570,228.2024,445,486,299.93Including:
Distribution18,126,061,624.6416,782,843,186.0518,126,061,624.6416,782,843,186.05Direct sales7,576,265,677.966,942,174,077.10164,338,689.661,346,144.03 219,640,822.73225,430,819.61522,263,413.21493,692,073.148,482,508,603.567,662,643,113.88
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
48. Revenue and operating costs
(Continued)Breakdown of revenue from principal activities By industryName of industry
Amount for the yearAmount for the prior yearRevenueCostsRevenueCostsMachine-made paper23,892,883,773.1022,038,839,089.6128,398,850,766.5124,448,024,979.32Chemical pulp551,886,319.48549,401,517.971,043,284,411.27816,562,733.50Electricity and steam223,450,300.54212,089,570.22288,447,315.51270,073,907.31Construction materials222,788,884.78216,481,504.04265,496,913.56228,492,849.08Hotel and property rentals212,364,573.64202,364,469.60238,020,274.82213,632,078.62Processing of moulds204,029,538.47198,297,579.81308,596,084.40277,645,763.64Paper chemicals128,495,469.03118,581,502.40169,232,476.00146,042,699.79Others932,734,366.44705,414,104.50713,188,615.76478,468,638.02Total26,368,633,225.4824,241,469,338.1531,425,116,857.8326,878,943,649.28 Machine-made paper, by main product typeName of industry
Amount for the yearAmount for the prior yearRevenueCostsRevenueCostsDuplex press paper7,702,426,452.756,929,011,543.248,449,759,248.927,407,821,676.66White paper board5,477,558,929.565,673,086,405.129,061,724,789.417,826,962,810.39Electrostatic paper4,005,559,008.363,410,527,141.514,077,351,284.383,497,341,216.24Coated paper3,925,663,395.233,389,639,629.494,149,820,827.473,457,680,224.04Anti-sticking raw paper1,127,626,969.18947,141,370.39973,542,096.46791,528,667.30Thermal paper553,666,757.69484,068,025.05582,687,847.45489,261,009.24Others1,100,382,260.331,032,967,683.961,103,964,672.42977,429,375.45Production interruption loss172,397,290.85Total23,892,883,773.1022,038,839,089.6128,398,850,766.5124,448,024,979.32
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
48. Revenue and operating costs
(Continued) Machine-made paper, by geographical segmentName of industry
Amount for the yearAmount for the prior yearRevenueCostsRevenueCostsMainland China17,366,661,577.2615,915,850,731.0920,254,734,795.5117,354,744,592.14Other countries and regions6,526,222,195.846,122,988,358.528,144,115,971.007,093,280,387.18Total23,892,883,773.1022,038,839,089.6128,398,850,766.5124,448,024,979.32 Revenue from top 5 customersPeriod
Total revenue fromtop 5 customers
Percentage of thetotal revenue in thesame period (%)20235,966,203,769.1422.42%20226,798,742,733.1321.24%Information related to performance obligations:
Item
Time for fulfilmentof performanceobligations
Significant terms ofpayment
Nature of goodsthat the Companyundertakes totransfer
Whether theperson is theprimary personin charge
Company’scommitmentsexpected tobe refunded tocustomers
Types of quality assuranceoffered by the Company andrelated obligationsMachine-made
paper
Domestic sales on theday of delivery to thecustomer; foreignsales on the day ofcustoms clearance
Domestic sales tend
to be provided onan invoice basis;foreign sales tendto be prepaid.
Produces easily
distinguishable
YesNoneGuaranteed quality assurance,
should there be objections toproduct quality within 7 daysof arrival, the products canbe returned and exchanged.
Other explanations: The Company’s performance obligations for sales of machine-made paper are generally less than one year, and theCompany takes advance payments or provides credit terms depending on the customer. When the Company is theprimary responsible party for a sale, it generally obtains the unconditional right to receive payment when control of themerchandise is transferred to the customer either at the time of shipment or upon delivery to the destination specified bythe customer.
Information related to the transaction price allocated to residual performance obligations:
As at the end of the reporting period, the amount of revenue with signed contracts but unfulfilled or uncompletedperformance obligation was RMB1,443,680,155.62, in which RMB1,443,680,155.62 was expected to be recognised in2024.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
49. Taxes and surcharges
Unit: RMBItem
Amount forthe period
Amount forthe prior periodProperty tax88,246,740.8384,937,624.08Stamp duty42,431,971.8850,855,100.84Land use tax34,743,967.0421,896,525.68Urban maintenance and construction tax18,839,445.0130,844,441.65Resource tax13,725,384.4012,151,246.70Environmental tax13,009,450.6413,153,239.01Educational surcharges8,522,314.8213,065,472.17Local education surcharges5,859,476.279,672,799.88Water conservation funds848,092.68941,851.21Others1,575,521.555,621,013.84Total227,802,365.12243,139,315.06
50. General and administrative expenses
Unit: RMBItem
Amount for
the period
Amount forthe prior periodWages and surcharges229,206,077.91230,961,622.37Business hospitality expenses94,404,109.3490,219,924.17Depreciation expenses91,759,528.8792,141,979.66Welfare expenses58,663,557.6660,931,519.54Amortisation of intangible assets and long-term expenses48,832,351.3950,808,836.96Repair cost and consumption of materials23,468,894.1424,983,894.65Intermediary service expenses21,621,384.6027,065,168.09Legal costs20,252,237.2424,306,211.03Insurance premium16,758,186.6417,343,722.19Travel expenses15,150,365.4910,066,215.41Office expenses3,871,812.806,827,412.53Termination benefits expenses2,091,062.8426,059,173.11Others64,240,213.0988,831,023.63Total690,319,782.01750,546,703.34
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
51. Sales and distribution expenses
Unit: RMBItem
Amount for
the period
Amount forthe prior periodWages and surcharges109,381,728.48120,855,156.29Business hospitality expenses51,126,929.3755,312,453.05Travel expenses28,631,831.5921,514,621.65Rental expenses7,343,527.126,048,188.50Selling commissions6,940,887.4011,571,414.61Depreciation expenses4,677,235.586,524,594.65Office expenses4,241,864.882,465,867.66Warehouse expenses411,253.96669,554.18Others18,244,379.0517,219,423.50Total230,999,637.43242,181,274.09
52. Research and development expense
Unit: RMBItem
Amount forthe period
Amount forthe prior periodConsumption of materials781,407,604.78872,932,892.44Utilities155,276,067.70181,428,197.66Wages and surcharges129,508,833.28146,671,151.98Depreciation expenses56,914,306.4145,016,402.19Insurance premium26,981,737.4228,028,216.33Housing provident funds4,435,343.174,848,051.84Welfare expenses3,362,929.394,448,785.76Union funds1,323,605.611,159,873.86Other expenses5,209,270.375,747,968.04Total1,164,419,698.131,290,281,540.10
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
53. Finance expenses
Unit: RMBItem
Amount forthe period
Amount forthe prior periodInterest expenses1,908,394,881.892,081,067,895.66Less: Capitalised interest amountInterest income201,101,017.34309,987,478.19Foreign exchange gains and losses-25,018,964.4346,654,427.89Less: Capitalisation of foreign exchange gains and lossesBank charges and others327,391,808.02328,821,303.70Total2,009,666,708.142,146,556,149.06
54. Other income
Unit: RMBSource of other income
Amount forthe period
Amount forthe prior periodAdditional deduction of VAT154,495,020.8225,116.70Government grants – amortised deferred income included in profit or loss133,096,353.76104,451,215.79Government grants – directly included in profit or loss36,809,925.69136,241,934.69Gain on debt restructuring10,400,321.831,030,353.24Refund of handling fees for withholding and payment of individualincome tax2,522,709.33474,548.44Total337,324,331.43242,223,168.86
55. Gain on change in fair value
Unit: RMBSource of gain on change in fair value
Amount for
the period
Amount forthe prior periodGain on change in fair value of consumable biological assets measured at fair value6,775,808.389,924,233.72Other non-current financial assets-3,590,983.625,350,000.00Financial assets held for trading-28,740,129.26-40,528,162.53Total-25,555,304.50-25,253,928.81
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
56. Investment income
Unit: RMBItem
Amount for
the period
Amount forthe prior periodInvestment gain on disposal of long-term equity investments391,450,223.81-856,627.60Income from long-term equity investments accounted for using the equity method128,934,922.0024,116,757.95Investment gain on debt restructuring44,897,024.23-62,888.33Dividend on financial assets held for trading and other noncurrentfinancial assets39,529,607.6938,224,826.21Investment gain on derecognition of financial assets-99,744,741.95-137,464,855.58Total505,067,035.78-76,042,787.35
57. Credit impairment loss
Unit: RMBItem
Amount forthe period
Amount forthe prior periodBad debt loss of other receivables-47,363,307.6954,677,374.62Bad debt loss of accounts receivable-96,453,353.50-38,857,265.91Bad debt loss of financial lease payments-176,139,588.20-101,897,077.27Total-319,956,249.39-86,076,968.56
58. Loss on impairment of assets
Unit: RMBItem
Amount forthe period
Amount forthe prior periodImpairment losses on construction in progress-662,764.60Loss on inventory impairment-44,344,534.62-17,659,966.20Total-45,007,299.22-17,659,966.20
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
59. Asset disposal income
Unit: RMBSource of asset disposal income
Amount forthe period
Amount forthe prior periodGain on disposal of fixed assets (“-” denotes loss)11,090,813.0054,255,232.29Sublease (“-” denotes loss)3,780,766.85Gain on disposal of intangible assets (“-” denotes loss)-264,150.94106,837,281.47Total14,607,428.91161,092,513.76
60. Non-operating income
Unit: RMB
Item
Amount forthe period
Amount forthe prior period
Included innon-recurring
profit or lossin the periodFine income1,965,328.232,334,679.241,965,328.23Gain on damage and retirement of non-current assets450,007.5482,413.79450,007.54Exempted debts222,676.3294,894.96222,676.32Government grants72,000.0073,741,500.0072,000.00Others288,757.32995,197.77288,757.32Total2,998,769.4177,248,685.762,998,769.41
(1) For details of government grant, please see Note XI. Government grants.
(2) For the specific reason for government grants as recurring profit or loss, please refer to Note XX.
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
61. Non-operating expenses
Unit: RMB
Item
Amount forthe period
Amount forthe prior period
Included innon-recurring
profit or lossin the periodUtilisation, cancellation and trading of carbon emission quota13,613,560.9723,662,741.8113,613,560.97Loss on damage and retirement of non-current assets4,940,010.7010,382,099.664,940,010.70Donation505,280.00805,000.00505,280.00Litigation16,348,160.25Total19,058,851.6751,198,001.7219,058,851.67
62. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMBItem
Amount for
the period
Amount forthe prior periodCurrent income tax calculated according to tax law and related regulations26,624,910.5290,855,030.56Deferred income tax expenses-409,686,894.47-225,948,373.97Total-383,061,983.95-135,093,343.41
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
62. Income tax expenses
(Continued)
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMBItem
Amount for
the periodTotal profit-1,709,704,401.81Income tax expenses calculated at statutory (or applicable) tax rates-256,455,660.27Effect of different tax rates applicable to certain subsidiaries-11,581,202.24Adjustments to income tax for prior periods-18,527,039.58Profit and loss of joint ventures and associates accounted for using the equity method-16,009,557.52Income not subject to tax (listed with“-”)-9,106,680.52Non-deductible costs, expenses and losses20,316,855.92The impact of tax rate changes on the opening deferred income tax balance4,499,969.53Tax effect of utilisation of unrecognised deductible losses and deductible temporarydifferences in the previous year (listed with“-”)-36,012,580.06Tax effect of utilisation of unrecognised deductible losses and deductible temporarydifferences74,768,856.53Tax effect of R&D fee deduction (listed with“-”)-116,004,399.19The pre-tax deduction of the interest on Perpetual Bonds accounted as equity-13,455,000.00Tax incentives such as equipment credits-5,715,006.49Deferred income taxes that have not been recognised as deductible losses and
deductible temporary differences in previous years are reversed in the current period.219,459.94Income tax expense-383,061,983.95
Explanation: The amount listed in“the impact of tax rate changes on the opening deferred income tax balance”for the period is thedifference caused by the different applicable tax rates of Wuhan Chenming Hanyang Paper Holdings Co., Ltd. (disposedof during the period) from a high-tech enterprise to a non-high-tech enterprise.
