SHANDONG CHENMING PAPER HOLDINGS LIMITED
Annual Report 2022
March 2023
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.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
I Important Notice, Table of Contents and Definitions ...... 1
IICompany Profile and Key Financial Indicators ...... 6IIIChairman’s Report ...... 11
IVManagement Discussion and Analysis ...... 13VDirectors’ Report ...... 45
VICorporate Governance ...... 56
VIIEnvironment and Social Responsibility ...... 100
VIIIMaterial Matters ...... 109
IXChanges in Share Capital and Shareholders ...... 139
XPreference Shares ...... 149
XIBonds ...... 150
XIIFinancial Report ...... 159
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 financialdepartment 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
Definitions
ItemDefinitionCompany, Group, Chenming Group, Chenming
Paper 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.Chenming InvestmentmeansShandong Chenming Investment LimitedChenming LeasingmeansShandong Chenming Financial Leasing Co., Ltd. and its
subsidiariesChenming GDR FundmeansWeifang Chenming Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)Chenrong FundmeansWeifang Chenrong Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)
I Important Notice, Table of Contents and Definitions
ItemDefinitionChenchuang FundmeansWeifang Chenchuang Equity Investment Fund Partnership (Limited
Partnership)Dongxing InvestmentmeansDongxing Securities Investment 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 2022 to 31 December 2022the beginning of the year or the periodmeans1 January 2022the end of the year or the periodmeans31 December 2022the prior yearmeansThe period from 1 January 2021 to 31 December 2021
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 Companydiscloses its annual report
Domestic: http://www.szse.cn; overseas: http://www.hkex.com.hkNames and websites of the media where the Companydiscloses 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
II Company Profile and Key Financial Indicators
V.Other relevant information
CPAs engaged by the CompanyName of CPAsGrant Thornton (Special General PartnershipCPAs’Office AddressFloor 11, Building No. 4, HuaChuang GuanLi Center, 219 Shunhai
Road, Lixia District, JinanName of the Signing Certified Public AccountantsLiu Jian and Jiang LeSponsors engaged by the Company to continuously perform its supervisory function during the reporting periodApplicable √ Not applicableFinancial advisors engaged by the Company to continuously perform its supervisory function during the reporting periodApplicable √ Not applicableVI.Major accounting data and financial indicatorsRetrospective adjustment to or restatement of the accounting data for prior years by the CompanyYes √ No
20222021
Increase/decreasefor the year ascompared to the
prior year2020Revenue (RMB)32,004,367,320.9133,019,812,294.14-3.08%30,736,517,996.90Net profit attributable to shareholders of the Company (RMB)
189,290,120.822,065,513,108.71-90.84%1,712,029,078.52Net profit after extraordinary gains or lossesattributable to shareholders of the Company (RMB)
-361,459,377.161,743,876,537.12-120.73%1,119,103,808.75Net cash flows from operating activities (RMB)3,449,824,242.378,581,888,192.64-59.80%11,259,802,676.28Basic earnings per share (RMB per share)0.030.56-94.64%0.36Diluted earnings per share (RMB per share)0.030.56-94.64%0.36Rate of return on weighted average net assets0.55%9.56%Decreased by 9.01
percentage points
5.84%
As at the end of 2022As at the end of 2021
Increase/decreaseas at the end ofthe year compared
to the end of theprior yearAs at the end of 2020Total assets (RMB)84,301,017,409.6282,869,661,681.081.73%91,575,457,828.62Net assets attributable to shareholders of theCompany (RMB)19,084,565,494.9219,117,985,306.48-0.17%24,276,968,789.00
II Company Profile and Key Financial Indicators
Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interestpayment deferred and accumulated to subsequent periods for Perpetual Bonds. When calculating financial indicatorssuch as earnings per share and rate of return on weighted average net assets, the interest on Perpetual Bonds ofRMB89,700,000.00 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 uncertainYes √ NoThe lower of net profit before or after extraordinary gains or losses is negative
√Yes No
Item20222021RemarkRevenue (RMB)32,004,367,320.9133,019,812,294.14Revenue from sales of
materials ofRMB903,160,256.93,and other revenue of RMB127,610,203.33.Deduction to revenue (RMB)1,030,770,460.262,203,901,882.20Revenue after deduction (RMB)30,973,596,860.6530,815,910,411.94
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 reportApplicable √ 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.VIII.Key Financial Indicators by Quarter
Unit: RMBQ1Q2Q3Q4Revenue8,514,983,059.748,161,445,306.098,679,605,529.936,648,333,425.15Net profit attributable to shareholders of the Company113,917,827.90116,223,635.8610,434,396.87-51,285,739.81Net profit after extraordinary gains or losses attributable to shareholders of the Company99,637,959.1273,769,968.01-18,272,552.33-516,594,751.96Net cash flows from operating activities222,704,964.47775,559,244.98150,935,364.722,300,624,668.20
II Company Profile and Key Financial Indicators
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 16 of the Hong Kong ListingRules
Unit: RMB’0,000For the year ended 31 December20222021202020192018Revenue3,200,4373,301,9813,073,6523,039,5432,887,576Profit before tax18,227230,618217,227204,848320,632Tax-13,50921,65026,60629,51864,158Profit for the current period attributable to shareholders of the Company18,929206,551171,203165,657250,983Minority interests12,8072,41719,4189,6735,491Basic earnings per share (RMB/share)0.030.560.360.330.51Rate of return on weighted average net assets (%)0.55%9.56%5.84%5.57%8.51%
Unit: RMB’0,000For the year ended 31 December20222021202020192018Total assets8,430,1028,286,9669,157,5469,795,89110,531,873Total liabilities6,057,2766,029,4636,577,5197,161,9147,944,704Minority interests464,369345,705152,329117,00382,296Equity attributable to shareholders of the Company1,908,4571,911,7992,427,6972,516,9742,504,873Net current assets (liabilities)-1,917,930-1,766,446-1,516,398-774,633-1,344,718Total assets less current liabilities3,240,2273,233,4714,052,9224,526,0144,390,405
II Company Profile and Key Financial Indicators
X.Items and amounts of extraordinary gains or losses
√Applicable Not applicable
Unit: RMBItemAmount for 2022Amount for 2021Amount for 2020DescriptionProfit or loss from disposal of non-current assets(including write-off of provision for assets impairment)161,509,859.17162,163,302.50-51,477,216.37Government grants (except for the government grantsclosely related to the normal operation of the Companyand granted constantly at a fixed amount or quantity inaccordance with a certain standard in compliance withnational policies and regulations) accounted for in profitor loss for the current period314,934,315.62261,974,874.53943,720,129.34Except for effective hedging business conducted in theordinary course of business of the Company, gain orloss arising from the change in fair value of financialassets held for trading and financial liabilities held fortrading, as well as investment gains from disposal offinancial assets held for trading, financial liabilities heldfor trading and financial assets available for sale-35,178,162.53-54,802,461.2921,166,216.02Profit or loss from debt restructuring967,464.9124,593,731.72-14,942,498.74Reversal of provision for impairment of receivablesindividually tested for impairment275,585,463.86Profit or loss from changes in the fair value of consumablebiological assets subsequently measured at fair value9,924,233.72-41,899.05-13,329,852.55Other non-operating income and expenses other than theabove items-37,391,130.09-15,461,704.288,582,997.62Loss on abnormal work stoppage-24,567,901.71Less: Effect of income tax137,333,913.6660,135,956.19120,949,832.54
Effect of minority interests (after tax)2,268,633.02-3,346,683.65155,276,771.30Total550,749,497.98321,636,571.59592,925,269.77Details 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 applicableNo extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for CompaniesOffering Their Securities to the Public No. 1 – Extraordinary Gains or Losses were defined by the Company as its recurringgain or loss items.
III Chairman’s Report
Dear shareholders,I ampleased to present the report of the Company for the financial year ended 31 December 2022 to all shareholders, and onbehalf of the board of directors, I would like to express my sincere gratitude to all shareholders for their care and support for theCompany.In 2022, the Company overcame the disturbance of external factors such as rising raw material prices and multiple outbreaks ofthe economic environment, sustained steady operation, continued to maintain profitability, and demonstrated strong resilience indevelopment.Seeking development in the“new normal”The Company used flexible and versatile strategies to reduce costs and increase efficiency against an extremely harsh economicenvironment, seeking maximum operational benefits. On the one hand, we kept up with market changes to timely adjust productstrategies and purchasing strategies, and further strengthened our inventory, capital and financial risk management to ensuresafety and stability of the capital chain. We also introduced strategic investors to increase our capital strength. On the otherhand, we seized the opportunities arising from a sharp decline in the overseas paper product supply, accelerated our“overseasexpansion”strategy, and extended our global footprint. During the reporting period, both sales volume and prices of the productsof the Company rose overseas with a significant increase of the sales. Meanwhile, the Company comprehensively improved itsproduct and service quality to seek improvement in products’added value, and develop stable customer relationships. Duringthe reporting period, the Company maintained the sales volume of its major machine-made paper products at a high level, andthe product prices also rose year on year. The Company still made profit amid pressure despite a significantly narrowingprofit squeeze of the Company due to weak market demand and higher production costs. In 2022, the Company realised netprofit of RMB317 million.Gaining strength for sustainable development
Chinese papermaking companies have long been dependent on imported pulp, and the full implementation of the“waste ban”
has further boosted the demand for alternative raw materials. In order to avoid dependence on external pulp and adapt to theneed for upgrading the papermaking raw material structure, the Company develops a comparative advantage in productioncosts by continuously deepening the layout of a“pulp and paper integration”strategy. At present, the Company are equippedwith wood pulp production lines at its major production bases with total wood pulp production capacity of 4.30 million tonnes,basically realising broadleaf wood pulp self-sufficiency. The Company is also planning to build its softwood wood pulp productioncapacity to further improve its raw material self-sufficiency structure and refine its upstream supply chain.The Company has pulp and papermaking capacity of more than 11 million tonnes with economies of scale. We will strive toachieve optimal production capacity by making overall arrangements and planning scientifically. The Company has seven seriesof products such as culture paper, white cardboard and coated paper, which are oriented to different fields of production and life,and will further shift to green, lightweight and high-end development in the future. The Company has built production capacity ofapproximately 2 million tonnes of high bulk cardboard, coated cardboard and food package board in, among others, ZhanjiangShouguang and Jiangxi, and constantly improved products’added value to seize market opportunities brought about by the“plasticban”.The sustainable competitiveness of an enterprise depends on the intensity of its knowledge and technology elements. Therefore,the Company attaches great importance to the independent innovation cultivation, makes full use of the R&D advantages of thenational enterprise technology centre and post-doctoral working station, and constantly enhances its R&D strength. As at theend of the reporting period, the Company had obtained more than 380 national patents, and had taken the lead among domesticpeers in passing ISO9001 quality system certification, ISO14001 environmental protection system certification and FSC-COCinternational forest system certification in China. In addition, the Company’s major production lines had reached the internationaladvanced level.
III Chairman’s Report
Striving for innovation amid change and progress amid stabilityAlthough uncertainties persist in the short run, the economic environment stabilised with orderly work and productionresumption, and an expected gradual recovery of market demand. In the long run, there will be still a huge paper demand tobe satisfied in China with reference to China’s GDP per capita heading for the level of a medium-level developed country by2035, and the historical experience of developed countries. In addition, the industry landscape has been continuouslyoptimised with the advantages of the top companies further strengthened due to environmental protection, the market factor,and others.In an unprecedented complex situation, only by adapting to trends and responding flexibly can the initiative be seized. In thefuture, we will strive for innovation amid change and progress amid stability in the following four aspects:
We will firmly promote the“pulp-paper integration”strategy. We will ensure the“quality and quantity”of the self-sufficient pulpsupply, which will be supplemented by a flexible procurement strategy, to constantly consolidate our cost advantage ofraw materials.We will promote mutual facilitation between production and sales. We will capitalise on market demand to produce productswhich can best meet customer demand, and help market development based on product quality. We will take advantage of ourintensive sales network, capitalise on the changes of customer demand, and promote the optimisation of the product structureand product quality.We will strengthen our financial management. We will strengthen the management of the working capital and cash flows, andstrike a balance between the financing size and financing costs.We will adhere to green development. We will strengthen pollution prevention and control and improve resource utilisationefficiency.On behalf of the board of directors, I would like to take this opportunity to express my heartfelt gratitude to all colleagues,partners, clients and investors for their understanding, supporting and acknowledgement of our enterprise in the previous year.Chen HongguoChairman30 March 2023
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Management Discussion and Analysis
I.Industry Situation of the Company during the Reporting Period
The industry in which the Company operates is paper making and paper product industry.The paper making industry is oneof the basic industries of the national economy that has the typical characteristics oflarge-scale industrial production such as continuous and efficient operation and significant scale benefits, which is closelyrelated to social and economic development and people’s lives. Since the reform and opening up, with the sustained andrapid development of the national economy, China’s paper making industry has gradually begun to transform from extensivegrowth to intensive growth. At the same time, driven by the upgrade of social demand, the increase of environmentalprotection policies, the continuous progress of technology and the change of resource supply, the reduction of low-endproduction capacity has been accelerated, and the structure of the paper making industry has been continuously optimised.However, the close connection between the paper making industry and the macroeconomy also renders the industry moresensitive to changes in the macroeconomy.During the reporting period, the global economic environment became widespread. Affected by the international situationand economic environment resurgence, energy and logistics costs remained high with higher inflation risks. Consumptionand the supply chain operation were frustrated to a significant extent with greater pressure downward pressure on theeconomy. For the papermaking industry, on the one hand, production costs rose significantly due to soaringupstream pulp, energy and transportation prices. On the other hand, the rise of paper product prices failed to keeppace with production costs due to factors such as sluggish downstream consumption and weak demand. Asignificantly narrowing profit squeeze in the industry intensified pressure on operation.In terms of output, revenue and profitability, according to data from the Ministry of Industry and Information Technology, in2022, the national output of machine-made paper and paperboard was 136.914 million tonnes, down 1.3% year on year.Revenue of papermaking and paper product enterprises above designated size was RMB1,522.89 billion, up 0.4% year onyear. Total profit was RMB62.11 billion, down 29.8% year on year. The output and revenue size in the industry remainedstable, but the profit level dropped significantly.Although the short-term performance of the industry is relatively low, the industry is expected to realise profit recovery withthe gradual stabilisation of the economic environment and the gradual recovery of market demand. In the long run,China’s paper products market still has large scope for development, according to the national“dual circulation”
strategy and “China’s GDP per capita heading for the level of a medium-level developed country by 2035”.
IV Management Discussion and Analysis
II.Principal activities of the Company during the Reporting PeriodThe Company is a large modern conglomerate principally engaged in pulp production and paper making, and themachine-made paper business is the major source of revenue and profit of the Company. At present, the Company hasproduction bases in Shandong, Guangdong, Jiangxi, Hubei, Jilin and other places, with annual pulp and paper productioncapacity of more than 11 million tonnes. It is the first domestic paper making enterprise that achieves a balance betweenpulp production and paper making capacity. During the reporting period, continuously taking“revitalising the Chinesepapermaking industry” as its mission, the Company had been committed itself to implementing a pulp and paper integrationstrategy. It deepened the development of pulp production and papermaking, its major operation, and realised revenueof RMB32,004 million and net profit of RMB317 million. There was no significant change in the principal activities of theCompany.
1.Products
The Company attaches great importance to technology research and development and brand benefits. Adoptingthe market-oriented approach, the Company adheres to technological innovation, continuously improves the levelof technological research and development and product service quality, develops green and low-carbon productswith high technological content and high added value, and comprehensively enhances the core competitiveness ofproducts. At present, the Company has the largest and most advanced pulping and papermaking production lines inthe world, with machine-made paper products covering more than 200 types in seven series, including culture paper,coated paper, white cardboard, copy paper, industrial paper, special paper, and household paper. The Companyowns“BIYUNTIAN”,“GOLDEN MINGYANG”,“CHENMING CLOUDY MIRROR”,“CHENMING CLOUDLY LION”,“CHENMING SNOW SHARK”,“CHENMING EAGLE”,“CHENMING GONGHAO”,“XINGZHILIAN” and other famousbrands, with each major product ranking among the highest in terms of market share in China. It is the enterprise withthe largest variety of products and the most complete products in the domestic paper making industry.During the reporting period, the Company was shortlisted for the list of“Top 500 Most Valuable Brands in China in2022”and won the title of“2022 Shandong Province Science and Technology Leading Enterprise”. Its main productssuch as culture paper, coated paper and household paper were selected into the first batch of“Shandong’s GoodProduct”brand list, and its poplar coated white cardboard, Xingzhilian tissue paper and Xingzhilian toilet paper hadwon the national“Green Design Products” award, fully demonstrating the Company’s excellent achievement in brandbuilding and strong brand value.
IV Management Discussion and Analysis
II.Principal activities of the Company during the Reporting Period(Continued)
1.Products
(Continued)CategoryMajor brands and typesMajor production 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 HeadquartersZhanjiang 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 printingWhite 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, publicity
pamphlets, 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 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 coatingSpecial 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.
IV Management Discussion and Analysis
II.Principal activities of the Company during the Reporting Period(Continued)
2.Operation model
During the reporting period, the Company’s business model did not underwent major changes.
(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 onevoteveto”. Through continuous improvement of the procurement information system, the Company has fully realisedmachine control management, and optimised the authorisation approval process, effectively standardisingthe procurement management system. Based on the needs of production bases, the Group integrates theresources of related parties and implements centralised procurement. The Company seeks sources and high-quality suppliers through industry exhibitions, on-site inspections and competitive factory research to strengthenprocurement at source and reduce procurement costs; and introduces a supplier competition mechanismby establishing a three-level joint review mechanism for suppliers and implementing a system of eliminatingsubstandard suppliers, so as to improve supply quality. Meanwhile, the Company actively cooperates withfinancial institutions and third parties in the supply chain financial business, and fully utilises the funds fromcontributing parties to lower procurement costs, deepen strategic cooperation and enhance supply chaincompetitiveness.
(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 activities 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 the national enterprise technology centre, the post-doctoral working station, the state certified CNASpulp and paper testing centre, Shandong Pulp and Paper Making Engineering Lab and the Guangdong Pulp andPaper Production Technology Research Centre, which have enhanced its independent innovation capabilities.Meanwhile, on the basis of introducing internationally advanced pulp and paper production lines and advancedtechnologies, the Company has made technological improvements and re-innovations, and establishednew standards for processes and product quality, forming distinctive core technologies. The Company alsoworks hard on the following aspects: carrying out academic research with colleges and universities and R&Dinstitutions such as Qilu University of Technology, Qingdao University of Science and Technology, TianjinUniversity of Science and Technology, and Institute of Chemical Industry of Forest Products of the ChineseAcademy of Forestry, introducing, digesting and absorbing scientific research and innovation achievements,accelerating the industrialisation of new and high technologies, optimising product mix, and improving thecompetitiveness of its products in the market.
3.The position of the Company in the industry during the reporting period
The papermaking industry is a strategic and fundamental industry closely related to national economic and socialdevelopment. In 2022, the papermaking industry had a narrowing profit squeeze with declining prosperity due toa sharp rise in the prices of raw materials, power and logistics in the upstream market and the weak demand inthe downstream market. According to data of the Ministry of Industry and Information Technology, total profit ofpapermaking and paper product enterprises above designated size nationwide in 2022 was RMB62.11 billion, downnearly 30% year on year. According to data of the National Bureau of Statistics, as of December 2022, the number ofloss-making papermaking and paper product enterprises was 1,799, representing a year-on-year increase of 40.9%.In this context, the Company responded flexibly and stubbornly, and continued to make profit amid difficulties,thereby showing its strong resilience.
IV Management Discussion and Analysis
II.Principal activities of the Company during the Reporting Period(Continued)
3.The position of the Company in the industry during the reporting period
(Continued)As a leading player in the paper making industry of China, the Company has implemented the strategy of innovativeoperation, quickened its pace in growth driver replacement and led the way in full industry chain operation, andhas emerged as the only paper making enterprise in China to achieve capacity balance between pulp productionand paper making. Currently, the Company has the annual pulp and paper production capacity of over 11 milliontonnes, tops the industry in its paper product variety and ranks among the best in China in terms of the market shareof its major products. During the reporting period, the Company strove to implement its strategy of pulp and paperintegration, with a coordinated development pattern further formed with Shouguang in the north, Huanggang in themiddle, and Zhanjiang in the south. The Company seized opportunities in overseas markets and improved its globalsales network, thus significantly growing sales to overseas markets. The Company strengthened its management,prevented and controlled risks, and laid the foundation for its sustainable development. The Company optimised theproduct structure, improved service quality, and strove to increase products’ added value, which further consolidatedits leading position in the industry. The Company had won awards such as“Top 500 Chinese Enterprises”,“FortuneChina 500”and“Top 10 Enterprises in the PRC Light Industry – Paper Sector”, which reflected the high recognitionand full affirmation of the Company from all walks of life.
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 building a supply chain. The core competitiveness of the Company did not underwent major changesduring the reporting period. The details of the core competitiveness 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.
3.Product advantages
The Company is an enterprise that offers the widest and the most complete product range in the paper makingindustry. The product series include culture paper, white paper board, coated paper, copy paper, household paper,thermal paper, etc., with each major product ranking among the best in terms of market share. The Company hasattached 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.
IV Management Discussion and Analysis
III.Analysis of Core Competitiveness(Continued)
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, Jiangxi, Hubei,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 the national enterprise technology centre, the post-doctoralworking station, the state certified CNAS pulp and paper testing centre. At the same time, the Company activelycarries out in-depth industry-university-research cooperation with prestigious domestic universities and researchinstitutes, continuously improves technical innovation capabilities and scientific research and development levels,and develops a series of new products with high technology contents and high added value as well as proprietarytechnologies. The Company and its subsidiaries Zhanjiang Chenming, Shouguang Meilun, Jiangxi Chenming, JilinChenming, Huanggang Chenming and Wuhan Chenming are high and new technology enterprises. As at the endof the reporting period, the Company had obtained over 380 national patents, and took the lead in obtaining theISO9001 quality system certification, the ISO14001 environmental protection system certification and the FSC-COCinternational 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 andresource recycling, and earnestly shouldered the corporate responsibility of environmental protection. In recent years,the Company 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, middle water treatment system,middle 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 middle water reuse project in the domestic paper industry.The reclaimed water recycle rate attains the industry-leading level. The reclaimed water quality meets drinking waterstandards, which can save hundreds of thousands cubic metres of fresh water every day. Meanwhile, in responseto the“dual carbon”policy, the Company actively introduces photovoltaic power generation and biomass powergeneration, continuously optimises the energy structure and improves the level of low-carbon production.
IV.Analysis of principal operations
1.Overview
During the reporting period, operating costs of papermaking companies remained high as prices of bulk rawmaterials, energy and power as well as international logistics soared due to factors such as the further developmentof public health events, the international political turmoil and high inflation. Meanwhile, in the downstream market,the price transmission mechanism did not work due to weak demand in the domestic market and the year-on-yeardecrease in sales volume, resulting in a narrowing corporate profit squeeze. Against a challenging situation, theCompany coordinated economic environment prevention and control, and production and operation with firmconfidence against difficulties, and consolidated its profitability by strengthening internal management, optimisingcost structure, curbing raw material costs, expanding overseas sales and other measures. In 2022, the Companyproduced 5.02 million tonnes and sold 5.15 million tonnes of machine-made paper, realising revenue of RMB32,004million and net profit of RMB317 million.
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(1) Components of revenue
Unit: RMB20222021Increase/
decreaseAmount% of revenueAmount% of revenueTotal revenue32,004,367,320.91100%33,019,812,294.14100%-3.08%By industryMachine-made paper28,398,850,766.5188.73%28,822,796,809.3287.29%-1.47%Chemical pulp1,043,284,411.273.26%248,980,922.180.75%319.02%Mould processing308,596,084.400.96%429,452,007.721.30%-28.14%Electricity and steam288,447,315.510.90%303,940,594.690.92%-5.10%Construction materials265,496,913.560.83%349,945,005.511.06%-24.13%Hotel and property rentals238,020,274.820.74%148,941,357.800.45%59.81%Chemicals169,232,476.000.53%131,104,964.350.40%29.08%Others1,292,439,078.844.04%2,584,650,632.577.83%-50.00%By productWhite paper board9,061,724,789.4128.31%9,579,581,625.0529.01%-5.41%Duplex press paper8,449,759,248.9226.40%7,287,152,353.0722.07%15.95%Coated paper4,149,820,827.4712.97%4,310,744,513.8713.06%-3.73%Electrostatic paper4,077,351,284.3812.74%3,857,097,045.4911.68%5.71%Anti-sticking raw paper973,542,096.463.04%1,168,436,835.303.54%-16.68%Thermal paper582,687,847.451.82%540,941,351.361.64%7.72%Other machine-made paper1,103,964,672.423.45%2,078,843,085.186.30%-46.90%Chemical pulp1,043,284,411.273.26%248,980,922.180.75%319.02%Mould processing308,596,084.400.96%429,452,007.721.30%-28.14%Electricity and steam288,447,315.510.90%303,940,594.690.92%-5.10%Construction materials265,496,913.560.83%349,945,005.511.06%-24.13%Hotel and property rentals238,020,274.820.74%148,941,357.800.45%59.81%Chemicals169,232,476.000.53%131,104,964.350.40%29.08%Others1,292,439,078.844.04%2,584,650,632.577.83%-50.00%By geographical segmentMainland China23,860,251,349.9174.55%28,894,011,653.2087.51%-17.42%Other countries and regions8,144,115,971.0025.45%4,125,800,640.9412.49%97.39%By sales modeDistribution20,430,260,632.5163.84%21,812,237,365.8166.06%-6.34%Direct sales11,574,106,688.4036.16%11,207,574,928.3333.94%3.27%
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 costsGross profit
Increase/decrease ofrevenue ascomparedto thecorrespondingperiod of theprior year
Increase/decrease of
operating
costs as
comparedto thecorrespondingperiod of the
prior year
Increase/decrease ofgross profitmargin ascomparedto thecorrespondingperiod of theprior yearBy industryMachine-made paper28,398,850,766.5124,448,024,979.3213.91%-1.47%10.89%-9.60%By productWhite paper board9,061,724,789.417,826,962,810.3913.63%-5.41%19.66%-18.09%Duplex press paper8,449,759,248.927,407,821,676.6612.33%15.95%23.37%-5.27%Coated paper4,149,820,827.473,457,680,224.0416.68%-3.73%10.45%-10.70%Electrostatic paper4,077,351,284.383,497,341,216.2414.23%5.71%11.35%-4.34%By geographical segmentMainland China23,860,251,349.9120,280,445,319.8215.00%-17.42%-5.78%-10.51%Other countries and regions8,144,115,971.007,093,280,387.1812.90%97.39%91.82%2.53%By sales modeDistribution20,430,260,632.5117,608,282,200.9113.81%-6.34%5.53%-9.69%Direct sales11,574,106,688.409,765,443,506.0915.63%3.27%14.39%-8.20%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
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 No
By industryItemUnit20222021
Increase/decreaseMachine-made paperSales’0,000 tonnes515545-5.50%Production output’0,000 tonnes502550-8.73%Inventories’0,000 tonnes3245-28.89%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: RMB
By industryItem
20222021
Increase/decreaseAmount% ofoperatingcostsAmount
% ofoperating
costsMachine-made paperRaw materials13,880,562,601.1656.78%13,227,151,426.9560.00%4.94%
Energy and power3,551,871,417.5414.53%2,771,580,665.0612.57%28.15%Chemicals3,219,278,883.0713.17%2,737,960,681.4612.42%17.58%Depreciation1,015,882,589.524.16%918,340,112.214.17%10.62%Shipping fee991,532,365.834.06%986,623,212.894.48%0.50%Labour costs300,586,979.171.23%282,029,126.211.28%6.58%Other production costs1,488,310,143.036.09%1,123,094,139.115.09%35.52%Subtotal24,448,024,979.32100.00%22,046,779,363.89100.00%10.89%Chemical pulpRaw materials483,207,371.4959.18%120,467,023.1362.81%301.11%
Energy and power123,647,038.0115.14%25,242,326.2813.16%389.84%Chemicals112,068,893.1613.72%24,936,130.3913.00%349.42%Accumulated Depreciation35,364,701.704.33%8,363,834.054.36%322.83%Labour costs10,463,973.851.28%2,568,596.081.34%307.38%Other production costs51,810,755.296.34%10,228,642.845.33%406.53%Subtotal816,562,733.50100.00%191,806,552.77100.00%325.72%Power and steamRaw materials214,274,012.4879.34%198,834,959.4076.47%7.76%
Depreciation26,624,446.179.86%19,199,537.957.38%38.67%Labour costs8,596,817.643.18%6,844,347.792.63%25.60%Energy and power6,245,631.232.31%25,124,584.809.66%-75.14%Chemicals470,492.880.17%746,078.650.29%-36.94%Other production costs13,862,506.915.13%9,269,615.373.56%49.55%Subtotal270,073,907.31100.00%260,019,123.96100.00%3.87%Construction materialsRaw materials158,431,654.7669.34%222,297,889.4570.37%-28.73%
Energy and power22,399,396.939.80%32,115,179.9410.17%-30.25%Shipping fee16,755,150.187.33%14,416,949.064.56%16.22%Labour costs8,353,153.123.66%14,568,778.004.61%-42.66%Depreciation6,753,081.282.96%9,626,644.953.05%-29.85%Other production costs15,800,412.816.92%22,887,012.537.24%-30.96%Subtotal228,492,849.08100.00%315,912,453.93100.00%-27.67%
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 No
During the year, 2 subsidiaries were newly established, namely Jiangxi Chenming Tea Co., Ltd. and ShouguangMeichen Energy Technology Co., Ltd., and 1 subsidiary was deregistered, namely Qingdao Chenming Pulp &Paper Electronic Commodity Spot Trading Co., Ltd. 2 subsidiaries were acquired not within the definition ofbusiness, namely Shanxi Fuyin Industrial Trading Co., Ltd. and Chongmin Culture Development (Shanghai) 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)6,798,742,733.13Total sales to top 5 customers as a percentage of the total sales for the year21.24%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 A2,770,087,211.848.66%2Customer B1,518,310,296.024.74%3Customer C1,049,894,583.173.28%4Customer D748,277,000.852.34%5Customer E712,173,641.252.23%Total6,798,742,733.1321.24%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)5,703,690,083.06Total purchases from top 5 suppliers as a percentage of the total purchases for the year20.84%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 A1,938,274,888.857.08%2Supplier B1,042,029,772.303.81%3Supplier C1,004,164,032.283.67%4Supplier D911,744,349.393.33%5Supplier E807,477,040.242.95%Total5,703,690,083.0620.84%Other explanation of the major suppliers Applicable √ Not applicable
3. Expenses
Unit: RMB20222021
Increase/decrease (%)
Reasons for materialchangesSelling and distribution expenses242,181,274.09293,509,692.51-17.49%Sales volume and wages or salaries
decreased year on year during thereporting period.General and administrative expenses750,546,703.34942,360,735.54-20.35%Production interruption loss was
adjusted in operating costs duringthe reporting period.Finance expenses2,146,556,149.062,387,471,286.46-10.09%Interest expenses of the Company
decreased year on year during thereporting period.