63. Items on statements of cash flow
(1) Cash relating to operating activities
Cash received relating to other operating activities
Unit: RMBItem
Amount for
the period
Amount forthe prior periodNet proceedings from the financial leasing business615,990,074.21184,749,056.18Finance expenses – Interest income192,639,004.29305,772,280.83Open credit and other income185,197,937.53745,295,349.96Government grants related to revenue36,369,756.40202,165,244.17Default penalty and fine988,348.52969,634.65Total1,031,185,120.951,438,951,565.79
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Items on statements of cash flow
(Continued)
(1) Cash relating to operating activities
(Continued)Cash paid relating to other operating activities
Unit: RMBItem
Amount for
the period
Amount forthe prior periodTransportation expenses827,892,596.27944,022,266.88Financial institutions charge231,394,529.58241,125,513.70Business hospitality expenses126,982,128.56117,853,387.22Travel expenses44,024,694.2232,480,740.17Intermediary service expenses42,941,628.9054,437,645.94Repair expenses23,853,382.8423,053,205.98Cargo handling charges16,197,187.5621,869,006.27Insurance premium16,063,115.6515,288,347.78Waste disposal expenses15,654,882.0615,891,052.20Leasing expenses13,911,319.4612,038,349.86Office expenses8,375,443.1210,681,717.81Litigation368,296,784.84Net investment in factoring business250,000,000.00Others190,183,959.20186,617,859.65Total1,557,474,867.422,293,655,878.30
(2) Cash relating to investing activities
Significant cash received relating to investing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior periodDemolition or relocation compensation received138,000,000.00163,509,091.00Net cash received from disposal of subsidiaries99,329,954.44Disposal of properties or property assets61,500,000.0050,500,000.00Total298,829,954.44214,009,091.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Items on statements of cash flow
(Continued)
(2) Cash relating to investing activities
(Continued)
Significant cash paid relating to investing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior periodExpenses on construction projects, land and fixed assets314,376,125.86885,436,648.94Net cash paid for acquisition of subsidiaries4,934,751.03367,997,918.78External investment expenses1,463,000,000.00Total319,310,876.892,716,434,567.72
(3) Cash relating to financing activities
Cash received relating to other financing activities
Unit: RMBItem
Amount for
the period
Amount forthe prior periodEquipment leaseback2,116,532,500.003,684,590,394.82Net recovery of guarantee deposit434,899,520.51Current accounts135,100,000.00Deposit for finance lease10,758,363.1834,500,000.00Total2,697,290,383.693,719,090,394.82
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Items on statements of cash flow
(Continued)
(3) Cash relating to financing activities
(Continued)
Cash paid relating to other financing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior periodRepayment of equipment leaseback2,761,859,486.352,237,763,312.31Repayment of Perpetual Bonds1,000,000,000.00Repayment of bonds350,000,000.001,078,685,100.00Acquisition of non-controlling interests200,000,000.00Repayment of Perpetual Bonds interest89,700,000.0089,700,000.00Equity in China Development Bank funds68,750,000.0075,500,000.00Security deposit for financial leasing68,250,000.0076,000,000.00Share repurchase under the share incentive scheme66,228,770.3811,757,730.78Lease payable7,013,099.60Repayment of short-term commercial paper and MTN1,200,000,000.00Net expense of guarantee deposit919,816,742.13Total4,611,801,356.335,689,222,885.22Changes in liabilities arising from financing activities
√ Applicable Not applicable
Unit: RMBItemOpening balance
Increase during the periodDecrease during the period
Closing balanceCash changesNon-cashchangesCash changes
Non-cashchangesShort-term borrowings36,385,048,295.0227,901,920,633.13790,297,925.3131,601,787,831.8433,475,479,021.62Long-term borrowings5,902,984,476.643,035,002,236.00139,321,559.073,122,391,126.015,954,917,145.70Bonds payable350,000,000.00350,000,000.00Long-term payables5,558,921,425.032,116,532,500.00184,700,254.212,964,716,507.074,895,437,672.17Lease liabilities58,202,765.047,013,099.605,510,075.3445,679,590.10Other payables (financing)282,524,750.00282,524,750.00Long-term receivables (deposit for financial leasing)319,386,351.3210,758,363.1846,884,229.8368,250,000.00308,778,944.33Other monetary funds (net change of guarantee deposit)11,756,140,645.56434,899,520.5111,321,241,125.05Other equity instrument investments (Perpetual Bonds)996,000,000.0089,700,000.001,085,700,000.00Capital reserve (Perpetual Bonds)4,000,000.004,000,000.00Total61,330,683,958.6133,781,638,002.821,250,903,968.4239,203,858,564.525,510,075.3456,284,058,248.97
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
64. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Supplementary information
Amount for
the period
Amount forthe prior period
1. Reconciliation of net profit as cash flows from operating
activities:
Net profit-1,326,642,417.86317,362,691.41Plus: Provision for impairment of assets364,963,548.61103,736,934.76Depreciation of fixed assets, depletion of oil and gas assets, and depreciation of bearer biological assets2,258,072,937.602,255,505,392.35Depreciation of right-of-use assets7,674,988.327,737,284.20Amortisation of intangible assets53,903,852.3154,698,978.50Amortisation of long-term prepaid expenses4,580,218.924,678,921.69Loss on disposal of fixed assets, intangible assets and other long-term assets (“-” denotes gain)-14,607,428.91-161,092,513.76Loss on scrapped fixed assets (“-” denotes gain)4,490,003.1610,299,685.87Loss on changes in fair value (“-” denotes gain)25,555,304.5025,253,928.81Finance expenses (“-” denotes gain)1,908,394,881.892,081,067,895.66Investment loss (“-” denotes gain)-505,067,035.7876,042,787.35Decrease in deferred income tax assets (“-” denotes increase)-354,157,315.89-220,919,108.82Increase in deferred income tax liabilities (“-” denotes decrease)1,308,894.76-5,029,265.45Decrease in inventories (“-” denotes increase)741,332,805.87-406,337,116.14Decrease in operating receivables (“-” denotes increase)348,500,778.63332,267,872.35Increase in operating payables (“-” denotes decrease)871,645,292.69-1,025,450,126.41OthersNet cash flows from operating activities4,389,949,308.823,449,824,242.37
2. Major investing and financing activities not involving cash
settlements
3. Net change in cash and cash equivalents:
Closing balance of cash764,233,742.612,159,460,149.51Less: Opening balance of cash2,159,460,149.513,168,915,847.02Plus: Closing balance of cash equivalentsLess: Opening balance of cash equivalentsNet increase in cash and cash equivalents-1,395,226,406.90-1,009,455,697.51
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
64. Supplementary information on cash flow statement
(Continued)
(2) Net Cash of Acquisition Subsidiaries Paid in Current Period
Unit: RMBAmountCash or cash equivalents paid in the current period for business combinations that occurredduring the period5,400,000.00Of which: Jiangxi Chenming Port Co., Ltd.5,400,000.00Less: Cash and cash equivalents held by the subsidiary on the acquisition date465,248.97Of which: Jiangxi Chenming Port Co., Ltd.465,248.97Plus: Cash or cash equivalents paid in the current period for business combinations that occurred during previous periodsOf which:
Net cash paid for acquisition of subsidiaries4,934,751.03
(3) Net Cash from Disposal of Subsidiaries Received in Current Period
Unit: RMB
AmountCash or cash equivalents received in the current period from disposal of subsidiaries during
the period100,000,000.00Of which: Wuhan Chenming Hanyang Paper Holdings Co., Ltd.100,000,000.00Less: Cash and cash equivalents held by the subsidiary on the date of loss of control670,045.56Of which: Wuhan Chenming Hanyang Paper Holdings Co., Ltd.670,045.56Plus: Cash or cash equivalents received in the current period from disposal of subsidiaries during previous periodsOf which:
Net cash received from disposal of subsidiaries99,329,954.44
(4) Cash and cash equivalents composition
Unit: RMBItemClosing balanceOpening balanceI. Cash764,233,742.612,159,460,149.51
Of which: Treasury cash3,674,805.363,491,219.08Bank deposit that can be used for payment at any time760,558,937.252,155,968,930.43III. Balance of cash and cash equivalent at end of period764,233,742.612,159,460,149.51Of which: Restricted cash and cash equivalents used by the Company or subsidiaries within the Group
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
64. Supplementary information on cash flow statement
(Continued)
(5) Monetary funds other than cash and cash equivalents
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Reasons why it is not cashand cash equivalentsOther monetary funds11,321,241,125.0511,756,140,645.56See Note VII.1 for detailsInterest accrued on deposits39,357,963.6484,834,191.01See Note VII.1 for detailsTotal11,360,599,088.6911,840,974,836.57
65. Notes to items of statements of changes in owners
’ equityNil
66. Foreign currency items
(1) Foreign currency items
Unit: RMBItem
Closing foreigncurrency balanceExchange rate
Closing balance
in RMBMonetary fundsOf which: USD57,899,568.507.0827410,085,273.80
EUR1,308,213.227.859210,281,509.34HKD2,253,743.550.90622,042,387.48GBP1,475.749.041113,342.31JPY1,197.000.050260.10Accounts receivableOf which: USD5,433,637.497.082738,484,824.25
EUR4,163,139.457.859232,718,945.57JPY146,734,998.000.05027,368,004.45Other receivablesOf which: USD1,043,685.647.08277,392,112.28
EUR7,100.597.859255,804.96Accounts payableOf which: USD83,066,527.527.0827588,335,294.47
EUR807,997.697.85926,350,215.45Short-term borrowingsOf which: USD2,000,000.007.082714,165,400.00
EUR1,050,000.007.85928,252,160.00
2023 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
66. Foreign currency items
(Continued)
(2) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose
their overseas principal places of business, functional currency and basis. Reasons shall be disclosed ifthere is any change in the functional currency.
√ Applicable Not applicable
No.Name of subsidiary
Principal place ofbusiness
Place ofincorporation
Functionalcurrency1Chenming GmbHHamburg, GermanyHamburg, GermanyEUR2Chenming Paper Korea Co., Ltd.Seoul, KoreaSeoul, KoreaKRW3Chenming International Co., Ltd.Los Angeles, USALos Angeles, USAUSD4Chenming Paper Japan Co., Ltd.Tokyo, JapanTokyo, JapanJPY5Chenming Paper United States Co., Ltd.Los Angeles, USALos Angeles, USAUSD6Chenming (Overseas) LimitedHong Kong, ChinaHong Kong, ChinaUSD7Chenming (Singapore) LimitedSingaporeSingaporeUSD8Chenming (HK) LimitedHong Kong, ChinaHong Kong, ChinaUSD
67. Leases
(1) The Company as a lessee
Unit: RMBItemAmount for the periodShort-term lease expenses8,017,898.94
(2) The Company as a lessor
Operating lease as a lessor
√ Applicable Not applicable
Lease income
Unit: RMBItemAmount for the periodLease income205,849,883.65
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
67. Leases
(Continued)
(2) The Company as a lessor
(Continued)
Financial lease as a lessor Applicable √ Not applicableUndiscounted lease payments for each of the next five years
√ Applicable Not applicable
Unit: RMBItem
Annual undiscounted lease paymentsClosing balanceOpening balanceThe first year179,905,002.33199,136,847.34The second year168,651,189.37192,606,625.78The third year167,585,064.63166,116,775.62The fourth year162,996,827.55142,350,767.99The fifth year159,887,562.91132,326,292.11Five years later165,396,559.34131,251,761.59Total1,004,422,206.13963,789,070.43VIII. R&D expenses
Unit: RMBItem
Amount duringthe period
Amount duringthe prior periodConsumption of raw materials781,407,604.78872,932,892.44Utilities155,276,067.70181,428,197.66Wages and surcharges129,508,833.28146,671,151.98Depreciation expenses56,914,306.4145,016,402.19Insurance premium26,981,737.4228,028,216.33Housing provident funds4,435,343.174,848,051.84Welfare expenses3,362,929.394,448,785.76Union funds1,323,605.611,159,873.86Other expenses5,209,270.375,747,968.04Total1,164,419,698.131,290,281,540.10Of which: R&D expenses included in profit or loss1,164,419,698.131,290,281,540.10
Capitalised R&D expenses
2023 ANNUAL REPORT
XII Financial Report
IX. Change in scope of consolidation
1. Business combination not under common control
(1) Business combination not under common control during the current period
Unit: RMB
Acquiree
Date ofacquiring theshareholding
Considerationfor acquiring theshareholding
Shareholdingratio acquired
The way ofacquiring theshareholding
AcquisitiondateThe basis fordeterminingthe date ofacquisition
The income ofacquiree from
the date ofacquisition tothe end of theperiodThe net profit ofacquiree from thedate of acquisitionto the end of theperiodThe cash flow ofacquiree from thedate of acquisition
to the end of theperiodJiangxi Chenming Port Co., Ltd.2023.4.305,400,000.00100.00%Acquisition2023.4.30Control3,659,154.57-1,234,456.79-13,656,465.04
(2) Cost of combination and goodwill
Unit: RMBCost of combinationJiangxi Chenming Port Co., Ltd.– Cash5,400,000.00Total cost of combination5,400,000.00Less: the interest in the fair value of the identifiable net assets acquired-2,873,638.42Amount of goodwill/cost of combination being less than the interest in the fair value of the identifiable net assets acquired8,273,638.42Method for determining the fair value of the cost of combination:
The Company adopted the asset-based appraisal method and determined the equity acquisition price of JiangxiChenming Port Co., Ltd. on the appraisal benchmark date to be RMB5.4 million.The main reason for the formation of significant goodwill: the Company did not control Jiangxi Chenming PortCo., Ltd. under common control, and the acquisition consideration is greater than the identifiable net assets.
XII Financial Report
IX. Change in scope of consolidation(Continued)
1. Business combination not under common control
(Continued)
(3) Acquiree
’s identifiable assets or liabilities as at the acquisition date
Unit: RMBJiangxi Chenming Port Co., Ltd.Fair value as at theacquisition date
Carrying amount as at the
acquisition dateAssets:188,785,445.0991,440,229.40Monetary funds465,248.97465,248.97Accounts receivable3,080,417.763,080,417.76Payments in advance232,725.00232,725.00Other receivables194,231.04194,231.04Long-term equity investments59,345,429.052,450,000.00Fixed assets111,076,981.6674,175,345.69Intangible assets14,358,032.0210,809,881.35Deferred income tax assets32,379.5932,379.59Liabilities:191,659,083.51185,591,615.51Accounts payable4,684,349.814,684,349.81Employee benefits payable11,000.0011,000.00Taxes payable35,123.6235,123.62Other payables179,933,386.60179,933,386.60Long-term borrowings927,755.48927,755.48Deferred income tax liabilities6,067,468.00Net assets-2,873,638.42-94,151,386.11Less: minority interestNet assets acquired from combination-2,873,638.42-94,151,386.11Method for determining the fair value of identifiable assets and liabilities:
The Company adopted the asset-based method valuation technique to determine the fair value of the assetsand liabilities of Jiangxi Chenming Port Co., Ltd. on the acquisition date.Contingent liabilities of the acquiree assumed in a business combination:
Nil
2023 ANNUAL REPORT
XII Financial Report
IX. Change in scope of consolidation(Continued)
1. Business combination not under common control
(Continued)
(4) Gains or losses arising from remeasurement of equity held before the acquisition date at fair value
Any transaction that realises the business combination step by step through multiple transactions and obtainscontrol during the reporting period Yes √ No
(5) Relevant explanation on the inability to reasonably determine the consideration of combination or the fair
value of the acquiree’s identifiable assets and liabilities on the acquisition date or at the end of the currentperiod of combination Applicable √ Not applicable
2. Disposal of a subsidiary
Any transaction or event that results in the loss of control of any subsidiary during the period
√ Yes No
Unit: RMB
Name of subsidiary
Disposalconsiderationat the date ofloss of control
Disposalpercentageat the dateof loss ofcontrol (%)
Disposalmethod atthe date ofloss ofcontrol
Date ofloss ofcontrol
The basis fordeterminingthe date ofloss ofcontrol
Difference betweenconsideration andshare of net assets
of relevantsubsidiary as per
consolidated
financial
statements
Remainingshareholdingas of the date
of loss of
control (%)
Carrying amount
of remainingshareholding as
of the date ofloss of control
as per
consolidated
financial
statements
Fair value of
remainingshareholding as of
the date of lossof control as per
consolidated
financial
statements
Gain or loss in
fair value of
remainingshareholding
Determinationand keyassumptionof fair valueof remainingshareholding asof the date of lossof control as perconsolidatedfinancialstatements
Relevant othercomprehensiveincome offormersubsidiarytransferred toprofit or loss orretained profitWuhan Chenming Hanyang Paper Holdings Co., Ltd.
480,000,000.0065.21Transfer2023.9.30Loss of
control
391,450,124.8934.64410,000,000.00254,998,849.78-155,001,150.22Backflushing the
correspondingproportion ofequity interest disposed of
Any situation where investments in subsidiaries are disposed of step by step through multiple transactions and controlis lost during the period Yes √ No
3. Change in scope of consolidation due to other reasons
During the year, 1 subsidiary was newly established, namely Shouguang Kunhe Trading Co., Ltd. 1 subsidiary wasderegistered, namely Beijing Chenming Financial Leasing Co., Ltd.
XII Financial Report
X. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Unit: RMB’0,000Name of subsidiary
Register
capital
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issueddebtsecurities
IssuedsharecapitalDirect(%)Indirect
(%)Zhanjiang Chenming Pulp &
Paper Co., Ltd.
691,357.24ZhanjiangZhanjiangPaper makingFor-profit corporation80.28Establishment00Shouguang Meilun Paper
Co., Ltd.
480,104.55ShouguangShouguangPaper makingFor-profit corporation64.87Establishment00Jilin Chenming Paper Co., Ltd.150,000.00JilinJilinPaper makingFor-profit corporation100Acquisition00Huanggang Chenming Pulp &Paper Co., Ltd.
335,000.00HuanggangHuanggangPulp productionFor-profit corporation70.1529.85Establishment00Shandong Chenming Paper
Sales Co., Ltd.
10,000.00ShouguangShouguangSales of paper
productFor-profit corporation100Establishment00Shouguang Chenming Importand Export Trade Co., Ltd.
70,000.00ShouguangShouguangTradingFor-profit corporation35.7164.29Establishment00Jiangxi Chenming Supply ChainManagement Co., Ltd.
200.00JiangxiJiangxiTradingFor-profit corporation70Establishment00Chenming GmbH65.00
(USD)GermanyGermanyPaper product
tradingFor-profit corporation100Establishment00Shouguang ChenmingPapermaking Machine
Co., Ltd.
200.00ShouguangShouguangMachinery
manufacturing
For-profit corporation100Establishment00Shouguang Hongxiang Printing
and Packaging Co., Ltd.
80.00ShouguangShouguangPrinting and
packaging
For-profit corporation100Acquisition00Shouguang Chenming Modern
Logistic Co., Ltd.
1,000.00ShouguangShouguangTransportationFor-profit corporation100Establishment00Jinan Chenming Paper Sales
Co., Ltd.
10,000.00JinanJinanInvestment
management/Paper product
trading
For-profit corporation100Establishment00Huanggang Chenming
Arboriculture DevelopmentCo., Ltd.
7,000.00HuanggangHuanggangArboricultureFor-profit corporation100Establishment00Chenming Arboriculture
Co., Ltd.
10,000.00WuhanWuhanArboricultureFor-profit corporation100Establishment00Chenming Paper Korea
Co., Ltd.
100.00
(USD)
KoreaKoreaPaper product
trading
For-profit corporation100Establishment00Shouguang Shun Da Customs
Declaration Co., Ltd.
150.00ShouguangShouguangCustoms
declaration
For-profit corporation100Establishment00Shanghai Chenming Industry
Co., Ltd.
370,000.00ShanghaiShanghaiProperty
investment and
management
For-profit corporation100Establishment00Shanghai Chenyin Trading
Co., Ltd.
41,000.00ShanghaiShanghaiTradingFor-profit corporation51Establishment00Shandong Chenming Group
Finance Co., Ltd.
500,000.00JinanJinanFinanceFor-profit corporation8020Establishment00Jiangxi Chenming Paper
Co., Ltd.
32,673.32(USD)NanchangNanchangPaper makingFor-profit corporation100Establishment00
2023 ANNUAL REPORT
XII Financial Report
Name of subsidiary
Registercapital
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued
debtsecurities
IssuedsharecapitalDirect(%)Indirect
(%)Nanchang Shengheng Trading
Co., Ltd.
1,000.00NanchangNanchangTradingFor-profit corporation100Establishment00Nanchang Kunheng Trading
Co., Ltd.
1,000.00NanchangNanchangTradingFor-profit corporation100Establishment00Jiangxi Chenming Port Co., Ltd.1,507.00JiangxiJiangxiCargo
transportation
For-profit corporation100Merger and
acquisition
Shouguang Chenming Art
Paper Co., Ltd.
2,000.00(USD)ShouguangShouguangPaper makingFor-profit corporation75Establishment00Hailaer Chenming Paper
Co., Ltd.
1,600.00HailaerHailaerPaper makingFor-profit corporation75Establishment00Shandong Grand View HotelCo., Ltd.
4,192.48(USD)ShouguangShouguangCateringFor-profit corporation90.05Establishment00Shandong Chenming FinancialLeasing Co., Ltd.
587,200.00JinanJinanFinancial leasingFor-profit corporation100Establishment00Qingdao Chenming Nonghai
Financial Leasing Co., Ltd
500,000.00QingdaoQingdaoFinancial leasingFor-profit corporation100Establishment00Chenming (HK) Limited9,990.00
(USD)
Hong KongHong KongPaper product
trading
For-profit corporation100Establishment00Shouguang Hongyi Decorative
Packaging Co., Ltd.
200.00ShouguangShouguangPackagingFor-profit corporation100Merger and
acquisition
Shouguang Xinyuan Coal
Co., Ltd.
300.00ShouguangShouguangCoalFor-profit corporation100Merger and
acquisition
Shouguang City Run Sheng
Wasted Paper Recycle
Co., Ltd.
2,380.00ShouguangShouguangPurchase and
sale of waste
For-profit corporation100Merger and
acquisition
Shouguang Wei Yuan Logistics Company Limited
393.00ShouguangShouguangLogisticsFor-profit corporation100Merger and
acquisition
Shandong Chenming
Investment Limited
20,000.00JinanJinanInvestmentFor-profit corporation100Establishment00Chenming Paper Japan
Co., Ltd.
150.00
(USD)
JapanJapanPaper product
trading
For-profit corporation100Establishment00Chenming International Co., Ltd.100.00
(USD)
the United
States
the United
States
Paper product
trading
For-profit corporation100Establishment00Zhanjiang ChenmingArboriculture DevelopmentCo., Ltd.
130,000.00ZhanjiangZhanjiangArboricultureFor-profit corporation100Establishment00Yangjiang ChenmingArboriculture DevelopmentCo., Ltd.
22,000.00YangjiangYangjiangArboricultureFor-profit corporation100Establishment00Nanchang Chenming
Arboriculture DevelopmentCo., Ltd.
1,000.00NanchangNanchangArboricultureFor-profit corporation100Establishment00
X. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
Name of subsidiary
Register
capital
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issueddebtsecurities
IssuedsharecapitalDirect(%)Indirect(%)Guangdong Huirui InvestmentCo., Ltd.
25,800.00ZhanjiangZhanjiangInvestmentFor-profit corporation100Establishment00Jilin Chenming New-style Wall
Materials Co., Ltd
1,000.00JilinJilinWall materialsFor-profit corporation100Establishment00Jilin Chenming Logistics
Co., Ltd.
500.00JilinJilinLogisticsFor-profit corporation100Establishment00Jiangxi Chenming Logistics
Co., Ltd.
500.00NanchangNanchangLogisticsFor-profit corporation100Establishment00Fuyu Chenming Paper Co., Ltd.30,800.00FuyuFuyuPaper makingFor-profit corporation100Establishment00Zhanjiang Meilun Pulp & PaperCo., Ltd.
10,000.00ZhanjiangZhanjiangPaper makingFor-profit corporation100Establishment00Shanghai Chenming Financial
Leasing Co., Ltd.
100,000.00ShanghaiShanghaiFinancial
leasingFor-profit corporation100Establishment00Wuhan Junheng PropertyManagement Co. Ltd.
39,600.00WuhanWuhanPropertyFor-profit corporation100Merger and
acquisition
Guangzhou Chenming PropertyManagement Co., Ltd.
100,000.00GuangzhouGuangzhouPropertyFor-profit corporation100Establishment00Shanghai Hongtai Real Estate
Co., Ltd.
60,391.77ShanghaiShanghaiReal estateFor-profit corporation100Merger and
acquisition
Shanghai Hongtai Property
Management Co., Ltd.
200.00ShanghaiShanghaiPropertyFor-profit corporation100Merger and
acquisition
Shandong Chenming
Commercial Factoring
Co., Ltd
20,000.00JinanJinanBusiness
factoring
For-profit corporation100Establishment00Guangzhou Chenming
Commercial Factoring
Co., Ltd.
10,000.00GuangzhouGuangzhouBusiness
factoring
For-profit corporation51Establishment00Jiangxi Chenming Tea Co., Ltd.1,000.00JiangxiJiangxiTea businessFor-profit corporation100Establishment00Zhanjiang Chenming Port
Co., Ltd.
10,000.00ZhanjiangZhanjiangPort servicesFor-profit corporation100Establishment00Chenming Paper United States
Co., Ltd.
100.00 (USD)the United
States
the United
States
Paper product
trading
For-profit corporation100Establishment00Guangdong Chenming Panels
Co., Ltd.
1,000.00GuangdongGuangdongPanelsFor-profit corporation100Establishment00Shanghai Chenming Pulp &
Paper Sales Co., Ltd.
10,000.00ShanghaiShanghaiPaper product
trading
For-profit corporation100Establishment00Meilun (BVI) Limited5.00 (USD)CaymanCaymanCommerceFor-profit corporation100Establishment00Weifang Chenming Growth
Driver Replacement EquityInvestment Fund Partnership(Limited Partnership)
100,000.00WeifangWeifangFundFor-profit corporation79Establishment00
X. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
2023 ANNUAL REPORT
XII Financial Report
Name of subsidiary
Register
capital
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued
debtsecurities
IssuedsharecapitalDirect(%)Indirect(%)Nanjing Chenming Culture
Communication Co., Ltd.
500.00NanjingNanjingMarketingFor-profit corporation100Establishment00Chenming (Overseas) Limited2,000.00 (USD)Hong KongHong KongPaper product
tradingFor-profit corporation100Establishment00Chenming (Singapore) Limited2,000.00 (USD)SingaporeSingaporePaper product
trading
For-profit corporation100Establishment00Kunshan Tuoan Plastic ProductsCo., Ltd.
5,000.00KunshanKunshanRubber and
plastic
For-profit corporation100Merger and
acquisition
Hubei Changjiang ChenmingHuanggang Equity InvestmentFund Partnership (LimitedPartnership)
200,100.00HuanggangHuanggangFundFor-profit corporation59.97Establishment00Hainan Chenming TechnologyCo., Ltd.
20,000.00HaikouHaikouWholesale and
retail
For-profit corporation100Establishment00Foshan Chenming Import andExport Trade Co., Ltd.
20,000.00FoshanFoshanTradingFor-profit corporation100Establishment00Shanghai Herui Investment
Co., Ltd.
30,150.00ShanghaiShanghaiBusiness
services
For-profit corporation100Merger and
acquisition
Hubei Huanggang Chenming
Equity Investment FundManagement Co., Ltd.
300.00HuanggangHuanggangCapital market
services
For-profit corporation60Establishment00Shandong Dingkun Asset
Management Partnership(Limited Partnership)
100,100.00ShouguangShouguangBusiness
services
For-profit corporation100Establishment00Huanggang Chenming Paper
Technology Co., Ltd.
100,000.00HuanggangHuanggangPaper makingFor-profit corporation100Establishment00Huanggang Chenming Port
Co., Ltd.
5,000.00HuanggangHuanggangPort servicesFor-profit corporation100Establishment00Weifang Chendu Equity
Investment Partnership(Limited Partnership)
32,000.00ShouguangShouguangCapital market
services
For-profit corporation79.69Establishment00Huanggang Chenming Pulp &
Fiber Trading Co., Ltd.
5,000.00HuanggangHuanggangTradingFor-profit corporation100Establishment00Shanxi Fuyin Industrial Trading
Co., Ltd.
36,000.00TaiyuanTaiyuanWholesale and
retail
For-profit corporation100Acquisition00Chongmin Culture Development
(Shanghai) Co., Ltd.
20,000.00ShanghaiShanghaiLeasing and
businessservices
For-profit corporation100Acquisition00Shouguang Meichen Energy
Technology Co., Ltd.
100.00ShouguangShouguangElectricityFor-profit corporation100Establishment00Shouguang Kunhe Trading
Co., Ltd.
1,000.00ShouguangShouguangTradingFor-profit corporation100Establishment00
X. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
X. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(2) Major non-wholly owned subsidiaries
Unit: RMB
Name of subsidiary
Minority interest
(%)
Gain or lossattributable tominority interestduring the period
Dividend tominority interestdeclared duringthe period
Closing balanceof minority interestShouguang Meilun
Paper Co., Ltd.35.1355,142,614.09149,313,617.442,202,990,923.91Zhanjiang Chenming Pulp& Paper Co., Ltd.19.72-89,947,577.95105,000,000.001,570,159,835.18
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Name of subsidiary
Closing balanceOpening balanceCurrent assets
Non-current
assetsTotal assets
Currentliabilities
Non-currentliabilitiesTotal liabilitiesCurrent assets
Non-currentassetsTotal assets
Currentliabilities
Non-currentliabilitiesTotal liabilitiesShouguang Meilun Paper Co.,
Ltd.5,534,633,307.0810,096,140,872.0415,630,774,179.126,282,312,497.46888,031,988.487,170,344,485.945,271,560,197.7410,517,781,981.2215,789,342,178.965,706,873,517.181,592,276,073.167,299,149,590.34Zhanjiang Chenming Pulp &Paper Co., Ltd.12,562,782,806.6913,116,686,959.2525,679,469,765.9414,866,141,937.071,876,669,919.4716,742,811,856.5412,177,003,083.1513,209,726,474.8125,386,729,557.9614,522,121,479.881,696,026,289.0916,218,147,768.97
Unit: RMB
Name of subsidiary
Amount for the periodAmount for the prior periodRevenueNet profit
Totalcomprehensive
income
Cash flows fromoperating activitiesRevenueNet profit
Totalcomprehensive
income
Cash flows fromoperating activitiesShouguang Meilun Paper
Co., Ltd.9,084,559,413.98153,008,366.72153,008,366.721,528,677,090.768,877,750,999.39384,015,682.06384,015,682.061,662,815,139.80Zhanjiang Chenming Pulp
& Paper Co., Ltd.11,000,808,231.98-541,888,245.61-543,112,252.631,332,553,432.6512,333,411,837.39162,214,497.02162,810,926.891,863,903,466.34
2023 ANNUAL REPORT
XII Financial Report
X. Interest in other entities(Continued)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(1) Changing in shareholding in subsidiaries
The Company previously held 62.49% equity interest in Shouguang Meilun Paper Co., Ltd. In 2023, theCompany and Dongxing Securities Investment Co., Ltd. entered into an equity transfer agreement in relation tothe transfer of 2.38% equity interest in Shouguang Meilun Paper Co., Ltd to the Company. The equity transfertransaction did not result in the loss of control over Shouguang Meilun Paper Co., Ltd. by the Company. Asat 31 December 2023, the equity transfer agreement was completed, and the transaction consideration paidwas RMB200 million. The transaction resulted in a decrease in minority interest by RMB199.3614 million, and adecrease in capital reserves by RMB638,600.The Company previously held 82.67% equity interest in Zhanjiang Chenming Pulp & Paper Co., Ltd. In 2023,the Company and Shandong Caixin Investment Co., Ltd. entered into a capital increase agreement in relation toZhanjiang Chenming Pulp & Paper Co., Ltd., and Shandong Caixin Investment Co., Ltd. acquired 2.89% equityinterest in Zhanjiang Chenming Pulp & Paper Co., Ltd. As at 31 December 2023, the capital increase agreementwas completed, and the additional capital contribution paid was RMB300 million. The transaction resulted inan increase in minority interest by RMB251.0441 million, and an increase in capital reserves by RMB48.9559million.
(2) Effect of the transactions on minority interest and equity attributable to the owners of the parent company
Unit: RMBItem
Shouguang Meilun Paper
Co., Ltd.Cost of acquisition200,000,000.00 – Cash200,000,000.00 – Fair value of non-cash assetsTotal cost of acquisition200,000,000.00Less: Share of net assets of the subsidiary calculated based on the proportion of equity interest acquired/disposed of199,361,382.36Difference638,617.64Of which: Capital reserve adjustment638,617.64
Unit: RMBItem
Zhanjiang Chenming Pulp
& Paper Co., Ltd.Amount of capital increase300,000,000.00 – Cash300,000,000.00 – Fair value of non-cash assetsTotal amount of capital increase300,000,000.00Share of the subsidiary’s net assets after the capital increase6,689,694,348.03Less: Share of the subsidiary’s net assets before the capital increase6,640,738,406.81Difference48,955,941.22Of which: Capital reserve adjustment48,955,941.22
XII Financial Report
X. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Name of joint venture and associate
Principle placeof business
Place ofincorporationNature of business
ShareholdingAccounting method
for investment in jointventures or associatesDirect(%)Indirect
(%)I. Joint ventureShouguang Jintou Industrial
Investment Partnership (LimitedPartnership)ShouguangShouguangInvestment49.57Equity methodII. AssociateGuangdong Nanyue Bank Co., Ltd.GuangdongGuangdongBank4.46Equity method
The Company holds 4.46% equity interest in Guangdong Nanyue Bank Co., Ltd. but is the second largestshareholder and is able to exercise significant influence over Guangdong Nanyue Bank Co., Ltd. by appointingone director to the board of directors (out of a total of nine directors on the board of directors).
2023 ANNUAL REPORT
XII Financial Report
X. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(2) Key financial information of major joint ventures
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodShouguang JintouIndustrial InvestmentPartnership (Limited
Partnership)
Shouguang JintouIndustrial InvestmentPartnership (Limited
Partnership)Current assets1,775,433,885.351,373,114,822.27Of which: Cash and cash equivalents1,047,090.4198,300.08Non-current assets408,884,578.74992,000,000.00Total assets2,184,318,464.092,365,114,822.27Current liabilities104,387,199.501,000.00Non-current liabilities5,805,542.05Total liabilities110,192,741.551,000.00Minority interestEquity interest attributable to shareholders of the
parent company2,074,125,722.542,365,113,822.27Share of net assets based on shareholding1,028,131,675.911,172,372,731.02Adjustments GoodwillUnrealised profit arising from intra-group transactions Others1,316,438,571.641,187,625,930.65Carrying amount of equity investment in joint ventures2,344,570,247.552,359,998,661.67Fair value of equity investment in joint ventures
where publicly quoted prices existRevenue857,541,982.94Finance expenses765,662.122,699.92Income tax expensesNet profit-15,428,414.12-2,699.92Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-15,428,414.12-2,699.92Dividends received from joint ventures during the year
XII Financial Report
X. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(3) Key financial information of major associates
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodGuangdong Nanyue Bank
Co., Ltd.
Guangdong Nanyue Bank
Co., Ltd.Current assets194,828,415,917.54153,109,778,598.66Non-current assets111,581,185,310.1174,753,438,649.12Total assets306,409,601,227.65227,863,217,247.78Current liabilities250,233,916,389.30181,929,537,932.08Non-current liabilities26,252,549,634.2826,407,317,751.35Total liabilities276,486,466,023.58208,336,855,683.43Minority interest68,358,275.9765,058,817.68Equity interest attributable to shareholders of theparent company29,854,776,928.1019,461,302,746.67Share of net assets based on shareholding1,331,523,051.001,314,611,000.54Adjustments GoodwillUnrealised profit arising from intra-group transactions OthersCarrying amount of equity investment in associates1,331,523,051.001,314,611,000.54Fair value of equity investment in associates where publicly quoted prices existRevenue2,739,283,882.642,704,071,331.52Net profit416,331,873.52383,800,672.37Net profit from discontinued operationsOther comprehensive income-9,346,709.529,399,591.65Total comprehensive income406,985,164.00393,200,264.02Dividends received from associates during the year
2023 ANNUAL REPORT
XII Financial Report
X. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(4) Summary financial information of non-major joint ventures and associates
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodJoint ventures:
Total carrying amount of investment197,483,273.06183,537,459.15Total amount of the following items based on shareholding Net profit16,545,813.911,023,678.08 Other comprehensive income Total comprehensive income16,545,813.911,023,678.08Associates:
Total carrying amount of investment811,622,814.12418,866,248.20Total amount of the following items based on shareholding Net profit102,840,690.39-6,845,264.34 Other comprehensive income Total comprehensive income102,840,690.39-6,845,264.34
XII Financial Report
XI. Government grants
1. Government grants recognised at the end of the reporting period at the amount receivable
Applicable √ Not applicableReasons for not receiving the estimated amount of government grants at the estimated time Applicable √ Not applicable
2. Liabilities in respect of government grants:
√ Applicable Not applicable
Unit: RMB
Subsidy item
AccountingitemOpening balance
New grantsduring the
period
Include innon-operatingincome for theperiod
Include in otherincome for theperiodOther changesfor the periodClosing balance
Asset-related/income-relatedFunding for environmental protectionDeferred
income
576,455,283.8051,761,248.56524,694,035.24Asset-relatedHuanggang pulp-forestry-paper projectDeferred
income
470,994,523.0525,026,217.80445,968,305.25Asset-relatedInfrastructure and environmentalprotection engineering transformationproject
Deferred income
208,320,966.6911,517,589.44196,803,377.25Asset-relatedFinancial subsidies for technical transformation project
Deferred income
132,614,525.641,730,000.0039,238,509.9695,106,015.68Asset-relatedZhanjiang forestry-pulp-paper projectDeferred
income
46,711,964.274,094,632.9242,617,331.35Asset-relatedProject fund for National Key Technology
Research and Development Program
Deferred income
958,425.00164,700.00793,725.00Asset-relatedOthersDeferred
income
33,174,780.011,293,455.0831,881,324.93Asset-relatedTotal1,469,230,468.461,730,000.00133,096,353.761,337,864,114.70
2023 ANNUAL REPORT
XII Financial Report
XI. Government grants(Continued)
3. Government grants included in profit or loss for the period:
√ Applicable Not applicable
Unit: RMBSubsidy itemAccounting item
Amount for the
period
Amount for theprior periodFunding for environmental protectionOther gains51,761,248.5650,592,141.88Financial subsidies for technical transformationproject
Other gains39,699,264.9652,395,702.39Huanggang pulp-forestry-paper projectOther gains25,026,217.8025,026,217.80Government awardsOther gains13,580,000.007,494,600.00Sewage treatment and water conservationtransformation project
Other gains11,517,589.4411,778,260.39Subsidies for social insuranceOther gains11,140,000.001,000,000.00Afforestation subsidyOther gains4,487,983.852,695,823.49Zhanjiang forestry-pulp-paper projectOther gains4,094,632.924,094,632.92Immediate VAT refundOther gains3,186,241.188,346,328.57Employment stabilisation subsidyOther gains1,143,782.303,012,954.63Enterprise reform and development subsidiesOther gains904,184.0066,394,161.00Project Funding for National Key TechnologyResearch and Development Program
Other gains164,700.00164,700.00Subsidies for foreign trade projectsOther gains46,689.71116,915.50R&D subsidyOther gains4,000.00500,000.00Special subsidy from the Bureau of FinanceNon-operating
income
73,730,000.00One-time job retention subsidiesOther gains2,125,800.00Refund of taxOther gains762,888.19OthersOther gains,
non-operatingincome
3,221,744.734,203,523.72Total169,978,279.45314,434,650.48
XII. Risk relating to financial instrumentsMain financial instruments of the Group include monetary funds, bills receivable, accounts receivable, accounts receivablefinancing, other receivables, non-current assets due within one year, financial assets held for trading, other current assets,long-term receivables, other non-current financial assets, bills payable, accounts payable, other payables, short-termborrowings, non-current liabilities due within one year, long-term borrowings, bonds payable, lease liabilities and long-termpayables. Details of financial instruments refer to related notes. The risks associated with these financial instruments andthe risk management policies adopted by the Company to mitigate these risks are described below. The management of theCompany manages and monitors these exposures to ensure that the above risks are controlled in a limited extent.