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
4. Research and development expenditure
√ Applicable Not applicable
Name of major R&D projectProject purposeProject progress
Objectives to beachieved
Expected impact on the futuredevelopment of the CompanyTechnological development of high-bulkelectrostatic paper
Saving raw materialsIndustrialisation
stage
To become
domesticallyleading
Improving product quality, loweringtransportation costs andproduction costs, and improvingthe Company’s economicbenefits.Technological development of whitecardboard for handbags
Enhancing productfunctionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction withproducts and increasing marketshare.Technological development of green-yellow
vision protection culture paper
Enhancing product
functionality or improvingperformance
Industrialisation
stage
To become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Technological development of moisture-proof
electrostatic copy paper
Enhancing product
functionality or improvingperformance
Pilot testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Technological development of coated paper
for high-end books and periodicals
Enhancing product
functionality or improvingperformance
Pilot testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.New technology development of high strengthpaper for journals
Enhancing productfunctionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction withproducts and increasing marketshare.Technological development of thermal paper
for menus
Enhancing product
functionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Technological development of rapid
oxidisation of corn starch
Reducing energyconsumption orimproving energyefficiency
Pilot 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
20222021
Percentage
of changeR&D headcount1,3701,900-27.89%Ratio of R&D personnel12.62%15.45%-2.83%Academic background of R&D personnelBachelor’s degree135185-27.03%Master’s degree311-72.73%Age composition of R&D personnelUnder 30305387-21.19%30~40 years old7171,034-30.66%Research and development expenditure of the Company
20222021
Percentage
of changeR&D expenditure (RMB)1,290,281,540.101,453,766,371.46-11.25%R&D expenditure to revenue4.03%4.40%-0.37%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
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
5. Cash flows
Unit: RMBItem20222021
Increase/decrease (%)Subtotal of cash inflows from operating activities36,218,528,896.1339,306,294,223.43-7.86%Subtotal of cash outflows from operating activities32,768,704,653.7630,724,406,030.796.65%Net cash flows from operating activities3,449,824,242.378,581,888,192.64-59.80%Subtotal of cash inflows from investing activities271,463,678.751,321,827,995.68-79.46%Subtotal of cash outflows from investing activities2,716,434,567.721,156,106,779.05134.96%Net cash flows from investing activities-2,444,970,888.97165,721,216.63-1575.35%Subtotal of cash inflows from financing activities37,596,224,354.3533,237,001,445.8313.12%Subtotal of cash outflows from financing activities39,577,284,434.8043,177,497,483.93-8.34%Net cash flows from financing activities-1,981,060,080.45-9,940,496,038.1080.07%Net increase in cash and cash equivalents-1,009,455,697.51-1,220,254,116.7717.27%Explanation on main effects of material changes in relevant data year-on-year
√ Applicable Not applicable
(1) Net cash flows from operating activities decreased by 59.80% as compared to the corresponding period of the
prior year mainly because the Company’s cash payment for purchasing goods increased significantly due to ayear-on-year rise in the prices of raw materials such as wood chips, raw coal and chemicals during the reportingperiod.
(2) Net cash flows from investment activities decreased by 1,575.35% as compared to the corresponding period
of the prior year mainly because net cash inflow from investing activities decreased year on year due to thethe participation in the establishment of joint ventures by Jiangxi Chenming, a subsidiary, during the reportingperiod for the purpose of revitalising the assets of the financial lease business, capitalising on the assetmanagement capabilities of government platforms, and consolidating and optimising the resource allocation.
(3) Net cash flows from financing activities increased by 80.07% as compared to the corresponding period of the
prior year mainly due to the decrease in liabilities due to be repaid 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 percentageof total profitReasonIs it sustainable?Other income242,223,168.86132.89%Receipt of government grants
related to daily business activities
Including RMB104 million whichis the annual amortisation amountof government grants received in prior periods, which is sustainableGain or loss arising from the change in fair value
-25,253,928.81-13.86%Fluctuations of fair values of the
shares of China Bohai Bank as wellas forestry assets and other non-current financial assets
NoCredit impairment loss-86,076,968.56-47.23%Bad debt provisions for receivablesNoGain on disposal of assets161,092,513.7688.38%Gains from disposal of land and
plant during the reporting period
NoNon-operating income77,248,685.7642.38%Mainly the receipt of government
grants not related to daily businessactivities
No
VI. Analysis of assets and liabilities
1. Material changes of asset items
Unit: RMBAs of the end of 2022As of the beginning of 2022
Percentage
changeDescriptionAmountAs a percentageof total assetsAmount
As a percentage
of total assetsInventories6,821,916,159.958.09%5,282,631,922.126.37%1.72%Mainly due to an increase in the Company’sraw material inventory, and an increaseof development costs resulting from thetransfer of the equity interest in ShanxiFuyin to the leasing company for debtoffsetting as at the end of the reportingperiod.Non-current assets
due within oneyear
3,998,724,415.854.74%5,216,934,172.616.30%-1.56%Mainly due to a year-on-year decrease in the
financial lease payments due within oneyear as at the end of the reporting period.Other current
assets
1,180,807,801.621.40%1,903,929,492.852.30%-0.90%Mainly due to the refund of value-added tax
(VAT) credit refund during the reportingperiod.Long-term equity
investments
4,277,013,369.565.07%1,894,794,764.192.29%2.78%Mainly due to the investment made by Jiangxi
Chenming and Chenming Leasing inShouguang Jintou Industrial InvestmentPartnership (Limited Partnership) during thereporting period.
IV Management Discussion and Analysis
As of the end of 2022As of the beginning of 2022
Percentage
changeDescriptionAmountAs a percentage
of total assetsAmount
As a percentageof total assetsFixed assets33,797,738,695.3040.09%35,653,492,676.1543.02%-2.93%Mainly due to the relocation, upgrade and
transformation of Wuhan Chenming’sequipment being included to constructionin progress during the reporting period, andthe impact of provision for depreciationduring the reporting period.Short-termborrowings
36,385,048,295.0243.16%33,523,025,186.2240.45%2.71%Mainly due to the increase in the size of short-
term debts as at the end of the reportingperiod.Non-current
liabilities duewithin one year
4,673,505,241.865.54%6,601,311,227.987.97%-2.43%Mainly due to the Company’s repayment ofmedium-term notes and bonds payabledue within one year during the reportingperiod.Long-term
borrowings
3,982,236,251.084.72%5,276,340,154.986.37%-1.65%Mainly due to the Company’s reduction in loansize during the reporting period.Long-term
payables
3,160,771,126.313.75%2,358,901,022.992.85%0.90%Mainly due to an increase in the Company’sfinancing for certain equipment during thereporting 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
Item
Openingbalance
Profit or lossfrom changein fair value
during theperiod
Cumulativefair valuechangecharged toequity
Impairment
providedduring theperiod
Purchasesduring theperiod
Disposalduring theperiod
Otherchanges
ClosingbalanceFinancial assets
1. Held-for-trading financial assets
(excluding derivative financial assets)110,886,182.88-36,177,738.00-120,976,372.2774,708,444.88
2. Other non-current financial asset519,927,003.255,350,000.0062,860,000.00263,000,000.001,526,241.63786,750,761.62
3. Consumable biological assets
measured at fair value1,519,305,850.779,924,233.7229,984,996.6541,007,081.7773,629,347.421,496,607,818.84Total2,150,119,036.90-20,903,504.28-58,116,372.27304,007,081.7775,155,589.052,358,067,025.34Whether 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: RMBItem
Carrying amount as at
the end of the periodReasons for such restrictionMonetary funds11,840,974,836.57As deposits for bank acceptance bills, letter
of credit, letter of guarantee, loans, depositreserves and interest receivableFixed assets10,063,641,052.69As collateral for bank borrowings and long-
term payablesInvestment properties4,895,514,630.65As collateral for bank borrowingsIntangible assets1,033,897,418.27As collateral for bank borrowings and long-
term payablesAccounts receivable100,000,000.00As collateral for borrowingsAccounts receivable financing/bills
receivable
8,497,931.30As collateral for obtaining letters of creditTotal27,942,525,869.48
IV Management Discussion and Analysis
VII. Analysis of investments
1. Overview
√ Applicable Not applicable
Investments during the reporting period (RMB)
Investments during thecorresponding period of
prior year (RMB)Change3,362,620,040.001,707,210,000.0096.67%
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMBName of investeePrincipal activitiesForm of investment
InvestmentamountShareholding
Sourceof fundPartner(s)
Period ofinvestmentProduct type
Progress asat the date ofbalance sheet
EstimatedreturnProfit or lossfrom investment
for the period
Involvementin lawsuitDate ofdisclosure
DisclosureindexShouguang Jintou
Industrial InvestmentPartnership (LimitedPartnership)
Investment using self-owned funds, enterprisemanagement, andenterprise managementconsulting
Newly
established
2,360,000,000.00 49.57%Self-owned
funds andcontributionof thecreditor’srights of thefinancialleasingbusiness
Shouguang Jintou Asset
Management Co.,Ltd., ShouguangXianglin EnterpriseManagement Co.,Ltd. and ShandongJinming New MaterialsCo., Ltd.
Long-termEquity
investmentCompletedN/A-2,699.92 No22 November
2022http://www.
cninfo.com.cn
Jiaohui Chenming
Zhuli (Suzhou)Emerging IndustryDevelopment FundPartnership (LimitedPartnership)
Equity investment,
investment managementand asset managementthrough private equityfunds
Newly
established
263,000,000.00 50%Self-owned
funds
BOCOM Financial Assets
Investment Co., Ltd.and BOCOM CapitalManagement Co., Ltd.
7 yearsEquity
investment
CompletedN/A1,911,813.60No29 July 2022http://www.
cninfo.com.cnShanxi Fuyin IndustrialTrading Co., Ltd.
Sales of agricultural and
sideline products, salesof chemical products,sales of metal materials,etc.
Acquisition368,000,000.00100%Self-owned
fundsSubsidiaryLong-termTradingCompletedN/A0.00No8 December
2022http://www.cninfo.com.cnChongmin CultureDevelopment(Shanghai) Co., Ltd.
Real estate development
and operation, andproperty services
Acquisition100%Self-owned
funds
SubsidiaryLong-termProperty
operation
CompletedN/A0.00No8 December
2022
http://www.
cninfo.com.cnShouguang Meichen
Energy TechnologyCo., Ltd.
Research and development
of power savingtechnology, sales ofpaper products
Newly
established
361,620,040,00100%Investment with
self-ownedequipment
SubsidiaryLong-termElectricity
and steamgeneration
CompletedN/A-102,335.93NoN/AN/AJiangxi Chenming Tea
Co., Ltd.
Internet sales of food,
general sales of food
Newly
established
10,000,000.00100%Self-owned
funds
SubsidiaryLong-termTea plantation
and sales
CompletedN/A-1,975,450.93NoN/AN/ATotal3,362,620,040.00168,673.18
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 equity
Purchasedamount inthe current
period
Soldamount inthe currentperiodProfit or lossduring thereporting period
Book valueat the end ofthe reportingperiodClassification inaccountSource of fundDomestic and foreign
shares
09668China Bohai Bank195,684,817.15Measured at
fair value
110,886,182.88-36,177,738.00-120,976,372.270.000.00-36,177,738.0074,708,444.88Held-for-trading
financial assets
Self-owned
fundsTotal195,684,817.15110,886,182.88-36,177,738.00-120,976,372.270.000.00-36,177,738.0074,708,444.88Disclosure 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)
Not applicable
(2) Derivatives 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.
IV Management Discussion and Analysis
VIII. Disposal of material assets and equity interest
1. Disposal of material assets
√ Applicable Not applicable
Counterparty(ies)Asset disposedDisposal date
Transactionconsideration(RMB’0,000)
Net profitcontributionto theCompanyfrom thebeginning ofthe periodup to thedisposaldate(RMB’0,000)Effect ofdisposal onthe Company
Net profitcontribution
to the
Company
on assetdisposal asa percentage
of total net
profit
Pricingbasis ofdisposal ofassets
Relatedpartytransactionor not
Relationship withcounterparty(ies)(applicable torelated partytransactions)
Relevantasset titlefully transferredor not
Relevantdebt fullytransferredor not
Carried outon scheduleor not, if not,the reasonsand measurestaken by theCompany
Disclosuredate
DisclosureindexShouguang
LandReserveCentre
Land and plant
of ShandongChenmingNo. 1 Factory
18 December
2022
16,350.91-253.14Disposal of assets did
not affect the normaloperation of theCompany. Meanwhile,the realisation of idleassets was able toreplenish the liquidity.
38.47%Market
price
NoN/ANoYesYesN/AN/A
2. Disposal of material equity interest
Applicable √ Not applicable
IV Management Discussion and Analysis
IX. Analysis of major subsidiaries and investees
√ Applicable Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the CompanyUnit: RMBName of companyType of companyPrincipal activitiesRegistered capitalTotal assetsNet assetsRevenueOperating profitNet profitZhanjiang ChenmingPulp & Paper Co.,Ltd.
SubsidiaryProduction and sale of duplex
press paper, electrostaticpaper, and white paperboard
6,713,808,892.0025,386,729,557.968,809,784,591.7812,333,411,837.39106,223,344.21162,214,497.02Shouguang MeilunPaper Co., Ltd.
SubsidiaryProduction and sale of
coated paper, culturepaper, household paperand chemical pulp
4,801,045,519.0015,789,342,178.968,490,192,588.62 8,877,750,999.39406,927,308.71384,015,682.06Huanggang ChenmingPulp & Paper Co.,Ltd.
SubsidiaryProduction and sale of
chemical pulp
3,245,000,000.008,439,240,135.433,556,852,689.974,717,482,595.22271,191,525.79271,059,517.61
IV Management Discussion and Analysis
IX. Analysis of major subsidiaries and investees(Continued)
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Name of company
Methods to acquire and disposeof subsidiaries during thereporting period
Impact on overall production andoperation and resultsJiangxi Chenming Tea Co., Ltd.Newly establishedNet profit decreased by RMB1.98 million.Shouguang Meichen Energy TechnologyCo., Ltd.
Newly establishedNet profit decreased by RMB100,000.Shanxi Fuyin Industrial Trading Co., Ltd.AcquisitionNo effect.Chongmin Culture Development
(Shanghai) Co., Ltd.
AcquisitionNo effect.Qingdao Chenming Pulp & Paper
Electronic Commodity Spot TradingCo., Ltd.
DeregisteredNet profit increased by RMB6,800.Particulars of major subsidiaries and investees
1. During the reporting period, benefited from their cost advantages brought about by the pulp-paper integration, as well
as the substantial increase in the export volume of their major products, Zhanjiang Chenming and Shouguang Meilunenjoyed a relatively strong profitability.
2. During the reporting period, due to the high price of wood pulp, Huanggang Chenming
’s sales of wood pulpincreased.
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 industryThe paper making industry is closely related to national economic security, and the consumption level of paper andpaper board is an important indicator to measure the economy and civilisation of a country. Since the reform andopening up, with the sustained and rapid development of the national economy, China’s papermaking industry hasgradually begun to transform from extensive growth to intensive growth. Driven by the tightening of environmentalprotection policies and other factors, the papermaking industry’s production capacity and market concentrationhave been continuously improved, and the industry pattern becomes excellent, but there is still much scope forimprovement. In 2022, due to factors such as a sharp increase in upstream production costs and the sluggishdemand in the downstream market, the overall profitability of the papermaking industry declined, and the numberof loss-making papermaking enterprises above designated size increased. Repeated market tests accelerated theclearing up of low-end enterprises, and likely promoted the industry structure improvement.During the reporting period, the“waste ban”continued to be implemented, and the transformation of the raw materialstructure of the papermaking industry accelerated. The“plastic limit”achievements continued to be consolidated,which promoted the development of high-end and light-weighted products in the product structure. The“doublecarbon”policy was fully implemented, and the green development concept had driven the industry to improve itsenvironmental protection level. The decrease in the supply of overseas paper products brought new“overseasexpansion”opportunities for Chinese companies, and the leading papermaking companies accelerated their overseaslayout. The weak domestic market demand promoted resources optimisation and reorganisation, and the industrypattern had been continuously optimised. International pulp prices remained high, and domestic leading companiesaccelerated the whole industrial chain layout, while domestic paper prices gradually bottomed out, and largecompanies had announced price rises, marking an imminent recovery of industry prosperity.In the long run, according to the national“double circulation” strategy and the goal of China’s GDP per capita headingfor the level of a medium-level developed country by 2035, China’s paper market demand in the future will still growgreatly, indicating potential market demand. With the improvement of people’s pursuit of quality of life, high-end,environmentally friendly, lightweight and customised products will be more popular, and it is imperative to optimiseand upgrade the product structure. As both product functions and supporting services are important, upgradingproduct services will become an important channel to increase products’added value. Large-scale pulp and papercompanies have accelerated industry integration through M&A and joint venture activity, which further improvesindustry concentration. The industry has continuously improved the resource utilisation rate, and transformed towardsthe use of clean, renewable, high energy density and low emission resources. It is inevitable for large companies toenhance their comprehensive competitiveness through the whole industrial chain development.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)
(ii) Development strategy of the CompanyThe Company always takes“revitalising the Chinese papermaking industry”as its mission and adheres to the generalkeynote of a green, low-carbon, recycling and sustainable development with scientific development as main theme.Centring on efficiency enhancement, the Company focuses on pulp production and papermaking as major operation.The Company will adhere to the strategic layout of pulp and paper integration, vigorously implement the innovation-driven development strategy, and accelerate the growth driver replacement. With transformation and upgrade guidedby green ecology, the Company will fully exploit its advantages in full industry chain. The Company will commit itselfto implementing the green development strategy. Leveraging technological advancement, advanced equipment andstrict management, it will properly carry out clean production, develop a circular economy, and build a resource-saving and environment-friendly enterprise benchmark, so that it can seek development while protecting theenvironment, and improve the level of environmental protection in scientific development, achieving both economicand environmental benefits. Adhering to the strategy of strengthening the enterprise with talents, the Company willimprove the talent training, introduction, use and incentive mechanism, and actively cultivate high-end, compound,innovative and international talent teams, so as to promote the Company’s high-quality development, consolidateits position as a leading Chinese papermaking enterprise, and develop Chenming as a RMB100 billion enterprisewith sustainable operation for a century, striving to become the most globally competitive world-class papermakingenterprise!(iii) Operation plans for 20232023 is the first year to fully implement the spirit of the 20th National Congress of the China Communist Party. Thereport to the 20th National Congress put forward that we must continue to focus on the real economy in pursuingeconomic growth, which is in line with the Company’s direction to focus on its principal activities and strengthenindustrial production. In a new year, the Company will continue to conscientiously implement the managementpolicy of“people-orientation, refined management, problem-orientation, and practical work”in the complicated andchanging industry and market landscape. It will pay close attention to corporate operation management, strengthenfinancial risk management and control, comprehensively realise potential and increase efficiency, and unswervinglypromote the Company’s high-quality development.
1. Adhere to profitability priority and improve sales
In 2023, the market situation remains complicated and ever-changing. Following the Group’s strategicdeployment, the sales companies will be market-oriented to seize price rise opportunities, scientifically andrationally allocate various resources, strengthen channel management, expand to overseas markets, and furtherimprove the sales management level. The details are as follows: According to the market capacity and customerdistribution, we will integrate inefficient markets to enhance organisational efficiency; strengthen profitabilitymanagement, actively seek sources of growth, adjust product structure, and focus on the promotion and salesgrowth of key products, especially cigarette cardboard, liquid package cardboard and food cardboard. Wewill strengthen channel construction, further develop direct sales customers, develop high-quality distributors,optimise overseas layout, set up management areas and branches, and further expand the market scope. Wewill make full use of the Company’s industrial layout advantages, promote the close-range market distribution ofhigh-profitability products, and improve service efficiency and product competitiveness.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)(iii) Operation plans for 2023(Continued)
2. Strengthen financing control and realise stable operation.
In 2023, the Company will focus on profitability, refine fund management, strictly control financial expenses,take various measures to reduce the gearing ratio, and optimise the capital structure. The details are as follows:
We will rationally plan long, medium and short-term financing, strengthen cooperation with large state-ownedbanks in medium and long-term low-cost financing, further broaden financing channels for medium and long-term equipment collection and improve the asset utilisation rate. We will continue to promote the market-oriented exit of strategic investors of Shouguang Meilun and Zhanjiang Chenming, effectively replace minorityequity financing of subsidiaries with equity financing of the Company, and reduce the debt repayment pressure.We will strengthen asset management, continuously reduce the size of the financial leasing business, dispose ofinefficient assets and idle assets, improve asset management level, and ensure the Company’s stable operation.
3. Strictly control production and promote production and efficiency
In 2023, the Company will focus on producing marketable products, promote the continuous increase of high-profitability products, ensure the stable operation of pulp and paper production lines, advance the constructionof pulp and paper projects, and keep improving the profitability indicators and operation quality of productionsystems. The details are as follows. According to the changes of raw material prices, we will timely carryout domestic raw materials substitution and process optimisation adjustment to optimise product structure.We will strictly control the process, strictly implement the paper machine standard parameters, stabilise theoperation of papermaking machines and pulp production lines, and ensure the pulp and paper production andefficiency improvement. We will build a safety and quality monitoring network, strictly supervise safety andquality, implement the safety production responsibility system, and ensure safety production. We will strengthenequipment management, strictly implement the control and implementation of equipment information system,and realise machine-controlled early warning management for equipment spot inspection, periodic maintenanceand equipment overhaul. We will implement project management, and focus on pushing Huanggang phase IIproject, Zhanjiang Chenming special paper project with annual production capacity of 180,000 tonnes, andShouguang Headquarters softwood bleaching chemical pulp project with annual production capacity of 300,000tonnes forward.
4. Strengthen cost control and improve supply chain management level
In 2023, the Company will further strengthen supplier management, upgrade the level of cooperationorganisations, broaden procurement channels, fully exploit market potential, strictly control procurement costs,and comprehensively improve supply chain management level. The details are as follows: We will strengthen theconstruction of raw material sourcing channels, cooperate with high-quality suppliers in Australia, Thailand andVietnam and other countries, and set up offices to ensure a stable supply of high-quality raw materials. We willconduct in-depth study and analysis of market rules, seize the timing for procurement, determine reasonableprocurement quantity, and improve procurement efficiency. We will introduce new processes and technologies,optimise the use of raw materials, deepen domestic product substitution, and exploit the cost potential. Wewill strengthen cooperation with strategic cooperation customers, strive for financial support to the maximumextent, and reduce financial costs. We will develop innovative ideas, further promote consignment mode, reducecapital occupation, and achieve efficiency improvement in supply chain management.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)
(iii) Operation plans for 2023(Continued)
5. Strengthen basic management to help high quality development
In 2023, the Company will continue to pay close attention to the basic management, focus on operatingprofit management, study and implement the profitability-enhancing measures in view of the key and weakmanagement links. The details are as follows: We will further consolidate team building, optimise staffing,strengthen employee training, improve performance appraisal management methods, and proceed withthe transformation and upgrade to human capital management from human resource management to helpcontinuous human capital adding value. We will strengthen the internal audit supervision management, improveinternal review coverage, check and correct mistakes, strictly investigate and deal with breaches of regulationsand disciplines, and improve the supervision and rectification implementation rate. We will further strengthenthe system construction, timely rectify the problems in the operation and management process, formulateand improve the excellent management system, ensure that all key issues are well-founded and effectivelyimplemented, improve the management level, and realise high-quality development.(iv) Future capital requirements and source of fundsFuture 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 and improving its operatingperformance, the Company will expand its financing channels and optimise financing structure through well plannedlong and short-term bond issue, introduction of third-party strategic investors, refinancing and other means, thusproviding stable financial support for the operation and development of the 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.Focusing on its principal operation on pulp production and papermaking, the Company will strive to itsinnovation-driven strategy. Centring on improving quality and efficiency, the Company will comprehensivelyoptimise industrial structure and regional layout, establish coordinated, efficient industry system, and respondto challenges arose by leveraging on its cost advantages, thus realising steady growth in operating results. Atthe same time, the Company will strengthen the financial information system construction, regulate financialmanagement, expand financing channels, lower capital cost and strengthen its macroeconomic and policy riskaversion capability.
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)
2. Environmental protection risk
In recent years, policies such as the Announcement on Adjusting the Catalogue of Prohibited Commoditiesin Processing Trade, The 14th Five-Year (2021-2025) Plan for National Economic and Social Development ofthe People’s Republic of China and the Outline of Long-term Goals for 2035, the Opinions on Accelerating theHigh-Quality Development of the Manufacturing Services Industry and the Guiding Opinions on Acceleratingthe Establishment and Improvement of a Green, Low-Carbon and Cyclical Economic System have been issuedone after another, with increasingly stringent environmental protection requirements. Such higher nationalenvironmental protection standards will further increase the investment in pollution control by enterprises in theindustry and increase the operating costs of the Company in the short term.The Company always adheres to the development idea of“placing green development and environmentalprotection as its priority”and conducts clean production. The Company widely adopts new technologies forenergy saving and emission reduction and strives to achieve its waste emission target. At present, the Companyadopts the world’s most advanced“ultrafiltration membrane+reverse osmosis membrane”technology tocomplete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reachesmore than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water of170,000 cubic metres every day. At the same time, the Company actively explores the comprehensive utilisationof innovative resources and industrial recycling development models, and built three major circular economyecological chains of“resources-products-renewable resources”.
3. Risk of price fluctuation of raw materials
Wood pulp and wood chips are the major raw materials of the industry. If the prices of wood pulp and woodchips fluctuate sharply in the future, they will bring upward pressure on the production costs of enterprises,which will have a certain impact on the normal production and operation of enterprises in the industry.The Company strives to implement the development strategy of pulp and paper integration. At present,its production capacity of wood pulp has reached 4.3 million tonnes, and it has cultivated a strong self-sufficiency of wood pulp. At the same time, it has established a more comprehensive supply chain managementmechanism, practiced source procurement, carried out long-term cooperation, closely followed the price trendsof the raw materials market, and strove to improve its forecasting ability, in order to minimise the impact offluctuations 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
As a strategic and fundamental industry closely related to the national economy, the papermaking industryhas made significant progress along with the steady development of the Chinese economy. Although thepapermaking industry has accelerated the elimination of outdated production capacity after several roundsof environmental protection policies, the industry structure has been optimised. However, there remains thephenomena of a large number of enterprises, excess and scattered production capacity, a large number of mid– and low-end products, and product homogeneity. The market competition is fierce.The Company will focus on improving product quality and supporting services, improve process technology,strengthen research and development capabilities, and enhance scientific and technological added value. Beingmarket-oriented, it will produce products that meet market demand and enhance core competitiveness, with aview to ensuring a stable and sustainable improvement in its operating results.
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.Chenming Leasing has comprehensive risk prevention and control measures for the financial leasing business,with strong risk resistance and low risk of default. At present, the Company focuses on the development ofits principal activities, i.e. pulp production and paper making, and continues to reduce the size of the financialleasing business. As at the end of the reporting period, the balance of financial leases of Chenming Leasingdecreased to RMB5.79 billion.
IV Management Discussion and Analysis
XII. Reception of research investigations, communications and interviews during the reportingperiod
√ Applicable Not applicable
Date of receptionSite of receptionWay of receptionType of recipientRecipient
Major discussionpoints and informationprovided
Index of the basicparticulars of the survey2 April 2022Panorama ? Interactive
Platform for InvestorsRelationship
OthersIndividuals and
institutions
Investors participatingin the 2021 annualresults briefing of theCompany
Company and industryoverview, theCompany’s 2021operating results andfuture prospects,project progress, etc.
For details, please
refer to the InvestorRelations ActivityRecord Sheet onwww.cninfo.com.cn4 May 2022Meeting room of the
Company
Conference callInstitutionsGuosheng Securities,
JIC Trust, DonghaiFunds, etc.
Company’s operatingconditions, businessconditions, industryoutlook, etc. for thefirst quarter of 2022
For details, pleaserefer to the InvestorRelations ActivityRecord Sheet onwww.cninfo.com.cn5 September 2022Meeting room of the
Company
Conference callInstitutionsGuosheng Securities,
Ping An AssetManagement, HorizonAsset, GTS Fund
Company’s operatingconditions, productioncapacity, projectprogress, etc. for thefirst half of 2022
For details, please
refer to the InvestorRelations ActivityRecord Sheet onwww.cninfo.com.cn16 November 2022Panorama ? Interactive
Platform for InvestorsRelationship
OthersIndividuals and
institutions
Investors who
participated inthe 2022 InvestorOnline CollectiveReception Day ofListed Companies inShandong
Corporate governance,
development strategy,operating status, etc.
Panorama“Investorrelations InteractivePlatform” (http://ir.p5w.net)
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 2022.I.Principal activitiesPlease refer to“II. Principal operationsof 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 distributionPlease refer to section XII“Financial Report” for the results of the Group for the year ended 31 December 2022.
III.DividendsDuring the reporting period, as the domestic market demand was insufficient due to the economic environment, the salesvolume of machine-made paper decreased year on year. At the same time, due to the rising prices of wood chips,chemicals, raw coal and other raw materials as well as energy prices, the Company faced great cost pressure. The netprofit attributable to shareholders of the Company for the reporting period decreased as compared with thecorresponding period of the prior year. Considering factors such as the current macroeconomic environment and theCompany’s strategic planning, the Board proposed not to pay cash dividend, issue bonus shares and increase sharecapital from reserves for 2022 to further reduce its liability size, optimise its capital structure, enhance the Company’sfinancial resilience, and satisfy the capital needs for, among other things, day-to-day production and operation, andproject construction, thereby enhancing risk resistance, securing the sustainable and steady development of the pulpproduction and paper making business, the principal business of the Company, and better safeguarding the long-terminterests of all shareholders, subject to approval of shareholders at the forthcoming annual general meeting of the Companyheld on 12 May 2023 (the“AGM”).
V Directors’ Report
IV. Closure of register of membersThe register of members of the Company will be closed from 9 May 2023 (Tuesday) to 12 May 2023 (Friday) (both daysinclusive), 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 12 May 2023 (Friday), 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 2023 (Monday).
V. Five-year financial summaryPlease refer to“IX. Five-year financial summary under paragraph 19 of appendix 16 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. Donations
During the year, the Company donated RMB805,000.00 (2021: RMB1,142,550.00) 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 of
acquisition 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 details
of changes in property, plant and equipment of the Group for the year ended 31 December 2022.IX. Share capital
Please refer to“I. Changes in shares”under section IX“Changes in Share Capital and Shareholders”for details of changes
in share capital of the Company for the year ended 31 December 2022.X. Pre-emptive rights
In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
shareholders 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 31
December 2022, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB9,857,716,037.54 (2021: RMB9,760,083,766.83) as set out in“II. Financial
Statements 1. Consolidated Balance Sheet”under section XII“Financial Report”.