1. Risk management goals and policies
The Company aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverseeffects on the Company’s financial performance from financial risk. Based on such objectives, the Company’s riskmanagement policies are established to identify and analyse the risks faced by the Company, to set appropriate risklimits and devise corresponding internal control procedures, and to monitor risks faced by the Company. Such riskmanagement policies and internal control systems are reviewed regularly to adapt to changes in market conditionsand the Company’s activities. The internal audit department of the Company undertakes both regular and ad-hocreviews of risk management controls and procedures
XII Financial Report
XII. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)Risks associated with the financial instrument of the Company mainly include credit risk, liquidity risk, market risk(including exchange rate risk, interest rate risk and commodity price risk).The board of directors is responsible to plan and establish the Company’s risk management structure, make riskmanagement policies and related guidelines, and supervise the implementation of risk management. The Companyhas already made risk management risks to identify and analyse risks that the Company face. These policiesmentioned specific risks, covering market, credit risk and liquidity risk etc. The Company regularly assesses marketenvironment and the operation of the Company changes to determine if to make alteration to risk management policyand systems. The Company’s risk management is implemented by Risk Management Committee according to theapproval of the board of directors. The Risk Management Committee works closely with other business department ofthe Company to identify, evaluating and avoiding certain risks. The Company’s internal audit department will audit therisk management control and procedures regularly and report the result to audit committee of the Company.The Company spreads risks through diverse investment and business lines, and through making risk managementpolicy to reduce risks of single industry, specific area and counterpart.
(1) Credit risk
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty resultingin financial losses to the Company.The Company manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable,accounts receivable, other receivables and long-term receivables etc.The Company’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listedbanks. The Company anticipated that the bank deposit does not have significant credit risk.For accounts receivables, other receivables and long-term receivables, the Company set related policies tocontrol exposure of credit risks. The Company evaluates client’s credit quality and set related credit periodbased on the client’s financial status, credit records and other factors such as current market situation etc. TheCompany keeps monitor the client’s credit record and for client with deteriorate credit records, the Companywill ensure the credit risk is under control in whole by means of written notice of payment collection, shorten orcancel credit period.The Company’s debtor spread over different industry and area. The Company continued to assess the creditevaluation to receivables and purchase credit guarantee insurance if necessary.The biggest credit risk exposure of the Company is the carrying amount of each financial asset in the balancesheet. The Company did not provide financial guarantee which resulted in credit risks.The amount of top 5 accounts receivable of the Company accounted for 36.65% (2022: 30.43%) of theCompany’s total accounts receivables. The amount of top 5 other receivable of the Company accounted for
70.32% (2022: 64.05%) of the Company
’s total other receivables.
2023 ANNUAL REPORT
XII Financial Report
XII. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(2) Liquidity risk
Liquidity risk refers to the risks that the Company will not be able to meet its obligations associated with itsfinancial liabilities that are settled by delivering cash or other financial assets.To manage the liquidity risk, the Company monitors and maintains a level of cash and cash equivalents tofinance the Company’s operations and mitigate the effects of fluctuations in cash flows. The management ofthe Company monitors the usage of bank borrowings and ensures compliance with the borrowing agreements.In the meantime, we obtain commitments from major financial institutions to provide sufficient standby funds tomeet short-term and long-term funding needs.Operating cash of the Company was generated from capital and bank and other borrowings. As at 31December 2023, the Company’s unused bank loan credit was RMB44,131.5478 million (31 December 2022:
RMB42,790.5450 million). The closing balance of financial assets of the Company due within one year amountedto RMB24,568.6892 million, while the closing balance of financial liabilities due within one year amounted toRMB48,230.6088 million. The financial assets due within one year was less than that of financial liabilities. Tomanage liquidity risk, in 2024, the Company will focus on its major operations, actively divest or dispose non-major operations, and put greater efforts in recovery of financial lease payment. In addition to controlling itscapital expenditures, the Company will also strengthen internal control and further lower its costs. The Companywill enhance market operations, boost sales volume and enhance corporate efficiency.As at the end of the period, the financial assets, financial liabilities and off balance sheet guarantee held by theCompany are analysed by their maturity date as below at their remaining undiscounted contractual cash flows (inRMB’0,000):
Item
Closing balanceWithin 1 year1 to 2 years2 to 5 yearsOver 5 yearsTotalFinancial assets:
Monetary funds1,208,547.491,208,547.49Financial assets held for trading4,629.434,629.43Bills receivable41,160.0041,160.00Accounts receivable307,757.71307,757.71Accounts receivable financing21,588.4221,588.42Other receivables273,484.02273,484.02Long-term receivables29,478.616,700.0036,178.61Other non-current financial assets78,156.1078,156.10Other current assets69,994.6569,994.65Non-current assets due within one year529,707.20529,707.20Total financial assets2,456,868.9229,478.616,700.0078,156.102,571,203.63Financial liabilities:
Short-term borrowings3,344,774.243,344,774.24Bills payable461,898.65461,898.65Accounts payable390,262.09390,262.09Other payables241,475.21241,475.21Non-current liabilities due within one year374,650.69374,650.69Other current liabilities10,000.0010,000.00Long-term borrowings84,962.58115,780.76267,358.11468,101.45Lease liabilities453.22354.015,249.956,057.18Long-term payables149,201.63112,355.62261,557.25Total financial liabilities and contingent liabilities4,823,060.88234,617.43228,490.39272,608.065,558,776.76
XII Financial Report
XII. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(2) Liquidity risk
(Continued)As at the end of the prior year, the financial assets, financial liabilities and off-balance sheet guarantee held bythe Company are analysed by their maturity date as below at their remaining undiscounted contractual cashflows (in RMB’0,000):
Item
Balance as at the end of the prior yearWithin 1 year1 to 2 years2 to 5 yearsOver 5 yearsTotalFinancial assets:
Monetary funds1,391,560.081,391,560.08Financial assets held for trading7,470.847,470.84Accounts receivable370,056.08370,056.08Accounts receivable financing92,496.0492,496.04Other receivables219,982.47219,982.47Long-term receivables139,749.8534,634.23174,384.08Other non-current financial assets78,675.0878,675.08Other current assets70,564.9070,564.90Non-current assets due within one year492,071.00492,071.00Total financial assets2,644,201.41139,749.8534,634.2378,675.082,897,260.57Financial liabilities:
Short-term borrowings3,635,232.463,635,232.46Bills payable312,859.58312,859.58Accounts payable411,496.68411,496.68Other payables185,450.80185,450.80Non-current liabilities due within one year487,609.74487,609.74Long-term borrowings102,329.00181,247.82114,646.81398,223.63Lease liabilities408.731,338.555,485.007,232.28Long-term payables169,345.00105,959.8759,653.02334,957.89Total financial liabilities and contingent liabilities5,032,649.26272,082.73288,546.24179,784.835,773,063.06
The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from thecarrying amount of the line items of the balance sheet.Maximum guarantee amount for signed guarantee contracts does not represent the amount to be paid.
2023 ANNUAL REPORT
XII Financial Report
XII. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(3) Market risk
Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow ofa financial instrument will be fluctuated due to the changes in market price.Interest rate riskInterest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuateddue to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument andunrecognised financial instrument (e.g. loan commitments).The Company’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowingand bonds payable. Financial liabilities issued at floating rate expose the Company to cash flow interest raterisk. Financial liabilities issued at fixed rate expose the Company to fair value interest rate risk. The Companydetermines the relative proportions of its fixed rate and floating rate contracts depending on the prevailingmarket conditions and to maintain an appropriate combination of financial instruments at fixed rate and floatingrate through regular reviews and monitors.The Company continuously monitors the interest rate position of the Company. The Company did not enterinto any interest rate hedging arrangements. But the management is responsible to monitor the risks of interestrate and consider to hedge significant interest risk if necessary. Increase in interest rates will increase the costof new borrowing and the interest expenses with respect to the Company’s outstanding floating rate interest-bearing borrowings, and therefore could have a material adverse effect on the Company’s financial result. Themanagement will make adjustments with reference to the latest market conditions. These adjustments mayinclude enter into interest swap agreement to mitigate its exposure to the interest rate risk.Interest bearing financial instrument held by the Company are as follows (in RMB’0,000):
Item
Balance for
the year
Balance forthe prior yearFinancial instrument with fixed interest rateFinancial liabilitiesOf which: Short-term borrowings3,344,774.243,635,232.46
Long-term borrowings468,101.45398,223.63Bonds payableLong-term borrowings due within one year127,390.27190,887.34Bonds payable due within one year35,000.00Total3,940,265.964,259,343.43Financial instrument with float interest rateFinancial assetsOf which: Monetary funds1,208,180.011,391,210.96Total1,208,180.011,391,210.96
XII Financial Report
XII. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(3) Market risk
(Continued)
As at 31 December 2023, if the interest rates of borrowings at floating interest rates increase or decrease by25 basis points with all other factors remain unchanged, the Company’s net profit and shareholders’equity willincrease or decrease by RMB3,733,100 (31 December 2022: RMB3,007,800). The bank’s interest settlementdate is generally the 20th of each month, according to the accounting period, so you need to consider theinterest rate for the next 11 days, the balance of the current loan * the average borrowing rate for the year *25%/360 * 11 * 25%.The financial instruments held by the Company at the reporting date expose the Company to fair value interestrate risk. This sensitivity analysis as above has been determined assuming that the change in interest rates hadoccurred at the reporting date and arisen from the recalculation of the above financial instrument issued at newinterest rates. The non-derivative tools issued at floating interest rate held by the Company at the reportingdate expose the Company to cash flow interest rate risk. The effect to the net profit and shareholder’s equityillustrated in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interestexpenses or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.Exchange rate riskExchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuateddue to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that aredenominated in a currency other than the functional currency in which they are measured.The principal business of the Company is situated within the PRC and is denominated in RMB. However,foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currencytransactions as recognised by the Company (assets and liabilities in foreign currencies and foreign currencytransactions are mainly denominated in US dollar, Japanese yen, South Korean Won, Euro, Hong Kong dollarand British pound).The following table details the financial assets and liabilities held by the Company which denominated in foreigncurrencies and amounted to RMB as at 31 December 2023 are as follows (in RMB’0,000):
Item
Liabilities denominated
in foreign currency
Asset denominatedin foreign currencyClosing balance
Closing balanceof the prior yearClosing balance
Closing balanceof the prior yearUSD60,628.27130,604.7045,596.2288,289.61EUR1,460.2420,033.374,305.6314,744.91HKD204.24100.71KRWJPY736.80768.90GBP1.331.37Total62,088.51150,638.0750,844.22103,905.50
The Group continuously monitors the size of the Group’s foreign currency transactions and foreign currencyassets and liabilities to minimise the foreign exchange risks it faces, and for this reason the Group may aim toavoid foreign exchange risk by signing forward foreign exchange contracts or currency swap contracts.
2023 ANNUAL REPORT
XII Financial Report
XII. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(3) Market risk
(Continued)Exchange rate risk(Continued)With other variables unchanged, the after-tax effect of the possible reasonable changes in the exchange rate offoreign currency to RMB on the current profit and loss of the Company is as follows (in RMB’0,000):
Increase (decrease) in after-tax profitsBalance for the periodBalance for the prior periodIncrease in exchange rate of USD5%-751.605%-2,115.75Decrease in exchange rate of USD-5%751.60-5%2,115.75Increase in exchange rate of Euro5%142.275%-264.42Decrease in exchange rate of Euro-5%-142.27-5%264.42
Other price risksOther price risks refer to the risk of fluctuations caused by changes in market prices other than exchange raterisks and interest rate risks, whether arising from factors related to a single financial instrument or its issuer, orfrom factors related to all similar financial instruments traded on the market. Other price risks can stem fromchanges in commodity prices, stock market indexes, equity instrument prices, and other risk variables.Listed equity instrument investments held by the Company classified as financial assets held for trading, othernon-current financial assets and other equity instrument investments are measured at fair value on the balancesheet date. Therefore, the Company is subject to the risk of changes in the securities market.The Company monitors closely the impact of price changes on the price risk of the Company’s investmentin equity securities. The Company has not taken any measures to avoid other price risks. However, themanagement is responsible for monitoring other price risks, and will consider holding multiple equity securitiesportfolios to reduce the price risk of equity securities investment when necessary.With other variables unchanged, the after-tax effect of the change of -38.03% (last year: -32.63%) in equitysecurities investment prices on the Company’s current profit and loss and other comprehensive income is asfollows (unit: RMB’0,000):
Item
Increase (decrease) inafter-tax profits
Increase (decrease) in othercomprehensive incomeBalance for
the period
Balance forthe prior period
Balance for
the period
Balance for
the prior
periodDue to the rise in the price of equity securities investmentDue to the decline in the price of equity securities investment-2,841.42-3,617.77
XII Financial Report
XII. Risk relating to financial instruments(Continued)
2. Capital management
The objective of the Company’s capital risk management is to safeguard the Company’s ability to continue as a goingconcern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimalcapital structure to reduce the cost of capital.In order to maintain or adjust the capital structure, the Company may adjust its financing methods, adjust the numberof dividends paid to shareholders, return capital to shareholders, issue new shares or disposes assets to reduce itsliabilities.The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided bytotal capital. As at 31 December 2023, the Company’s gearing ratio is 73.46% (31 December 2022: 71.85%).
3. Financial assets
(1) By transfer method
√ Applicable Not applicable
Unit: RMBTransfer Method
Nature of financialassets transferred
Amount of financialassets transferred
Confirmation ofderecognitionBasis for derecognitionTransfer AgreementFinancial lease receivables369,762,057.02DerecognisedIf the Company transfers substantially
all the risks and rewards of ownership of the financial asset to the transfereeTransfer AgreementFactoring receivables27,600,041.68DerecognisedIf the Company transfers substantially
all the risks and rewards of ownership of the financial asset to the transfereeTotal397,362,098.70
(2) Financial assets derecognised due to transfer
√ Applicable Not applicable
Unit: RMBItem
Method of financialassets transfer
Amount of financialassets derecognised
Gains or lossesassociated with
derecognitionFinancial lease receivables from Ningxia Jianlong Special Steel Co LtdTransfer Agreement369,762,057.0230,237,942.98Factoring receivables from Yueqing Zhongneng Commercial Management Co., Ltd.Transfer Agreement27,600,041.68Total397,362,098.7030,237,942.98
2023 ANNUAL REPORT
XII Financial Report
XII. Risk relating to financial instruments(Continued)
3. Financial assets
(Continued)
(3) Continuous involvement in the transferred financial asset
Applicable √ Not applicableXIII. Fair value disclosure
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Based on the inputs of the lowest level that are of great significance to the measurement as a whole in the fair valuemeasurement, the fair value can be categorised as:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2: Observable inputs other than the quoted market price of assets or liabilities in Level 1, either directly (theprices) or indirectly (derived from prices).Level 3: Any input that is not based on observable market data (unobservable inputs) is used for assets or liabilities.
(1) Items and amounts measured at fair value
As at the end of the period, assets and liabilities measured at fair value are listed as follows based on the three
hierarchies as set out above:
Unit: RMB
Item
Fair valuemeasurementscategorised into
Level 1
Fair valuemeasurementscategorised into
Level 2
Fair valuemeasurementscategorised into
Level 3TotalI. Measurement of fair value on an ongoingbasis(i) Financial assets held for trading46,294,291.7146,294,291.71
1. Debt instruments investments
2. Equity instrument investments46,294,291.7146,294,291.71(ii) Accounts receivable financing215,884,249.97215,884,249.97(iii) Other non-current financial assets781,561,040.57781,561,040.57(iv) Biological assets1,483,978,089.611,483,978,089.61
1. Consumable biological assets1,483,978,089.611,483,978,089.61Total assets measured at fair value on an
ongoing basis46,294,291.712,481,423,380.152,527,717,671.86II. Non-continuous measurement of fair value
Identifiable assets of the acquiree acquired
in a business combination not under
common control183,330,768.93183,330,768.93
Total assets measured at fair value not on
an ongoing basis183,330,768.93183,330,768.93
Identifiable liabilities of the acquiree
acquired in a business combination
not under common control182,760,158.04182,760,158.04
Total liabilities measured at fair value not on
an ongoing basis182,760,158.04182,760,158.04
XII Financial Report
XIII. Fair value disclosure(Continued)
1. Fair value of assets and liabilities measured at fair value as at the end of the period
(Continued)
(2) Quantitative information about significant unobservable inputs used in the level 3 fair value measurement
that are significant
Unit: RMBItem
Fair value as at theend of the periodValuation techniquesUnobservable inputsRangeEquity instrument investments:
Shandong Hongqiao Venture Capital Co., Ltd.78,170,000.00Cost methodWeifang Chenchuang Equity Investment Fund Partnership (Limited Partnership)
400,041,731.59See explanation for
detailsJiaohui Chenming Zhuli (Suzhou) EmergingIndustry Development Fund Partnership (Limited Partnership)
259,057,284.79See explanation for
detailsConsumable biological assets:
Forestry1,483,978,089.61Roll back method of
market price
Unit price per tonne of Eucalyptus woodUnit price per tonne of wet pineUnit price per tonne of fir wood
RMB560RMB555RMB625
Explanation: The Company has no active trading market for Weifang Chenchuang Equity Investment Fund Partnership (Limited
Partnership) and Jiaohui Chenming Zhuli (Suzhou) Emerging Industry Development Fund Partnership (LimitedPartnership). Due to the withdrawal or entry of shareholders of the underlying companies during the period, the Companycalculates their fair values at the end of the period with reference to the changes in transaction prices of shareholders.XIV. Related parties and related party transactions
1. Parent company of the Company
Name of parent company
Place ofincorporation BusinessBusiness natureRegistered capital
Shareholding of theparent companyin the Company
Voting right of the
parent companyin the CompanyChenming Holdings Co., Ltd.ShouguangInvestment in manufacture of paper, electricity,
steam, and arboriculture
1,238,787,70027.78%27.78%
Description of the parent company of the Company:
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office.
2. Subsidiaries of the Company
For details of the Company’s subsidiaries, please refer to Note IX. 1.
2023 ANNUAL REPORT
XII Financial Report
XIV. Related parties and related party transactions(Continued)
3. Joint ventures and associates of the Company
For details of material joint ventures and associates of the Company, please refer to Note IX. 3.Balance of related party transaction between the Company and its joint ventures or associates during the period orprior periods are as follows:
Name of joint ventures or associatesRelationWeifang Port Wood Chip Terminal Co., Ltd.A joint venture of the CompanyShouguang Meite Environmental Technology Co., Ltd.A joint venture of the CompanyWeifang Xingxing United Chemical Co., Ltd.A joint venture of the CompanyShouguang Chenming Huisen New-style Construction Materials Co., Ltd.
A joint venture of the CompanyWuhan Chenming Hanyang Paper Holdings Co., Ltd.An associate of the CompanyChenming (Qingdao) Asset Management Co., Ltd.An associate of the CompanyGuangdong Nanyue Bank Co., Ltd.An associate of the CompanyXuchang Chenming Paper Co., Ltd.An associate of the Company
4. Other related parties
Name of other related partiesRelationShouguang Huixin Construction Materials Co., Ltd.A subsidiary of a company invested by the Directors
and Senior Management of the CompanyLide Technology Co., Ltd.A subsidiary of a company invested by the Directors
and Senior Management of the CompanyShouguang Chenming Guangyuan Real Property Company Limited
A subsidiary of a company invested by the Directors
and Senior Management of the CompanyChen Hongguo, Hu Changqing, Li Xingchun, Li Weixian,Li Xueqin, Li Feng, Dong Lianming, Yuan Xikun,Li Zhenzhong, Li Mingtang, Ge Guangming, Li Kang, Qiu Lanju and Sang Ailing
Key management personnel of the Company
XII Financial Report
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods/receiving of services
Unit: RMB
Related party
Details of relatedparty transaction
Amount for
the period
Transactionfacility approved
Whether thetransactionfacility isexceeded
Amount for the prior periodWeifang Port Wood Chip Terminal Co., Ltd.
Port miscellaneous expenses78,803,278.24N/ANo63,328,942.04
Table on sales of goods/providing of services
Unit: RMBRelated party
Details of related partytransaction
Amount forthe period
Amount forthe prior periodShouguang Chenming HuisenNew-style Construction Materials Co., Ltd.Sales of electricity and steam16,738,082.4718,254,341.50Shouguang Huixin Construction Materials Co., Ltd.Sales of cement, coal, oil, etc.141,035.23190,846.21
(2) Related party leasing
The Company as lessor:
Unit: RMB
Name of lesseeType of leased asset
Lease income
recognisedfor the current
period
Lease income
recognisedfor the previous
periodShouguang Meite Environmental Technology Co., Ltd.Housing1,467,889.911,467,889.91Chenming (Qingdao) Asset Management Co., Ltd.Housing789,102.99769,053.72Lide Technology Co., Ltd.Housing1,898,020.911,795,618.08Shouguang Chenming Huisen New-style Construction Materials Co., Ltd.Land222,477.07220,183.49Shouguang Huixin Construction Materials Co., Ltd.Land123,853.21123,853.21
2023 ANNUAL REPORT
XII Financial Report
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party guarantee
The Company as guarantor
Unit: RMB
Party being guaranteed
Amount underguarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedWeifang Port Wood Chip Terminal Co., Ltd.95,600,000.002017-12-202027-12-20NoShouguang Meilun Paper Co., Ltd.364,394,014.752023-6-192024-6-19NoShouguang Meilun Paper Co., Ltd.88,180,874.402023-6-272024-6-27NoShouguang Meilun Paper Co., Ltd.99,947,491.872023-7-52024-7-5NoShouguang Meilun Paper Co., Ltd.91,760,456.122023-7-252024-7-25NoShouguang Meilun Paper Co., Ltd.20,000,000.002023-8-252024-8-24NoShouguang Meilun Paper Co., Ltd.10,000,000.002023-2-282024-2-27NoShouguang Meilun Paper Co., Ltd.205,066,883.192023-7-122024-1-9NoShouguang Meilun Paper Co., Ltd.34,000,000.002023-7-282024-7-27NoShouguang Meilun Paper Co., Ltd.34,967,515.542023-8-92024-2-6NoShouguang Meilun Paper Co., Ltd.20,000,000.002023-8-252024-8-23NoShouguang Meilun Paper Co., Ltd.200,000,000.002023-4-252024-4-24NoShouguang Meilun Paper Co., Ltd.50,000,000.002023-7-122024-7-12NoShouguang Meilun Paper Co., Ltd.285,000,000.002023-12-152024-6-12NoShouguang Meilun Paper Co., Ltd.90,000,000.002023-10-232024-10-23NoShouguang Meilun Paper Co., Ltd.189,952,001.132023-12-182024-6-17NoShouguang Meilun Paper Co., Ltd.43,000,000.002023-12-192024-12-18NoShouguang Meilun Paper Co., Ltd.10,000,000.002023-12-262024-4-10NoShouguang Meilun Paper Co., Ltd.10,000,000.002023-12-262024-4-10NoHainan Chenming Technology Co., Ltd.50,000,000.002023-3-302024-3-30NoHainan Chenming Technology Co., Ltd.71,500,000.002023-11-282024-5-26NoHainan Chenming Technology Co., Ltd.28,500,000.002023-11-302024-5-28NoHainan Chenming Technology Co., Ltd.43,000,000.002023-8-102024-2-2NoHainan Chenming Technology Co., Ltd.29,000,000.002023-8-162024-2-5NoHainan Chenming Technology Co., Ltd.100,000,000.002023-9-282024-3-27NoHainan Chenming Technology Co., Ltd.100,000,000.002023-11-302024-5-29NoHuanggang Chenming Pulp & Paper Co., Ltd.90,000,000.002023-5-232024-5-22NoHuanggang Chenming Pulp & Paper Co., Ltd.20,000,000.002023-4-272024-4-26NoHuanggang Chenming Pulp & Paper Co., Ltd.30,000,000.002023-7-182024-7-17NoHuanggang Chenming Pulp & Paper Co., Ltd.45,000,000.002023-8-102024-8-9NoHuanggang Chenming Pulp & Paper Co., Ltd.20,000,000.002023-8-182024-8-16NoHuanggang Chenming Pulp & Paper Co., Ltd.120,000,000.002023-7-122024-7-11No
XII Financial Report
Party being guaranteed
Amount underguarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedHuanggang Chenming Pulp & Paper Co., Ltd.50,000,000.002023-9-282024-9-28NoHuanggang Chenming Pulp & Paper Co., Ltd.50,000,000.002023-10-132024-10-13NoHuanggang Chenming Pulp & Fiber Trading Co., Ltd.10,000,000.002023-8-312024-8-30NoHuanggang Chenming Pulp & Fiber Trading Co., Ltd.10,000,000.002023-9-262024-9-26NoHuanggang Chenming Pulp & Fiber Trading Co., Ltd.10,000,000.002023-11-132024-11-13NoHuanggang Chenming Pulp & Fiber Trading Co., Ltd.10,000,000.002023-11-242024-11-22NoJilin Chenming Paper Co., Ltd.18,000,000.002023-6-272024-5-10NoJilin Chenming Paper Co., Ltd.63,999,300.002023-9-142024-3-7NoJilin Chenming Paper Co., Ltd.200,000,000.002023-12-152025-12-15NoJilin Chenming Paper Co., Ltd.63,640,000.002023-10-132024-4-13NoJilin Chenming Paper Co., Ltd.100,000,000.002023-12-292024-6-27NoJiangxi Chenming Paper Co., Ltd.70,000,000.002023-4-202024-4-19NoJiangxi Chenming Paper Co., Ltd.160,000,000.002023-5-242024-5-22NoJiangxi Chenming Paper Co., Ltd.60,000,000.002023-5-252024-5-22NoJiangxi Chenming Paper Co., Ltd.10,000,000.002023-6-122024-6-7NoJiangxi Chenming Paper Co., Ltd.30,000,000.002023-6-132024-6-11NoJiangxi Chenming Paper Co., Ltd.80,000,000.002023-6-162024-6-15NoJiangxi Chenming Paper Co., Ltd.50,000,000.002023-6-192024-5-22NoJiangxi Chenming Paper Co., Ltd.250,000,000.002023-6-192024-6-13NoJiangxi Chenming Paper Co., Ltd.20,000,000.002023-6-202024-6-17NoJiangxi Chenming Paper Co., Ltd.20,000,000.002023-6-212024-6-17NoJiangxi Chenming Paper Co., Ltd.17,924,293.142023-6-252024-6-20NoJiangxi Chenming Paper Co., Ltd.10,000,000.002023-6-292024-6-24NoJiangxi Chenming Paper Co., Ltd.250,000,000.002023-6-302024-6-28NoJiangxi Chenming Paper Co., Ltd.13,682,900.002023-8-162024-2-16NoJiangxi Chenming Paper Co., Ltd.8,238,396.392023-9-122024-3-8NoJiangxi Chenming Paper Co., Ltd.100,000,000.002023-7-52024-7-4NoJiangxi Chenming Paper Co., Ltd.1,636,736.702023-8-82024-6-20NoJiangxi Chenming Paper Co., Ltd.10,000,000.002023-9-52024-8-30NoJiangxi Chenming Paper Co., Ltd.438,970.162023-9-52024-6-20NoJiangxi Chenming Paper Co., Ltd.97,400,000.002023-9-202024-3-18NoJiangxi Chenming Paper Co., Ltd.96,050,000.002023-9-202024-3-18NoJiangxi Chenming Paper Co., Ltd.12,000,000.002023-9-262024-3-22NoJiangxi Chenming Paper Co., Ltd.14,000,000.002023-12-182024-6-14NoJiangxi Chenming Paper Co., Ltd.3,339,000.002023-12-252024-9-30NoJiangxi Chenming Paper Co., Ltd.10,000,000.002023-9-272024-9-20No
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party guarantee
(Continued)
2023 ANNUAL REPORT
XII Financial Report
Party being guaranteed
Amount under
guarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedShouguang Chenming Import and Export Trade Co., Ltd.150,000,000.002023-12-212024-6-19NoShandong Chenming Paper Sales Co., Ltd.50,000,000.002023-1-52024-1-2NoShandong Chenming Paper Sales Co., Ltd.50,000,000.002023-1-122024-1-8NoShandong Chenming Paper Sales Co., Ltd.330,033,668.832023-4-62024-4-8NoShandong Chenming Paper Sales Co., Ltd.129,933,410.352023-4-62024-4-8NoShandong Chenming Paper Sales Co., Ltd.150,000,000.002023-8-92024-2-5NoShandong Chenming Paper Sales Co., Ltd.296,829,334.442023-8-142024-8-14NoShandong Chenming Paper Sales Co., Ltd.111,125,326.612023-9-182024-9-18NoShandong Chenming Paper Sales Co., Ltd.54,723,975.972023-9-262024-9-26NoShandong Chenming Paper Sales Co., Ltd.181,517,502.432023-10-72024-10-7NoShandong Chenming Paper Sales Co., Ltd.198,262,078.032023-10-72024-10-7NoShandong Chenming Paper Sales Co., Ltd.50,000,000.002023-10-182024-10-11NoShandong Chenming Paper Sales Co., Ltd.40,000,000.002023-11-282024-11-28NoShandong Chenming Paper Sales Co., Ltd.160,000,000.002023-12-192024-6-17NoShandong Chenming Paper Sales Co., Ltd.260,000,000.002023-12-192024-6-17NoShanghai Chenming Pulp & Paper Sales Co., Ltd.10,000,000.002023-5-292024-5-25NoShanghai Chenming Pulp & Paper Sales Co., Ltd.50,000,000.002023-8-242024-2-23NoShanghai Chenming Pulp & Paper Sales Co., Ltd.4,500,000.002023-11-212024-11-20NoKunshan Tuoan Plastic Products Co., Ltd20,000,000.002023-2-272024-2-26NoKunshan Tuoan Plastic Products Co., Ltd5,000,000.002023-9-82024-2-26NoKunshan Tuoan Plastic Products Co., Ltd10,000,000.002023-8-92024-2-9NoKunshan Tuoan Plastic Products Co., Ltd5,000,000.002023-9-272024-3-26NoKunshan Tuoan Plastic Products Co., Ltd5,000,000.002023-9-272024-9-26NoChenming (HK) Limited15,480,000.002023-12-72024-2-2NoZhanjiang Chenming Pulp & Paper Co., Ltd.21,000,000.002023-1-162024-1-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.15,000,000.002023-1-202024-1-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.14,000,000.002023-1-302024-1-29NoZhanjiang Chenming Pulp & Paper Co., Ltd.125,000,000.002023-2-232024-3-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,000,000.002023-2-232024-3-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002023-3-232024-3-21NoZhanjiang Chenming Pulp & Paper Co., Ltd.68,000,000.002023-4-242024-4-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.72,000,000.002023-4-212024-4-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.74,500,000.002023-5-252024-5-24NoZhanjiang Chenming Pulp & Paper Co., Ltd.209,000,000.002023-6-82024-5-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002023-6-252024-6-24NoZhanjiang Chenming Pulp & Paper Co., Ltd.81,200,000.002023-6-192024-6-19No
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party guarantee
(Continued)
XII Financial Report
Party being guaranteed
Amount under
guarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedZhanjiang Chenming Pulp & Paper Co., Ltd.70,000,000.002023-6-212024-6-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.67,000,000.002023-7-142024-1-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.45,000,000.002023-7-192024-1-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002023-7-202024-1-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.65,000,000.002023-7-192024-1-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002023-7-212024-7-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002023-7-242024-7-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-7-282024-7-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002023-7-262024-1-22NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-8-82024-8-7NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-8-112024-8-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.3,900,000.002023-8-112024-8-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.67,000,000.002023-8-142024-8-13NoZhanjiang Chenming Pulp & Paper Co., Ltd.59,000,000.002023-8-142024-8-13NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-8-242024-8-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-9-272024-9-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.6,000,000.002023-9-272024-3-5NoZhanjiang Chenming Pulp & Paper Co., Ltd.10,500,000.002023-9-272024-3-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002023-10-112024-4-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.78,000,000.002023-10-112024-10-11NoZhanjiang Chenming Pulp & Paper Co., Ltd.113,000,000.002023-10-122024-10-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.30,000,000.002023-11-102024-4-29NoZhanjiang Chenming Pulp & Paper Co., Ltd.98,700,000.002023-11-172024-5-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002023-11-212024-5-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002023-11-282024-5-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.85,500,000.002023-11-292024-11-21NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,290,000.002023-11-292024-5-29NoZhanjiang Chenming Pulp & Paper Co., Ltd.6,000,000.002023-12-42024-11-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.6,000,000.002023-12-82024-6-5NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-12-92024-12-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002023-12-192024-6-18NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,290,000.002023-12-112024-4-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.65,000,000.002023-7-122024-1-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.85,000,000.002023-7-172024-1-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.10,500,000.002023-7-242024-1-24NoZhanjiang Chenming Pulp & Paper Co., Ltd.70,000,000.002023-8-72024-2-7No