V Directors’ Report
XII. DirectorsAs at 31 December 2022, 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 contracts
All 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.
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“XII. Related parties and related party transactions”in section XII“Financial Report”.In 2022, the Company had 24 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)Number
4.8 million to 5.2 million1
4.0 million to 4.8 million0
3.6 million to 4.0 million0
3.2 million to 3.6 million1
2.8 million to 3.2 million0
2.4 million to 2.8 million1
2.0 million to 2.4 million1
1.6 million to 2.0 million5
1.2 million to 1.6 million1
0.8 million to 1.2 million0Below 0.8 million14
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 during the year.
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and chief executives
As at 31 December 2022, 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 CompanyNamePosition
Number of shares (A shares)held as at the end of thereporting period (shares)DirectorsChen Hongguo (Note 1)Chairman and general manager31,080,044Hu ChangqingExecutive Director and vice chairman3,792,857Li XingchunExecutive Director and vice chairman5,000,000Li FengExecutive Director and deputy general manager3,156,027Li WeixianExecutive Director and deputy general manager1,562,100Han 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 KangSupervisor149,300Pan AilingSupervisor–Zhang HongSupervisor–Sang AilingSupervisor–Qiu LanjuSupervisor–Associated corporations
NamePosition
Name of associatedcorporations
Number ofshares held atthe beginningof the reportingperiod (shares)
Change duringthe period (+/-)
Number ofshares held atthe end of thereporting period
(shares)Chen HongguoChairmanShouguang Henglian
Enterprise Investment Co. Ltd. (Note 2)
231,000,000–231,000,000Note 1: Save for the 31,080,044 A shares held personally, Chen Hongguo is deemed to be interested in the 3,861,322 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.
As a result, the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by
Shouguang Henglian is also deemed to be held by Chen Hongguo.
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and chief executives(Continued)Save as disclosed above, as at 31 December 2022, 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 10 to the Rules Governingthe Listing of Securities on Hong Kong Stock Exchange (hereinafter referred to as the“Hong Kong Listing Rules”). Saveas disclosed above, as at 31 December 2021, none of the Directors, Supervisors or chief executives of the Company hadany 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 10 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 2022, 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 2022, 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 as
a percentage ofName
Number of shares
held (shares)
Total sharecapital (%)
Class ofshares (%)Chenming Holdings Co., Ltd.457,322,919A shares (L)15.3526.21Chenming Holdings (Hong Kong) Limited210,717,563 B shares (L)7.0729.83Chenming Holdings (Hong Kong) Limited153,414,000 H shares (L)5.1529.04(L) – Long position (S) – Short position (P) – Lending poolSave as disclosed above, as at 31 December 2022, 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 provisionNone 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.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 2022.
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 planfor 2023”and“(IV) Future capital requirements and source of funds”of“XI. Outlook on the future development of theCompany”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 2022 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 July 18, 2022, the Company convened the second extraordinary meeting of the tenth session of the Board and thefirst extraordinary meeting of the tenth session of the Supervisory Committee, at which the Company considered andapproved the Resolution on the Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Schemeand Repurchase and Cancellation of Certain Restricted Shares. In view of the fact that 15 of the proposed participantsof the Company’s 2020 Restricted A Share Incentive Scheme failed to comply with the unlocking conditions of the2020 Restricted A Share Incentive Scheme (Draft) due to, among others, resignation, change of duty and removal fromoffice. According to the authorisation granted at the 2020 second extraordinary general meeting, the 2020 first classmeeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed sharesof the Company, the Board will repurchase and cancel certain restricted shares granted to the persons mentionedabove but not yet unlocked, with a repurchase of 4,466,000 shares at a repurchase price of RMB2.5184172 per share.Calculated based on the repurchase price plus bank loan interest for the same period, the total amount of repurchasepayment was RMB12.3669 million. On 18 October 2022, the Company completed the repurchase and cancellationprocedures of the 4,466,000 restricted A shares at the Shenzhen Branch of China Securities Depository and ClearingCorporation Limited.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 Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2022 have been reviewedby the Audit Committee of the Company.
XXX. Gearing ratio
As at 31 December 2022, the Company’s gearing ratio (including minority interest) was 60.88%, representing a decrease of
0.67 percentage point from 61.55% for 2021.
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 a large integrated pulp and paper enterprise in China that achievesa complete balance of pulp production and paper making, the Company have maintained a leading position among itsindustry peers for over 20 consecutive years in terms of its main indicators of corporate economic efficiency.The Company has good sustainable profitability. In 2022, the Company realised revenue of RMB32,004 million, net profit ofRMB317 million and net cash inflows from operating activities of RMB36,219 million.In compiling the accounts for the year ended 31 December 2022, the Directors have chosen and thoroughly applied theappropriate accounting policies with due and reasonable judgement and estimates having been made, and prepared theaccounts on a going concern basis. The auditor of the Company has prepared the 2022 annual financial report on a goingconcern basis, and has issued a standard unqualified audit opinion (see Financial Report section).Therefore, the Board believes the Company has the ability to continue as a going concern.XXXII. Connected transactionsOn 30 March 2022, each of Qingdao Chenming Nonghai Financial Leasing Co., Ltd. (“Qingdao Chenming”) and ChenmingLeasing, both are the indirect wholly-owned subsidiaries of the Company, entered into a loan transfer agreement withKunpeng Asset Management Co., Ltd. (“Kunpeng Asset”), pursuant to which, each of Qingdao Chenming and ChenmingLeasing intended to sell the loans with a total carrying amount of approximately RMB305 million to Kunpeng Asset at a totalconsideration of RMB304 million.Chenming Holdings is a connected person of the Company. As Qinghai Chenming Industrial Co., Ltd. is owned as to 67%by Chenming Holdings and Kunpeng Asset is owned as to 51% by the former, Kunpeng Asset is also a connected personof the Company. Accordingly, the transactions under these loan transfer agreements constitute connected transactions ofthe Company under Chapter 14A of the Listing Rules.The Board believes that the disposal of the loans can improve the asset management efficiency of the Company, furtherreduce the size of the financial leasing business, accelerate the capital recovery of the financial leasing business of theCompany, enhance the liquidity of the assets of the Company, and improve the asset-liability structure and operating cashflows, which will in turn provide financial support for the sound business development of the Company and is conducive topromoting the business development of the Company.For details, please refer to the announcement dated 30 March 2022 of the Company.Save as disclosed above, for the year ended 31 December 2022, the Group did not enter into any connected transactionrequired under the Listing Rules of the Stock Exchange. The related party transactions entered into by the Group during theyear ended 31 December 2022 are set out in Note XII to the financial statements. Save as disclosed above, these relatedparty transactions do not constitute connected transactions or continuing connected transactions (as defined in the ListingRules of the Stock Exchange) of the Group.
V Directors’ Report
XXXIII. Major investment, acquisition and disposalDuring the year ended 31 December 2022, the Group entered into the following major transaction agreements.
1. Entering into capital contribution agreement for the introduction of investors to contribute capital to
Zhanjiang Chenming
On 27 June 2022, the Company, CDB Development Fund Co., Ltd., Beijing Chuanfa Investment Management Co.,Ltd., Xiamen International Trade Industry Development Equity Investment Fund Partnership (Limited Partnership) andZhanjiang Chenming entered into a capital contribution agreement, pursuant to which Xiamen International TradeIndustry Development Equity Investment Fund Partnership (Limited Partnership) agreed to inject capital in an amountof RMB400,000,000 to Zhanjiang Chenming pursuant to the terms and conditions under the capital contributionagreement.On 28 July 2022, the Company, BOCOM Financial Assets Investment Co., Ltd. and Zhanjiang Chenming entered intoa capital contribution agreement, pursuant to which BOCOM Financial Assets Investment Co., Ltd. agreed to injectcapital in a total amount of RMB500,000,000 to Zhanjiang Chenming pursuant to the terms and conditions under thecapital increase agreement. On the same date, the Company, Jiaohui Chenming Zhuli (Suzhou) Emerging IndustryDevelopment Fund Partnership (Limited Partnership) and Zhanjiang Chenming entered into a capital contributionagreement, pursuant to which Jiaohui Chenming Zhuli (Suzhou) Emerging Industry Development Fund Partnership(Limited Partnership) agreed to inject capital in a total amount of RMB500,000,000 to Zhanjiang Chenming pursuantto the terms and conditions of the capital increase agreement.For details, please refer to the announcements of the Company dated 27 June 2022 and 28 July 2022.
V Directors’ Report
XXXIII. Major investment, acquisition and disposal(Continued)
2. Purchase of Assets by issue of consideration shares and cash payment
On 21 November 2022, the Company and Dongxing Securities Investment Co., Ltd. entered into the Agreementon Assets Purchase by Issuance of Shares, pursuant to which the Company conditionally purchased 1.19% equityinterest in Shouguang Meilun held by Dongxing Securities Investment Co., Ltd. On the same date, the Company,Chenming Investment, Chongqing International Trust Inc. and Chenming (Qingdao) Asset Management Co., Ltd.entered into the Agreement on Asset Purchase by Issuance of Shares and Cash Payment, pursuant to whichthe Company conditionally purchased 44.44% limited partnership share in Chenrong Fund held by ChongqingInternational Trust Inc., and Chenming Investment purchase 0.22% general partnership share in Chenrong Fund heldby Chenming (Qingdao) Asset Management Co., Ltd. by cash payment. The shares issued for the asset purchase bythe issuance of shares are domestic-listed RMB ordinary shares (A shares) with a par value of RMB1.00 per share.The pricing benchmark date for the asset purchase by the issuance of shares is the announcement date of the firstresolution of the Board to consider the transactions. Under amicable negotiations among the parties, the price of theasset purchase by the issuance of shares was set at RMB4.42/share.The benchmark date for the audit and valuation of the subject assets involved in this transaction is 30 September2022. As at the end of this reporting period, the audit and valuation work was not completed. The transaction priceof the subject assets of the transactions will be based on the results of the valuation report issued by the valuationagency and filed with the state-owned assets supervision and administration institution or its authorised unit,determined through negotiations by the parties to the transactions, and agreed by the parties through signing asupplementary agreement. The final number of the shares to be issued is subject to the number approved by theCSRC. Should there be any distribution of dividend, issue of bonus shares, conversion of capital reserve into sharecapital of the Company from the pricing benchmark date to the issue date of the issuance, the issue price will beadjusted accordingly in accordance with the relevant rules of Shenzhen Stock Exchange, and the number of sharesissued will also be adjusted accordingly.For details, please refer to the announcement of the Company dated 21 November, 2022.
3. Concluded a partnership agreement on the establishment of a limited partnership enterprise
On 21 November 2022, Shouguang Jintou Asset Management Co., Ltd. (the general partner), Shouguang XianglinEnterprise Management Co., Ltd. (a limited partner) and Shandong Jinming Trade Co., Ltd. (a limited partner) enteredinto a partnership agreement in relation to the establishment of a limited partnership with Shanghai ChenmingFinancial Leasing Co., Ltd. (a limited partner), a subsidiary of the Company, and Jiangxi Chenming (a limited partner).The name of the limited partnership is Shouguang Jintou Industrial Investment Partnership (Limited Partnership)(tentative name, subject to industrial and commercial registration), and the total capital contribution to be made byall partners is RMB4.761 billion, of which Shouguang Jintou Asset Management Co., Ltd. made cash contributionof RMB1 million, Shouguang Xianglin Enterprise Management Co., Ltd. made cash contribution of RMB1.2 billion,Shandong Jinming Trade Co., Ltd. made cash contribution of RMB1 million, Shanghai Chenming Financial LeasingCo., Ltd. made contribution of its creditor’s rights in accounts receivable arising from the financial leasing businesswith an appraised value of RMB1.16 billion, and Jiangxi Chenming made cash contribution of RMB1.2 billion.For details, please refer to the announcement of the Company dated 21 November, 2022.
XXXIV. Tax relief
The 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 practiceTaking the actual situation of the Company into account, the Company continuously improved its legal person governancestructure, strengthened its internal control system, proactively organised Directors, Supervisors and the Senior Managementof the Company to attend the special training sessions of the regulatory departments to enhance their competence, andcontinuously strengthened its information disclosure in strict compliance with the requirements of the Company Law (
), the Securities Law (), the Code of Corporate Governance for Listed Companies (), theRules Governing Listing of Stocks on Shenzhen Stock Exchange (), the Listing Rules of HongKong Stock Exchange and the related requirements as required by the CSRC, thereby further enhancing the standardisedoperation level of the Company.As of the end of the reporting period, the actual practice of corporate governance complied with the requirements of theregulatory documents issued by the CSRC regarding the governance of listed companies.(I) Shareholders and general meetingThe Company regulates the convening, holding and proceedings of shareholder meetings in strict compliance with therequirements of the Rules Governing Shareholders’General Meetings of Listed Companies, the Articles of Associationand the Company’s Rules of Procedure of the General Meeting of Shareholders, and both on-site voting and onlinevoting are provided as channels to participate in such meetings. Where material matters which affect the interests ofminority shareholders are considered, the votes by minority shareholders are counted separately to ensure that theminority shareholders enjoy equal status and all shareholders can exercise their rights in full. During the reportingperiod, the general meetings convened by the Company were witnessed by lawyers with issue of their legal opinionsto effectively safeguard the legitimate rights and interests of the listed company and all shareholders.(II) Controlling shareholder and the listed companyDuring 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 Board
The Board of the Company has a total of 11 Directors, of which 4 are independent Directors. They are professionals
with professional knowledge in finance, law, management, etc., ensuring the quality and level of decision-making
by the Board. During the reporting period, the Board held a total of 12 meetings, and the convening and holding
of Board meetings were in strict compliance with the Articles of Association and the Rules of Procedure of Board
Meetings and other relevant provisions. Directors of the Company were able to diligently perform their duties. They
attended meetings on time and reviewed each proposal earnestly, which had pivotal impact on decision in corporate
governance. Independent Directors performed their duties independently and expressed their independent opinions
on 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 Committee, 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 Board during the reporting period.
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 8 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 transparency
The Company earnestly fulfils its information disclosure obligation, and makes true, accurate, timely, complete andfair disclosure in respect of the Company’s information without false information, misleading statement or materialomission 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 180 periodic reports, interim announcements, and related documents through the website of the Hong KongStock Exchange, ensuring that all shareholders had fair access to company-related information and had full right toknow.(VI) Prevention and control of insider informationDuring the reporting period, the Company strictly complied the provisions of the“Registration Management Systemof Personnel with Insider Information”to strengthen the confidentiality of insider information and improve theregistration and management of personnel with insider information. The Directors, Supervisors, Senior Managementand other related personnel of the Company were able to strictly observe their confidentiality obligations throughoutthe preparation of periodic reports, temporary announcements and the planning of major events. There was no casewhere insiders use inside information to buy and sell company shares before the disclosure of material and sensitiveinformation that affects the stock price of the Company, and there is no case where they are investigated by theregulatory authorities.
(VII) Relevant stakeholders
During the reporting period, the Company always insisted on honest operation and was able to fully respect andsafeguard the legitimate rights and interests of stakeholders such as bankers and other creditors, employees,suppliers and consumers, strengthened communication and exchange with all parties, and actively cooperate tojointly promote the sustainable, stable and healthy development of 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.
III. Competition in the industry
Applicable √ Not applicable
VI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reportingperiod
1. General meetings during the reporting period
MeetingType of meeting
Attendance rateof investorsConvening dateDisclosure dateResolutions of meeting2021 annual generalmeeting
Annual general
meeting
20.22%11 May 202212 May 2022http://www.cninfo.com.
cn (announcement no.:
2022-032)2022 first extraordinarygeneral meeting
Extraordinary generalmeeting
19.81%15 June 202216 June 2022http://www.cninfo.com.
cn (announcement no.:
2022-049)2022 secondextraordinary generalmeeting
Extraordinary generalmeeting
20.85%23 December
2022
24 December2022
http://www.cninfo.com.
cn (announcement no.:
2022-096)
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 ofthe beginningof the term
Date of theend of the term
Shareholdingat thebeginning of
the period
(shares)
Increase inthe numberof sharesheld duringthe period(shares)Decrease inthe number
of sharesheld duringthe period(shares)
Otherchanges(shares)Shareholdingat theend ofthe period(shares)Reason forchangesChen HongguoChairmanIn officeM586 September
2001
15 June 202531,080,04400031,080,044N/AGeneral manager15 June 202215 June 2025Hu ChangqingVice chairmanIn officeM5723 June 201815 June 20255,042,85701,250,00003,792,857Personal capital
needsLi XingchunVice chairmanIn officeM5711 June 201915 June 20255,000,0000005,000,000N/ALi FengDirectorIn officeM4919 June 202015 June 20253,906,0270750,00003,156,027Personal capital
needsDeputy general
manager
15 June 202215 June 2025Li WeixianDirectorIn officeM4115 June 202215 June 20252,240,2000678,10001,562,100Personal capital
needsDeputy general
manager
6 November
2019
15 June 2025Han TingdeDirectorIn officeM5411 June 201915 June 202500000N/ALi ChuanxuanDirectorIn officeM4511 June 201915 June 202500000N/ALi ZhihuiIndependent
Director
In officeM6415 June 202215 June 202500000N/ASun JianfeiIndependent
Director
In officeM5011 June 201915 June 202500000N/AYin MeiqunIndependent
Director
In officeF5211 June 201915 June 202500000N/AYang BiaoIndependent
Director
In officeM4311 June 201915 June 202500000N/ALi KangSupervisorIn officeF4127 July 202015 June 2025149,300000149,300N/A
Chairman of theSupervisoryCommittee
15 June 202215 June 2025Pan AilingSupervisorIn officeF5811 June 201915 June 202500000N/AZhang HongSupervisorIn officeF5811 June 201915 June 202500000N/AQiu LanjuSupervisorIn officeF4911 June 201915 June 202500000N/ASang AilingSupervisorIn officeF4419 April 202115 June 202500000N/ALi XueqinDeputy general
manager
In officeF5718 March 200315 June 20253,861,3220003,861,322N/ALi ZhenzhongDeputy general
manager
In officeM4920 March 201115 June 20252,113,0000166,60001,946,400Personal capital
needsLi MingtangDeputy general
manager
In officeM5515 June 202215 June 20251,000,0000250,0000750,000Personal capital
needsGe GuangmingDeputy general
manager
In officeM5215 June 202215 June 202500000N/ADong LianmingFinancial
controller
In officeM4812 October
2018
15 June 20251,069,6000210,0000859,600Personal capital
needsYuan XikunSecretary to the
Board
In officeM3716 May 201815 June 2025344,700000344,700N/AChu Hon LeungHong Kong
companysecretary
In officeM4011 June 201915 June 202500000N/AChen GangGeneral managerResignedM508 August 202115 June 20221,139,7000200,0000939,700Personal capital
needsTotal56,946,75003,504,700053,442,050
During the reporting period, did any Director and Supervisor resign and was any member of the Senior Managementdismissed during their term of office Yes √ No
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 applicable
NamePositionTypeDateReason
Li WeixianDirectorElected15 June 2022Election of the new session, and elected as a
Director of the tenth session of the Board atthe 2022 first extraordinary general meeting.Li ZhihuiIndependent
Director
Elected15 June 2022Election of the new session, and elected as an
independent Director of the tenth sessionof the Board at the 2022 first extraordinarygeneral meeting.Li KangChairman of the
SupervisoryCommittee
Elected15 June 2022Elected as the chairman of the Supervisory
Committee at the first meeting of the tenthsession of the Supervisory Committee.Chen HongguoGeneral managerAppointed15 June 2022Appointed as the general manager of the
Company at the first meeting of the tenthsession of the Board.Li FengDeputy general
manager
Appointed15 June 2022Appointed as a deputy general manager of the
Company at the first meeting of the tenthsession of the Board.Li MingtangDeputy general
manager
Appointed15 June 2022Appointed as a deputy general manager of the
Company at the first meeting of the tenthsession of the Board.Ge GuangmingDeputy general
manager
Appointed15 June 2022Appointed as a deputy general manager of the
Company at the first meeting of the tenthsession of the Board.Chen GangGeneral managerResigned upon
expiry of theterm
15 June 2022Resigned upon expiry of the term
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 Labor Medal(), Nationwide Excellent Entrepreneur () and USA RISI CEO ofthe Year (“CEO”). He is vice chairman of the China National Light Industry Council.He joined the Company in 1987 and had held positions including chief officer of manufacturing section,chief officer of branch factory, deputy general manager, Director of the Company and the chairman ofWuhan Chenming. He is currently the chairman and general manager of Chenming Holdings, the chairmanand general manager of the Company and a Party Committee Secretary. Mr. Chen Hongguo is the spouseof Ms. Li Xueqin, a deputy 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 Holdings Co.,Ltd., accumulating more than 30 years of experience in industry, securities, trust and other fields. He iscurrently the chairman of Leadbank Technology Ltd., director of Western Leadbank Fund ManagementCo., Ltd., independent director of Huadian International Power Co., Ltd., chairman of Kunpeng AssetManagement Co., Ltd., and a vice chairman of the Company.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, the general manager of the Group,and chairman of the financial division of a group. He is currently an executive Director and deputy generalmanager 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 the manager of thebond business department of Hengtai Changcai Securities Co., Ltd., and a non-executive Director of theCompany.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 is currently a non-executive Directorof 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., an external director of XinxingHeavy Industries Group Co., Ltd. and an external supervisor of Dezhou Bank Co., Ltd. He is currently anindependent Director of the Company.
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 ofNevada, Reno, and concurrently served as the consultant of hedge funds such as Eagle Peak Fund LP.From August 2010 to February 2017, he was an assistant professor at Antai College of Economics &Management, Shanghai Jiao Tong University. He was selected in the National Academic LeadershipTalent Programme in Accounting (Standby List) (()) organised by theMinistry of Finance, as well as the Shanghai Pujiang Talent Programme. From February 2017 to August2020, he was a professor at the Institute for Social and Economic Research of Nanjing Audit University,and a part-time professor at Antai College of Economics & Management and Advanced Institute ofFinance, Shanghai Jiao Tong University. He is currently an Associate professor of Shanghai AdvancedInstitute of Finance of Shanghai Jiao Tong University, supervisor of Boyang (Shanghai) Energy TechnologyCo., Ltd., independent director of Nanya New Material Technology Co., Ltd., independent director ofSuzhou Tianwo Technology Co., Ltd., independent director of Cubic Digital Technology Co., Ltd., and anindependent 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 is, among others, one of the“Guangzhou Top Ten Young and Middle-aged Jurists”, an outstanding young talent in the“GuangdongSpecial Support Programme”, a selected member in the“Double Thousand Plan ()”of theMinistry of Education and the Central Politics and Law Committee, a training candidate in the“Thousand-Hundred-Ten project ()”for universities in Guangdong Province, a member of the first councilof the Civil Prosecution Professional Committee of the Procuratorial Research Association of the ChinaLaw Society, a member of the Expert Advisory Committee to Guangdong People’s Procuratorate, asupervisory member and judicial advisory expert of the Standing Committee of Guangzhou People’sCongress, an expert certified in Major Administrative Decision-Making and Argumentation in Guangzhouand a member of the Expert Committee of the Department of Emergency Management of GuangdongProvince. He has also served as an independent director of Guangdong Tianhe Agricultural ResourcesCo., Ltd., an independent director of Qiaoyi Logistics Co., Ltd., an external director of Science City(Guangzhou) Investment Group Co., Ltd., a director of Guangzhou Zhongda Nansha TechnologyInnovation Industrial Park Co., Ltd., a director of Guangzhou Zhongda Intellectual Property ServiceCo., Ltd., an external supervisor of Dongguan Rural Commercial Bank Co., Ltd., and a supervisor ofGuangzhou Chuanwen Education Consulting Co., Ltd. He is currently an independent Director of theCompany.Ms. Yin Meiqun holds a doctorate in accounting, and is a professor, an advisor to doctoral students, and acertified public accountant in China. She paid academic visits to Sweden, Finland, Denmark and the IowaState University in the United States. From July 1993 to June 2007, she was a professor in the departmentof accounting at Harbin University of Science and Technology. From July 2007 to August 2021, she wasa professor of Beijing International Studies University. She is currently a professor of China University ofPolitical Science and Law, a representative of the 15th Beijing Municipal People’s Congress, a memberof the Accounting Education Committee of the Accounting Society of China, a council member of theAccounting Society of China, a member of the IMA China Management Accounting Expert Committee, anindependent director of Beijing Life Insurance Co., Ltd, and an independent director of China Best GroupHolding 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, assistant to thegeneral manager of the management section of purchasing department, and deputy financial controller of theCompany. She is currently the chairman of the Supervisory Committee of the Company, responsible for themanagement of the audit department.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 the vice chairperson of theAccounting Institute, Shandong Province (), a council member of Shandong ComparativeManagement Association, a visiting scholar at University of Connecticut in the United States and a state-levelcandidate for the New Century Ten Million Talents Project (“”). She is a specialist entitledto the State Council Special Allowance (), and a special expert of the Taishan Scholar. Sheis 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 independentdirector of Shandong Xinhua Medical Equipment Co., Ltd., and an independent director of Shandong SunwayChemical Group 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, head of a multinational corporation research institute, a non-practisingmember of the Chinese Institute of Certified Public Accountants, a director of China Association of InternationalTrade, a director of Shandong Province External Trade Association, an independent director of Shandong Hi-speed Road & Bridge Group Co., Ltd., an independent director of Vosges Group Co., Ltd., an independentdirector of China National Heavy Duty Truck Group Jinan Truck Co., Ltd., and an independent director of CisenPharmaceutical Co., Ltd. She is currently a Supervisor 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.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
Mr. Chen Hongguo is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He is asenior 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 Labor Medal (
), Nationwide Excellent Entrepreneur () and USA RISI CEO of the Year(“CEO”). He is a vice chairman of the China National Light Industry Council. He joinedthe Company in 1987 and had held positions including chief officer of manufacturing section, chief officer ofbranch factory, deputy general manager, Director of the Company and the chairman of Wuhan Chenming. Heis currently the chairman and general manager of Chenming Holdings, the chairman and general manager ofthe Company and a Party Committee Secretary. Mr. Chen Hongguo is the spouse of Ms. Li Xueqin, a deputygeneral manager of the Company.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 and general manager 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 deputy 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 joined theCompany in 1995 and had served as principal representative of the Shanghai management region of a salescompany, sales manager of light weight coated culture paper products, general manager 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
Whether receivingany remunerationor allowance fromthe shareholderof the Company
Chen HongguoChenming Holdings
Company Limited
Chairman and
general manger
22 September 201629 December 2023NoHu ChangqingChenming Holdings
Company Limited
Director22 September 201629 December 2023NoLi XueqinChenming Holdings
Company Limited
Director22 September 201629 December 2023NoLi FengChenming Holdings
Company Limited
Director13 August 202129 December 2023NoExplanation of the
employment at theshareholder of theCompany
Nil
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 applicable
Name ofemployeeName of other unitsPosition at other units
Date of thebeginning of the term
Date of theend of the term
Whether receivingany remuneration orallowance fromother unitsYang BiaoGuangdong Guangzhou Daily Media Co., Ltd.Independent director19 August 201919 August 2022YesYang BiaoGuangdong Tianhe Agricultural Means of Production 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 201729 September 2023YesSun JianfeiSuzhou Thvow Technology Co., Ltd.Independent director8 May 2020YesSun JianfeiCubic Digital Technology Co., Ltd.Independent director18 May 202118 May 2024YesSun JianfeiZhejiang Yueling Co., Ltd.Independent director1 November 201613 May 2022YesYin MeiqunShangqiu Dingfeng Wood Co., Ltd.Independent director21 April 202120 April 2024YesYin MeiqunChina Best Group Holding LimitedIndependent director1 December 202130 November 2024YesLi ZhihuiTianjin Troila Information Technology Co., Ltd.Independent director31 August 201917 October 2022YesLi XingchunHuadian International Power Co., Ltd.Independent director30 June 202029 June 2023YesPan AilingShinva Medical Instrument Co., Ltd.Independent director27 July 202026 July 2023YesPan AilingLu Thai Textile Co., Ltd.Independent director6 June 20169 June 2022YesPan AilingShandong Denghai Seed Industry Co., Ltd.,Independent director12 April 201910 May 2022YesPan AilingShandong Sunway Chemical Group Co., Ltd.Independent director15 May 202015 May 2023YesZhang HongShandong Zhangqiu Blower Co., Ltd.Independent director27 March 201922 April 2022YesZhang HongSunvim Group Co., Ltd.Independent director15 July 201927 May 2023YesZhang HongSinotruck Jinan Truck Co., Ltd.Independent director28 April 202027 April 2023YesZhang HongCisen Pharmaceutical Co., Ltd.Independent director8 December 20208 December 2023YesZhang HongShandong Hi-speed Road & Bridge Group Co., Ltd.Independent director23 April 201922 June 2023YesSanctions against current Directors, Supervisors and Senior Management of the Company and those who resigned duringthe 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 the band ofRMB0.20 million to 5.00 million and the specific amount for each of them was determined by the remunerationcommittee based on the main financial indicators and operation target completed by the Company, the scope ofwork and main responsibilities of the Directors and Senior Management of the Company, the target completionof the Directors and Senior Management as assessed by the duty and performance appraisal system, as wellas business innovation capability and profit generation ability of the Directors and the Senior Management. Theannual remuneration of Supervisors assuming specific managerial duties in the Company were determined bythe general manager office of the Company based on specific managerial duties assumed by them. Fixed annualremuneration policy was adopted on external Supervisors who did not hold actual management positions inthe Company. As approved at the 2022 first extraordinary general meeting of the Company, the Company paideach of the independent non-executive Directors and non-executive Directors of the Company allowance ofRMB200,000 (before tax). The remuneration of external Supervisors amounted to RMB100,000 (before tax). Thetravel expenses for attending board meetings, supervisory meetings and general meetings of the Company andfees reasonably incurred in the performance of their duties under the Articles of Association by independentnon-executive Directors, non-executive Directors and 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.
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)
Unit: RMB’0,000
NamePositionGenderAgeStatus
Totalremunerationbefore taxreceived fromthe Company
Receivedremunerationfrom relatedparties of theCompany
Chen HongguoChairman and general managerM58In office359.99NoHu ChangqingVice chairmanM57In office224.65NoLi XingchunVice chairmanM57In office480.00YesLi FengDirector and deputy general managerM49In office195.03NoLi WeixianDirector and deputy general managerM41In office256.04NoHan TingdeDirectorM54In office20.00NoLi ChuanxuanDirectorM45In office20.00NoLi ZhihuiIndependent DirectorM64In office10.00NoSun JianfeiIndependent DirectorM50In office20.00NoYin MeiqunIndependent DirectorF52In office20.00NoYang BiaoIndependent DirectorM43In office20.00NoLi KangChairman of the Supervisory CommitteeF41In office66.96NoPan AilingSupervisorF58In office10.00NoZhang HongSupervisorF58In office10.00NoQiu LanjuSupervisorF49In office62.55NoSang AilingSupervisorF44In office22.50NoLi XueqinDeputy general managerF57In office165.28NoLi ZhenzhongDeputy general managerM49In office189.61NoLi MingtangDeputy general managerM55In office163.38NoGe GuangmingDeputy general managerM52In office143.64NoDong LianmingFinancial controllerM48In office189.25NoYuan XikunSecretary to the BoardM37In office76.64NoChu Hon LeungHong Kong company secretaryM40In office0.00NoChen GangGeneral managerM50Resigned26.54NoTotal2,752.06
Note: The total pre-tax remuneration received by Directors, Supervisors and the Senior Management from the Company is the remunerationduring their tenure.