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party guarantee
(Continued)
2023 ANNUAL REPORT
XII Financial Report
Party being guaranteed
Amount underguarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedZhanjiang Chenming Pulp & Paper Co., Ltd.186,000,000.002023-9-272024-3-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.39,600,000.002023-10-72024-4-7NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002023-10-122024-4-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.98,000,000.002023-10-132024-4-13NoZhanjiang Chenming Pulp & Paper Co., Ltd.60,200,000.002023-11-232024-5-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002023-11-242024-5-24NoZhanjiang Chenming Pulp & Paper Co., Ltd.65,000,000.002023-11-232024-5-23NoJiangxi Chenming Paper Co., Ltd.30,000,000.002023-9-82026-8-22NoJiangxi Chenming Paper Co., Ltd.29,450,000.002023-3-312024-9-30NoJiangxi Chenming Paper Co., Ltd.31,350,000.002023-3-312024-9-30NoJiangxi Chenming Paper Co., Ltd.2,422,500.002023-5-92024-9-30NoJiangxi Chenming Paper Co., Ltd.5,300,000.002023-6-272024-9-30NoJiangxi Chenming Paper Co., Ltd.3,359,000.002023-8-72024-9-30NoJiangxi Chenming Paper Co., Ltd.20,988,806.622022-7-12024-7-1NoJiangxi Chenming Paper Co., Ltd.30,000,000.002023-12-42025-6-3NoShanghai Chenming Pulp & Paper Sales Co., Ltd.9,750,000.002023-2-132026-2-12NoKunshan Tuoan Plastic Products Co., Ltd10,000,000.002023-9-272024-10-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.98,000,000.002021-1-52024-1-4NoZhanjiang Chenming Pulp & Paper Co., Ltd.85,000,000.002022-5-312024-5-30NoZhanjiang Chenming Pulp & Paper Co., Ltd.20,000,000.002022-6-172024-6-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.20,000,000.002022-6-172024-12-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.120,000,000.002022-6-172025-6-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.42,300,000.002022-10-252024-10-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.33,900,000.002023-12-262025-1-24NoZhanjiang Chenming Pulp & Paper Co., Ltd.104,316,080.982022-6-292025-6-29NoZhanjiang Chenming Pulp & Paper Co., Ltd.77,000,000.002023-3-312026-3-29NoZhanjiang Chenming Pulp & Paper Co., Ltd.150,000,000.002023-6-22026-6-2NoZhanjiang Chenming Pulp & Paper Co., Ltd.84,770,798.652023-6-202026-6-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.300,000,000.002023-7-122026-7-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002023-11-82028-11-8NoTotal12,524,711,316.30
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party guarantee
(Continued)
XII Financial Report
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(4) Related party lending and borrowing
Unit: RMBRelated partyBorrowing amount
CommencementdateExpiry dateDescriptionBorrowingChenming Holdings Co., Ltd.364,700,000.002023-1-12023-12-31Controlling
shareholderGuangdong Nanyue Bank Co., Ltd.2,069,060,000.002023-1-12023-12-31Associate
(5) Remuneration of key management staff
The Company has 23 key management staff for the period and 24 for the prior period. The remunerationpayment is as follows:
Unit: RMB’0,000Item
Amount duringthe period
Amount duringthe prior periodRemuneration of key management staff2,361.672,752.06
Distribution band of remuneration of key management staff
Band of annual remuneration
Amount duringthe year (RMB’0,000)
Amount during
the prior year (RMB’0,000)Total2,361.672,752.06Of which: (number of staff in each band of amount)RMB4.80-5.20 million1RMB4.00-4.80 million1RMB3.60-4.00 millionRMB3.20-3.60 million1RMB2.80-3.20 million1RMB2.40-2.80 million1RMB2.00-2.40 million21RMB1.60-2.00 million15RMB1.20-1.60 million41RMB0.80-1.20 million2Below RMB0.80 million1214
2023 ANNUAL REPORT
XII Financial Report
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(5) Remuneration of key management staff
(Continued) Breakdown of remuneration of key management staff
Key management staff
Amount during the year (RMB’0,000)
Total(RMB’0,000)FeesBonusesSalaries,allowancesand benefits
Social welfare contribution
HousingfundSocialinsurance
Of which:
Pensioninsurance
Yin Meiqun20.0020.00Yang Biao20.0020.00Sun Jianfei20.0020.00Li Zhihui20.0020.00Subtotal of independent non-executive Directors80.0080.00Li Chuanxuan20.0020.00Han Tingde20.0020.00Subtotal of non-executive
Directors40.0040.00Chen Hongguo308.906.934.421.59317.42Hu Changqing188.789.936.042.54201.25Li Xingchun420.00420.00Li Feng135.866.934.421.59144.38Li Weixian216.5611.326.795.08232.96Subtotal of executive Directors1,270.1035.1121.6710.801,316.01Li Kang75.786.934.421.5984.30Pan Ailing10.0010.00Zhang Hong10.0010.00Qiu Lanju66.956.464.071.6275.03Sang Ailing17.603.642.270.8522.09Total of Supervisors180.3317.0310.764.06201.42Subtotal of other Senior Management members674.4440.1725.479.63724.24Total2,244.8792.3157.9024.492,361.67
XII Financial Report
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(5) Remuneration of key management staff
(Continued)
Breakdown of remuneration of key management staff(Continued)
Key management staff
Amount during the year (RMB’0,000)
Total(RMB’0,000)FeesBonusesSalaries,allowancesand benefits
Social welfare contribution
HousingfundSocialinsurance
Of which:
Pensioninsurance
Yin Meiqun20.0020.00Yang Biao20.0020.00Sun Jianfei20.0020.00Li Zhihui10.0010.00Subtotal of independentnon-executive Directors70.0070.00Li Chuanxuan20.0020.00Han Tingde20.0020.00Subtotal of non-executive Directors40.0040.00Chen Hongguo352.246.223.951.53359.99Hu Changqing216.856.223.951.58224.65Li Xingchun480.00480.00Li Feng187.286.223.951.53195.03Li Weixian240.8110.546.264.69256.04Subtotal of executive Directors1,477.1829.2018.119.331,515.71Li Kang59.206.233.951.5366.96Pan Ailing10.0010.00Zhang Hong10.0010.00Qiu Lanju54.866.163.821.5362.55Sang Ailing18.003.652.280.8522.50Total of Supervisors152.0616.0410.053.91172.01Subtotal of other Senior
Management904.9339.6124.889.80954.34Total2,644.1784.8553.0423.042,752.06
Note: Social welfare contribution includes basic pension insurance, medical insurance, work-related injury insurance, maternity
insurance, and unemployment insurance
2023 ANNUAL REPORT
XII Financial Report
XIV. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(5) Remuneration of key management staff
(Continued)The 5 highest paid individuals of the Company during the year included 4 directors of the Companyand 1 other senior management personnel. The remuneration range of 1 senior management personnelwas RMB1.6 million to RMB2 million, with an annual salary of RMB1.6967 million, social insurance ofRMB64,600 (including pension insurance of RMB40,700), and housing provident fund of RMB16,200.A. Remuneration of the five highest paid individualsItem
Amounts during
the period
Amounts during
the prior yearSalaries, allowances and benefits1,295.831,477.18Housing provident fund10.839.33Social welfare contribution34.6429.20 Of which: Pension insurance21.3218.11Total1,341.301,515.71
B. Distribution band of remuneration of the five highest paid individualsBand of annual remuneration
Number of individualsduring the year
Number of individuals
during the prior yearRMB4.80-5.20 million1RMB4.00-4.80 million1RMB3.20-3.60 million1RMB2.80-3.20 million1RMB2.40-2.80 million1RMB2.00-2.40 million21RMB1.60-2.00 million11RMB1.20-1.60 million
For the financial year ended 31 December 2023, no other bonuses, which are discretionary or are based
on the Company’s, the Company’s or any member of the Company’s performance, were paid to orreceivable by the 5 highest paid individuals, and no other emoluments were paid by the Company to theDirectors of the Company and the 5 highest paid individuals as an inducement to join or upon joining theCompany or as compensation for loss of office. None of the Directors waived any emoluments during theyear.
XII Financial Report
XIV. Related parties and related party transactions(Continued)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMBItemRelated party
Closing balanceOpening balanceBook balance
Bad debtprovisionBook balance
Bad debtprovisionAccounts receivableShouguang Chenming Huisen New-style
Construction Materials Co., Ltd.
1,856,833.501,392.06Accounts receivableShouguang Meite Environmental
Technology Co., Ltd.
6,782,462.481,774,117.95Accounts receivableChenming (Qingdao) Asset Management
Co., Ltd.
2,359.0323.18Other receivablesWeifang Port Wood Chip Terminal
Co., Ltd.
75,554,749.848,991,998.4671,722,249.853,755,227.15Other receivablesShouguang Meite Environmental
Technology Co., Ltd.
10,427,200.002,102,653.3818,291,242.681,779,523.20Other receivablesXuchang Chenming Paper Co., Ltd.327,400.006,791.28Other receivablesWuhan Chenming Hanyang Paper
Holdings Co., Ltd.
227,252,701.60Payments in advanceShouguang Meite Environmental
Technology Co., Ltd.
6,370,726.99
(2) Accounts payable
Unit: RMBItemRelated party
Closing bookbalance
Opening book
balanceAccounts payableWeifang Port Wood Chip Terminal Co., Ltd.6,932,747.4519,479,518.82Accounts payableShouguang Meite Environmental Technology Co., Ltd.12,973,303.12Accounts payableWeifang Xingxing United Chemical Co., Ltd.26,905,494.3426,905,494.34Accounts payableWuhan Chenming Hanyang Paper Holdings Co., Ltd14,334,304.63Accounts payableWuhan Chenming Qianneng Electric Power Co., Ltd.72,483.77Other payablesWeifang Xingxing United Chemical Co., Ltd.16,860,000.0016,860,000.00Other payablesChenming Holdings Co., Ltd.135,612,917.24Other payablesLide Technology Co., Ltd.559,897.05508,619.46Other payablesChenming (Qingdao) Asset Management Co., Ltd.115,583.42116,656.55Other payablesWuhan Chenming Hanyang Paper Holdings Co., Ltd.305,000,000.00Contract liabilitiesShouguang Huixin Construction Materials Co., Ltd.20,000.00Payments in advanceChenming (Qingdao) Asset Management Co., Ltd.2,000.00
2023 ANNUAL REPORT
XII Financial Report
XIV. Related parties and related party transactions(Continued)
6. Related party accounts receivable and accounts payable
(Continued)
(3) Deposits with related parties
Unit: RMBItemRelated partyClosing balanceOpening balanceBank depositGuangdong Nanyue Bank Co., Ltd.7,189,314.6210,069,515.51Other monetary fundsGuangdong Nanyue Bank Co., Ltd.1,311,200,000.00927,400,000.00
(4) Loans from related parties
Unit: RMBItemRelated partyClosing balanceOpening balanceShort-term borrowingsGuangdong Nanyue Bank Co., Ltd.2,069,060,000.001,909,100,000.00
XII Financial Report
XV. Share-based Payment
1. General information of share-based payment
√ Applicable Not applicable
Unit: RMBGrant Item Category
Granted during the periodExercised during the periodUnlocked during the periodLapsed during the periodQuantityAmountQuantityAmountQuantityAmountQuantityAmountManagement22,645,800.0022,645,800.00Total22,645,800.0022,645,800.00Share options or other equity instruments outstanding at the end of the period.
√ Applicable Not applicable
Grant Item Category
Share options outstanding at the
end of the periodOther equity instruments issued at the end of the periodRange ofexercise prices
Remainingduration ofthe contract
Range ofexercise pricesRemaining duration of the contractManagement–Restricted shares eligible for the first release
period of the 2020 A Share RestrictedShare Incentive Plan were unlocked inJuly 2022, the conditions for the releaseof restricted shares for the secondrelease period were not fulfilled, and theprocedure was carried out to considerthe repurchase of the registrations in July2023, and the time for the third releaseperiod was July 2025.
Other explanation:
1. The Company held the ninth extraordinary meeting of the ninth session of the Board of Directors on 30 March 2020, and on 15 May
2020, the Company convened the second extraordinary shareholders’ meeting for 2020, the first shareholders’meeting for 2020 for thedomestic listed share class and the first shareholders’meeting for 2020 for the overseas listed share class, at which matters relatingto the Company’s 2020 Restricted A Share Incentive Scheme were considered and approved. Matters relating to the Company’s2020 Restricted A Share Incentive Scheme were considered and approved, and 79,600,000 A Restricted Shares were granted to 111incentive objects at a grant price of RMB2.85 per share on 29 May 2020.
2. On 15 July 2020, 79,600,000 A Restricted Shares granted to the incentive objects were issued and listed.
3. On 18 July 2022, the Company convened the Second Interim Meeting of the Tenth Session of the Board of Directors and the First
Interim Meeting of the Tenth Session of the Supervisory Board, at which the Company considered and approved the“Resolution onthe Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of CertainRestricted Shares.”, the number of the target group for the unlocking of the restricted shares is 96, and the number of shares availablefor unlocking is 29,948,000
2023 ANNUAL REPORT
XII Financial Report
XV. Share-based Payment(Continued)
1. General information of share-based payment
(Continued)
On 27 July 2022, 29,948,000 A shares of restricted shares released from restricted sale were listed for trading. On 18 October 2022, theCompany completed the repurchase and cancellation procedures of 4,466,000 A shares of restricted shares at the Shenzhen Branch ofChina Securities Depository and Clearing Corporation Limited.
4. On 17 July 2023, the Company convened the Ninth Interim Meeting of the Tenth Session of the Board of Directors and the Fifth Interim
Meeting of the Tenth Session of the Supervisory Board and considered and passed the“Resolution Regarding the Failure to Achieve theConditions for Unlocking the Restricted Shares during the Second Unlocking Period of the Restricted Share Incentive Scheme for 2020AShares and the Repurchase and Registration of Part of the Restricted Shares”, which was approved by the Board of Directors and theSupervisory Board of the Company. At the same time, 5 incentive objects were disqualified from incentive status due to their departurefrom the Company. The Board of Directors of the Company repurchased 22,929,000 A-share restricted shares which had been grantedto the registered incentive targets but had not been released from restriction on sale, at a repurchase price of RMB2.5184172/share(exclusive of the interest rate of the bank’s loan for the same period). On 20 November 2023, the Company completed the repurchaseand cancellation procedures of 22,929,000 A-share restricted shares at the Shenzhen Branch of China Securities Depository andClearing Corporation Limited.
2. Equity-settled share-based payment
√ Applicable Not applicable
Unit: RMBThe method of determining the fair value of equity instrument on the grant date
Ex-right price of
grant of shareThe significant parameters of determining the fair value of equity instrument on the grant dateBasis for determining the quantity of exercisable equity instrumentsSee explanation
for detailsReasons for significant difference between the current estimate and previous estimateAccumulated amount of equity-settled share-based payment included in the capital reserve58,698,080.00Total amount of equity-settled share-based payment recognised in the current period-27,467,521.92Explanation: At each balance sheet date during the vesting period, the Company, based on the latest information such as the latest update on
the change in the number of entitled employees, will make best estimates to adjust the expected number of equity instrumentsthat can be vested. As at the exercise date, the final estimated number of exercisable equity instruments should equal the actualnumber of exercisable equity instruments.
3. Share-based payment expense for the period
Unit: RMBCategory of items granted
Equity-settled share-based
payment expenses
Cash-settled share-based
payment expensesManagement-27,467,521.92Total-27,467,521.92
XII Financial Report
XVI. Undertaking and contingency
1. Significant commitments
(1) Capital commitments
Unit: RMBCapital commitments contracted for but not yetnecessary to be recognised on the balance sheetClosing balance
Balance as at theend of the prior yearCommitments in relation to acquisition and construction of long-term assets288,776,312.58184,833,000.27
(2) Other commitments
As at 31 December 2023, the Company has no other commitments that should be disclosed.
2. Contingency
(1) Contingent liabilities arising from pending litigation and arbitration and their financial impacts
As at 31 December 2023, the Company had no contingent items such as outstanding litigation and externalguarantees that should be disclosed.
(2) Contingent liabilities arising from debt guarantees given in favour of other entities and their financial effects
As at 31 December 2023, the Company has no contingent liabilities arising from debt guarantees provided toother entities.
(3) Other contingent liabilities (excluding contingent liabilities that are highly unlikely to result in an outflow of
economic benefits to the enterprise)As at 31 December 2023, the Company has no other contingencies that should be disclosed.
XVII. Post-balance sheet event
Description of significant non-adjustments to post-balance sheet eventItemDescription
Effect on financial position and results ofoperationsTransfer of an AssociateDisposal of Goldtrust Futures
Co., Ltd.
The consideration for this transaction was
RMB197,000,000, with a carrying valueof RMB187,780,000 as at the balancesheet date, which is expected to generatean investment income of approximatelyRMB9,220,000.Transfer of a subsidiaryDisposal of Kunshan Tuoan
Plastic Products Co., Ltd.
The consideration for this transaction was
RMB143.73 million, and the carrying valueof the asset group containing goodwill atthe balance sheet date was RMB141.48million, resulting in an investment gain ofapproximately RMB9.12 million
2023 ANNUAL REPORT
XII Financial Report
XVIII. Other Material Matters
1. Transfer and Disposal of Significant Assets
In order to further optimise the asset structure, revitalise inefficient assets, improve asset utilisation efficiency,expedite capital recovery, increase cash inflow, focus on the main business of pulping and paper making, andenhance the Company’s profitability, the Company externally transferred its 65.21% equity interest in WuhanChenming Hanyang Paper Company Limited (corresponding to 137,822,000 shares) for RMB480.0 million during theperiod, resulting in an investment gain of RMB391.45 million.
2. Segment information
(1) Basis for determination and accounting policies
According to the Company’s internal organisational structure, management requirements and internal reportingsystem, the Company’s operating business is divided into 4 reporting segments. These report segments aredetermined based on the financial information required by the company’s daily internal management. Themanagement of the Group regularly evaluates the operating results of these reporting segments to determinethe allocation of resources to them and evaluate their performance.The Company’s reporting segments include:
(1) Machine paper segment, which is responsible for production and sales of machine paper;
(2) Financial services segment, which provides financial services;
(3) Hotels and property rentals segment, which is responsible for hotel services and property rental;
(4) Other segments, which is responsible for the above segments otherwise.
The transfer prices of the transfer transactions between the Company’s segments are based on market prices.Segment report information is disclosed in accordance with the accounting policies and measurement standardsadopted by each segment when reporting to management. These accounting policies and measurement basisare consistent with the accounting policies and measurement basis used in preparing the financial statements.
XII Financial Report
XVIII.Other Material Matters(Continued)
2. Segment information
(Continued)
(2) Financial Information of Reporting Segment
Unit: RMBCurrent period or end of current period
Machine-madepaper
Financialservices
Hotels andproperty rentalsOthersOffsetTotalRevenue26,058,035,388.40301,292,707.38254,837,443.631,219,004,554.911,224,599,866.1226,608,570,228.20Of which: Revenue from external transactions25,702,327,302.60164,338,689.66219,640,822.73522,263,413.2126,608,570,228.20Revenue from inter-segment transactions355,708,085.80136,954,017.7235,196,620.90696,741,141.701,224,599,866.12Of which: Revenue from principal activities25,788,767,491.17301,198,367.76243,565,800.51849,762,727.46814,661,161.4226,368,633,225.48Operating costs24,386,288,002.52204,302,382.76130,727,028.361,168,316,010.651,444,147,124.3624,445,486,299.93Of which: Costs of principal activities23,814,132,560.42204,302,382.76122,251,073.59794,535,943.46 693,752,622.0824,241,469,338.15Operating expenses200,500,812.07145,808.0623,056,705.857,298,824.542,513.09230,999,637.43Of which: Wages96,356,812.7172,901.738,678,304.122,861,300.98107,969,319.54Depreciation expenses1,512,250.483,152,288.2312,696.874,677,235.58Office expenses2,423,476.31312,114.692,058.202,737,649.20Travel expenses27,622,492.1012,886.33401,223.13595,230.0328,631,831.59Selling commissions806,731.105,681,138.216,487,869.31Rental expenses7,258,810.1384,716.997,343,527.12Hospitality expenses49,883,644.7060,020.008,206.241,046,790.2350,998,661.17Warehouse expenses411,253.96411,253.96Others14,636,594.544,823,431.232,284,777.282,513.0921,742,289.96Operating profit/(loss)-1,160,171,360.20-136,565,046.01-155,575,612.67-77,629,857.27163,702,443.40-1,693,644,319.55Total assets86,100,280,962.7122,071,239,021.479,506,827,255.338,256,043,256.8646,447,337,542.7979,487,052,953.58Total liabilities64,520,459,199.324,546,731,289.224,386,780,705.482,745,589,649.1017,810,363,735.1758,389,197,107.95Total cost of construction in progress incurred for the current period475,949,831.352,547,924.54478,497,755.89Fixed assets purchased295,923,899.03273,136.942,265,531.655,638,663.73292,823,903.89Intangible assets purchased148,906,631.361,278,301.89150,184,933.25
2023 ANNUAL REPORT
XII Financial Report
XVIII.Other Material Matters(Continued)
2. Segment information
(Continued)
(2) Financial Information of Reporting Segment
(Continued)Current period or end of current period
Machine-madepaper
Financialservices
Hotels andproperty rentalsOthersOffsetTotalRevenue31,060,902,199.96513,737,457.49407,708,595.771,078,425,733.981,056,406,666.2932,004,367,320.91Of which: Revenue from external transactions30,831,898,263.48209,378,132.90252,786,565.21710,304,359.3232,004,367,320.91Revenue from inter-segment transactions229,003,936.50304,359,324.59154,922,030.55368,121,374.651,056,406,666.29Of which: Revenue from principal activities30,351,334,966.47510,812,929.20392,942,305.381,040,599,028.05870,572,371.2731,425,116,857.83Operating costs26,519,303,991.9724,127,622.19245,767,473.54981,659,808.74397,133,189.4427,373,725,707.00Of which: Costs of principal activities26,141,672,045.9724,127,622.19243,578,769.09928,299,382.58458,734,170.5526,878,943,649.28Operating expenses330,862,031.952,027,775.320,781,250.467,378,140.91118,867,924.53242,181,274.09Of which: Wages111,959,367.651,083,950.725,011,031.362,800,806.56120,855,156.29Depreciation expenses2,762,233.8321,086.383,726,869.9314,404.516,524,594.65Office expenses2,457,473.42109.347,972.90312.002,465,867.66Travel expenses20,739,647.05293,464.7622,399.36459,110.4821,514,621.65Selling commissions5,186,161.755,719,346.53665,906.3311,571,414.61Rental expenses5,963,156.3985,032.116,048,188.50Hospitality expenses53,909,040.66629,164.145,498728,750.2955,312,453.05Warehouse expenses110,697.41558,856.77669,554.18Others127,774,253.796,248,132.382,064,961.86118,867,924.5317,219,423.50Operating profit/(loss)185,030,101.36177,059,466.81-50,760,342.83-8,455,442.51146,655,118.87156,218,663.96Total assets93,381,574,480.4319,836,405,559.587,691,848,679.669,918,047,942.6046,526,859,252.6584,301,017,409.62Total liabilities68,282,718,766.386,492,021,313.813,712,424,442.273,442,492,189.8521,356,893,123.3060,572,763,589.01Total cost of construction in progress incurred for the current period773,725,786.03499,590.09774,225,376.12Fixed assets purchased150,507,691.3496,748.87173,040.683,589,925.25154,367,406.14Intangible assets purchased307,004,863.50578,112.98307,582,976.48
XII Financial Report
XVIII.Other Material Matters(Continued)
3. Others
(1) CHENMING HOLDINGS (HONG KONG) LIMITED (hereinafter referred to as
“Hong Kong Chenming Holdings”),a wholly-owned subsidiary of Chenming Holdings Company Limited (hereinafter referred to as“ChenmingHoldings S”), has commenced an equity financing business with three overseas organisations (hereinafterreferred to as“Lenders”) in order to meet its own funding needs. In order to satisfy its funding needs, HongKong Chenming Holdings has commenced equity financing business with three overseas organisations(hereinafter referred to as the“Lenders”). Hong Kong Chenming Holdings deposited 210.72 million B shares(representing 7.07% of the total share capital of the Company) and 153.41 million H shares (representing 5.15%of the total share capital of the Company) held by Hong Kong Chenming Holdings with custodian designated bythe Lenders, who provided the loan to Hong Kong Chenming Holdings/After repaying the entire loan from one of the Lenders, Hong Kong Chenming Holdings requested for the returnof the shares, but the lender refused to co-operate in the return of the 110 million B shares and 95 million Hshares on the grounds that there had been a breach of contract of default during the life of the loan. ChenmingHong Kong Holdings verified the custody of the shares with the other two lenders who have not yet fully repaidthe loans, and the lenders have not yet provided the required documentary proof of the safe custody of theshares.After the Lender refused to return the Shares and failure in negotiation, Chenming Holdings is of the view thatthere is a risk of improper infringement on the legitimate rights and interests of Hong Kong Chenming Holdings,and it immediately sought help from the Chinese public security bureau and Hong Kong lawyers to collecteffective evidence. As of the date of this announcement, Chenming Holdings is under normal production andoperation, and is actively safeguarding its legitimate rights and interests through legal channels.There is a risk that the shares involved may not be returned, which may result in a decrease in the percentageof shareholding of Chenming Holdings in the Company, but will have no impact on the status of ChenmingHoldings as the largest shareholder and will have no impact on the control of the Company.
(2) On 14 June 2022, the Hong Kong Court of Final Appeal handed down its judgment in the case of H-share
liquidation filed by ArjowigginsHKK2Limited (“HKK2 Company”) in relation to the Company’s Joint Venturedispute and the Company has paid the relevant amount of compensation.On 25 October 2022, the Company instructed its legal adviser in Hong Kong to apply to the Court of FirstInstance to seek the dismissal or adjournment of the winding-up petition filed by HKK2 against the CompanyOn 25 July 2023, the Court of First Instance held a hearing on the said application.On 10 August 2023, the Company received a judgment from the judge of the Court of First Instance, Mr. JusticeHarris, which ruled that the winding-up petition be stayed and the relevant arbitration hearing will take place inMay 2024, given that the Company’s arbitration petition filed in the Hong Kong International Arbitration Centrein June 2022 against the Joint Venture Contracts formed the basis of the Company’s cross claim against HKK2in the winding-up proceedings.
2023 ANNUAL REPORT
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements
1. Accounts receivable
(1) Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year (including 1 year)18,345,187.32136,390,102.961 to 2 years11,500,000.002 to 3 yearsOver 3 years3,002,821.173,002,821.17Total32,848,008.49139,392,924.13
(2) Disclosure by bad debt provision method
Unit: RMB
Category
Closing balanceOpening balanceBook balanceBad debts provision
Carryingamount
Book balanceBad debts provision
CarryingamountAmountPercentage
(%)Amount
Provisionpercentage
(%)AmountPercentageAmount
Provisionpercentage(%)Accounts receivable assessed individually for bad debt provisionAccounts receivable assessed collectively for bad debt provision32,848,008.49100.004,631,237.4814.1028,216,771.01139,392,924.13100.004,637,396.403.33134,755,527.73Of which:
Due from related party customers10,453,076.7531.8210,453,076.75101,246,295.7472.63101,246,295.74Due from non-related party customers22,394,931.7468.184,631,237.4820.6817,763,694.2638,146,628.3927.374,637,396.4012.1633,509,231.99Total32,848,008.49100.004,631,237.4814.1028,216,771.01139,392,924.13100.004,637,396.403.33134,755,527.73
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
1. Accounts receivable
(Continued)
(2) Disclosure by bad debt provision method
(Continued)
Items assessed collectively for bad debt provision: Due from related party customers
Unit: RMBName
Closing balanceBook balance
Bad debtsprovision
Provisionpercentage (%)Within 1 year453,076.751 to 2 years10,000,000.00Total10,453,076.75Items assessed collectively for bad debt provision: Receivables from non-related party customer
Unit: RMBName
Closing balanceBook balance
Bad debtsprovision
Provisionpercentage (%)Within 1 year17,892,110.57128,416.310.721 to 2 years1,500,000.001,500,000.00100.002 to 3 yearsOver 3 years3,002,821.173,002,821.17100.00Total22,394,931.744,631,237.4820.68If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs:
Applicable √ Not applicable
2023 ANNUAL REPORT
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
1. Accounts receivable
(Continued)
(3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMBCategory
Openingbalance
Changes in the period
ClosingbalanceProvisionRecovery orreversalWrite-offOthersBad debt provision4,637,396.40274,431.92280,590.844,631,237.48Total4,637,396.40274,431.92280,590.844,631,237.48
(4) Top five accounts receivable and contract assets based on closing balance of debtors
The total amount of top five accounts receivable and contract assets based on closing balance of debtorsfor the period amounted to RMB32,584,552.66 in total, accounting for 99.19% of the total closing balanceof accounts receivable and contract assets. The closing balance of the corresponding bad debt provisionamounted to RMB4,546,562.13 in total.
Unit: RMBName of entity
Closing balance ofaccounts receivable
Percentage to totalclosing balance ofaccounts receivable (%)
Closing balance ofbad debt provision ofaccounts receivableCustomer 112,119,163.2336.8984,834.14Customer 210,000,000.0030.44Customer 35,589,712.6817.0239,127.99Customer 44,422,600.0013.464,422,600.00Customer 5453,076.751.38Total32,584,552.6699.194,546,562.13
2. Other receivables
Unit: RMBItemClosing balanceOpening balanceInterest receivableDividend receivableOther receivables9,237,241,240.869,337,019,470.13Total9,237,241,240.869,337,019,470.13
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
2. Other receivables
(Continued)
(1) Other receivables
1) Classification of other receivables by nature
Unit: RMBNatureClosing book balanceOpening book balanceOpen credit9,304,134,372.169,391,199,670.38Guarantee deposit and deposit740,000.00850,000.00Reserve and borrowings22,523,648.6015,112,113.60Others1,793,548.6313,027,863.16Sub-total9,329,191,569.399,420,189,647.14Bad debt provision91,950,328.5383,170,177.01Total9,237,241,240.869,337,019,470.13
2) Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year9,165,796,778.419,332,813,880.831 to 2 years76,289,024.677,536,768.102 to 3 years7,386,768.104,626,771.34Over 3 years79,718,998.2175,212,226.87Sub-total9,329,191,569.399,420,189,647.14Less: bad debt provision91,950,328.5383,170,177.01Total9,237,241,240.869,337,019,470.13
3) Particulars of bad debt provision
Unit: RMBCategoryBook balance
ECL rate (%)for the next12 months
Bad debtprovisionCarrying amountReasonBad debt provision assessed collectively9,279,097,598.720.4541,856,357.869,237,241,240.86Amount due from government agencies14,571,387.1499.6114,513,987.3957,399.75 Amount due from related parties8,842,259,445.820.108,991,998.468,833,267,447.36 Other receivables422,266,765.764.3518,350,372.01403,916,393.75Total9,279,097,598.720.4541,856,357.869,237,241,240.86
2023 ANNUAL REPORT
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
2. Other receivables
(Continued)
(1) Other receivables
(Continued)
3) Particulars of bad debt provision
(Continued)Closing bad debt provision at phase 2:
As at the end of the period, the Company had no interest receivable, dividend receivable and otherreceivables at phase 2.Closing bad debt provision at phase 3:
Unit: RMBCategoryBook balance
Lifetime ECL
rate (%)
Bad debtprovisionCarrying amountReasonBad debt provision assessed individually50,093,970.67100.0050,093,970.670.00Total50,093,970.67100.0050,093,970.670.00
Bad debt provision assessed individually:
Unit: RMBCategoryBook balance
Lifetime ECLrate (%)
Bad debtprovisionCarrying amountReasonValtra Inc. of Finland5,526,048.24100.005,526,048.240.00Overdue for a
prolongedperiod andunlikely to berecoveredMetso Paper Machinery (China) Co., Ltd.