VI Corporate Governance
VI. Performance of Directors during the reporting period
1. Board meetings during the reporting period
MeetingConvening dateDisclosure dateResolutions of meeting
The twelfth meeting of the ninthsession of the Board
30 March 202231 March 2022http://www.cninfo.com.cn
(announcement no.: 2022-011)The thirteenth meeting of the ninthsession of the Board
29 April 2022N/AThe Company’s 2022 First Quarterly
Report was considered and
approved. It was exempted
from disclosure by resolution
announcement.The twenty-fourth extraordinary
meeting of the ninth session ofthe Board
23 May 202224 May 2022http://www.cninfo.com.cn
(announcement no.: 2022-033)The twenty-fifth extraordinarymeeting of the ninth session ofthe Board
30 May 202231 May 2022http://www.cninfo.com.cn
(announcement no.: 2022-046)The first meeting of the tenthsession of the Board
15 June 202216 June 2022http://www.cninfo.com.cn
(announcement no.: 2022-051)The first extraordinary meeting ofthe tenth session of the Board
27 June 202228 June 2022http://www.cninfo.com.cn
(announcement no.: 2022-055)The second extraordinary meeting
of the tenth session of theBoard
18 July 202219 July 2022http://www.cninfo.com.cn
(announcement no.: 2022-059)The third extraordinary meeting ofthe tenth session of the Board
28 July 202229 July 2022http://www.cninfo.com.cn
(announcement no.: 2022-067)The second meeting of the tenthsession of the Board
30 August 2022N/AThe Full Text and Summary of the
Company’s 2022 Interim Report
was considered and approved. It
was exempted from disclosure by
resolution announcement.The third meeting of the tenth
session of the Board
28 October 202231 October 2022http://www.cninfo.com.cn
(announcement no.: 2022-076)The fourth extraordinary meetingof the tenth session of theBoard
21 November 202222 November 2022http://www.cninfo.com.cn
(announcement no.: 2022-084)The fifth extraordinary meeting of
the tenth session of the Board
7 December 20228 December 2022http://www.cninfo.com.cn
(announcement no.: 2022-092)
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 ofattendancerequiredfor Boardmeetingsduring thereporting
period
Attendanceat Boardmeetings in
person
Attendance
at Boardmeetings bycommunication
Attendanceat Boardmeetings byproxy
Absencefrom Boardmeetings
Absentfrom Boardmeetings twicein a row(in person)
Attendanceat generalmeetings
Chen Hongguo1201200No0Hu Changqing1201200No3Li Xingchun1201200No3Li Feng1201200No3Li Weixian80800No2Han Tingde1201200No3Li Chuanxuan1201200No3Li Zhihui80800No2Sun Jianfei1201200No3Yin Meiqun1201200No3Yang Biao1201200No3Explanation 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).
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.
VI Corporate Governance
VI. Performance of Directors during the reporting period(Continued)
4. Other details about the performance of duties by Directors
Were there any suggestions from Directors adopted by the Company?
√ Yes No
Explanation on the adoption or non-adoption with related suggestions from the DirectorsDuring the reporting period, Directors of the Company performed their duties with integrity, diligence, responsibilityand faithfulness, actively participated in corporate governance and decision-making activities, attended the Boardmeetings of the Company, carefully reviewed various proposals that need to be reviewed at Board meetings,and made resolutions in strict compliance with the regulations and requirements of the Company Law, the RulesGoverning Listing of Stocks on Shenzhen Stock Exchange, the Guidelines for Self-discipline Regulation of ListedCompanies of Shenzhen Stock Exchange No. 1 – Standard Operation of Listed Companies on the Main Board and theArticles of Association and other relevant laws, regulations and regulatory documents. In accordance with the Rulesfor Independent Directors of Listed Companies, Work System of Independent Directors and other regulations, theindependent Directors of the Company performed their duties independently, diligently and responsibly. During thereporting period, the independent Directors of the Company paid attention to the appropriation of funds of the Companyby the controlling shareholder and other related parties of the Company and external guarantees, and issued specialexplanation. They issued prior approval opinions for the estimated cap of ordinary related party transactions for 2022,and the debt transfer of financial leasing business and related party transactions, and also issued independent andimpartial opinions for the Company’s external guarantees, appointment of audit firm, election of the new session andother matters which had a significant impact on minority shareholders during the reporting period, which effectivelysafeguarded the overall interests of the Company and the legitimate rights and interests of all shareholders, especiallyminority shareholders, and further enhanced the standardised operation level of the Company.
VI Corporate Governance
VII. Special committees under the Board during the reporting period
Name of thecommitteeMember
Number ofmeetingconvenedConvening dateDetails of the meeting
Important opinionand adviceOther performance of duty
Details ofobjection
AuditCommittee
Yin Meiqun, LiChuanxuan andSun Jianfei
230 March 2022Reviewed the Company’s2021 Financial FinalAccounts Report, FullText and Summaryof the Company’s2021 Annual Report,Proposal on theAppointment ofAuditor for 2022 andProposal on Provisionfor Impairment ofAssets in 2021
Agreed to submit to the
Board for review
Communication with externalauditing institution engagedby the Company and thefinancial department of theCompany in respect of the2021 financial report auditing,review of the 2021 auditor’sreport and financial report;review of the independence,professional competence,investor protection ability,and practice qualifications ofGrant Thornton.
Nil
29 April 2022Reviewed the 2022 First
Quarterly Report of theCompany
Agreed to submit to the
Board for review
Review of the 2022 first quarterly
report of the Company.
NilYin Meiqun, Li
Zhihui and SunJianfei
230 August 2022Reviewed the Full Text
and Summary of the2022 Interim Report ofthe Company
Agreed to submit to the
Board for review
Review of the 2022 interim
financial statements of theCompany; paying attentionto the appropriation offunds of the Company bythe controlling shareholderand other related parties ofthe Company and externalguarantees.
Nil
28 October 2022Reviewed the 2022 Third
Quarterly Report of theCompany
Agreed to submit to the
Board for review
Review of the 2022 third
quarterly report of theCompany.
Nil
VI Corporate Governance
Name of thecommitteeMember
Number ofmeetingconvenedConvening dateDetails of the meeting
Important opinionand adviceOther performance of duty
Details ofobjection
RemunerationandAssessmentCommittee
Yang Biao, Li
Xingchun andSun Jianfei
330 March 2022Reviewed the Proposal
on Determinationof Remuneration ofDirectors, Supervisorsand SeniorManagement for 2021
Agreed to submit to theBoard for review
Determination of theremuneration of Directors,Supervisors and the SeniorManagement based onthe operations of theCompany, and the duty andperformance appraisal ofexecutive Directors, SeniorManagement, and Supervisorswho assume specificmanagement positions in theCompany in 2021.
Nil
23 May 2022Reviewed the Proposal
on Allowances for non-executive Directorsand Independent non-executive Directors ofthe Tenth Session ofthe Board
Agreed to submit to the
Board for review
Determination of the allowances
for non-executive Directorsand independent non-executive Directors uponcomprehensive considerationwith reference to theremuneration of directors ofother listed companies of thesame size, as well as basedon the Company’s actualoperations and the duties ofnon-executive Directors andindependent non-executiveDirectors.
Nil
18 July 2022Reviewed the Proposal
on the Fulfilment of theUnlocking Conditionsof the RestrictedShares Granted underthe 2020 RestrictedA Share IncentiveScheme during theFirst Unlocking Period,and the Proposalon the Adjustmentto the RepurchasePrice of the 2020Restricted A ShareIncentive Schemeand Repurchase andCancellation of CertainRestricted Shares
Agreed to submit to theBoard for review
Review of the performance
appraisal indicators at thecompany level and theperformance appraisalindicators at individual levelof the participants, anddetermination of the list ofparticipants who do not meetthe unlocking conditions aswell as the repurchase priceand repurchase quantity ofrestricted shares.
Nil
VII. Special committees under the Board during the reporting period(Continued)
VI Corporate Governance
Name of thecommitteeMember
Number ofmeetingconvenedConvening dateDetails of the meeting
Important opinionand adviceOther performance of duty
Details ofobjection
Nomination
Committee
Sun Jianfei, Chen
Hongguo and YinMeiqun
123 May 2022Reviewed the Proposal
on the Election ofCandidates for Non-independent Directorsof the Tenth Sessionof the Board, andthe Proposal on theElection of Candidatesfor Independent Non-executive Directors ofthe Tenth Session ofthe Board
Agreed to submit to theBoard for review
Review of the qualificationand work experience of thecandidates for Directors.
Nil
StrategicCommittee
Chen Hongguo, HuChangqing andYang Biao
128 October 2022Reviewed the Proposal
on the Investmentand Construction ofSoftwood BleachedChemical PulpProject with AnnualProduction Capacityof 300,000 Tonnesand the Proposal onZhanjiang Chenming’sInvestment andConstruction ofSpecial paper Projectwith Annual ProductionCapacity of 180,000Tonnes
Agreed to submit to the
Board for review
Comprehensive understanding
of the purpose, prospects andfunding of the constructionprojects and feasibilityanalysis of the constructionprojects according to thefeasibility report.
Nil
VII. Special committees under the Board during the reporting period(Continued)
VI Corporate Governance
VIII. Performance of duties by the Supervisory Committee
Were 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 period2,596Number of staff at major subsidiaries (person) as at the end of the reporting period7,462Total number of staff (person) as at the end of the reporting period10,855Total number of staff receiving remuneration during the period (person)10,855Number 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 staff7,259Sales staff500Technical staff465Financial staff177Administrative staff1,203Other staff1,251Total10,855
Education levelCategory of education level
Number of people
(person)
Postgraduate and above21Undergraduate887Post-secondary2,178Technical secondary and below7,769Total10,855
VI Corporate Governance
IX. Personnel of the Company(Continued)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subjectto the relevant laws and regulations, the Company adopts different standards of remuneration for different employees,which are determined based on their position, skill variety, performance, etc. with reference to the remuneration levelin the labour market, the average level of salary in the society and the corporate reference line set by the government.The Company provides various benefits to the employees, including social insurance, housing allowance and paidleaves, etc.
3. Training programmes
The Company attaches importance to personnel training, implements the corporate spirit of“learning, surpassingand leading”and establishes a learning organisation. In 2023, the Company will further enhance cooperation withprofessional training institutions to enhance training quality. Meanwhile, the Company will innovate its way of learningand build a practical online learning platform. We will also develop quality training materials and improve existing onesby levels, initiating targeted training programmes. For the junior level staff, the training focuses on professional skillsand business knowledge. For the middle-level staff, the training focuses on team management and execution. For theSenior Management, the training focuses on leadership. A team of excellent quality is built through training.
4. Labour outsourcing
Applicable √ Not applicable
X. 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 applicable
VI Corporate Governance
X.Profit distribution of the Company and conversion of capital reserves into share capital(Continued)The 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 applicable
Explanation on why it was profitable during the reportingperiod and the Parent Company’s profit available fordistribution to shareholders was positive but no cashdividend distribution plan was proposed
Use and plan of use of the Company’s undistributed profitsDuring the reporting period, as the domestic market demandwas insufficient due to the economic environment, the salesvolume of machine-made paper decreased year on year. Atthe same time, due to the rising prices of wood chips,chemicals, raw coal and other raw materials as well asenergy prices, the Company faced great cost pressure. Thenet profit attributable to shareholdersof the Company forthe reporting period decreased as compared with thecorresponding period of the prior year. Considering factorssuch as the current macroeconomic environment and theCompany’s strategic planning, in order to further reduce itsliability size, optimise its capital structure, enhance theCompany’s financial resilience, and satisfy the capital needsfor, among other things, day-to-day production andoperation, and project construction, thereby enhancing riskresistance, securing the sustainable and steadydevelopment of the pulp production and paper makingbusiness, the principal business of the Company, and bettersafeguarding the long-term interests of all shareholders.
The retained undistributed profits of the Company are
accumulated and carried forward to the next year,which will be mainly used for day-to-day operation anddevelopment, repayment of interest-bearing liabilitiesand project construction of the Company to ensure thenormal production, operation and business expansion ofthe Company, and to provide a reliable guarantee for theimplementation of the Company’s medium and long-termdevelopment strategy, thus effectively safeguarding theinterests of the Company and all shareholders, especiallysmall and medium shareholders.
Profit 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.
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, representing 5.61% of the total number of restricted shares granted under the 2020Restricted A Share Incentive Scheme.
7. On 27 July 2022, 29,948,000 restricted A shares that were unlocked were listed for trading.
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)
8. On 9 October 2022, Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi
Tong Yan Zi (2022) No. 371C000576), in which they verified the change in the registered capital and paid-in capital (share capital) of the Company as of 30 September 2022. Verification result: As of 30 September2022, the registered capital and paid-in capital (share capital) of the Company upon the change amounted toRMB2,979,742,200.00 and RMB2,979,742,200.00, respectively.
9. On 18 October 2022, the Company completed the procedures for the repurchase and cancellation of 4,466,000
restricted A shares with the Shenzhen 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 heldat thebeginning ofthe period
Numberof newlygrantedshareoptionsduring thereporting
period
Numberof sharesexercisableduring thereporting
period
Numberof sharesexercisedduring thereporting
period
Exerciseprice ofthe sharesexercisedduring thereporting
period(RMB/share)
Numberof shareoptions held
at the endof the period
Marketprice at theend of thereporting
period(RMB/share)
Number ofrestrictedshares held
at thebeginningof the period
Number ofunlocked
sharesduring the
current
period
Numberof newlygrantedrestricted
sharesduring thereporting
period
Grant priceof restricted
shares(RMB/share)
Number ofrestrictedshares heldat the endof the period
ChenHongguo
Chairman and
general manager
0000004.9820,000,0008,000,00002.8512,000,000HuChangqing
Vice chairman0000004.985,000,0002,000,00002.853,000,000Li XingchunVice chairman0000004.985,000,0002,000,00002.853,000,000Li FengDirector and deputy
general manager
0000004.983,000,0001,200,00002.851,800,000Li WeixianDirector and deputy
general manager
0000004.982,000,000800,00002.851,200,000Li XueqinDeputy general
manager
0000004.983,000,0001,200,00002.851,800,000Li ZhenzhongDeputy general
manager
0000004.982,000,000800,00002.851,200,000Li MingtangDeputy general
manager
0000004.981,000,000400,00002.85600,000DongLianming
Financial controller0000004.981,000,000400,00002.85600,000Yuan XikunSecretary to the
Board
0000004.98300,000120,00002.85180,000Total0000042,300,00016,920,000025,380,000Remarks(if any)
Nil
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.The internal control of the Company was able to cover the main aspects of the Company’s operation andmanagement, and there were no major omissions. The units, businesses and events included in the evaluation scopeand high-risk areas covered the main aspects of the Company’s operation and management, and there were no majoromissions. The design of the internal control system of the Company was sound and reasonable. The implementationof internal controls 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
solution
Shanxi Fuyin IndustrialTrading Co., Ltd.
In December 2022, the leasing company
acquired 100% equity interest inShanxi Fuyin, which holds 100% equityinterest in Chongmin Culture. Themajor asset of Chongmin Culture is acomprehensive property integratingcommercial, office and apartmentpurposes located at XinzhuangBusiness District, Minhang District,Shanghai, the business, assets, financeand personnel of which have been fullytaken over by the Company, and theproject is currently under constructionas scheduled.
CompletedNilN/AN/AN/AChongmin Culture
Development(Shanghai) Co., Ltd.
CompletedNilN/AN/AN/A
VI Corporate Governance
XIV. Self-assessment report on internal control or auditor’s report on internal control
1. Self-assessment report on internal controls
Date of disclosure of assessment report on internal controls31 March 2023Index 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 Company99.80%Percentage of revenue included in assessment to revenue in consolidated financialstatements of the Company99.10%
Basis for identifying deficienciesTypeFinancial reportingNon-financial reporting
Qualitative criteria Indicators of material deficiencies in the internal control of financial
reporting include: ineffective control environment, material loss toand adverse impact on the Company as a result of misconductby Directors, Supervisors and Senior Management; materialmisstatement of non-exceptional incidents; ineffectiveness insupervision of internal control of the Company by the Board, or itsdelegated authorities, and the internal audit department.Indicators of major deficiencies in internal control of financialreporting include: failure in selecting and applying accountingpolicies in accordance with generally accepted accountingprinciples; failure to establish procedures and control measures toprevent corrupt practices; failure to establish corresponding controlmechanism for the accounting of unusual or special transactionsor failure to implement or set up the corresponding compensationcontrol; failure to reasonably ensure the truthfulness and accuracyin the preparation of financial statement, as a result of one or moredeficiencies in the control of financial reporting as of the end of theperiod.General deficiencies: other deficiencies in internal control that do not
constitute material or major deficiencies.
Indicators of material deficiencies in the internal control of non-financial
reporting include: major failure as a result of the decision makingprocess; lack of control system or occurrence of systematic failure inprincipal activities and lack of effective compensation control, highturnover rate of mid to senior level management and senior technicalstaff; failure to address the findings of internal control assessment,in particular material deficiencies; and other factors which imposematerial adverse impact on the Company.Indicators of major deficiencies in internal control of nonfinancial
reporting include: general failure as a result of the decision-makingprocess; deficiencies in major business procedure or system; highturnover rate of key staff; failure to address the findings of internalcontrol assessment, in particular major deficiencies; and other factorswhich impose 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 procedure or system; high turnoverrate of employees; and failure to rectify general deficiencies.Quantitative
criteria
General 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 the target of accounting error/thetotal revenue; material deficiencies: deviation greater than 0.5%from the target of accounting error/the total revenue.
General deficiencies: quantitative criterion (financial loss) less than
RMB5,000,000; major deficiencies: quantitative criterion (financial loss)between RMB5,000,000 and RMB20,000,000; 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. Self-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 internalcontrol over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31December 2022.Disclosure of auditor’s report on internal controlDisclosedDate of disclosure of auditor’s report on internal control31 March 2023Index 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 No
XV. Rectification of problems found in self-inspection under the special initiative on corporate
governance of the listed companyNot applicable
VI Corporate Governance
XVI. 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, IV Chairman and General Manager and XVII Communications withshareholders in this section, the Company had fully complied with all the principles and code provisions of the Codeon Corporate Governance as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.(ii) Securities transactions by DirectorsThe 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 10 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) BoardThe 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 Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration andsupervision of the Company’s businesses to facilitate its success. The Executive Director or the Senior Managementis authorised to be responsible for the various divisions and functions and management of the processing. Directorsof the Company shall act objectively and make decisions in the interests of the Company. The management andthe Senior Management of the Company held regular meetings with the Board to discuss the ordinary businessoperations and performance of the Company, and carried out the relevant decisions of the Board. The managementand the Senior Management of the Company have to get prior approval from, among others, the Board, before theymake any decision or enter into any commitment on behalf of the Company. The Company will arrange independentlegal advice upon the request from the Directors or any committees of the Board, if the Board or any committees ofthe Board consider it necessary to seek for independent professional 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, 5 of which were regular meetings and 7 were extraordinarymeetings. None of the Directors were absent from any Board meetings.
Attendance at the relevant meetings (attention required/attended)NamePosition
Boardmeetings
AuditCommitteemeetings
NominationCommitteemeetings
Remunerationand AssessmentCommitteemeetings
StrategicCommitteemeetings
Generalmeetings
I. Executive DirectorsChen HongguoChairman12/12N/A1/1N/A1/13/0Hu ChangqingVice chairman12/12N/AN/AN/A1/13/3Li XingchunVice chairman12/12N/AN/A3/3N/A3/3Li FengExecutive Director12/12N/AN/AN/AN/A3/3Li WeixianExecutive Director8/8N/AN/AN/AN/A2/2II. Non-executive Directors
Li ChuanxuanDirector12/122/2N/AN/AN/A3/3Han TingdeDirector12/12N/AN/AN/AN/A3/3III. Independent non-executive
DirectorsLi ZhihuiIndependent Director8/82/2N/AN/AN/A2/2Sun JianfeiIndependent Director12/124/41/13/3N/A3/3Yin MeiqunIndependent Director12/124/41/1N/AN/A3/3Yang BiaoIndependent Director12/12N/AN/A3/31/13/3
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)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.The Board held 5 regular meetings during the year, each by giving a 10-day notice in advance to ensure that allDirectors could participate in discussions of matters in the agenda. Reasonable prior notification was given for theother meetings of the Board to ensure all Directors could take time to attend.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 2022 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 and general manager of the Company. Please refer to part V of this section for hisbrief 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.Mr. Chen Hongguo is the chairman and general manager of the Company. The Board believes that Mr. Chen Hongguohas a thorough understanding of the culture and the operation model of the Company. As the Chairman and generalmanager of the Company, he can facilitate the planning and implementation of the business strategies of the Group,which is more conducive to the management and operational efficiency of the Group. The responsibilities of theChairman and the general manager are clearly defined and the Board structure of the Company ensures a balance ofpower and provides sufficient checks and balances, thus effectively safeguarding the interests of the Company andinvestors.
(v) Independent non-executive Directors
There 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 Directors
According 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.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(viii) Board committees
Pursuant to Code on Corporate Governance, the Board has established four committees, namely, Audit Committee,Remuneration and Assessment Committee, Strategic Committee and Nomination Committee, for overseeing particularaspects of the Company’s affairs. Each Board Committee has its own defined written terms of reference. The writtenterms of reference of each Board Committee are published on websites of stock exchange and the Company.Save for requirements of Code on Corporate Governance, the Company also set up Strategic Committee, foroverseeing and studying long-term strategic development plan of the Company and making recommendations.(ix) Audit CommitteeThe Audit Committee of the Company comprises three members. The members of the ninth session of the AuditCommittee of the Board included Yin Meiqun (as the chairman), Li Chuanxuan and Sun Jianfei. Two of them, includingthe chairman, are independent non-executive Directors. On 15 June 2022, the Company completed the election ofthe new session of the Board, and convened the first meeting of the tenth session of the Board on the same day toconsider and elect the members of the Audit Committee of the new session of the Board, including Yin Meiqun (as thechairman), Li Zhihui and Sun Jianfei, all of whom are independent non-executive Directors. The primary duties of theAudit Committee are serving as a communication media between internal and external audit and the related reviewand supervision. Yin Meiqun and Sun Jianfei have appropriate professional qualifications or appropriate accounting orrelated financial management 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 2022 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 2022. 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 ofHong 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 Committee
The 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. The Nomination Committee of the ninthsession of the Board includes Sun Jianfei (as the chairman), Chen Hongguo and Yin Meiqun. Two of them, includingthe chairman, are independent non-executive Directors. On 15 June 2022, the Company completed the election ofthe new session of the Board, and convened the first meeting of the tenth session of the Board on the same day toconsider and elect the members of the Nomination Committee of the new session of the Board, including Li Zhihui (asthe chairman), Chen Hongguo and Yin Meiqun. Two of them, including the chairman, are independent non-executiveDirectors, which is in compliance with Code on Corporate Governance Practices. The Nomination Committee isprimarily responsible for selecting candidates for directors and the management of the Company, determining theselection criteria and procedure and making recommendations.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong 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, after studying the needs of the Company for new Directorsand managerial personnel and taking into consideration the Board diversity policy, identified suitable candidates forDirector and managerial positions through various channels (including from the Group internally and from the humanresources market). Upon acceptance of nomination by the nominated person, the Nomination Committee performedqualification review on preliminary candidates by holding meetings, review criteria include the academic qualifications,relevant experience and specialised skills of the preliminary candidates. One to two months prior to election of newDirectors, the Nomination Committee submitted recommendations and relevant materials of the directorial candidatesto the Board; prior to engaging new Senior Management, the Nomination Committee submitted recommendationsand relevant materials of the new Senior Management personnel to the Board.Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VII ofthis section.(xii) Strategic CommitteeThe Company set up a Strategic Committee which comprised three members, including Chen Hongguo (as thechairman), Hu Changqing and Yang Biao. The Strategic Committee is primarily responsible for studying the long termstrategic development and major investments of the Company and making recommendations.The primary duties of the Strategic Committee are (1) conducting research and submitting proposals regarding thelong term development strategic plan; (2) conducting research and submitting proposals regarding the financingplans for major investments which require approval from the Board as stipulated in the Articles of Association of theCompany; (3) conducting research and submitting proposals regarding major capital operations and assets operationprojects which require approval from the Board as stipulated in the Articles of Association of the Company; (4)conducting research and submitting proposals regarding other material matters that may affect the development ofthe Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other mattersas delegated by the Board.Particulars of the meetings held by the Strategic Committee during the reporting period are detailed in part VII of thissection.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xiii) AuditorOn 19 June 2020, the Company convened the 2019 annual general meeting, and considered and approved theResolution in relation to the Appointment of the Auditor for 2020, and continued to engage Grant Thornton (SpecialGeneral Partnership) as the domestic auditor of the Company for 2020 and be responsible for domestic auditing ofthe Company for 2020.On 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.(xiv) Remuneration for the AuditorThe financial statements for 2022 prepared in accordance with Accounting Standards for Business Enterprises by theGroup were audited by Grant Thornton (Special General Partnership). In 2022, the Company paid the auditor a totalof RMB2.5 million (tax inclusive; tax exclusive amount: RMB2.3585 million) in respect of financial statements auditfor 2021 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 2021.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) totaling 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 totaled RMB2.5156 million.
(xv) Supervisors and Supervisory Committee
The 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 8 meetings, and all Supervisors attendedSupervisory Committee meetings convened during the year, and carefully reviewed the 2021 Annual Report, 2022First Quarterly Report, 2022 Interim Report and 2022 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.(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.
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 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 11 May 2022 by the Company, two extraordinary general meetings wereconvened in 2022. The attendance record of Directors at each general meeting is set out below:
NameDirectors attending general meetings in person
2021 annual general meetingHu Changqing, Li Chuanxuan, Li Feng, Han Tingde, Li Chuanxuan,
Sun Jianfei, Yin Meiqun, Yang Biao2022 first extraordinary general meetingHu Changqing, Li Chuanxuan, Li Feng, Han Tingde, Li Chuanxuan,
Sun Jianfei, Yin Meiqun, Yang Biao;Li Zhihui (Director candidate), Li Weixian (Director candidate)2022 second 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 the chairman of the Strategic 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 all 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.
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
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 100 of the Articles of Association of the Company, Shareholder(s) alone or in aggregateholding 10% or more of the Company’s voting shares shall be entitled to request the Board to conveneextraordinary general meetings, provided that such request shall be made in writing. The Board shall, inaccordance with provisions of the laws, administrative regulations and the Articles of Association, furnish awritten reply stating its agreement or disagreement to the convening of an extraordinary general meeting withinten days after receiving such proposal 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 of the Company, if Shareholders determine to convenea general meeting on their own, they shall give a written notice to the Board and file the same with the stockexchange for records. The shareholding percentage of shareholders who convened shall not be lower than 10%prior to the announcement 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 of the Company, the Board and its secretary shallcooperate with respect to matters relating to general meetings convened by Shareholders on their own. TheBoard shall provide Shareholder registers as of the date of shareholding register.Pursuant to Article 103 of the Articles of Association of the Company, if a general meeting is convened byshareholders on their own, 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 ofHong 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 Secretary
NameYuan 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 of the Company, shareholders individually or jointly holdingover 3% of the total 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.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.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(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 11 May 2022, 15 June 2022 and 18 July 2022, the Company amended the new Articles of Association. Theamendments were primarily relating to deletion of the chapters in relation to preference shares, and contents includingguarantees, relevant duty performance regulations for independent Directors, the number of Board members, changesin shares after repurchase and cancellation of certain restricted shares, etc. The Memorandum of Association and theamended version of the new Articles of Association of the Company are available on websites of the Company andStock 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.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 femaleDirectors. 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.
VI Corporate Governance
XVI.Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)
(xxi)Dividend policyDuring the reporting period, as the domestic market demand was insufficient due to the economic environment, thesales volume of machine-made paper decreased year on year. At the same time, due to the rising prices of woodchips, chemicals, raw coal and other raw materials as well as energy prices, the Company faced great costpressure. The net profit attributable to shareholders of the Company for the reporting period decreased ascompared with the corresponding period of the prior year. Considering factors such as the current macroeconomicenvironment and the Company’s strategic planning, the Board proposed not to pay cash dividend, issue bonusshares and increase share capital from reserves for 2022 to further reduce its liability size, optimise its capitalstructure, enhance the Company’s financial resilience, and satisfy the capital needs for, among other things, day-to-day production and operation, and project construction, thereby enhancing risk resistance, securing thesustainable and steady development of the pulp production and paper making business, the principal business ofthe Company, and better safeguarding the long-term interests of all shareholders.
VII Environment 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, and Regulations on Groundwater Management, and theMeasures for the 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 licensingThe issue dates and the validity periods of pollution discharge permits of subsidiaries are as follows:
Shandong Chenming Paper Holdings Limited: Issued on 7 December 2021 and valid up to 26 December 2026.Shouguang Meilun Paper Co., Ltd.: Issued on 7 December 2021 and valid up to 26 December 2026.Jiangxi Chenming Paper Co., Ltd.: Issued on 11 June 2020 and valid up to 27 June 2025.Jilin Chenming Paper Co., Ltd.: Issued on 10 December 2021 and valid up to 9 December 2026.Zhanjiang Chenming Pulp & Paper Co., Ltd.: Issued on 30 May 2022 and valid up to 29 May 2027.Huanggang Chenming Pulp & Paper Co., Ltd.: Issued on 14 September 2021 and valid up to 13 September 2026.Wuhan Chenming Hanyang Paper Holdings Co., Ltd.: Issued on 26 April 2020 and canceled due to the suspension ofproduction on 29 December 2022.
VII Environment and Social Responsibility
Industry emission standards and the status of pollutant emissions involved in production and operationactivities
Name of companyor subsidiary
Categoryof majorpollutantsand specificpollutants
Name of majorpollutantsand specificpollutants
Way ofemission
Number ofemissionoutlets
Distribution of emissionoutletsEmission concentration
Pollutant emissionstandards implementedTotal emissions
Approvedtotalemissions
Excessiveemissions
ShandongChenmingPaper HoldingsLimited
Exhaust gasSO
Organisedemission
2Chenming Industrial ParkPower plant no. 1: 10.5mg/m
Power plant no. 2: 10.7mg/m
35mg/m
Power plant no. 1: 17.1tPower plant no. 2: 19.6t
160.32t/yearNo
Exhaust gasNO
x
Organised
emission
2Chenming Industrial ParkPower plant no. 1: 39.2mg/m
Power plant no. 2: 39.4mg/m
50mg/m
Power plant no. 1: 63.8tPower plant no. 2: 72.0t
233.91t/yearNo
Exhaust gasParticulatesOrganised
emission
2Chenming Industrial ParkPower plant no. 1: 0.467mg/m
Power plant no. 2: 0.876mg/m
5mg/m
Power plant no. 1: 0.679tPower plant no. 2: 1.61t
23.39t/yearNo
WastewaterCODIndirect
emission
2Chenming Industrial ParkSewage outlet no. 1: 175mg/L
Sewage outlet no. 2: 179mg/L
300mg/LSewage outlet no. 1: 1,609t
Sewage outlet no. 2: 2,088t
6,510.74t/
year
NoWastewaterAmmonia
nitrogen
Indirect
emission
2Chenming Industrial ParkSewage outlet no. 1: 5.28mg/L
Sewage outlet no. 2: 1.57mg/L
30mg/LSewage outlet no. 1: 47.5t
Sewage outlet no. 2: 18.2t
650.7t/yearNo
WastewaterTotal nitrogenIndirect
emission
2Chenming Industrial ParkSewage outlet no. 1: 15.5mg/L
Sewage outlet no. 2: 15.2mg/L
70mg/LSewage outlet no. 1: 136
Sewage outlet no. 2: 171
1519.1 t/yearNoShouguang Meilun
Paper Co., Ltd.
Exhaust gasSO
Organisedemission
4Chenming Industrial ParkPower plant no. 1: 11.8mg/m
Power plant no. 2: 12.6mg/m
Alkali recovery: 1.62mg/m
Lime kiln: 7.54mg/m
35mg/m
(self-ownedpower plant), 50mg/m
(chemical pulp mill)
Power plant no. 1: 21.6tPower plant no. 2: 25.3tAlkali recovery: 15.5tLime kiln: 10.7t
342.89t/yearNo
Exhaust gasNO
x
Organised
emission
4Chenming Industrial ParkPower plant no. 1: 31.1mg/m
Power plant no. 2: 30.2mg/m
Alkali recovery: 76.4mg/m
Lime kiln: 32.7mg/m
50mg/m
(self-ownedpower plant), 100mg/m
(chemical pulp mill)
Power plant no. 1: 55.1tPower plant no. 2: 57.0tAlkali recovery: 733tLime kiln: 47.4t
1,202.75t/
year
NoExhaust gasParticulatesOrganised
emission
4Chenming Industrial ParkPower plant no. 1: 0.46mg/m
Power plant no. 2: 0.804mg/m
Alkali recovery: 0.568mg/m
Lime kiln: 0.870mg/m
5mg/m
(self-ownedpower plant), 10mg/m
(chemical pulp mill)
Power plant no. 1: 0.847tPower plant no. 2: 1.54tAlkali recovery: 5.41tLime kiln: 1.18t
121.979t/
yearNo
VII Environment and Social Responsibility
Name of companyor subsidiary
Categoryof majorpollutantsand specificpollutants
Name of majorpollutantsand specificpollutants
Way ofemission
Number ofemissionoutlets
Distribution of emissionoutletsEmission concentration
Pollutant emissionstandards implementedTotal emissions
Approvedtotalemissions
Excessiveemissions
Wuhan Chenming
Hanyang PaperHoldings Co.,Ltd.
Exhaust gasSO
Organisedemission
2Within Qianneng Electric
Power factory area
130T/h furnace: 3.25mg/m
75T/h furnace: 7.36mg/m
50mg/m
1.44381t102.58t/yearNoExhaust gasNO
xOrganisedemission
2Within Qianneng Electric
Power factory area
130T/h furnace: 55.13mg/m
75T/h furnace: 46.15mg/m
100mg/m
14.8345t205.16t/yearNoExhaust gasParticulatesOrganised
emission
2Within Qianneng Electric
Power factory area
130T/h furnace: 1.57 mg/m
75T/h furnace: 5.18mg/m
20mg/m
0.89747t41.032t/yearNoWastewaterCODDirect emission1Total wastewater
discharge
40.16mg/L80mg/L28.67t184.3t/yearNoWastewaterAmmonia
nitrogen
Direct emission1Total wastewater
discharge
1.812mg/L8mg/L0.44t17.3t/yearNoWastewaterTotal nitrogenDirect emission1Total wastewater
discharge
5mg/L12mg/L4.95t–NoJiangxi Chenming
Paper Co., Ltd.
Exhaust gasSO
Organised
emission
1Thermal power plant240T/h furnace: 12.35mg/m
200mg/m
41.526t806t/yearNoExhaust gasNO
x
Organised
emission
1Thermal power plant240T/h furnace: 29.05mg/m
200mg/m
97.6932t806t/yearNoExhaust gasParticulatesOrganised
emission
1Thermal power plant240T/h furnace: 4.6mg/m
30mg/m
15.4547t135t/yearNoWastewaterCODDirect emission1Total wastewater
discharge
44.72mg/L90mg/L204.5406t1,260t/yearNoWastewaterAmmonia
nitrogen
Direct emission1Total wastewater
discharge
1.13mg/L8mg/L5.1817t112t/yearNoWastewaterTotal nitrogenDirect emission1Total wastewater
discharge
4.93mg/L12mg/L21.754t–NoJilin ChenmingPaper Co., Ltd.
Exhaust gasSO
Organised
emission
3 (2 in use,
1 spare)
Within factory area4.87mg/m
100mg/m
3.65t97t/yearNoExhaust gasNO
x
Organised
emission
3 (2 in use,
1 spare)
Within factory area32.07mg/m
100mg/m
23.76t213t/yearNoExhaust gasParticulatesOrganised
emission
3 (2 in use,
1 spare)
Within factory area9.22mg/m
30mg/m
6.23t51.66t/yearNoWastewaterCODIndirect
emission
1Total wastewater
discharge
126.58mg/L500mg/L558.46t6,000t/yearNoWastewaterAmmonia
nitrogen
Indirect
emission
1Total wastewater
discharge
1.6mg/L45mg/L7.13t500t/yearNoWastewaterTotal nitrogenIndirect
emission
1Total wastewater
discharge
5.93mg/L50mg/L24.65t–NoZhanjiangChenming Pulp& Paper Co.,Ltd.
Exhaust gasSO
Organisedemission
5Within factory areaPower plant no. 1: 7.6mg/m
Power plant no. 2: 6.86mg/m
Power plant no. 3: 3.42mg/m
Power plant no. 4:: 7.47mg/m
1#2#3#4# circulatingfluidised bed boilers:
35mg/m
56.409t620t/yearNoExhaust gasNO
x
Organised
emission
5Within factory areaAlkali recovery: 123.04mg/m
Power plant no. 1: 12.12mg/m
Power plant no. 2: 9.71mg/m
Power plant no. 3: 8.05mg/m
Power plant no. 4:: 6.53mg/m
Alkali recovery: 200mg/m
1#2#3#4# circulating
fluidised bed boilers:
50mg/m
1,302.598t1,800t/yearNoExhaust gasParticulatesOrganised
emission
5Within factory areaPower plant no. 1: 1.81mg/m
Power plant no. 2: 1.08mg/m
Power plant no. 3: 0.76mg/m
Power plant no. 4:: 0.93mg/m
1#2#3#4# circulating
fluidised bed boilers:
10mg/m
11.853t195.06t/yearNoWastewaterCODDirect emission1Within factory area39.14mg/L90mg/L778.432t1943t/yearNoWastewaterAmmonia
nitrogen
Direct emission1Within factory area1.27mg/L8mg/L25.065t43.9t/yearNoWastewaterTotal nitrogenDirect emission1Within factory area4.82mg/L12mg/L96.167t320.4t/yearNo
VII Environment and Social Responsibility
Name of companyor subsidiary
Categoryof majorpollutantsand specificpollutants
Name of majorpollutantsand specificpollutants
Way ofemission
Number ofemissionoutlets
Distribution of emissionoutletsEmission concentration
Pollutant emissionstandards implementedTotal emissions
Approvedtotalemissions
Excessiveemissions
HuanggangChenming Pulp& Paper Co.,Ltd.
Exhaust gasSO
Organisedemission
1Lime kiln chimney18.59 mg/m
80mg/m
13.76t142.872t/
yearNoExhaust gasSO
Organisedemission
1Alkali furnace chimney3.43 mg/m
200mg/m
11.170t328.417t/
yearNoExhaust gasNO
xOrganisedemission
1Lime kiln chimney135.16 mg/m
180mg/m
107.36t181.887t/
year
NoExhaust gasNO
xOrganisedemission
1Alkali furnace chimney171.08 mg/m
200mg/m
587.576t950.829t/
year
NoExhaust gasParticulatesOrganised
emission
1Lime kiln chimney16.40 mg/m
200mg/m
12.03t45.311t/yearNoExhaust gasParticulatesOrganised
emission
1Alkali furnace chimney13.00 mg/m
30mg/m
44.019t83.759t/yearNoWastewaterCODIndirect
emission
1Total wastewater
discharge
15.13 mg/L150mg/L128.04t398.911t/
year
NoWastewaterAmmonia
nitrogen
Indirect
emission
1Total wastewater
discharge
0.10 mg/L14mg/L0.85t39.891t/yearNoWastewaterTotal nitrogenIndirect
emission
1Total wastewater
discharge
1.20mg/L15mg/L10.21t–No
I. Major environmental protection matters(Continued)
Treatment of pollutants
1. Shandong Chenming Paper Group 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. In 2022,the environmental protection exhaust gas treatment facilities operated well, and were overhauled in time accordingto the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and the exhaust gas wasdischarged up to the standard after treatment.Its sewage treatment plant uses the traditional activated sludge wastewater treatment process, and the wastewaterwhich is treated up to the standard is discharged into the sewage treatment plant of Shouguang Zhongye Water Co.,Ltd. In 2022, the wastewater treatment facilities operated well, and were overhauled in time according to the overhaulplan. The daily average wastewater indicator did not exceed the standard, and the wastewater was discharged up tothe 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, and the chemical pulp lime kiln uses the exhaust gas treatment process of ozone denitration+ electrostaticdust removal+wet type electric dust removal. In 2022, the environmental protection exhaust gas treatment facilitiesoperated well, and were overhauled in time according to the overhaul plan. The daily average exhaust gas indicatordid not exceed the standard, and the exhaust gas was discharged up to the standard after treatment.
VII Environment and Social Responsibility
I. Major environmental protection matters(Continued)
Treatment of pollutants(Continued)
3. Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
The Qianneng Electric Power uses the exhaust gas treatment process of limestone desulfurisation+SCR catalyticreduction+SNCR selective non-catalytic reduction denitrification+electric and bag composite dust removal. In 2022,the environmental protection exhaust gas treatment facilities operated well, and were overhauled in time accordingto the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and the exhaust gas wasdischarged up to the standard after treatment.Water pollutants are treated by physicochemical+biochemical+Fenton treatment methods, and the 20,000-tonnetreatment process is: catchment well-conditioning-primary settling-cooling tower-aeration tank-secondary settlingtank-Fenton-re-conditioning tank-clarifier. The water treatment process has operated normally, and the averagedischarge in 2022 was: COD at 56mg/L, with the discharge standard at 80mg/L, ammonia nitrogen at 1.71mg/L,with the discharge standard at 8mg/L and total nitrogen at 2.22mg/L, with the discharge standard at 12mg/L. All thepollutants were discharged up to the standard.
4. 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+waterwashing. In 2022, the environmental protection exhaust gas treatment facilities operated well, and were overhauledin time according to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and theexhaust 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-and-frame 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.
5. 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), and the discharge is up to the standard.
VII Environment and Social Responsibility
I. Major environmental protection matters(Continued)
Treatment of pollutants(Continued)
6. Zhanjiang Chenming Pulp and Paper Co., Ltd.
Atmospheric pollutant treatment: bag filter dust removal+wet limestone-gypsum desulfurisation+SCR denitrationsystem. Atmospheric pollutant treatment facilities operate normally. In 2022, the average emissions were lower thanthe emission standards, and the total pollutant emissions were lower than the approved total emissions. In 2022,the total particulate emissions were 11.853 tonnes, which were lower than the standard of 195.06 tonnes/year, thenitrogen oxides were 1302.598 tonnes, which were lower than the total 1800 tonnes/year, and the sulphur dioxide was
56.409 tonnes, which was lower than the total 620 tonnes/year. The discharge was up to the standard.
Water pollutants are treated by physicochemical+biochemical+Fenton treatment methods, and the 86.000-tonnetreatment process is: catchment well-conditioning-primary settling-cooling tower-aeration tank-secondary settlingtank-Fenton-re-conditioning tank-clarifier. The 30,000-tonne treatment process is: catchment well-primary settlingtower – hydrolysis tank-IC tower – aeration tank-secondary settling tank-Fenton-oxidation callback tank-final settlingtank. The water treatment process has operated normally. In 2022, the average discharge was: COD at 56mg/L, ascompared with the discharge standard at 80mg/L, ammonia nitrogen at 1.71mg/L, as compared with the dischargestandard at 8mg/L and total nitrogen at 2.22mg/L, as compared with the discharge standard at 12mg/L. All thepollutants were discharged up to the standard.
7. 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. Thedischarge is up to the standard.The lime kiln scrubbing tower which was constructed with an investment of RMB4.2 million came into use on 1May 2022. It can effectively reduce the emission concentration of sulphur dioxide and hydrogen sulphide to below10 mg/m
.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.
VII Environment and Social Responsibility
I. Major environmental protection matters(Continued)
Environmental self-monitoring programmeThe 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.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 wasunderway.
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 Environment and Social Responsibility
I. Major environmental protection matters(Continued)Investment in environmental governance and protection and payment of environmental protection taxThe 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, middle water treatment system, middle 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 2022, the Company paid environmental protection taxamounting to RMB13.4381 million.Administrative penalties for environmental problems during the reporting period
Name of companyor subsidiaryReasons for penaltyViolationsPenalty results
Impact on the productionand operation of thelisted company
Corrective measures of theCompany
Jiangxi Chenming
Paper Co., Ltd.
Excessive emission of
polluted water
On 12 September 2021, the Nanchang
Municipal Ecological EnvironmentBureau conducted an onsiteinspection of Jiangxi Chenming.After testing, the suspended solidsof the wastewater samples collectedfrom the wastewater dischargeoutlet amounted to 59.33 mg/L,and the chromaticity amounted to64, which were 0.98 times and 0.28times higher than the standard,respectively. Therefore, thewastewater discharge exceeded thestandard.
On 7 January 2022,
the NanchangMunicipal EcologicalEnvironment Bureauissued the Decisionon AdministrativePenalty andimposed a fine ofRMB401,000 onJiangxi Chenming.
Jiangxi Chenming
had completedrectification, andpaid the fine ontime. There was nosignificant adverseimpact on the listedcompany
Control at source ensuredthat the indicators of eachsection reached the requiredrange through strict controlon the operation of the watertreatment system. Waterintake stabilisation avoidedthe impact of excessive watervolume to affect the indicatorof suspended solids in theeffluent. The monitoringof drainage indicators wasstrengthened. They wereadjusted on time to ensurethat the discharge met thestandards.
Other environmental information to be disclosedThe 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 informationOther environmental protection related information is announced on the Company’s website.
VII Environment and Social Responsibility
II.Social responsibilityIn 2022, adhering to the philosophy of“Creating high-quality paper products and sincerely repaying the society”, theCompany paid attention to the creation of social value while pursuing economic benefits, and took the initiative to performsocial responsibility. It was awarded various honorary titles such as“2022 Environmental and Social ResponsibilityEnterprise”,“Enterprises with Excellent Contribution in Supporting Education Development”and“2022 Top 500 High-techEnterprises for Philanthropy in China”. For details, please refer to the 2022 Environment, Social and Governance Report ofShandong Chenming Paper Holdings Limited published by the Company on CNINFO on 31 March 2023.
III.Consolidate and expand the achievements of poverty alleviation and rural revitalisation
For a long time, the Company has always taken“revitalising the Chinese papermaking industry”as its own responsibility,staying true to original aspiration, bravely taking responsibility, giving consideration to both righteousness and benefit, andattaching importance to virtue. In order to consolidate and expand the poverty alleviation achievements and fully supportrural revitalisation, the Company actively participates in various charitable activities while focusing on the development ofits principal activities. It has participated in the“Daily Donation with Compassion”activity in Shouguang City for more thanten years in a row, helping the disadvantaged groups out of poverty through charitable relief projects such as“Aid for theDisabled”,“Special Life Assistance”and“Poverty Alleviation Activities”and the staff mutual aid foundation of the Company.During the COVID-19 economic environment prevention and control period, the Company actively implemented economicenvironment prevention measures, built its own safety barrier, and steadily promoted production resumption in theproduction bases. Meanwhile, the Company donated money and materials worth of more than RMB13 million to theeconomic environment area to help recover the local economies. During the reporting period, the Board considered andapproved the investment in and construction of the softwood bleaching chemical pulp project with annual productioncapacity of 300,000 tonnes and the investment in and construction of the special paper project with annual productioncapacity of 180,000 tonnes by Zhanjiang Chenming in Taiping Town, Mazhang District, Zhanjiang City. Upon completion,the projects will create employment opportunities and promote the economic development of township areas. In thefuture, the Company will give full play to its own advantages, continue to actively participate in poverty alleviation activitieswhile developing and expanding business, help the recipients get rid of poverty and become rich with pragmaticmeasures, keep promoting rural revitalisation, and practicing social responsibility with high quality.
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 applicable
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performance
Undertakingmadeduring assetrestructuring
Shandong Chenming
Paper HoldingsLimited andits Directors,Supervisors andSenior Management(Chen Hongguo,Hu Changqing, LiXingchun, Feng Li, 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 toprovide 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 November
2022
Until the
implementationof therestructuring iscompleted.
Implementing as
normal
VIII Material Matters
Undertaking
Party involved inundertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performance
Chenming 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 theimplementationof therestructuring iscompleted.
Implementing asnormal
Chen Hongguo, HuChangqing, LiXingchun, Feng Li, 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 thepreliminary disclosure of disposal of shares by certain Directors andSenior Management members, namely Hu Changqing, Li Feng, LiWeixian, Li Zhenzhong, Li Mingtang, Dong Lianming and Yuan Xikun.Due to personal capital needs, the Directors and Senior Managementmembers mentioned above intended to dispose of 3,753,100 sharesby centralised bidding or bulk transaction within 6 months after thedate of the announcement of disposal of shares. For details, pleaserefer to 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 November2022
Until thecompletiondate of theimplementationof therestructuringplan
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 performance
Chenming 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 letteron 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 November
2022
Until the
completiondate of theimplementationof therestructuringplan
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 performance
Dongxing 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 November2022
Until the
completiondate of theimplementationof therestructuringplan
Implementing asnormal
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 performance
Dongxing SecuritiesInvestment Co., Ltd.
Undertaking on
share 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 months
from the dateof completionof shareissuance
Implementing as
normal
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 dateof completionof shareissuance
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 performance
Dongxing SecuritiesInvestment Co., Ltd.,Chenming (Qingdao)Asset ManagementCo., Ltd.
Explanation and
commitmentletter 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
completiondate of theimplementationof therestructuringplan
Implementing as
normal
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 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
completiondate of theimplementationof thisrestructuringplan
Implementing asnormal
Dongxing SecuritiesInvestment 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 the above-mentioned subjects have not been placed on file for investigation forsuspected 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 November2022
Until the
completiondate of theimplementationof thisrestructuringplan
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 performance
Dongxing Securities
Investment 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 thecompletiondate of theimplementationof therestructuringplan
Implementing asnormal
Chongqing International
Trust Inc.
Commitmenton no illegalmatters in thepast five years
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. The company and its major management personnel did not fail to
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.
21 November
2022
Until the
completiondate of theimplementationof thisrestructuringplan
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 performance
Undertaking
made on initialpublic offeringor refinancing
Chenming Holdings Co.,
Ltd.
Non-competitive
undertaking
(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 whenChenmingHoldings 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 performance
Chenming Holdings Co.,
Ltd.
Defective
properties
(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 January2008
During theperiod whenChenmingHoldings 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 incompleteperformance and 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)
VIII Material Matters
II. Appropriation of funds of the Company by the controlling shareholder and other relatedparties 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 Directors regarding the latest“modified auditor’s report”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 accountantsApplicable √ Not applicableVI. Changes in accounting policies, accounting estimates or correction of major accounting
errors as compared to the financial report for the prior year
√ Applicable Not applicable
Changes in accounting policies as a result of application of new accounting standardsPrior to the changes, the Company applied the Accounting Standards for Business Enterprises – Basic Standards andvarious specific accounting standards, application guidelines thereof, interpretations and other related rules promulgated bythe Ministry of Finance.Upon the changes, the Company will apply the Interpretation No. 15 and the Interpretation No. 16 promulgated by theMinistry of Finance on 31 December 2021 and 13 December 2022, respectively.On 31 December 2021, the Accounting Standards for Business Enterprises Interpretation No. 15 (Cai Hui [2021] No. 35,hereinafter referred to as“Interpretation No. 15”) regarding regulations on the Accounting Treatment for the External Salesof Products or By-Products Produced Prior to Reaching the Intended Use of Fixed Assets or During the R&D Process andthe Determination of Onerous Contracts were promulgated, and were applied by the Company since 1 January 2022.On 13 December 2022, the Accounting Standards for Business Enterprises Interpretation No. 16 (Cai Hui [2022] No. 31,hereinafter referred to as“Interpretation No. 16”) regarding the Accounting Treatment for the Income Tax Impacts ofDividends in Relation to Financial Instruments Classified as Equity Instrument by the Issuer and the Accounting Treatmentfor the Reclassification of Cash-Settled Share-Based Payment as Equity-Settle Share-Based Payment by an Enterprisewere promulgated, and were applied by the Company since the date of promulgation.Other unchanged parts remain to be applicable in accordance with the Accounting Standards for Business Enterprises –Basic Standards and various specific accounting standards, application guidelines thereof, interpretations and other relatedrules promulgated by the Ministry of Finance in prior period.
VIII Material Matters
VII. Reason for changes in scope of the consolidated financial statements as compared to thefinancial report for the prior year
√ Applicable Not applicable
During the year, 2 subsidiaries were newly established, namely Jiangxi Chenming Tea Co., Ltd. and Shouguang MeichenEnergy Technology Co., Ltd., and 1 subsidiary was deregistered, namely Qingdao Chenming Pulp & Paper ElectronicCommodity Spot Trading Co., Ltd. 2 subsidiaries were acquired not within the definition of business, namely Shanxi FuyinIndustry and Trade Co., Ltd. and Chongmin Culture Development (Shanghai) Co., Ltd.VIII. Engagement or dismissal of accounting firmsCurrent accounting firm engagedName of the domestic accounting firm
Grant Thornton (SpecialGeneral Partnership)Remuneration of the domestic accounting firm (RMB’0,000)330Continued term of service of the domestic accounting firm4Name of certified public accountants of the domestic accounting firmLiu Jian and Jiang LeiContinued term of service of certified public accountants of the domestic accounting firm3Whether 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 applicable
During the year, the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal controlof the Company for 2022. The Company paid RMB800,000 as internal control audit fees during the reporting period. TheCompany engaged Guotai Junan Securities Co., Ltd. as its domestic financial advisor due to the change of listing venueof the domestic listed foreign shares and their listing and trading on the Main Board of The Stock Exchange of Hong KongLimited by conversion, and did not pay for the financial advisor fees during the reporting period. The Company engagedGuotai Junan Capital Limited as its overseas financial advisor, and paid HK$1,000,000 as financial advisor fees during thereporting period. The Company engaged Huaying Securities Co., Ltd. as its financial advisor in respect of the issuance ofshares and payment of cash consideration for acquisition of assets, and did not pay for the financial advisor fees during thereporting 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.
VIII Material Matters
XI. Material litigation and arbitration
√ Applicable Not applicable
General informationon the litigation(arbitration)Amount involved
Whetherprovisions aremadeProgressTrial results and impact
Enforcement ofjudgment
Date ofdisclosureDisclosure index
Summary of matters notsubject to disclosureas material litigation(arbitration) in whichChenming Leasing isthe plaintiff
RMB930.7005 millionNoApart from one litigation case
with subject amount ofRMB25.3 million was stillat the first instance stage,judgments were madefor most of the litigations(arbitrations), and enteredthe execution stage.
For litigation (arbitration) with judgmentmade, the court ordered relevantdefendant and guarantor to settleoutstanding loans to the Company,in line with the request of theCompany and would not have anysignificant impact on the operationand financial condition of theCompany.
In the progress
of execution
Not applicableNot applicable
Summary of matters not
subject to disclosureas material litigation(arbitration) in whichthe Company andother subsidiaries ofthe Company are theplaintiff
RMB72.5720 millionNoLitigations (arbitrations)
were being proceededpursuant to the litigationprocedures. Some of thelitigations (arbitrations)have commenced courtsession and pending forjudgment, while some ofthem were under trial.
Conclusions have not yet made. It
is expected that there would notbe any significant impact on theoperation and financial condition ofthe Company.
Not yet
entered theexecutionstage
Not applicableNot applicable
VIII Material Matters
General informationon the litigation(arbitration)Amount involved
Whetherprovisions aremadeProgressTrial results and impact
Enforcement ofjudgment
Date ofdisclosureDisclosure index
Summary of matters notsubject to disclosureas material litigation(arbitration) in whichthe Company andother subsidiaries ofthe Company are thedefendants
RMB104.9522 millionNoLitigations (arbitrations)
were being proceededpursuant to the litigationprocedures. Some of thelitigations (arbitrations)have commenced courtsession and pendingfor judgment. Firstinstance judgments weremade for some of thelitigations (arbitrations)and appeal was madeby counterparty or theCompany. Some of thelitigations (arbitrations)were under trial.
Conclusions have not yet made. It
is expected that there would notbe any significant impact on theoperation and financial condition ofthe Company.
Not yet
entered theexecutionstage
Not applicableNot applicable
XII. Punishment and rectification
√ Applicable Not applicable
NameTypeReasonType of investigation punishmentConclusion (if any)
Disclosuredate
DisclosureindexJiangxi Chenming
Paper Co., Ltd.
SubsidiaryExcessive emission
of polluted water
General administrative penaltiesOn 12 September 2021, the Nanchang Municipal Ecological Environment Bureau
conducted an on-site inspection of Jiangxi Chenming. After testing, thesuspended solids of the wastewater samples collected from the wastewaterdischarge outlet amounted to 59.33 mg/L, and the chromaticity amountedto 64, which were 0.98 times and 0.28 times higher than the standard,respectively. Therefore, the wastewater discharge exceeded the standard.On 7 January 2022, the Nanchang Municipal Ecological EnvironmentBureau issued the Decision on Administrative Penalty and imposed a fine ofRMB401,000 on Jiangxi Chenming. As at the disclosure date of the Report,Jiangxi Chenming had completed rectification, and paid the fine on time.
N/AN/A
Rectification
√ Applicable Not applicable
(1) Control at source ensured that the indicators of each section reached the required range through strict control on the
operation of the water treatment system. (2) Water intake stabilisation avoided the impact of excessive water volumeto affect the indicator of suspended solids in the effluent. (3) The monitoring of drainage indicators was strengthened.They were adjusted on time to ensure that the discharge met the standards.
XI. Material litigation and arbitration(Continued)
VIII Material Matters
XIII. Credibility of the Company, its controlling shareholders and beneficial controllers Applicable √ Not applicableXIV. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Related party
Relationshipwith theCompany
Types of therelated partytransactions
Subject matter ofthe related partytransactions
Pricing basis ofthe related partytransaction
Related partytransactionprice
Amount ofrelated partytransactions(RMB’0,000)Percentageas the amountof similartransactions
Amount oftransactions
approved(RMB’0,000)WhetherexceedingapprovedcapSettlement ofrelated partytransactions
Market price ofavailable similartransaction
DisclosuredateDisclosure index
Weifang Sime Darby West Port
Co., Ltd.
Joint ventureLabour servicePort miscellaneous
fees
Market priceMarket price6,332.895.90%10,000.00NoBank acceptance
and telegraphictransfer
Not applicable31 March 2022http://
www.cninfo.com.cnTotal6,332.8910,000.00Particulars 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 during the reportingperiod.
4. Related creditors
’ rights and debts transactions
√ Applicable Not applicable
Was there any non-operating related creditors’ rights and debts transaction
√ Yes No
Creditor’s rights receivable from any related party
VIII Material Matters
XIV. Significant related party transactions(Continued)
4. Related creditors
’rights and debts transactions(Continued)
Related party
Relationshipwith theCompanyReason
Was there anynon-operatingcapitaloccupation
Openingbalance(RMB’0,000)
Amountincreasedduring thecurrentperiod(RMB’0,000)
Amountrecoveredduring thecurrentperiod(RMB’0,000)
InterestrateInterest forthe currentperiod(RMB’0,000)
Closingbalance(RMB’0,000)
Shouguang Meite
EnvironmentalTechnology Co., Ltd.
A joint ventureFinancial supportNo1,729.92––6.00%99.201,829.12Weifang Sime Darby West
Port Co., Ltd.
A joint ventureFinancial supportNo8,066.79–1,296.616.00%397.757,167.93Effect of related creditors’
rights on the operatingresults and financialposition of theCompany
The above creditors’rights did notaffect the ordinary operationof the Company. Moreover,they catered to the needsfor development of existingbusinesses of Shouguang MeiteEnvironmental and WeifangSime Darby West Port andlowered the financing costs.Debts payable to any related party
Related party
Relationship withthe CompanyReason
Openingbalance(RMB’0,000)
Amountincreasedduring thecurrent period(RMB’0,000)
Amount repaidduring thecurrent period(RMB’0,000)
Interest
rate
Interest for thecurrent period(RMB’0,000)
Closingbalance(RMB’0,000)
Chenming Holdings Company
Limited
The controllingshareholder
Financialsupport
–23,500.0023,500.007.00%47.25–Guangdong Nanyue Bank Co.,Ltd.
An associateBorrowing220,100.00190,910.00220,100.00Market
interest rate
4,825.54190,910.00Effect of related debts on the operating results and financial positionof the Company
Financial support was provided by Chenming Holdings without requiring any pledge or
guarantee, which was a testament to its support and confidence in the future development ofthe Company, and helped the Company promote project construction and satisfy its needsfor 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 applicable
There 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 applicableThere was no contracting of the Company during the reporting period.
VIII Material Matters
XV. Material contracts and implementation(Continued)
1. Custody, contracting and leasing
(Continued)
(3) Leasing
√ Applicable Not applicable
Leasing 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: RMBItem2022
Low-value leases7,345,715.07Total7,345,715.07As 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: RMBItem2022
Lease income190,694,151.90
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 the
balance sheet date and the total amount of undiscounted lease receipts to be received in the remaining years.