4,725,039.89100.004,725,039.890.00Overdue for a
prolongedperiod andunlikely to berecovered78 entities including Andritz39,842,882.54100.0039,842,882.540.00Overdue for a
prolongedperiod andunlikely to berecoveredTotal50,093,970.67100.0050,093,970.670.00
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
2. Other receivables
(Continued)
(1) Other receivables
(Continued)
3) Particulars of bad debt provision
(Continued)Provision for bad debts made on a general model of ECL:
Unit: RMBBad debts provision
Stage 1Stage 2Stage 3
TotalECLs for thenext 12 months
Lifetime ECLs(not credit-impaired)
Lifetime ECLs(credit-impaired)Balance as at 1 January 202334,208,745.7448,961,431.2783,170,177.01Balance as at 1 January 2023 for the period – Transferred to stage 2 – Transferred to stage 3 – Reversed to stage 2 – Reversed to stage 1Provision for the period7,647,612.121,132,539.408,780,151.52Reversal for the periodTransfer for the periodWrite-off for the periodOther changesBalance as at 31 December 202341,856,357.8650,093,970.6791,950,328.53Changes in carrying book balances with significant changes in loss provision for the period Applicable √ Not applicable
4) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMBCategory
Openingbalance
Changes in the period
ClosingbalanceProvisionRecovery or
reversal
Transfer or
Write-offOthersBad debt provision83,170,177.018,780,151.5291,950,328.53Total83,170,177.018,780,151.5291,950,328.53
2023 ANNUAL REPORT
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
2. Other receivables
(Continued)
(1) Other receivables
(Continued)
5) Top five accounts receivable based on closing balance of debtors
The total amount of top five other receivables based on closing balance of debtors for the periodamounted to RMB5,633,038,306.52 in total, accounting for 60.38% of the total closing balance of otherreceivables. The closing balance of the corresponding bad debt provision amounted to RMB0.00 in total.
Unit: RMBName of entityNatureClosing balanceAgeing
Percentage to totalclosing balanceof other receivables (%)
Closing balance ofbad debt provisionCustomer 1Open credit1,298,000,000.00Within 1 year13.91Customer 2Open credit1,319,906,791.36Within 1 year14.15Customer 3Open credit1,087,487,475.00Within 1 year11.66Customer 4Open credit1,032,000,000.00Within 1 year11.06Customer 5Open credit895,644,040.16Within 1 year9.60Total5,633,038,306.5260.38
3. Long-term equity investments
Unit: RMBItem
Closing balanceOpening balanceBook balance
ImpairmentprovisionBook valueBook balance
Impairment
provisionBook valueInvestment in subsidiaries17,898,687,687.2217,898,687,687.2218,502,944,740.8118,502,944,740.81Investment in joint ventures86,542,364.1586,542,364.1582,741,230.1582,741,230.15Investment in associates319,764,325.105,994,545.96313,769,779.14246,471,611.335,994,545.96240,477,065.37Total18,304,994,376.475,994,545.9618,298,999,830.5118,832,157,582.295,994,545.9618,826,163,036.33
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
3. Long-term equity investments
(Continued)
(1) Investment in subsidiaries
Unit: RMB
Investee
Opening balance(Book value)
Openingbalance ofimpairmentprovision
Change for the period
Closing balance(book value)
Closingbalance ofimpairmentprovisionAdditionalcontribution
Withdrawncontribution
ImpairmentprovisionOthers
Chenming Paper Korea Co., Ltd.6,143,400.006,143,400.00Chenming GmbH4,083,235.004,083,235.00Hailaer Chenming Paper Co., Ltd.12,000,000.0012,000,000.00Huanggang Chenming Pulp & Paper Co., Ltd.2,350,000,000.002,350,000,000.00Huanggang Chenming ArboricultureDevelopment Co., Ltd.70,000,000.0070,000,000.00Jinan Chenming Paper Sales Co., Ltd.100,000,000.00100,000,000.00Wuhan Chenming Hanyang Paper HoldingsCo., Ltd.264,493,210.21264,493,210.21Shandong Grand View Hotel Co., Ltd.80,500,000.00200,000,000.00280,500,000.00Zhanjiang Chenming Pulp & Paper Co., Ltd.5,137,500,000.0068,750,000.005,206,250,000.00Shouguang Chenming Modern LogisticCo., Ltd.10,000,000.0010,000,000.00Shouguang Chenming Art Paper Co., Ltd.113,616,063.80113,616,063.80Shouguang Meilun Paper Co., Ltd.4,449,441,979.31200,000,000.004,649,441,979.31Shouguang Shun Da Customs Declaration
Co, Ltd.1,500,000.001,500,000.00Shandong Chenming Paper Sales Co., Ltd.762,641,208.20762,641,208.20Shouguang Chenming Import and ExportTrade Co., Ltd.250,000,000.00250,000,000.00Shouguang Chenming Papermaking
Machine Co., Ltd.2,000,000.002,000,000.00Shouguang Hongxiang Printing and
Packaging Co., Ltd.3,730,000.003,730,000.00Shandong Chenming Group Finance Co., Ltd.4,000,000,000.004,000,000,000.00Chenming Arboriculture Co., Ltd.45,000,000.0045,000,000.00Chenming Paper United States Co., Ltd.6,407,800.006,407,800.00Weifang Chenming Growth Driver
Replacement Equity Investment Fund
Partnership (Limited Partnership)592,500,340.5332,778,016.57559,722,323.96Weifang Chendu Equity Investment
Partnership (Limited Partnership)241,387,503.7613,094,618.61228,292,885.15Total18,502,944,740.81468,750,000.001,073,007,053.5917,898,687,687.22
2023 ANNUAL REPORT
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
3. Long-term equity investments
(Continued)
(2) Investment in associates and joint ventures
Unit: RMB
Investee
Openingbalance(book value)
Openingbalance ofimpairment
provision
Change for the period
Closingbalance(book value)
Closingbalance ofimpairmentprovisionAdditionalcontribution
Withdrawncontribution
Investmentgain or lossrecognisedunder equity
methodAdjustmentof othercomprehensiveincomeOtherchangein equityinterestDistributionof cashdividend orprofitdeclaredImpairmentprovisionOthers
I. Joint Ventures
Zhuhai Dechen New Third
Board Equity InvestmentFund Company (LimitedPartnership)36,776,710.91487,093.4510,000,000.0027,263,804.36Ningbo Kaichen Huamei
Equity Investment FundPartnership (LimitedPartnership)197,218,318.7790,910,511.3610,000,000.00278,128,830.13Chenming (Qingdao) AssetManagement Co., Ltd.6,482,035.691,895,108.968,377,144.65Xuchang Chenming Paper
Co., Ltd.5,994,545.965,994,545.96Subtotal240,477,065.375,994,545.9693,292,713.7720,000,000.00313,769,779.145,994,545.96II. Associates
Shouguang Chenming
Huisen New-style
Construction Materials
Co., Ltd.7,892,659.422,107,624.172,600,000.007,400,283.59Weifang Port Wood Chip
Terminal Co., Ltd.74,848,570.734,293,509.8379,142,080.56Subtotal82,741,230.156,401,134.002,600,000.0086,542,364.15Total323,218,295.525,994,545.9699,693,847.7722,600,000.00400,312,143.295,994,545.96
Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses Applicable √ Not applicableDetermination of present value of recoverable amount based on expected cash flows Applicable √ Not applicable
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
4. Revenue and operating costs
Unit: RMBItem
Amount for the periodAmount for the prior periodOperating RevenueOperating CostsOperating RevenueCostsPrincipal activities5,560,666,894.035,556,483,312.726,270,637,334.306,040,121,665.12Other activities2,018,747,725.421,619,996,618.011,249,427,268.181,005,967,022.32Total7,579,414,619.457,176,479,930.737,520,064,602.487,046,088,687.44
Breakdown information of operating revenues and operating costs:
Unit: RMBCategory of contract
Machine-made paperOthersTotalOperating RevenueOperating CostsOperating RevenueOperating CostsOperating RevenueOperating CostsType of goods7,200,349,780.386,986,898,810.46379,064,839.07189,581,120.277,579,414,619.457,176,479,930.73Including:
Machine-made paper5,560,666,894.035,556,483,312.725,560,666,894.035,556,483,312.72 Others1,639,682,886.351,430,415,497.74379,064,839.07189,581,120.272,018,747,725.421,619,996,618.01 By geographical area7,200,349,780.386,986,898,810.46379,064,839.07189,581,120.277,579,414,619.457,176,479,930.73Including:
Mainland China6,048,307,215.695,804,923,689.77379,064,839.07189,581,120.276,427,372,054.765,994,504,810.04 Other countries and regions1,152,042,564.691,181,975,120.691,152,042,564.691,181,975,120.69 By the timing of delivery7,200,349,780.386,986,898,810.46379,064,839.07189,581,120.277,579,414,619.457,176,479,930.73Including:
Goods (at a point in time)7,200,349,780.386,986,898,810.46255,627,989.0487,223,462.507,455,977,769.427,074,122,272.96Services (within a certain period)123,436,850.03102,357,657.77123,436,850.03102,357,657.77 By sales channels7,200,349,780.386,986,898,810.46379,064,839.07189,581,120.277,579,414,619.457,176,479,930.73Including:
Distribution4,804,123,673.234,816,398,489.334,804,123,673.234,816,398,489.33 Direct sales2,396,226,107.152,170,500,321.13379,064,839.07189,581,120.272,775,290,946.222,360,081,441.40
2023 ANNUAL REPORT
XII Financial Report
XIV. Major Item Notes of the Parent Company’s Financial Statements(Continued)
4. Revenue and operating costs
(Continued)Information related to performance obligations:
Item
Time for fulfilment ofperformance obligationsSignificant terms of payment
Nature of goods that theCompany undertakesto transfer
Whether theperson is theprimary personin charge
Company’scommitmentsexpected tobe refundedto customers
Types of quality assuranceoffered by the Company andrelated obligationsMachine-made paper
Domestic sales on the day ofdelivery to the customer;foreign sales on the day of customs clearance
Domestic sales tend to be
provided on an invoice basis;
foreign sales tend to be
prepaid.
Produces easily distinguishableYesNoneGuaranteed quality assurance,
should there be objections toproduct quality within 7 daysof arrival, the products can be returned and exchanged.
Other explanations: The Company’s performance obligations for sales of machine-made paper are generally less than one year, and theCompany takes advance payments or provides credit terms depending on the customer. When the Company is the primary responsible partyfor a sale, it generally obtains the unconditional right to receive payment when control of the merchandise is transferred to the customer eitherat the time of shipment or upon delivery to the destination specified by the customer.Information related to the transaction price allocated to residual performance obligations:
At the end of the reporting period, the amount of revenue with signed contracts but unfulfilled or uncompletedperformance obligation was RMB1,454,807,158.83, in which RMB1,454,807,158.83 was expected to be recognised in2024.
5. Investment income
Unit: RMBItem
Amount forthe period
Amount forthe periodInvestment gain on disposal of long-term equity investments215,506,789.79751,679.56Income from long-term equity investments accounted for using the equity method99,693,847.76-314,623.14Income from long-term equity investments accounted for using the cost method88,000,000.00731,666,286.45Investment gain on holding other non-current financial assets1,867,060.624,746,821.37Investment gain on derecognition of financial assets-47,421,175.71-63,403,215.00Total357,646,522.46673,446,949.24
XII Financial Report
XX. Supplementary information
1. Breakdown of extraordinary gains or losses for the current period
√ Applicable Not applicable
Unit: RMBItemAmountRemarkProfit or loss from disposal of non-current assets (including write-off of
provision for assets impairment)431,805,592.54Government grants (except for the government grants closely related to
the normal operation of the Company, granted in accordance with an
established standard and having an ongoing effect on the Company’s
profit or loss in compliance with national policies and regulations)
accounted for in profit or loss for the current period117,211,489.25Except for effective hedging activities conducted in the ordinary course
of business of the Company, gain or loss arising from the change in fair
value of financial assets and financial liabilities held by a non-financial
company, as well as gain or loss arising from disposal of its financial
assets and financial liabilities58,579,398.48Reversal of provision for impairment of receivables individually tested for
impairment99,483,459.63Profit or loss from debt restructuring55,297,346.06Profit or loss from changes in the fair value of consumable biological
assets subsequently measured at fair value6,775,808.38Other non-operating income and expenses other than the above items-11,642,079.10Total extraordinary gains or losses757,511,015.24Less: Effect of income tax of extraordinary gains or losses89,176,973.22Net extraordinary gains or losses668,334,042.02Less: Net effect of extraordinary gains or losses attributable to minority
interest (after tax)7,503,507.14Extraordinary gains or losses attributable to ordinary shareholders of the
Company660,830,534.88Other profit or loss items consistent with the definition of extraordinary items:
Applicable √ Not applicableThe Company does not have other profit or loss items consistent with the definition of extraordinary items.Explanation on classification of non-recurring profit and loss listed in Explanatory Announcement No. 1 on InformationDisclosure of Companies Offering Their Securities to the Public – Non-recurring Profit and Loss as non-recurring profitand loss
√ Applicable Not applicable
2023 ANNUAL REPORT
XII Financial Report
XX. Supplementary information(Continued)
1. Breakdown of extraordinary gains or losses for the current period
(Continued)
An explanation of the definition of non-recurring profit and loss items listed in the“Interpretative Bulletin No. 1 onDisclosure of Information by Publicly Traded Companies – Non-Recurring Profits and Losses (Revised 2023)”asrecurring in accordance with the definitions and principles:
Unit: RMBItemDuring the periodReasonsOther income52,766,790.28Government grants related to assets that are closely related to the
Company’s normal operations are subsequently amortised to otherincome, which has a continuing effect on the Company’s profit or lossand is therefore accounted for as recurring profit or loss.Impact of the implementation of Interpretative Announcement No. 1 on Information Disclosure by Companies withPublic Securities – Non-Recurring Gains and Losses (Revised 2023) on the amount of non-recurring gains and lossesfor the year 2022:
Unit: RMBItemRevisedUnrevisedAmount ImpactedProfit or loss from disposal of non-current assets161,509,859.17161,509,859.17Government grants (except for the government grants closely related
to the normal operation of the Company and granted constantly ata fixed amount or quantity in accordance with a certain standard incompliance with national policies and regulations) accounted for inprofit or loss for the current period259,087,092.47314,934,315.62-55,847,223.15Profit or loss from debt restructuring967,464.91967,464.91Except for effective hedging activities conducted in the ordinary course
of business of the Company, gains or losses arising from changes inthe fair value of financial assets held for trading, derivative financialassets, financial liabilities held for trading, derivative financial liabilitiesand investment gains on disposal of financial assets held for trading,derivative financial assets, financial liabilities held for trading, derivativefinancial liabilities and other creditor investments,-35,178,162.53-35,178,162.53Reversal of impairment loss on receivables tested individually for
impairment275,585,463.86275,585,463.86Profit or loss from changes in the fair value of consumable biological
assets subsequently measured at fair value9,924,233.729,924,233.72Other non-operating income and expenses other than the above items-37,391,130.09-37,391,130.09Total extraordinary gains or losses634,504,821.51690,352,044.66-55,847,223.15Less: Effect of income tax of extraordinary gains or losses128,956,830.19137,333,913.66-8,377,083.47Net extraordinary gains or losses505,547,991.32553,018,131.00-47,470,139.68Less: Net effect of extraordinary gains or losses attributable to minority
interest (after tax)1,202,165.882,268,633.02-1,066,467.14Extraordinary gains or losses attributable to ordinary shareholders of the
Company504,345,825.44550,749,497.98-46,403,672.54
XII Financial Report
XX. Supplementary information(Continued)
2. Return on net assets and earnings per share
Profit for the reporting period
Rate of return on net assets
on weighted average basis
Earnings per share
Basic(RMB per share)
Diluted(RMB per share)Net profit attributable to ordinary shareholders of the
Company-7.65-0.45-0.45Net profit after extraordinary gains or losses attributable to
ordinary shareholders of the Company-11.45-0.68-0.68
3. Accounting data difference under accounting standard at home and abroad
(1) Differences of net profit and net assets disclosed in financial reports prepared under IAS and Chinese
accounting standards Applicable √ Not applicable
(2) Differences of net profit and net assets disclosed in financial reports prepared under oversea and Chinese
accounting standards Applicable √ Not applicable
(3) Reasons for the differences in figures under domestic and foreign accounting standards. The name of
the foreign audit institution shall be indicated if the data audited by the foreign audit institution has beenregulated differently. Applicable √ Not applicable
The Board of Shandong Chenming Paper Holdings Limited
28 Mar 2024