Unit: RMBYear2022.12.31
Within 1 year after the balance sheet date199,136,847.341 to 2 years after the balance sheet date192,606,625.782 to 3 years after the balance sheet date166,116,775.623 to 4 years after the balance sheet date142,350,767.994 to 5 years after the balance sheet date132,326,292.11More than 5 years after the balance sheet date131,251,761.59Total963,789,070.43Items 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.
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 RMB10,005.0265 million. As at 31 December 2022, 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 RMB11,974.3434 million, representing 62.74% of the equityattributable to shareholders of the Company as at the end of 2022.
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-guaranteeTerm
Fulfilled
or notGuaranteeto relatedpartiesor not
Weifang Sime Darby West
Port Co., Ltd.
24 July 201717,500.0020 December 201711,480.00General guaranteeCredit guaranteeNo10 yearsNoNoZhanjiang Runbao Trading
Co., Ltd.
30 March 202216,000.0025 April 202216,000.00Pledge34.64% equity
interest in WuhanChenming
Remaining equity transfer
payment of RMB160million
2 yearsNoNoZhanjiang Dingjin Trading
Co., Ltd.
7 December 202213,558.197 December 202213,558.19PledgePropertiesRemaining equity transfer
payment of RMB136million
3 yearsNoNoShanghai Shuilan Trading
Co., Ltd.
7 December 202245,700.007 December 202245,700.00Pledge100% equity interest
in ShanghaiChongmin
80% equity interest in
Taixing Port held byShanghai Huahao
3 yearsNoNoTotal external guarantees approved during the
reporting period (A1)
75,258.19Total actual external guarantees during the reporting period (A2)75,258.19Total 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)86,738.19
VIII Material Matters
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
Guarantees between the Company and its subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateral
Counter-guaranteeTerm
Fulfilledor notGuaranteeto relatedpartiesor not
Zhanjiang Chenming Pulp &Paper Co., Ltd.
30 March 2019142,404.0016 October 2020142,404.00General guaranteeNoNo5 yearsNoNoZhanjiang Chenming Pulp &Paper Co., Ltd.
30 March 20221,050,000.0012 May 2022273,881.95General guaranteeNoNo1 yearNoNoShouguang Meilun Paper
Co., Ltd.
27 March 20204,900.0030 April 20224,900.00General guaranteeNoNo5 yearsNoNoShouguang Meilun Paper
Co., Ltd.
30 March 2022500,000.006 July 2022121,883.76General guaranteeNoNo1 yearNoNoJiangxi Chenming Paper
Co., Ltd.
30 March 201950,245.0019 January 202250,245.00General guaranteeNoNo5 yearsNoNoJiangxi Chenming Paper
Co., Ltd.
30 March 2022400,000.0019 May 2022124,289.38General guaranteeNoNo1 yearNoNoHuanggang Chenming Pulp
& Paper Co., Ltd.
25 March 20212,000.0022 April 20222,000.00General guaranteeNoNo7 yearsNoNoHuanggang Chenming Pulp
& Paper Co., Ltd.
30 March 2022350,000.0019 May 202268,500.00General guaranteeNoNo1 yearNoNoHuanggang Chenming
Paper Technology Co.,Ltd.
30 March 2022500,000.00General guaranteeNoNo1 yearNoNoHuanggang Chenming Pulp
& Fiber Trading Co., Ltd.
30 March 202230,000.00General guaranteeNoNo1 yearNoNoJilin Chenming Paper Co.,
Ltd.
30 March 202230,000.0023 May 202211,658.00General guaranteeNoNo1 yearNoNoWuhan Chenming Hanyang
Paper Holdings Co., Ltd.
30 March 202250,000.00General guaranteeNoNo1 yearNoNoShouguang Chenming Art
Paper Co., Ltd.
30 March 202220,000.00General guaranteeNoNo1 yearNoNoShandong Chenming Group
Finance Co., Ltd.
30 March 202230,000.00General guaranteeNoNo1 yearNoNoKunshan Tuoan PlasticProducts Co., Ltd.
30 March 202210,000.00General guaranteeNoNo1 yearNoNoZhanjiang Chenming
ArboricultureDevelopment Co., Ltd.
30 March 202230,000.00General guaranteeNoNo1 yearNoNoShouguang HongyiDecorative PackagingCo., Ltd.
30 March 20225,000.00General guaranteeNoNo1 yearNoNoChenming (Singapore) Co.,Ltd.
30 March 202240,000.00General guaranteeNoNo1 yearNoNoChenming (HK) Limited30 March 2022200,000.0026 September 202217,411.50General guaranteeNoNo1 yearNoNoJiangxi Chenming Tea Co.,
Ltd.
30 March 202210,000.00General guaranteeNoNo1 yearNoNo
VIII Material Matters
Guarantees between the Company and its subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateral
Counter-guaranteeTerm
Fulfilled
or not
Guaranteeto relatedpartiesor not
Shandong Chenming Pulp &Paper Sales Co., Ltd.
30 March 201945,996.807 April 202245,996.80General guaranteeNoNo5 yearsNoNoShandong Chenming Pulp &Paper Sales Co., Ltd.
30 March 2022350,000.0028 July 2022158,632.26General guaranteeNoNo1 yearNoNoShanghai Chenming Pulp &Paper Sales Co., Ltd.
30 March 2022150,000.0031 May 202213,500.00General guaranteeNoNo1 yearNoNoShouguang ChenmingImport and Export TradeCo., Ltd.
30 March 201910,000.0014 January 202210,000.00General guaranteeNoNo5 yearsNoNoShouguang Chenming
Import and Export TradeCo., Ltd.
30 March 202250,000.00General guaranteeNoNo1 yearNoNoHainan Chenming
Technology Co., Ltd.
30 March 2022100,000.0016 May 20228,000.00General guaranteeNoNo1 yearNoNoChenming (Overseas) Co.,
Ltd.
30 March 202240,000.00General guaranteeNoNo1 yearNoNoShanghai Hongtai Property
Management Co., Ltd.
30 March 202210,000.00General guaranteeNoNo1 yearNoNoNanchang Chenming
ArboricultureDevelopment Co., Ltd.
30 March 202210,000.00General guaranteeNoNo1 yearNoNoShouguang Chenming
Papermaking MachineCo., Ltd.
30 March 20225,000.00General guaranteeNoNo1 yearNoNoShouguang Hongxiang
Printing and PackagingCo., Ltd.
30 March 20225,000.00General guaranteeNoNo1 yearNoNoShouguang Chenming
Modern Logistic Co.,Ltd.
30 March 20225,000.00General guaranteeNoNo1 yearNoNoShandong Grand View Hotel
Co., Ltd.
30 March 20225,000.00General guaranteeNoNo1 yearNoNoTotal amount of guarantee provided for subsidiaries
approved during the reporting period (B1)
3,985,000.00Total amount of guarantee provided for subsidiaries during the reporting period (B2)1,000,502.65Total amount of guarantee provided for subsidiariesapproved as at the end of the reporting period (B3)
4,240,545.80Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4)1,053,302.65
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
VIII Material Matters
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
Guarantees between subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
GuaranteeprovidedType of guaranteeCollateral
Counter-guaranteeTerm
Fulfilledor not
Guaranteeto relatedpartiesor not
Chenming (HK) Limited30 March 20196,393.5017 March 20206,393.50General guaranteeNoNo5 yearsNoNoShouguang Meilun Paper Co., Ltd4 December 202030,400.004 December 202030,400.00PledgePropertiesNo3 yearsNoNoWuhan Chenming Hanyang PaperHoldings Co., Ltd.
4 December 2020600.004 December 2020600.00PledgePropertiesNo3 yearsNoNoHuanggang Chenming Pulp &Paper Co., Ltd.
4 December 202020,000.004 December 202020,000.00PledgePropertiesNo3 yearsNoNoTotal amount of guarantee provided for subsidiariesapproved during the reporting period (C1)
0.00Total amount of guarantee provided for subsidiaries during the reporting period (C2)0.00Total amount of guarantee provided for subsidiariesapproved as at the end of the reporting period (C3)
57,393.50Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4)57,393.50Total amount of guarantee provided (i.e. sum of the above
three guarantee amount)Total amount of guarantee approved during the reporting
period (A1+B1+C1)
4,060,258.19Total amount of guarantee during the reporting period (A2+B2+C2)1,075,760.84Total amount of guarantee approved as at the end of the
reporting period (A3+B3+C3)
4,390,697.49Total balance of guarantee as at the end of the reporting period (A4+B4+C4)1,197,434.34The percentage of total amount of guarantee provided (i.e.A4+B4+C4) to the net assets of the Company
62.74%
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D)0.00Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E)293,309.06Total amount of guarantee provided in excess of 50% of net assets (F)243,206.07Sum of the above three amount of guarantee (D+E+F)536,515.13For 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
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. Issuance of shares and asset purchase through cash payments
On 21 November 2022, the Company held the fourth extraordinary meeting of the tenth session of the Board andthe second extraordinary meeting of the tenth session of the Supervisory Committee, and considered and approvedrelevant resolutions including the Resolution on Asset Purchase through Issuance of Shares and Cash Payment.The Company intended to acquire 1.19% equity interests in Shouguang Meilun (corresponding capital contributionof RMB57,210,526 to Shouguang Meilun) held by Dongxing Investment and 44.44% limited partnership share inChenrong Fund held by Chongqing Trust through issuance of shares. Shandong Chenming Investment Co., Ltd., awholly-owned subsidiary of the Company, intended to acquire 0.22% general partnership share in Chenrong held byChenming (Qingdao) Asset Management Co., Ltd. (“Chenming Asset Management”) through cash payment. The typeof shares issued by the Company for asset purchase was domestic-listed RMB ordinary shares (A shares), with issueprice of RMB4.42 per share. As of the end of the reporting period, the audit and evaluation on subject asset under thetransaction have not yet completed.For details, please refer to the relevant announcements (announcement no.: 2022-084 and 2022-085) of the Companypublished on CNINFO on 22 November 2022.
VIII Material Matters
XVI. Other matters of significance(Continued)
2. Information disclosure index for 2022
Announcement no.Subject matterDate of publicationPublication website and index
2022-001Announcement on the Continued Pledge of Shares held by
Shareholders
15 January 2022http://www.cninfo.com.cn2022-002Announcement on the Recognition of the Company and its
Subsidiaries as High and New Technology Enterprises
11 February 2022http://www.cninfo.com.cn2022-003Announcement on the Development of Equipment Financing
Business by a Subsidiary
24 February 2022http://www.cninfo.com.cn2022-004The First Indicative Announcement on Adjustment of Coupon
Rate of“18 Chenming Bond 01”and ImplementationMeasures for Resale by Investors
25 February 2022http://www.cninfo.com.cn2022-005The Second Indicative Announcement on Adjustment of
Coupon Rate of“18 Chenming Bond 01”and ImplementationMeasures for Resale by Investors
1 March 2022http://www.cninfo.com.cn2022-006The Third Indicative Announcement on Adjustment of Coupon
Rate of“18 Chenming Bond 01”and ImplementationMeasures for Resale by Investors
3 March 2022http://www.cninfo.com.cn2022-007Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
12 March 2022http://www.cninfo.com.cn2022-008Announcement on the Development of Equipment Financing
Business by a Subsidiary
14 March 2022http://www.cninfo.com.cn2022-009Announcement on the 2021 Annual Online Performance Briefing28 March 2022http://www.cninfo.com.cn2022-010Announcement on the Development of Equipment Financing
Business by a Subsidiary
29 March 2022http://www.cninfo.com.cn2022-011Announcement on Resolutions of the Twelfth Meeting of the
Ninth Session of the Board of Directors
31 March 2022http://www.cninfo.com.cn2022-012Announcement on Resolutions of the Twelfth Meeting of the
Ninth Session of the Supervisory Committee
31 March 2022http://www.cninfo.com.cn2022-013Notice of 2021 Annual General Meeting31 March 2022http://www.cninfo.com.cn2022-0142021 Annual Report Summary31 March 2022http://www.cninfo.com.cn2022-015Special Statement on Securities Investment in 202131 March 2022http://www.cninfo.com.cn2022-016Announcement on Appointment of Auditor for 202231 March 2022http://www.cninfo.com.cn2022-017Announcement on the Expected Continuing Related Party
Transaction in 2022
31 March 2022http://www.cninfo.com.cn2022-018Announcement on the Development of Equipment Financing
Business
31 March 2022http://www.cninfo.com.cn
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index
2022-019Announcement on Carrying out Factoring Business of Accounts
Receivable
31 March 2022http://www.cninfo.com.cn2022-020Announcement on Expected Provision of Guarantees to
Subsidiaries for 2022
31 March 2022http://www.cninfo.com.cn2022-021Special Statement on the Proposed Non-Distribution of Profit
for 2021
31 March 2022http://www.cninfo.com.cn2022-022Announcement on the Amendments to the Company’s RelevantSystems
31 March 2022http://www.cninfo.com.cn2022-023Announcement on the Provision of External Guarantees31 March 2022http://www.cninfo.com.cn2022-024Announcement on Loan Transfer and Related Party Transaction31 March 2022http://www.cninfo.com.cn2022-025Announcement on Results of Resale by Bondholders of“
Chenming Bond 01”
31 March 2022http://www.cninfo.com.cn2022-026Shandong Chenming Paper Holdings Limited Announcement on
Payment of 2022 Interest with Respect to the First Tranche ofCorporate Bonds Publicly Issued to Qualified Investors in 2018
31 March 2022http://www.cninfo.com.cn2022-027Announcement on Receipt of Government Subsidies by
Subsidiaries
1 April 2022http://www.cninfo.com.cn2022-028Announcement on the Proposed Resale of“18 Chenming Bond
” Sale-back Bonds
7 April 2022http://www.cninfo.com.cn2022-029Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
21 April 2022http://www.cninfo.com.cn2022-0302022 First Quarterly Report30 April 2022http://www.cninfo.com.cn2022-031Announcement on the Results of Resale of“18 Chenming Bond
” Bonds
10 May 2022http://www.cninfo.com.cn2022-032Announcement on Resolutions of 2021 Annual General Meeting12 May 2022http://www.cninfo.com.cn2022-033Announcement on Resolutions of the Twenty-fourth
Extraordinary Meeting of the Ninth Session of the Board ofDirectors
24 May 2022http://www.cninfo.com.cn2022-034Announcement on Resolutions of the Seventh Extraordinary
Meeting of the Ninth Session of the Supervisory Committee
24 May 2022http://www.cninfo.com.cn2022-035Declaration by Nominator of Independent Director (Li Zhihui)24 May 2022http://www.cninfo.com.cn2022-036Declaration by Nominator of Independent Director (Sun Jianfei)24 May 2022http://www.cninfo.com.cn2022-037Declaration by Nominator of Independent Director (Yang Biao)24 May 2022http://www.cninfo.com.cn2022-038Declaration by Nominator of Independent Director (Yin Meiqun)24 May 2022http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
2. Information disclosure index for 2022
(Continued)
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index
2022-039Declaration by Candidate for Independent Director (Li Zhihui)24 May 2022http://www.cninfo.com.cn2022-040Declaration by Candidate for Independent Director (Sun Jianfei)24 May 2022http://www.cninfo.com.cn2022-041Declaration by Candidate for Independent Director (Yang Biao)24 May 2022http://www.cninfo.com.cn2022-042Declaration by Candidate for Independent Director (Yin Meiqun)24 May 2022http://www.cninfo.com.cn2022-043Announcement on the Purchase of Liability Insurance for
Directors, Supervisors and Senior Management
24 May 2022http://www.cninfo.com.cn2022-044Notice of the First Extraordinary General Meeting of 202224 May 2022http://www.cninfo.com.cn2022-045Announcement on Credit Rating Adjustment30 May 2022http://www.cninfo.com.cn2022-046Announcement on Resolutions of the Twenty-fifth Extraordinary
Meeting of the Ninth Session of the Board of Directors
31 May 2022http://www.cninfo.com.cn2022-047Notice on Cancellation of Certain Resolutions of 2022 First
Extraordinary General Meeting and Supplementary Notice ofthe General Meeting
31 May 2022http://www.cninfo.com.cn2022-048Announcement on Receipt of Government Subsidies by
Subsidiaries
1 June 2022http://www.cninfo.com.cn2022-049Announcement on Resolutions of the First Extraordinary General
Meeting of 2022
16 June 2022http://www.cninfo.com.cn2022-050Announcement on the Election of Employee Representative
Supervisors
16 June 2022http://www.cninfo.com.cn2022-051Announcement on Resolutions of the First Meeting of the Tenth
Session of the Board of Directors
16 June 2022http://www.cninfo.com.cn2022-052Announcement on Resolutions of the First Meeting of the Tenth
Session of the Supervisory Committee
16 June 2022http://www.cninfo.com.cn2022-053Announcement on the Progress of Litigation21 June 2022http://www.cninfo.com.cn2022-054Announcement on the Continued Pledge of Shares held by
Shareholders
28 June 2022http://www.cninfo.com.cn2022-055Announcement on Resolutions of the First Extraordinary Meeting
of the Tenth Session of the Board
28 June 2022http://www.cninfo.com.cn2022-056Announcement on Capital Increase and Introduction of Strategic
Investors of a Majority-owned Subsidiary
28 June 2022http://www.cninfo.com.cn2022-057Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
13 July 2022http://www.cninfo.com.cn2022-0582022 Interim Results Forecast16 July 2022http://www.cninfo.com.cn2022-059Announcement on Resolutions of the Second Extraordinary
Meeting of the Tenth Session of the Board of Directors
19 July 2022http://www.cninfo.com.cn2022-060Announcement on Resolutions of the First Extraordinary Meeting
of the Tenth Session of the Supervisory Committee
19 July 2022http://www.cninfo.com.cn2022-061Review Opinions on Relevant Matters Proposed at the First
Extraordinary Meeting of the Tenth Session of the SupervisoryCommittee
19 July 2022http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
2. Information disclosure index for 2022
(Continued)
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index
2022-062Announcement on Fulfilment of the Unlocking Conditions for
the First Unlocking Period under the 2020 Restricted A ShareIncentive Scheme
19 July 2022http://www.cninfo.com.cn2022-063Announcement on Adjustment to the Repurchase Price of the
2020 Restricted A Share Incentive Scheme and Repurchaseand Cancellation of Certain Restricted Shares
19 July 2022http://www.cninfo.com.cn2022-064Announcement on Repurchase and Cancellation of Certain
Restricted Shares and Notice to Creditors
19 July 2022http://www.cninfo.com.cn2022-065Indicative Announcement on Release of Restricted Shares for
the First Unlocking Period under the 2020 Restricted A ShareIncentive Scheme for Listing and Trading
25 July 2022http://www.cninfo.com.cn2022-066Announcement on Continued Pledge of Shares held by
Shareholders and Partial Release of Pledge of Shares byShareholders
26 July 2022http://www.cninfo.com.cn2022-067Announcement on Resolution of the Third Extraordinary Meeting
of the Tenth Session of the Board of Directors
29 July 2022http://www.cninfo.com.cn2022-068Announcement on Capital Increase and Introduction of Strategic
Investors of a Majority-owned Subsidiary
29 July 2022http://www.cninfo.com.cn2022-069Announcement on Pledge of Shareholders’ Shares29 July 2022http://www.cninfo.com.cn2022-070Announcement on Continued Pledge of Shares held by
Shareholders
6 August 2022http://www.cninfo.com.cn2022-071Announcement on the Preliminary Disclosure of Disposal of
Shares by Certain Directors and Senior Management of theCompany
13 August 2022http://www.cninfo.com.cn2022-0722022 Interim Report Summary31 August 2022http://www.cninfo.com.cn2022-073Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Technological Transformation Project
13 October 2022http://www.cninfo.com.cn2022-074Announcement on Completion of Repurchase and Cancellation
of Certain Restricted Shares
21 October 2022http://www.cninfo.com.cn2022-075Announcement on the Release of Pledge of Shares held by
Shareholders
27 October 2022http://www.cninfo.com.cn2022-076Announcement on Resolutions of the Third Meeting of the Tenth
Session of the Board of Directors
31 October 2022http://www.cninfo.com.cn2022-077Announcement on Resolutions of the Third Meeting of the Tenth
Session of the Supervisory Committee
31 October 2022http://www.cninfo.com.cn2022-0782022 Third Quarterly Report31 October 2022http://www.cninfo.com.cn2022-079Announcement on Investment in Coniferous Wood Bleached
Chemical Pulp Project with Annual Production Capacity of300,000 Tonnes
31 October 2022http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
2. Information disclosure index for 2022
(Continued)
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index
2022-080Announcement on Investment in Construction of Special Paper
Project with Annual Production Capacity of 180,000 Tonnesby Zhanjiang Chenming
31 October 2022http://www.cninfo.com.cn2022-081Announcement on Continued Pledge of Shares held by
Shareholders
5 November 2022http://www.cninfo.com.cn2022-082Announcement on Expiry of Approval Regarding Change of
Listing Venue of the Domestic Listed Foreign Shares and TheirListing and Trading on the Main Board of the Stock Exchangeof Hong Kong Limited by Conversion
12 November 2022http://www.cninfo.com.cn2022-083Announcement on Participation in the 2022 Annual Online Group
Reception Day for Investors of Listed Companies in ShandongJurisdiction
12 November 2022http://www.cninfo.com.cn2022-084Announcement on Resolutions of the Fourth Extraordinary
Meeting of the Tenth Session of the Board of Directors
22 November 2022http://www.cninfo.com.cn2022-085Announcement on Resolutions of the Second Extraordinary
Meeting of the Tenth Session of the Supervisory Committee
22 November 2022http://www.cninfo.com.cn2022-086Indicative Announcement on General Risks Regarding Asset
Purchase Through Issuance of Shares and Cash Payments
22 November 2022http://www.cninfo.com.cn2022-087Announcement on Not Convening General Meeting for
Consideration of Matters Regarding Asset Purchase ThroughIssuance of Shares and Cash Payments at the Moment
22 November 2022http://www.cninfo.com.cn2022-088Opinions of Supervisory Committee on Asset Purchase Through
Issuance of Shares and Cash Payments
22 November 2022http://www.cninfo.com.cn2022-089Announcement on Involvement in the Establishment of Limited
Partnership Company by a Subsidiary
22 November 2022http://www.cninfo.com.cn2022-090Announcement on Pledge of Shares and Continued Pledge of
Shares held by Shareholders
25 November 2022http://www.cninfo.com.cn2022-091Announcement on the Implementation Progress of the Share
Disposal Plan by Certain Directors and Senior Management ofthe Company
7 December 2022http://www.cninfo.com.cn2022-092Announcement on Resolutions of the Fifth Extraordinary Meeting
of the Tenth Session of the Board of Directors
8 December 2022http://www.cninfo.com.cn2022-093Announcement of Repayment of Debts by Pledge of Equity and
Provision of External Guarantees
8 December 2022http://www.cninfo.com.cn2022-094Announcement on Provision of External Guarantees8 December 2022http://www.cninfo.com.cn2022-095Notice of 2022 Second Extraordinary General Meeting8 December 2022http://www.cninfo.com.cn2022-096Poll Results of the 2022 Second Extraordinary General Meeting24 December 2022http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
2. Information disclosure index for 2022
(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 27 June 2022, the first extraordinary meeting of the tenth session of the Board of the Company considered andapproved the Proposal on Capital Contribution and Introduction of Strategic Investors of a Majority-owned Subsidiary.Given the recognition of Zhanjiang Chenming for its bright development prospect, Xiamen International Trade IndustryDevelopment Equity Investment Fund Partnership (Limited Partnership) made capital contribution to ZhanjiangChenming in the amount of RMB400 million, of which RMB266,351,374 was included in the registered capital and theremaining RMB133,648,626 was included in the capital reserve.On 28 July 2022, the third extraordinary meeting of the tenth session of the Board of the Company considered andapproved the Proposal on the Capital Contribution for Share Increase and Introduction of Strategic Investors for aControlling Subsidiary. BOCOM Financial Assets Investment Co., Ltd. (“BOCOM Investment”) and Jiaohui ChenmingZhuli (Suzhou) Emerging Industry Development Fund Partnership (Limited Partnership) (“Jiaohui Chenming Fund”)contributed capital to Zhanjiang Chenming, with a total capital contribution of RMB1,000 million. BOCOM Investmentand Jiaohui Chenming Fund contributed RMB500 million and RMB500 million, respectively.For details, please refer to the relevant announcements (announcement no.: 2022-055, 2022-056 and 2022-068) ofthe Company published on CNINFO on 28 June and 29 July 2022.
2.Business status of Chenming Leasing
At present, the Company focuses on the development of its principal activities, i.e. pulp production and paper making,and continues to reduce the size of the financial leasing business. As at the end of the reporting period, the balanceof financial leases of Chenming Leasing decreased to RMB5.79 billion. Some financial lease receivables of ChenmingLeasing were overdue due to factors such as the resurgent economic environment and the weak domestic economicenvironment with the overdue principals amounting to RMB1,791 million, for which provisions of RMB663 millionwere made, and a provision coverage rate of 37.02%. Certain assets have been seized through litigation. TheCompany has resorted to, among other things, control of the underlying assets, litigation for seizure, recoveryfor guarantors and debt reconstruction with the overall risks under control.
3.Construction and put into production of Shouguang Meilun household paper projectIn order to optimise resources allocation, accelerate growth driver replacement and facilitate industry upgrade andtransformation, the Company relocated the household paper production line of Wuhan Chenming to ShouguangMeilun. In September 2022, the household paper relocation project of Shouguang Meilun commenced trial operation.In December 2022, the project was officially put into production. Total investment of the project amounted to RMB460million. The full set of equipment and control system of production was sourced from Valmet in Finland. The wholeproduct line adopted most advanced equipment and system in the world, including double headbox, sharper, shoepress, Yankee dryer, high-temperature air cover, as well as the complete set of automatic DCS system, QCS system,electric transmission system and MES system, thus realising full automatic control. The width of paper-makingmachine is 5,600mm, with operation speed up to 2,000m/min. The project uses 100% virgin wood pulp as rawmaterial. Products will undergo 450 high-temperature sterilisation, and can be used for the production for differenttypes of high-end paper products such as toilet paper roll, pocket tissue, facial tissue, napkin and paper towels, withannual production capacity up to 49,000 tonnes.
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 shares84,733,5212.84%-23,243,684-23,243,68461,489,8372.06%
1. Shares held by other domestic
investors84,733,5212.84%-23,243,684-23,243,68461,489,8372.06%Including: Shares held by
domestic natural persons84,733,5212.84%-23,243,684-23,243,68461,489,8372.06%II. Non-restricted shares2,899,474,67997.16%18,777,68418,777,6842,918,252,36397.94%
1. RMB ordinary shares1,664,784,16355.79%18,777,68418,777,6841,683,561,84756.50%
2. Domestic listed foreign shares706,385,26623.67%706,385,26623.71%
3. Overseas listed foreign shares528,305,25017.70%528,305,25017.73%III. Total number of shares2,984,208,200100.00%-4,466,000-4,466,0002,979,742,200100.00%The reasons for such changes
√ Applicable Not applicable
During the reporting period, 29,948,000 RMB ordinary shares were released under the first unlocking period of the2020 Restricted A Share Incentive Scheme. In particular, 11,170,316 RMB ordinary shares were subject to 75%automatic lock-up for unlocking restricted shares held by Directors and Senior Management of the Company underEquity Incentive Scheme. The number of non-restricted shares increased by 18,777,684 in aggregate, while thenumber of restricted shares decreased by 18,777,684 in aggregate. During the reporting period, 4,466,000 restrictedA shares held by participants but yet to be released were repurchased and cancelled as the unlocking conditionswere not met. The number of restricted shares had decreased by 4,466,000 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 applicable
On 18 July 2022, the second extraordinary meeting of the tenth session of the Board and the first extraordinarymeeting of the tenth session of the Supervisory Committee considered and approved the Resolution on the Fulfilmentof the Unlocking Conditions of the Restricted Shares Granted under the 2020 Restricted A Share Incentive Schemeduring the First Unlocking Period and the Resolution on the Adjustment to the Repurchase Price of the 2020Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares. IndependentDirectors of the Company express their independent consent opinions.There were 96 participants who fulfilled the unlocking conditions under the first unlocking period of the 2020Restricted A Share Incentive Scheme, with 29,948,000 shares eligible for unlocking. There were 15 participants whodid not fulfilled the unlocking conditions as he/she had resigned, changed duty and removed from office. The numberof restricted shares held by participants but yet to be released amounted to 4,466,000 in aggregate, representing
5.61% of total number of shares granted under the 2020 Restricted A Share Incentive Scheme.
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 earnings per share and net assets per share attributable to ordinary shareholders of theCompany for the latest year and the latest period Applicable √ Not applicableOther information considered necessary by the Company or required by the securities regulatoryauthorities to be disclosed Applicable √ Not applicable
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 of
period
Restrictedshares released
during theperiod
Restrictedshares increasedduring the
period
Restrictedshares at theend of periodReason for restrictionDate of release from restrictionChen Hongguo23,310,0330023,310,033Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
In accordance with the equity incentiveplan (draft) and relevant requirementsfor shares held by Directors,Supervisors and Senior ManagementHu Changqing5,032,14301,250,0003,782,143Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022Li Xingchun5,000,00001,250,0003,750,000Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022Li Feng3,679,5200750,0002,929,520Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022Li Weixian2,003,6000442,7001,560,900Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022Li Kang111,97500111,975Locked-up shares of Directors,
Supervisors and Senior Management
In accordance with relevant
requirements for shares held byDirectors, Supervisors and SeniorManagementLi Xueqin3,000,0000104,0092,895,991Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022Li Zhenzhong2,084,7500500,0001,584,750Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022Li Mingtang1,000,0000250,000750,000Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
26 July 2022
IX Changes in Share Capital and Shareholders
Name of shareholders
Restrictedshares at thebeginning of period
Restrictedshares releasedduring theperiod
Restrictedshares increasedduring the
period
Restrictedshares at theend of periodReason for restrictionDate of release from restrictionDong Lianming1,000,0000250,000750,000Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
26 July 2022Yuan Xikun333,525075,000258,525Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
26 July 2022Chen Gang1,104,7750504,775600,000Restricted shares of the participants of
the Share Incentive SchemeLocked-up shares of Directors,Supervisors and Senior Management
400,000 restricted shares under the
Equity Incentive Scheme werereleased on 26 July 2022;104,775 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 14 December 2022.Geng Guanglin2,716,95002,716,9500Restricted shares of the participants of
the Equity Incentive SchemeLocked-up shares of Directors,
Supervisors and Senior Management
2,000,000 restricted shares under
the Equity Incentive Scheme werereleased on 18 October 2022;716,950 locked-up shares of Directors,
Supervisors and Senior Managementwere released on 9 December 2022.Li Dong56,250056,2500Locked-up shares of Directors,
Supervisors and Senior Management
9 December 2022Other 99 participants
under the 2020Restricted A ShareIncentive Scheme
34,300,000015,094,00019,206,000Restricted shares of the participants of
the Equity Incentive Scheme
12,628,000 restricted shares under
the Equity Incentive Scheme werereleased on 26 July 2022.
2,466,000 restricted shares under the
Equity Incentive Scheme completedregistration for repurchase andcancellation on 18 October 2022.Total84,733,521023,243,68461,489,837
I. Changes in shares(Continued)
2. Changes in restricted shares
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 applicable
On 18 July 2022, the second extraordinary meeting of the tenth session of the Board and the first extraordinarymeeting of the tenth session of the Supervisory Committee considered and approved the Resolution on theAdjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and Repurchase andCancellation of Certain Restricted Shares. On 18 October 2022, the Company completed the registration of therepurchase and cancellation of certain restricted shares granted to 15 participants but yet to be released under the2020 Restricted A Share Incentive Scheme, with a total of 4,466,000 A shares repurchased and cancelled. The totalnumber of shares of the Company changed from 2,984,208,200 to 2,979,742,200. The controlling shareholder of theCompany remained unchanged. Upon the repurchase and cancellation of 4,466,000 A shares by the Company, therewas no change in net assets, while assets and liabilities decreased by RMB12.7281 million simultaneously.
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 of ordinaryshareholders as at theend of the reportingperiod
156,799, of which134,311 were holdersof A shares, 22,159were holders of Bshares and 329 wereholders of H shares
Total number ofordinary shareholdersas at the end of themonth prior to thepublication date ofthis annual report
156,371, of which133,998 were holdersof A shares, 22,044were holders of Bshares and 329 wereholders of H shares
Total number ofholders of preferenceshares with restoredvoting right as at theend of the reportingperiod
0Total number of
holders 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
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
15.35%457,322,91900457,322,919Pledged251,440,000HKSCC NOMINEES LIMITEDOverseas legal
person
12.53%373,388,625-117,7500373,388,625CHENMING HOLDINGS (HONG KONG) LIMITEDOverseas legal
person
12.22%364,131,56300364,131,563Hong ZejunDomestic natural
person
2.57%76,700,00076,700,000076,700,000Chen HongguoDomestic natural
person
1.04%31,080,044023,310,0337,770,011SHANDONG SUN HOLDINGS GROUP CO., LTD.Domestic non-
state-ownedlegal person
0.84%24,987,1178,599,300024,987,117HONG KONG SECURITIES CLEARING COMPANYLIMITED
Overseas legalperson
0.59%17,712,0813,651,110017,712,081VANGUARD TOTAL INTERNATIONAL STOCK
INDEX FUND
Overseas legal
person
0.50%14,771,9450014,771,945VANGUARD EMERGING MARKETS STOCK0
INDEX FUND
Overseas legal
person
0.49%14,688,346674,700014,688,346GUOTAI JUNAN SECURITIES (HONG KONG) LIMITEDOverseas legal
person
0.28%8,434,361-2,078,80208,434,361Strategic investors or general legal persons who
become 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,
chairman and general manager 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
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
1. Total number of shareholders and shareholdings
(Continued)Shareholdings of the top ten non-restricted shareholders
Name of shareholder
Number of non-
restricted sharesheld as at the endof the reportingperiodClass of shares
Class of sharesNumberCHENMING HOLDINGS COMPANY LIMITED457,322,919RMB ordinary shares457,322,919HKSCC NOMINEES LIMITED373,388,625Overseas listed
foreign shares
373,388,625CHENMING HOLDINGS (HONG KONG) LIMITED364,131,563Domestic listed
foreign shares
210,717,563Overseas listed
foreign shares
153,414,000Hong Zejun76,700,000RMB ordinary shares76,700,000SHANDONG SUN HOLDINGS GROUP CO., LTD.24,987,117RMB ordinary shares24,987,117HONG KONG SECURITIES CLEARING COMPANYLIMITED
17,712,081RMB ordinary shares17,712,081VANGUARD TOTAL INTERNATIONAL STOCKINDEX FUND
14,771,945Domestic listed
foreign shares
14,771,945VANGUARD EMERGING MARKETS STOCKINDEX FUND
14,688,346Domestic listed
foreign shares
14,688,346GUOTAI JUNAN SECURITIES (HONG KONG)LIMITED
8,434,361Domestic listed
foreign shares
8,434,361Jin Xing8,370,205Domestic listed
foreign shares
8,370,205Related party relationship or acting in concert
among the top ten shareholders of non-restrictedshares, and between the top ten shareholdersof non-restricted shares and the top tenshareholders
A shareholder, Chenming Holdings (Hong Kong) Limited, whichis an overseas legal person, is a wholly-owned subsidiary of ashareholder, Chenming Holdings Company Limited, which is astate-owned legal person. Save for the above, it is not aware thatany other shareholders of tradable shares are persons actingin concert. It is also not aware that any other shareholders oftradable shares are related to each other.Securities margin trading of top ten ordinary
Shareholders
Chenming Holdings Company Limited held 457,322,919 RMBordinary shares, of which 326,322,919 shares were held throughordinary account and 131,000,000 shares were held throughcredit guarantee security account;Hong Zejun held 76,700,000 RMB ordinary shares, of which noshare was held through ordinary account and 76,700,000 shareswere held through credit guarantee security account;Shandong Sun Holdings Group Co., Ltd. held 24,987,117 RMBordinary shares, of which no share was held through ordinaryaccount and 24,987,117 shares were held through creditguarantee security account.
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10ordinary shareholders 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.
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 controlling shareholders
Legal representative/Person
in charge of the unitDate of establishmentEnterprise codePrincipal businessCHENMING HOLDINGS COMPANY LIMITEDChen Hongguo30 December 200591370783783485189QInvestment in paper making, electricity, heat
and arboriculture by its own capital.Shareholdings of controlling shareholders who have control or hold shares in otherdomestic or overseas listed companies during the reporting period
Save for the Company, Chenming Holdings Company Limited does not have control over or hold any equityinterest of other domestic or overseas listed companies.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 personName of beneficialcontroller
Legalrepresentative/Person in chargeof the unit
Date ofestablishmentEnterprise codePrincipal businessState-owned Assets
Supervision andAdministration Bureau ofShouguang City
N/A1 August 1991N/AResponsible for the
management and capital
operation of the state-
owned assets of enterprises
and business units in
Shouguang city.Shareholdings of beneficial
controller who has controlor holds shares in otherdomestic or overseaslisted companies duringthe reporting period
Save for the Company, State-owned Assets Supervision and Administration Officeof Shouguang City is also the beneficial controller of Shandong Molong PetroleumMachinery 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
15.35%
12.22%
100%
45.21%
100%
Administration Commission of Shouguang CityShandong Shouguang Jinxin InvestmentDevelopment Holdings Group Co., Ltd.
Shandong Chenming Paper Holdings Limited
Chenming Holdings Company Limited
Chenming Holdings(Hong Kong) Limited
Beneficial controller controlling the Company through trust or other asset management method Applicable √ Not applicable
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
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
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 applicable
IV. 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.
XI Bonds
√ Applicable Not applicable
I. Enterprise bonds Applicable √ Not applicableThe Company had no enterprise bonds during the reporting period.II. Corporate Bonds
√ Applicable Not applicable
1. Basic information on Corporate Bonds
Unit: RMBName of bond
BondabbreviationBond codeIssue dateValue dateMaturity date
Outstandingamount of the
bondsInterestrate
Paymentmethod
Trading
venue
The public issuance of the Corporate Bonds ofShandong Chenming Paper Holdings Limited toqualified investors in 2018 (phase I)
18 ChenmingBond 01
11264129 March
2018
2 April 20182 April 2023350,000,000.006.50%Interest is
paid annually.The principalamount andinterest for thelast tranche willbe paid on thematurity date.
Shenzhen
StockExchange
Investor eligibility arrangement (if any)Online subscription: Public investors with A share security account opened under China Securities
Depository and Clearing Co., Ltd.Offline subscription: Institutional investors with A share security account opened under China Securities
Depository and Clearing Co., Ltd.Applicable trading mechanismDual listing and trading on the centralised bidding system and the Integrated Negotiated Trading Platform of
the Shenzhen Stock ExchangeWhether there are delisting risks (if any) and countermeasuresNoOverdue and outstanding bonds Applicable √ Not applicable
XI Bonds
II. Corporate Bonds(Continued)
2. Triggering and execution of issuer
’s or investor’s option clause or investor protection clause
√ Applicable Not applicable
“18 Chenming Bond 01”is attached with options for the issuer to adjust the coupon rate and for investors to resell.The issuer of“18 Chenming Bond 01”has the right to determine the adjustment to the coupon rate for the following3 years at the end of the second year and the adjustment to the coupon rate for the following year as the end of thefourth year. If the issuer does not exercise the option to adjust the coupon rate, the coupon rate for the subsequentterm will remain unchanged. After issuing the announcement on whether the coupon rate of the relevant tranche ofbonds will be adjusted and the range of adjustment, the investors have the right to register for reselling during theperiod as announced to resell all or part of the relevant tranche of bonds held to the issuer at par value.The Company chose to lower the coupon rate of“18 Chenming Bond 01”to 6.50% at the end of the fourth year asagreed in the Prospectus on the Public Issuance of the Corporate Bonds of Shandong Chenming Paper HoldingsLimited to Qualified Investors in 2018 (phase I). Bondholders of“18 Chenming Bond 01”could declare resale in wholeor in part for“18 Chenming Bond 01”bonds they held on 28 February, 1 March, 2 March, 3 March and 4 March 2022at a resale price of RMB100 per bond (interests exclusive). According to the data provided by the Shenzhen Branchof China Securities Depository and Clearing Corporation Limited, the amount of the“18 Chenming Bond 01”for thisresale was 1,955,000.00, and the total amount of the resale was RMB195,500,000.00 (interests exclusive) with aremaining custodial amount of 1,545,000.00.From 8 April 2022 to 30 April 2022, the Company handled the resale of bonds to be resold in accordance with relevantregulations. The number of resale bonds completed was 1,955,000.00 at an average resale price of RMB100 perbond. Upon the completion of the resale, there were no bonds that had not been resold, and the remaining custodialamount of“18 Chenming Bond 01” was 3,500,000.00.For details, please refer to the relevant announcements (announcement no.: 2022-004, 2022-005, 2022-006, 2022-025, 2022-028 and 2022-031) of the Company published on CNINFO on 25 February, 1 March, 3 March, 31 March, 7April and 10 May 2022.
XI Bonds
II. Corporate Bonds(Continued)
3. Particulars of intermediary organisations
Bond Name
Name of theintermediaryorganisationBusiness address
Name ofSigningaccountant
Contact person ofthe intermediaryorganisationContact no.
The public issuance ofthe Corporate Bonds ofShandong ChenmingPaper Holdings Limitedto qualified investors in2018 (phase I)
GF SecuritiesCo., Ltd.
37th Floor, TaikangInsurance Building,No. 429 NanquanNorth Road, PudongNew Area, Shanghai
N/AJiang Chuan021-38003800-
3705
China ChengxinSecuritiesRating Co.,Ltd.
Building 6, YinheSoho, No. 2Nanzhugan Hutong,ChaoyangmenneiStreet, DongchengDistrict, Beijing
N/ASun Shu010-66428877
Beijing
ZhonglunW&D LawFirm
19th Floor, Jintai
Building, No. 1Xibahe South Road,Chaoyang District,Beijing
N/AYao Zhengwang010-64402232
Ruihua China
CPAs (SpecialGeneralPartnership)
Corporate Square,
35 Finance Street,Xicheng District,Beijing
Wang
Zongpeiand ZhaoYanmei
Wang Zongpei010-88091190
Change of the above intermediary organisations during the reporting period Yes √ No
XI Bonds
II. Corporate Bonds(Continued)
4. Use of proceeds
Unit: RMB
Bond Name
Total amountof proceeds
Utilisedamount
Unutilised
amount
Operation of specialaccount for the proceeds
(if any)
Rectificationof irregularitiesin the use ofproceeds(if any)
Is the useof proceeds
consistentwith the useof proceedsguaranteed
under theprospectus,proposed useof proceeds
and otheragreement?
The public issuance of the Corporate
Bonds of Shandong Chenming PaperHoldings Limited to qualified investorsin 2018 (phase I)
900,000,000.00900,000,000.000.00Special account for proceeds
is used for the deposit ofspecial capital from bonds
NilYes
Proceeds to be used for construction projects Applicable √ Not applicableChange in the use of proceeds from the above bonds during the reporting period Applicable √ Not applicable
5. Adjustment of credit rating results during the reporting period
√ Applicable Not applicable
On 26 May 2022, China Chengxin International Credit Rating Co., Ltd. (“China Chengxin International”) issued theFollow-up Rating Report (2022) with Respect to the Public Issuance of the Corporate Bonds of Shandong ChenmingPaper Holdings Limited to Qualified Investors in 2018 (phase I) (Xin Ping Wei Han Zi [2022] Gen Zong No. 0343). ChinaChengxin International adjusted the issuer credit rating of the Company at AA+, the credit rating of“18 ChenmingBond 01”at AA+, and the negative rating outlook, to: the issuer credit rating of the Company at AA+ and the creditrating of“18 Chenming Bond 01”at AA+ unchanged, and the issuer and debt credit ratings included in the creditrating watch list.For further details, please refer to the Follow-up Rating Report (2022) with Respect to the Public Issuance of theCorporate Bonds of Shandong Chenming Paper Holdings Limited to Qualified Investors in 2018 (phase I) disclosed onCNINFO on 26 May 2022.
XI Bonds
II. Corporate Bonds(Continued)
6. Implementation of and changes in guarantee, debt repayment plan and other repayment guarantee
measures during the reporting period and their impacts on the rights and interests of bond investors
√ Applicable Not applicable
“18 Chenming Bond 01”bonds are unsecured bonds. During the reporting period, the Company was able to strictlyimplement the debt repayment plan, and paid the interest on time and in full according to the time stipulated in theprospectus. Its debt repayment plan and other debt repayment guarantee measures remained changed, and wereconsistent with the relevant commitments in the prospectus.III. Non-financial corporate debt financing instruments
√ Applicable Not applicable
1. Basic information of non-financial corporate debt financing instruments
Unit: RMBBond Name
BondabbreviationBond codeIssue dateValue date
Maturity
date
Outstandingamount of the
bonds
Interest
ratePayment methodTrading venue
2017 first tranche of
medium-term notes ofShandong ChenmingPaper HoldingsLimited
17 Lu Chenming
MTN001
10177900111 July 201712 July 2017N/A1,000,000,000.008.97%Perpetual mid-term
notes. Interest ispaid annually and theprincipal is repaidupon maturity.
Inter-bank bond market
Investor eligibility arrangement (if any)NilApplicable trading mechanismInter-bank bond market trading mechanismWhether there are delisting risks (if any) and countermeasuresN/AOverdue and outstanding bonds Applicable √ Not applicable
2. Triggering and execution of issuer
’s or investor’s option clause or investor protection clause
Applicable √ Not applicable
XI Bonds
III. Non-financial corporate debt financing instruments(Continued)
3. Particulars of intermediary organisations
Bond Name
Name of theintermediaryorganisationBusiness address
Name of signingaccountant
Contact person ofthe intermediaryorganisationContact no.
2017 first tranche of medium-term notes of ShandongChenming Paper Holdings Limited
China Galaxy SecuritiesCo., Ltd.
11/F, Tower C, Corporate Square 35
Finance Street, Xicheng District, Beijing
N/ADong Desen010-66568876Hengfeng Bank Co., Ltd.No. 248 South Street, Zhifu District, Yantai,
Shandong Province
N/AWang Wanjun010-83571412China Chengxin
Securities RatingCo., Ltd.
Building 6, Yinhe Soho, No. 2 Nanzhugan
Hutong, Chaoyangmennei Street,Dongcheng District, Beijing
N/ASun Shu010-66428877Beijing Zhonglun W&D
Law Firm
19th Floor, Jintai Building, No. 1 Xibahe
South Road, Chaoyang District, Beijing
N/AYao Zhengwang010-64402232Ruihua China CPAs
(Special GeneralPartnership)
Corporate Square, 35 Finance Street,
Xicheng District, Beijing
Wang Zongpei and
Zhao Yanmei
Wang Zongpei010-88091190Change of the above intermediary organisations during the reporting period Yes √ No
XI Bonds
III. Non-financial corporate debt financing instruments(Continued)
4. Use of proceeds
Unit: RMB
Bond Name
Total amount ofproceedsUtilised amount
Unutilisedamount
Operation of specialaccount for theproceeds
Rectificationofirregularitiesin the use ofproceeds(if any)
Is the useof proceedsconsistentwith the useof proceedsguaranteedunder theprospectus,proposed useof proceedsand otheragreement?
2017 first trancheof medium-termnotes of ShandongChenming PaperHoldings Limited
1,000,000,000.001,000,000,000.000.00Special account for
proceeds is usedfor the depositof special capitalfrom bonds
NoYes
Proceeds to be used for construction projects Applicable √ Not applicableChange in the use of proceeds from the above bonds during the reporting period Applicable √ Not applicable
5. Adjustment of credit rating results during the reporting period
√ Applicable Not applicable
On 26 May 2022, China Chengxin International issued the Follow-up Rating Report of Shandong Chenming PaperHoldings Limited 2022 (Xin Ping Wei Han Zi [2022] Gen Zong No. 0345). China Chengxin International adjustedthe issuer credit rating of the Company at AA+, the credit ratings of“17 Lu Chenming MTN001”,“18 Lu ChenmingMTN002”,“19 Lu Chenming MTN001”and“19 Lu Chenming MTN002”at AA+, and the negative rating outlook, to:
the issuer credit rating of the Company at AA+ and the credit ratings of“17 Lu Chenming MTN001”,“18 Lu ChenmingMTN002”,“19 Lu Chenming MTN001”and“19 Lu Chenming MTN002”at AA+ unchanged, and the issuer and debtcredit ratings included in the credit rating watch list.For further details, please refer to the Follow-up Rating Report of Shandong Chenming Paper Holdings Limited 2022disclosed on Chinamoney on 26 May 2022.
XI Bonds
III. Non-financial corporate debt financing instruments(Continued)
6. Implementation of and changes in guarantee, debt repayment plan and other repayment guarantee
measures during the reporting period and their impacts on the rights and interests of bond investors
√ Applicable Not applicable
“17 Lu Chenming MTN001”, is not guaranteed. During the reporting period, the Company was able to strictlyimplement the debt repayment plans, and paid the interest on time and in full according to the time stipulated in theprospectuses. Their debt repayment plans and other debt repayment guarantee measures remained changed, whichwere consistent with the relevant commitments in the prospectuses.IV. Convertible bonds Applicable √ Not applicableThe Company had no convertible bonds during the reporting period.V. The loss in the scope of the consolidated financial statements during the reporting period
exceeding 10% of the net assets as at the end of the prior year Applicable √ Not applicableVI. Overdue interest-bearing debts other than bonds at the end of the reporting period Applicable √ Not applicableVII. Breaches of the regulations during the reporting period Yes √ No
XI Bonds
VIII. Major accounting data and financial indicators of the Company over the past two years as atthe end of the reporting period
Unit: RMB’0,000
Item
As at the endof the reporting
period
As at the end of
the prior year
Increase/decrease as atthe end of the reportingperiod as compared tothe end of the prior year
Current ratio63.04%65.05%-2.01%Gearing ratio71.85%72.76%-0.91%Quick ratio49.90%54.59%-4.69%
The reportingperiod
The correspondingperiod of the prior
year
Increase/decrease of
the reporting period
as compared tocorresponding period of
the prior year
Net profit after extraordinary gains or losses-36,145.94174,387.65-120.73%Proportion of EBITDA to total debts8.61%13.43%-4.82%Interest coverage ratio1.09%2.12-48.58%Cash interest coverage ratio2.74%4.45-38.43%EBITDA interest coverage ratio2.30%3.32-30.72%Loans payment ratio100.00%100.00%0.00%Interest payment ratio100.00%100.00%0.00%
Note: EBITDA=Total profit+interest expenses-interest income+depreciation of fixed assets+amortisation of investment property+amortisation of
intangible assets+amortisation of long-term prepaid expenses
XII Financial Report
I. Auditors’ ReportType of auditor’s opinionStandard and unqualified opinionsThe date of the audit report signed30 March 2023Name of the auditorGrant Thornton (Special General Partnership)Reference number of the auditor’s reportZhi Tong Shen Zi (2023) No. 371A006018Name of certified public accountantsLiu Jian and Jiang LeiText of the auditor’s reportTo 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 2022, 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 2022 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 2022 and of its consolidated and the Company’s operatingresults and cash flows for 2022.
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.
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III. Key audit mattersKey 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.(I) Impairment provision test for inventories of machine-made paperFor detailed disclosures of relevant information, please see note V. 12 and note VII. 7 of the financial statements.
1. Details
The inventory balance of Chenming Paper as at the end of 2022 was RMB6,856,750,700, of whichthe balance of raw materials, work in progress and goods in stock related to machine-made paperbusiness was RMB4,221,963,900, with a provision for impairment of inventories of RMB34,834,500 anda carrying value of RMB4,187,129,400. 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. 29 and note VII. 47 of the financialstatements.
1. Details
For the year 2022, Chenming Paper achieved operating revenue of RMB32,004,367,300, of whichRMB29,442,135,200 was from machine-made paper and pulp, accounting for 91.99% 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.
XII Financial Report
IV. Other informationThe management of Chenming Paper is responsible for other information. Other information includes the informationcovered in the 2022 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.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.
XII Financial Report
(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).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 : Liu Jian(Project Partner)Chinese Certified Public Accountant: Jiang LeiBeijing, China 30 March 2023
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 2022
Unit: RMBItem31 December 202231 December 2021CURRENT ASSETS:
Monetary funds14,000,434,986.0814,119,782,939.66Financial assets held for trading74,708,444.88110,886,182.88Bills receivableAccounts receivable3,212,260,445.962,656,517,150.46Accounts receivable financing924,960,384.16435,459,341.76Prepayments788,191,626.82891,485,078.46Other receivables1,717,445,443.442,252,864,083.00Including: Interest receivable
Dividend receivableInventories6,821,916,159.955,282,631,922.12Non-current assets due within one year3,998,724,415.855,216,934,172.61Other current assets1,180,807,801.621,903,929,492.85Total current assets32,719,449,708.7632,870,490,363.80
XII Financial Report
Item31 December 202231 December 2021NON-CURRENT ASSETS:
Long-term receivables1,486,807,783.471,788,759,975.35Long-term equity investments4,277,013,369.561,894,794,764.19Other non-current financial assets786,750,761.62519,927,003.25Investment property6,256,723,113.156,473,538,431.91Fixed assets33,797,738,695.3035,653,492,676.15Construction in progress558,866,880.36197,749,526.05Bearer biological assets13,697,336.80Right-of-use assets181,614,699.25197,429,176.44Intangible assets1,831,338,830.921,592,672,934.54Goodwill26,946,905.3826,946,905.38Long-term prepaid expenses44,462,851.4549,141,773.14Deferred income tax assets1,335,700,565.601,114,781,456.78Other non-current assets983,905,908.00489,936,694.10Total non-current assets51,581,567,700.8649,999,171,317.28Total assets84,301,017,409.6282,869,661,681.08
XII Financial Report
Item31 December 202231 December 2021CURRENT LIABILITIES:
Short-term borrowings36,385,048,295.0233,523,025,186.22Bills payable3,128,595,835.043,089,512,327.40Accounts payable4,114,966,767.763,871,131,345.34Receipts in advance14,261,436.6738,274,028.20Contract liabilities1,306,029,389.801,382,289,597.54Employee benefits payable144,925,887.00169,899,008.01Taxes payable261,011,669.09321,495,480.67Other payables1,870,403,909.171,538,013,585.93Including: Interest payable15,895,930.5155,437,777.80
Dividend payableNon-current liabilities due within one year4,673,505,241.866,601,311,227.98Total current liabilities51,898,748,431.4150,534,951,787.29
XII Financial Report
Item31 December 202231 December 2021NON-CURRENT LIABILITIES:
Long-term borrowings3,982,236,251.085,276,340,154.98Bonds payable155,000,000.00Lease liabilities53,596,047.4657,281,205.81Long-term payables3,160,771,126.312,358,901,022.99Provisions325,259,082.28Deferred income1,469,230,468.461,573,681,684.25Deferred income tax liabilities8,181,264.2913,210,529.74Total non-current liabilities8,674,015,157.609,759,673,680.05Total liabilities60,572,763,589.0160,294,625,467.34
XII Financial Report
Item31 December 202231 December 2021OWNERS’ EQUITY:
Share capital2,979,742,200.002,984,208,200.00Other equity instruments996,000,000.00996,000,000.00Including: Preference shares
Perpetual Bonds996,000,000.00996,000,000.00Capital reserves5,361,200,522.295,227,258,100.41Less: Treasury shares128,780,100.00226,860,000.00Other comprehensive income-821,940,694.57-445,582,729.36Special reserves15,791,710.95Surplus reserves1,212,009,109.971,212,009,109.97General risk provisions79,900,268.7176,825,918.60Retained profit9,390,642,477.579,294,126,706.86Total equity attributable to owners of the Company19,084,565,494.9219,117,985,306.48
Minority interest4,643,688,325.693,457,050,907.26Total shareholders’ equity23,728,253,820.6122,575,036,213.74Total liabilities and shareholders’ equity84,301,017,409.6282,869,661,681.08Legal Representative:
Chen Hongguo
Financial controller:
Dong Lianming
Head of the financial department:
Zhang Bo
2. Balance sheet of the Company
Unit: RMBItem31 December 202231 December 2021CURRENT ASSETS:
Monetary funds5,661,807,164.726,827,656,382.37Bills receivable3,482,822,426.803,625,270,000.00Accounts receivable134,755,527.73141,601,245.51Accounts receivable financing7,923,732.09Prepayments375,206,833.58239,461,509.15Other receivables9,337,019,470.138,900,179,262.54
Including: Interest receivable
Dividend receivable126,325,018.50Inventories692,338,698.67639,423,803.30Non-current assets due within one year13,434,710.01Other current assets86,159,558.4944,894,366.29Total current assets19,783,544,390.1320,426,410,301.25
XII Financial Report
Item31 December 202231 December 2021NON-CURRENT ASSETS:
Long-term receivables15,914,404.2513,612,038.99Long-term equity investments18,826,163,036.3318,806,029,815.18Other non-current financial assets123,750,761.62119,927,003.25Fixed assets3,654,340,361.493,753,927,591.49Construction in progress24,865,009.5894,436,880.66Intangible assets490,533,559.72520,068,337.11Deferred income tax assets518,171,288.92393,918,032.54Other non-current assets986,260.707,000,000.00Total non-current assets23,654,724,682.6123,708,919,699.22Total assets43,438,269,072.7444,135,330,000.47
XII Financial Report
Item31 December 202231 December 2021CURRENT LIABILITIES:
Short-term borrowings12,885,183,530.8113,761,223,259.09Bills payable9,455,780,407.309,725,713,524.15Accounts payable1,288,578,359.051,129,675,956.85Contract liabilities1,503,256,921.15888,114,906.08Staff remuneration payables65,349,838.5057,487,223.39Tax payables11,729,028.39115,257,929.68Other payables1,856,098,294.14970,585,670.47Including: Interest payable15,895,930.5155,437,777.80
Dividend receivableNon-current assets due within one year1,171,869,377.782,111,092,964.34Total current assets28,237,845,757.1228,759,151,434.05
XII Financial Report
Item31 December 202231 December 2021NON-CURRENT LIABILITIES:
Long-term borrowings1,698,253,561.101,779,135,700.00Bonds payable155,000,000.00Long-term payables150,911,348.0052,376,768.35Provisions325,259,082.28Deferred income33,251,328.0435,232,490.83Total non-current assets1,882,416,237.142,347,004,041.46Total liabilities30,120,261,994.2631,106,155,475.51
XII Financial Report
Item31 December 202231 December 2021OWNERS’ EQUITYShare capital2,979,742,200.002,984,208,200.00Other equity instruments996,000,000.00996,000,000.00
Including: Preference shares
Perpetual Bonds996,000,000.00996,000,000.00Capital reserves5,147,225,041.115,154,365,336.31Less: Treasury shares128,780,100.00226,860,000.00Special reserves2,066,138.15Surplus reserves1,199,819,528.061,199,819,528.06Retained profit3,121,934,271.162,921,641,460.59Total shareholders’ equity13,318,007,078.4813,029,174,524.96Total liabilities and shareholders’ equity43,438,269,072.7444,135,330,000.47
XII Financial Report
3. Consolidated Income Statement
Unit: RMBItem20222021I. Total revenue32,004,367,320.9133,019,812,294.14Including: Revenue32,004,367,320.9133,019,812,294.14II. Total operating costs32,046,430,688.6530,583,840,093.56Including: Operating costs27,373,725,707.0025,222,275,795.28
Taxes and surcharges243,139,315.06284,456,212.31Sales and distribution expenses242,181,274.09293,509,692.51General and administrative expenses750,546,703.34942,360,735.54Research and development expense1,290,281,540.101,453,766,371.46Finance expenses2,146,556,149.062,387,471,286.46Including: Interest expenses2,081,067,895.662,348,200,417.05
Interest income309,987,478.19287,289,410.33Plus: Other income242,223,168.86220,600,635.49Investment income (“-” denotes loss)-76,042,787.35-69,578,338.92Including: Investment income from associates and
joint ventures24,116,757.9531,476,499.83Ga ins on derecognition of financial assets
measured at amortised cost (“-”denotesloss)-137,464,855.58-258,113,630.19Gain on change in fair value (“-” denotes loss)-25,253,928.81-77,073,812.67Credit impairment loss (“-” denotes loss)-86,076,968.56-268,735,361.31Loss on impairment of assets (“-” denotes loss)-17,659,966.20-11,285,890.45Gain on disposal of assets (“-” denotes loss)161,092,513.7651,559,551.66
XII Financial Report
Item20222021III. Operating profit (“-” denotes loss)156,218,663.962,281,458,984.38Plus: Non-operating income77,248,685.7671,694,386.81Less: Non-operating expenses51,198,001.7246,973,061.20IV. Total profit (“-” denotes total loss)182,269,348.002,306,180,309.99Less: Income tax expenses-135,093,343.41216,496,288.54V. Net profit (“-” denotes net loss)317,362,691.412,089,684,021.45(I) Classification according to the continuity of operation:
Including: Net profit from continuing operations (“-”
denotes net loss)317,362,691.412,089,684,021.45Net profit from discontinued operations (“-”denotesnet loss)(II) Classification according to ownership:
1. Net profit attributable to shareholders of the
Company189,290,120.822,065,513,108.71
2. Profit or loss of minority interest128,072,570.5924,170,912.74VI. Net other comprehensive income after tax-376,357,965.21116,103,878.30Net other comprehensive income after tax attributable toshareholders of the Company-376,357,965.21116,103,878.30
(1) Other comprehensive income that cannot be
reclassified to profit and loss
(2) Other comprehensive income that will be reclassified
to profit and loss-376,357,965.21116,103,878.30
1. Exchange differences arising from translation
of financial statements denominated in foreigncurrencies-376,954,395.08114,257,267.36
2. Other comprehensive income that may be
reclassified to profit and loss under the equitymethod596,429.871,846,610.94Other comprehensive income, net of tax attributable to
minority interestVII. Total comprehensive income-58,995,273.802,205,787,899.75
Total comprehensive income attributable to shareholders of
the Company-187,067,844.392,181,616,987.01Total comprehensive income attributable to minority
interest128,072,570.5924,170,912.74VIII. Earnings per share:
(I) Basic earnings per share0.030.56(II) Diluted earnings per share0.030.56Legal Representative:
Chen Hongguo
Financial controller:
Dong Lianming
Head of the financial department:
Zhang Bo
XII Financial Report
4. Income statement of the Company
Unit: RMBItem20222021I. Revenue7,520,064,602.488,761,491,410.08Less: Operating costs7,046,088,687.447,357,969,445.55Taxes and surcharges33,903,732.0873,724,285.85Sales and distribution expenses8,097,899.539,558,862.03General and administrative expenses143,936,740.47225,572,928.07Research and development expense269,160,568.77357,549,848.69Finance expenses775,464,172.57596,154,250.94Including: Interest expenses942,221,009.811,026,360,435.96
Interest income426,232,368.25538,879,542.11Plus: Other income40,656,440.237,369,035.15
Investment income (“-” denotes loss)673,446,949.242,932,306,416.92Including: Investment income from associates and
joint ventures-314,623.14-3,156,467.36Gains on derecognition of financial assets measured
at amortised cost (“-” denotes loss)-63,403,215.00-12,601,533.35Gain on change in fair value (“-” denotes loss)1,600,000.00Credit impairment loss (“-” denotes loss)5,350,000.0060,361,147.28Loss on impairment of assets (“-” denotes loss)10,519,416.80-1,108,450.71Gain on disposal of assets (“-” denotes loss)-12,924,176.525,690,737.73II. Operating profit (“-” denotes loss))151,386,962.313,147,180,675.32Plus: Non-operating income111,848,393.6850,666,803.06Less: Non-operating expenses73,996,545.764,482,683.25III. Total profit (“-” denotes total loss)20,105,385.253,193,364,795.13Less: Income tax expenses165,739,554.1924,799,796.59IV. Net profit (“-” denotes net loss)-124,253,256.383,168,564,998.54(I) Net profit from continuing operations (“-”denotes netloss)289,992,810.573,168,564,998.54(II) Net profit from discontinued operations (“-”denotesnet loss)289,992,810.57V. Total comprehensive income289,992,810.573,168,564,998.54
XII Financial Report
5. Consolidated cash flow statement
Unit: RMBItem20222021I. Cash flows from operating activities:
Cash received from sales of goods and rendering of
services34,004,940,977.9537,026,791,230.42Tax rebates received774,636,352.3959,547,522.63Cash received relating to other operating activities1,438,951,565.792,219,955,470.38Subtotal of cash inflows from operating activities36,218,528,896.1339,306,294,223.43Cash paid for goods and services27,914,460,565.1225,422,330,671.57Cash paid to and for employees1,378,611,065.391,467,112,946.72Payments of taxes and surcharges1,181,977,144.951,426,328,693.53Cash paid relating to other operating activities2,293,655,878.302,408,633,718.97Subtotal of cash outflows from operating activities32,768,704,653.7630,724,406,030.79Net cash flows from operating activities3,449,824,242.378,581,888,192.64
XII Financial Report
Item20222021II. Cash flows from investing activities:
Cash received from investments1,526,241.63222,670,944.63Cash received from investment income37,543,374.8181,429,872.21Net cash received from disposal of fixed assets, intangible
assets and other long-term assets232,394,062.31217,787,583.26Net cash received from disposal of subsidiaries and other
business units–306,239,547.48Cash received relating to other investing activities–493,700,048.10Subtotal of cash inflows from investing activities271,463,678.751,321,827,995.68Cash paid for purchase of fixed assets, intangible assets
and other long-term assets885,436,648.94632,606,779.05Cash paid on investments1,463,000,000.00396,000,000.00Net cash paid for acquisition of subsidiaries and other
business units367,997,918.78–Cash paid relating to other investing activities–127,500,000.00Subtotal of cash outflows from investing activities2,716,434,567.721,156,106,779.05Net cash flows from investing activities-2,444,970,888.97165,721,216.63III. Cash flows from financing activities:
Cash received from investments1,400,000,000.002,350,000,000.00Including: Ca sh received from subsidiaries from minority
investment1,400,000,000.002,350,000,000.00Cash received from borrowings32,477,133,959.5326,078,252,949.16Cash received relating to other financing activities3,719,090,394.824,808,748,496.67Subtotal of cash inflows from financing activities37,596,224,354.3533,237,001,445.83Cash repayments of amounts borrowed31,525,777,100.6429,423,534,354.33Cash paid for dividend and profit distribution or interest
payment2,362,284,448.943,327,088,059.92Including: Div idend and profit paid by subsidiaries to
minority shareholders200,352,435.08126,809,125.87Cash paid relating to other financing activities5,689,222,885.2210,426,875,069.68Subtotal of cash outflows from financing activities39,577,284,434.8043,177,497,483.93Net cash flows from financing activities-1,981,060,080.45-9,940,496,038.10IV. Effect of foreign exchange rate changes on cash and cashequivalents-33,248,970.46-27,367,487.94V. Net increase in cash and cash equivalents-1,009,455,697.51-1,220,254,116.77
Plus: Balance of cash and cash equivalents as at the
beginning of the period3,168,915,847.024,389,169,963.79VI. Balance of cash and cash equivalents as at the end of the
period2,159,460,149.513,168,915,847.02
XII Financial Report
6. Cash flow statement of the Company
Unit: RMBItem20222021I. Cash flows from operating activities:
Cash received from sales of goods and rendering ofservices9,262,082,947.689,921,458,290.29Tax rebates received9,335,732.78–Cash received relating to other operating activities546,476,129.29318,480,435.45Subtotal of cash inflows from operating activities9,817,894,809.7510,239,938,725.74
Cash paid for goods and services7,950,820,408.327,949,092,113.55Cash paid to and for employees298,994,477.43324,850,174.01Payments of taxes and surcharges200,234,241.01296,341,765.94Cash paid relating to other operating activities876,312,163.51835,108,368.36Subtotal of cash outflows from operating activities9,326,361,290.279,405,392,421.86Net cash flows from operating activities491,533,519.48834,546,303.88II. Cash flows from investing activities:
Cash received from investments1,526,241.633,488,670,944.63Cash received from investment income918,541,961.593,346,501,947.10Net cash received from disposal of fixed assets, intangible
assets and other long-term assets175,178,998.353,871,823.30Net cash received from disposal of subsidiaries and other
business units––Cash received relating to other investing activities–493,655,373.48Subtotal of cash inflows from investing activities1,095,247,201.577,332,700,088.51
Cash paid for purchase of fixed assets, intangible assets
and other long-term assets30,885,811.9019,676,071.84Cash paid on investments–882,210,000.00Net cash paid for acquisition of subsidiaries and other
business units––Cash paid relating to other investing activities––Subtotal of cash outflows used in investing activities30,885,811.90901,886,071.84Net cash flows from investing activities1,064,361,389.676,430,814,016.67III. Cash flows from financing activities:
Cash received from investments––Cash received from borrowings19,328,476,282.3622,083,489,278.32Cash received relating to other financing activities771,135,279.77110,000,000.00Subtotal of cash inflows from financing activities20,099,611,562.1322,193,489,278.32
XII Financial Report
Item20222021Cash repayments of amounts borrowed20,169,398,149.5418,497,803,668.52Cash paid for dividend and profit distribution or interest
payment612,303,611.03996,025,461.24Cash paid relating to other financing activities1,533,109,819.219,373,355,123.84Subtotal of cash outflows from financing activities22,314,811,579.7828,867,184,253.60Net cash flows from financing activities-2,215,200,017.65-6,673,694,975.28IV. Effect of foreign exchange rate changes on cash and cashequivalents-177,257.07504,245.77V. Net increase in cash and cash equivalents-659,482,365.57592,169,591.04
Plus: Ba lance of cash and cash equivalents as at the
beginning of the period893,454,314.56301,284,723.52VI. Balance of cash and cash equivalents as at the end of the
period233,971,948.99893,454,314.56
XII Financial Report
7. Consolidated statement of changes in owners
’ equity
Amount for the reporting period
Unit: RMB
Item
2022
Equity attributable to owners of the Company
MinorityinterestTotalowners’ equityShare capital
Other equity instruments
Capital
reservesLess:
Treasury
sharesOthercomprehensive
incomeSpecial
reservesSurplusreservesGeneral risk
provisionsRetained profitOthersSubtotal
Preference
sharesPerpetual BondsOthers
I. Balance as at the end of the
prior year2,984,208,200.00996,000,000.005,227,258,100.41226,860,000.00-445,582,729.361,212,009,109.9776,825,918.609,294,126,706.8619,117,985,306.483,457,050,907.2622,575,036,213.74OthersII. Balance as at the beginning of
the year2,984,208,200.00996,000,000.005,227,258,100.41226,860,000.00-445,582,729.361,212,009,109.9776,825,918.609,294,126,706.8619,117,985,306.483,457,050,907.2622,575,036,213.74III. Changes in the period(“-” denotes decrease)-4,466,000.00133,942,421.88-98,079,900.00– 376,357,965.2115,791,710.953,074,350.1196,515,770.71-33,419,811.561,186,637,418.431,153,217,606.87(I) Total comprehensive income– 376,357,965.21189,290,120.82-187,067,844.39128,072,570.59– 58,995,273.80(II) Capital paid in and reduced
by owners-4,466,000.00133,942,421.88-98,079,900.00227,556,321.881,258,917,282.921,486,473,604.80
1. Ordinary shares paid by
owners-4,466,000.00-8,262,100.00-12,728,100.001,258,917,282.921,246,189,182.92
2. Capital paid by holders of
other equity instruments––
3. Amount of share-based
payments recognised inowners’ equity1,121,804.80-98,079,900.0099,201,704.8099,201,704.80
4. Others141,082,717.08141,082,717.08141,082,717.08
(III) Profit distribution3,074,350.11-92,774,350.11-89,700,000.00-200,352,435.08-290,052,435.08
1. Transfer to surplus
reserves–––
2. Transfer to general risk
provisions3,074,350.11-3,074,350.11–
3. Distribution to owners
(or shareholders)-89,700,000.00-89,700,000.00-200,352,435.08-290,052,435.08
(IV) Special reserves15,791,710.9515,791,710.9515,791,710.95
1. Withdrew in the period29,147,795.1729,147,795.1729,147,795.17
2. Used in the period
(denotes in“-”)-13,356,084.22-13,356,084.22-13,356,084.22IV. Balance as at the end of the
period2,979,742,200.00996,000,000.005,361,200,522.29128,780,100.00-821,940,694.5715,791,710.951,212,009,109.9779,900,268.719,390,642,477.5719,084,565,494.924,643,688,325.6923,728,253,820.61
XII Financial Report
Amount for the prior period
Unit: RMB
Item
2021
Equity attributable to owners of the Company
Minority interestTotal owners’
equityShare capital
Other equity instruments
Capital reserves
Less:
Treasury shares
Othercomprehensive
incomeSpecial
reservesSurplus reserves
General risk
provisionsRetained profitOthersSubtotalPreference sharesPerpetual BondsOthers
I. Balance as at the end of theprior year2,984,208,200.004,477,500,000.00996,000,000.005,321,911,413.75226,860,000.00-561,686,607.661,212,009,109.9774,122,644.209,999,764,028.7424,276,968,789.001,523,294,926.2425,800,263,715.24Plus: Others-1,803,277,670.52-1,803,277,670.52-1,803,277,670.52II. Balance as at the beginningof the year2,984,208,200.004,477,500,000.00996,000,000.005,321,911,413.75226,860,000.00-561,686,607.661,212,009,109.9774,122,644.208,196,486,358.2222,473,691,118.481,523,294,926.2423,996,986,044.72
III. Changes in the period
(“-” denotes decrease)-4,477,500,000.00-94,653,313.34116,103,878.302,703,274.401,097,640,348.64-3,355,705,812.001,933,755,981.02-1,421,949,830.98(I) Total comprehensiveincome116,103,878.302,065,513,108.712,181,616,987.0124,170,912.742,205,787,899.75(II) Capital paid in andreduced by owners-4,477,500,000.00-94,653,313.34-4,572,153,313.342,312,271,861.82-2,259,881,451.52
1. Ordinary shares paid
by owners2,312,271,861.822,312,271,861.82
2. Capital paid by
holders of other equityinstruments-4,477,500,000.00-22,500,000.00-4,500,000,000.00-4,500,000,000.00
3. Amount of share-
based paymentsrecognised in owners’
equity52,556,871.8952,556,871.8952,556,871.89
4. Others-124,710,185.23-124,710,185.23-124,710,185.23
(III) Profit distribution2,703,274.40-967,872,760.07-965,169,485.67-126,809,125.87-1,091,978,611.54
1. Transfer to general risk
provisions2,703,274.40-2,703,274.40
2. Distribution to owners
(or shareholders)-965,169,485.67-965,169,485.67-126,809,125.87-1,091,978,611.54
(IV) Transfer within owners’
equity-275,877,667.67-275,877,667.67
1. Others-275,877,667.67-275,877,667.67
IV. Balance as at the end of the
period2,984,208,200.00996,000,000.005,227,258,100.41226,860,000.00-445,582,729.361,212,009,109.9776,825,918.609,294,126,706.8619,117,985,306.483,457,050,907.2622,575,036,213.74
XII Financial Report
8. Statement of changes in equity of owners of the Company
Amount for the reporting period
Unit: RMB
Item
2022
Share capital
Other equity instruments
Capital reserves
Less:
TreasurysharesOthercomprehensive
incomeSpecialreservesSurplusreservesRetained
profitOthersTotal owners’
equity
Preference
sharesPerpetual
BondsOthers
I. Balance as at the end of the prior
year2,984,208,200.00996,000,000.005,154,365,336.31226,860,000.001,199,819,528.062,921,641,460.5913,029,174,524.96II. Balance as at the beginning ofthe year2,984,208,200.00996,000,000.005,154,365,336.31226,860,000.001,199,819,528.062,921,641,460.5913,029,174,524.96III. 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 comprehensive income289,992,810.57289,992,810.57(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-4,466,000.00-8,262,100.00-12,728,100.00
2. Capital paid by holders of
other equity instruments
3. Amount of share-based
payments recognised inowners’ equity1,121,804.80-98,079,900.0099,201,704.80
(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
(V) 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
(denotes in“-”)-611,268.94-611,268.94
IV.Balance as at the end of theperiod2,979,742,200.00996,000,000.005,147,225,041.11128,780,100.002,066,138.151,199,819,528.063,121,934,271.1613,318,007,078.48
XII Financial Report
Amount for the prior period
Unit: RMB
Item
2021
Share capital
Other equity instruments
Capitalreserves
Less:
TreasurysharesOthercomprehensiveincomeSpecialreservesSurplusreservesRetained
profitOthersTotal owners’
equity
Preference
sharesPerpetual
BondsOthers
I. Balance as at the end of the
prior year2,984,208,200.004,477,500,000.00996,000,000.005,124,308,464.42226,860,000.001,199,819,528.06718,245,947.7215,273,222,140.20
II. Balance as at the beginning ofthe year2,984,208,200.004,477,500,000.00996,000,000.005,124,308,464.42226,860,000.001,199,819,528.06718,245,947.7215,273,222,140.20III. Changes in the period
(“-” denotes decrease)-4,477,500,000.0030,056,871.892,203,395,512.87-2,244,047,615.24
(I) Total comprehensive income3,168,564,998.543,168,564,998.54(II) Capital paid in and reduced
by owners-4,477,500,000.0030,056,871.89-4,447,443,128.11
1. Ordinary shares paid by
owners
2. Capital paid by holders of
other equity instruments-4,477,500,000.00-22,500,000.00-4,500,000,000.00
3. Amount of share-based
payments recognised inowners’ equity52,556,871.8952,556,871.89
(III) Profit distribution-965,169,485.67-965,169,485.67
1. Transfer to surplus
reserves
2. Distribution to owners (or
shareholders)-965,169,485.67-965,169,485.67
IV.Balance as at the end of theperiod2,984,208,200.00996,000,000.005,154,365,336.31226,860,000.001,199,819,528.062,921,641,460.5913,029,174,524.96
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”) wasShandong Shouguang Paper Mill Corporation, which was changed as a joint stock company with limited liabilitythrough offering to specific investors in May 1993. In December 1996, with approval by Lu Gai Zi [1996] No. 270issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committeeof the State Council, the Company was changed as a joint stock company with limited liability established by shareoffer.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 2022, the total share capital of the Company was 2,979,742,200 shares. For details, please referto Note VII. 38.The Company established a corporate governance structure comprising the general meeting, the board of directorsand the supervisory committee, and has human resources department, information technology department,corporate management department, legal affairs department, financial management department, capital managementdepartment, securities investment department, procurement department, audit department, and other departments.The Company and its subsidiaries (the“Company”) are principally engaged in, among other things, processing andsale of paper products (including machine-made paper and paper board), paper making raw materials and machinery;generation and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber;manufacturing, processing and sale of wood products; and hotel service, and equipment financial and operatingleasing, investment properties and property service etc.The financial statements and notes thereto were approved at the fourth meeting of the tenth session of the board ofdirectors of the Company (the“Board”) on 30 March 2023.
2. Scope of consolidation
Subsidiaries of the Company included in the scope of consolidation in 2022 totalled 78. For details, please referto Note IX“Interest in other entities”. The scope of consolidation of the Company during the year had four morecompanies included and one company less compared to the prior year. For details, please refer to Note VIII“Changein scope of consolidation”.
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 2014) 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 heat, 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. 29“Revenue”. For the critical accounting judgments and estimates made by the management, please refer toNote V. 38“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 2022 and relevant information such as theoperating results and cash flows of the consolidated entity and the Company for 2022.
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. 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 combination(or the aggregate nominal value of shares issued as consideration) and the carrying amount of the net assetsobtained in the combination is charged to the capital reserve (share capital premium/capital premium). If thecapital reserve (share capital premium/capital premium) is not sufficient to absorb the difference, any excessshall be adjusted against retained earnings.Business combinations involving entities under common control and achieved in stagesIn the separate financial statements, the initial investment cost is calculated based on the shareholding portionof the assets and liabilities obtained and are measured at the carrying amounts as recorded by the party beingmerged at the combination date. The difference between the initial investment cost and the sum of the carryingamount of the original investment cost prior to the combination and the carrying amount of consideration paidfor the combination is adjusted to the capital reserve (share capital premium/capital premium), if the capitalreserve is not sufficient to absorb the difference, the excess difference shall be adjusted to retained earnings.In the consolidated financial statements, the assets and liabilities of the party being merged that are obtainedat the combination by the absorbing party shall be measured at the carrying value as recorded by the ultimatecontrolling party in the consolidated financial statements at combination date. The difference between the sumof the carrying value from original shareholding portion and the new investment cost incurred at combinationdate and the carrying value of net assets obtained at combination date shall be adjusted to capital reserve (sharecapital premium/capital premium), if the balance of capital reserve is not sufficient to absorb the differences,any excess is adjusted to retained earnings. The long-term investment prior to the absorbing party obtainingthe control of the party being merged, the recognised profit or loss, comprehensive income and other changeof owners’equity at the closer date of the acquisition date and combination date under common control shallseparately offset the opening balance of retained earnings and profit or loss during comparative statements.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
5. Accounting treatment of business combinations under common control and not under common
control(Continued)
(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 stagesIn the separate financial statements, the initial investment cost of the investment is the sum of the carryingamount of the equity investment held by the entity prior to the acquisition date and the additional investmentcost at the acquisition date. The disposal accounting policy of other comprehensive income related withequity investment prior to the acquisition date recognised under equity method shall be compliance with themethod when the acquiree disposes the related assets or liabilities. Owners’equity due to the changes of otherowners’equity other than the changes of net profit, other comprehensive income and profit distribution shallbe transferred to profit or loss for current period when disposed of. If the equity investment held by the entityprior to the acquisition date is measured at fair value, the cumulative changes in fair value recognised in othercomprehensive income shall be transferred to retained earnings for current period when accounted for usingcost method.In the consolidation financial statements, the combination cost is the sum of consideration paid at acquisitiondate and fair value of the acquiree’s equity investment held prior to acquisition date. The cost of equity ofthe acquiree held prior to acquisition date shall be remeasured at the fair value at acquisition date, and thedifference between the fair value and carrying amount shall be recognised as investment income or loss for thecurrent period. Other comprehensive income and changes of other owners’ equity related with acquiree’s equityheld prior to acquisition date shall be transferred to investment profit or loss for current period at acquisitiondate, except for the other comprehensive income incurred by the changes of net assets or net liabilities due tothe remeasurement of defined benefit plans.
(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)
6. Preparation of consolidated financial statements
(1) Scope of consolidation
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. A subsidiary is an entity controlled by the Company (including an enterprise, a separable part ofan investee, a structured entity, etc.).
(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, andintracompany 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
6. 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 transferred to currentprofit or loss at the time when the control is lost, except for other comprehensive income arising from changesin net assets or net liabilities due to remeasurement of defined benefit plan by the investee.
7. 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)
8. 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.
9. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. 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 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)
10. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. 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)
10. 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 adverse
condition 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. 11.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. 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 debt investments 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)
10. 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.Bills receivable, accounts receivable and contract assetsFor bills receivable, accounts receivable and contract assets, regardless of whether there is a significantfinancing component, the Company always makes provision for impairment at an amount equal to lifetimeECLs.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
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)
Bills receivable, accounts receivable and contract assets(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.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 2: 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.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)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)
Long-term receivables(Continued)
The Company classifies the finance lease receivables, deposits receivable and other receivables into portfoliosbased on the credit risk characteristics, and calculates the ECLs on a portfolio basis. The basis for determiningthe portfolios is as follows:
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 deposits receivable and receivables for construction projects, the Company refers to the historical creditloss experience, combined with the current situation and the forecast of future economic conditions, andcalculates the 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. 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)
10. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. 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.
11. 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)
11. 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.
12. 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 net realisable value of inventories and provision for inventory impairment
Net realisable value of inventories refers to the amount of the estimated price of inventories less the estimatedcost incurred upon completion, estimated sales expenses and taxes and levies. The realisable value ofinventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effectof after-balance-sheet-date events.At the balance sheet date, provision for inventory impairment is made when the cost is higher than the netrealisable value. The Company usually make provision for inventory impairment based on categories ofinventories. At the balance sheet date, in case the factors causing inventory impairment no longer exists, theoriginal provision for inventory impairment shall be reversed.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
12. 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.
13. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
13. Long-term equity investments
(Continued)
(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.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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
13. 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)
13. 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. 22.
14. 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. 22.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.
15. Fixed assets
(1) Conditions for recognition of fixed assets
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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
15. Fixed assets
(Continued)
(2) Depreciation method by category of fixed assets
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
Useful lives ofdepreciation (Year)
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. 22.
(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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
16. 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.The method for impairment provision of construction in progress is set out in Note V. 22.
17. 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. 22.The closing balance of materials for project is presented as“construction in progress” item in the balance sheet.
18. 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;The acquisition, construction or production activity necessary for the asset to be ready for its intended
use or sale has been started.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
18. 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.
19. Biological assets
Bearer biological assets refer to biological assets held for the purpose of producing agricultural products, providinglabour services or renting, including economic forests, firewood forests, productive livestock and draught animals.The Company’s bearer biological assets are mainly tea trees. The cost of a planted or propagated bearer biologicalasset includes the expenses directly attributable to the asset and necessarily incurred before the asset is ready for itsintended production and operation, including the borrowing costs that are eligible for capitalisation.The management, protection and feeding costs of a biological asset subsequent to crown closure or after the asset isready for its intended production and operation are expensed and recognised in profit or loss as incurred.Depreciation of bearer biological assets is calculated using the straight-line method over the estimated useful life ofeach biological asset less its residual value as follows:
Type of bearer biological assetsUseful life (year)
Estimated residual
value
Annual depreciation
rate
Tea tree105%9.50%
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
19. Biological assets
(Continued)The Company reviews the useful life and estimated net residual value of a bearer biological asset and the depreciationmethod applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixedasset or the depreciation method used shall be accounted for as a change in accounting estimate.The difference between the disposal income of the sale, loss, death or damage of a bearer biological asset, net of itscarrying 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. 22.
20. 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.
22.
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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
21. Intangible assets
(Continued)The amortisation methods for the intangible assets with finite useful life are as follows:
TypeUseful life
Method ofamortisationRemark
Land use rights50-70Straight-line methodSoftware5-10Straight-line methodPatents5-20Straight-line methodCertificates of third party right3Straight-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. 22.
22. Long-term 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-useassets, intangible assets, goodwill and others (excluding inventories, investment property measured at fair value,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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
22. Long-term asset impairment
(Continued)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.
23. 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.
24. 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.
25. 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 to 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
25. 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 contributions intoa separate fund and the Company has no further obligations for payment. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.Defined contribution plansDefined contribution plans include basic pension insurance and unemployment insurance.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)
25. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
26. 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.
27. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
27. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
28. 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 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.
29. 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 when
the 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 Company
under the contract;when the goods produced by the Company under the contract are irreplaceable and the Company has
the right to payment for performance completed to date during the whole contract term.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. 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 thecurrent 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 thecustomer obtains physical possession of the goods.The Company has transferred all of the substantial risks and rewards of ownership of the goods to thecustomer, which is when the customer obtain all of the substantial risks and rewards of ownership of thegoods to the customer. The customer has accepted the goods. Other information indicates that the customer has obtained control of the goods.The Company’s right to consideration in exchange for goods or services that the Company has transferred tocustomers (and such right depends on factors other than passage of time) is accounted for as contract assets,and contract assets are subject to impairment based on ECLs (Note V. 10). The Company’s unconditionalright to receive consideration from customers (only depends on passage of time) is accounted for as accountsreceivable. The Company’s obligation to transfer goods or services to customers for which the Company hasreceived or should receive consideration from customers is accounted for as contract liabilities.Contract assets and contract liabilities under the same contract are presented on a net basis. Where the netamount has a debit balance, it is presented in“contract assets”or“other non-current assets”according to itsliquidity. Where the net amount has a credit balance, it is presented in“contract liabilities”or“other non-currentliabilities” according to its liquidity.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. Revenue
(Continued)
(2) Specific methods
Specific method for revenue recognition of machine-made paper business of the Company: in terms ofdomestic sales of machine-made paper, revenue is recognised when goods are delivered to the customers andsuch deliveries are confirmed; while in terms of overseas sales of machine-made paper, revenue is recognisedon the day when goods are loaded on board and declared.Specific method for recognition of finance lease income of the Company: according to the repayment schedule,the income is recognised by instalments according to the effective interest rate.Specific method for recognition of revenue from real estate of the Company: revenue is recognised byamortising the property rental income on a straight-line basis over the lease term.The specific method for the Company to recognise revenue from electricity and steam: the sales of steam andelectricity by the Company are performance obligations performed at a point of time. For sales of electricity, theCompany recognises revenue from sales of electricity based on the quantity of electricity delivered to customersevery month at a price agreed in the contract. For sales of steam, the Company recognises revenue from salesof steam based on the amount of steam delivered to customers every month at a price agreed in the contract.The specific method for the Company to recognise revenue from construction materials, moulds and paperchemicals: revenue is recognised when goods are delivered to the customers and such deliveries are confirmed.
30. 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)
30. 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.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.The costs of contract performance recognised as assets, if the amortisation period is less than one year or a normaloperating cycle upon the initial recognition, are presented as“Inventories”item, and if the amortisation period is morethan one year or a normal operating cycle upon the initial recognition, are presented as“other non-current assets”
item.The contract obtaining costs recognised as assets, if the amortisation period is less than one year or a normaloperating cycle upon the initial recognition, are presented as“other current assets”item, and if the amortisationperiod is more than one year or a normal operating cycle upon the initial recognition, are presented as“other non-current assets” item.
31. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
31. 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 recognisedin profit or loss over the periods in which the related costs, expenses or losses are recognised. A government grantmeasured at nominal amount is directly included in profit or loss for the current period. The Company adopts aconsistent 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 on theessence of economic business; otherwise, recognised in non-operating income.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.
32. 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;
(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)
32. 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;
(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.
33. 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. 20.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
33. 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)
33. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
33. 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)
33. 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.
34. Production safety expenses
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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
35. 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.
36. 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 incentive plancannot be fulfilled subsequently, the Company repurchase the shares at the predetermined price. If the registrationand other capital increase procedures for the restricted shares issued to employees are completed in accordancewith relevant regulations, the Company recognises share capital and capital reserve (or capital premium) based onthe subscription money received from the employees on the grant date; and recognises treasury shares and otherpayables for repurchase obligation.
37. 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.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
37. Critical accounting judgments and estimates
(Continued)
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.Impairment of goodwillThe Company assesses the impairment of goodwill at least annually, which requires estimates on the use value ofasset groups allocated with goodwill. When estimating use value, the Company is required to estimate the future cashflow from such asset groups while selecting the appropriate discount rate to calculate the present value of future cashflow.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.Share-based paymentsWhen calculating the liabilities and expenses related to the equity incentive plan, the management of the Company isrequired to make judgments and estimates on issues such as the turnover rate and vesting conditions. Differences inthe judgments and estimates will have a material effect on the financial statements.
38. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
Interpretation No. 15 of the Accounting Standards for Business EnterprisesThe Ministry of Finance issued Interpretation No. 15 of the Accounting Standards for Business Enterprises (CaiKuai [2021] No. 35) (“Interpretation No. 15”) in December 2021.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
38. Changes in significant accounting policies and accounting estimates
(Continued)
(1) Changes in significant accounting policies
(Continued)
Interpretation No. 15 of the Accounting Standards for Business Enterprises(Continued)Interpretation No. 15 stipulates that, in case an enterprise conducts external sales of products or by-productsproduced before fixed assets reaching their intended use or during the R&D process (collectively,“Trial Sales”),the revenues and costs related to Trial Sales shall be accounted for separately and included in the currentprofit and loss in accordance with the Accounting Standards for Business Enterprises No. 14 – Revenue andthe Accounting Standards for Business Enterprises No. 1 – Inventories. The net amount arising from relevantrevenue for Trial Sales offsetting relevant costs for Trial Sales shall not be written off against the cost of thefixed assets or R&D expenses. Before the relevant products or by-products under Trial Sales are sold externally,those products that meet the requirements of the Accounting Standards for Business Enterprises No. 1 –Inventories shall be recognised as inventories, and those products that meet the recognition criteria for relevantassets in other relevant accounting standards for business enterprises shall be recognised as those relevantassets.From 1 January 2022, the Company has implemented the requirement of“Accounting treatment for externalsales of the fixed assets before reaching their intended use or the products or by-products produced during theR&D process of a company” under Interpretation No. 15 and made retrospective adjustment.Interpretation No.15 stipulates that,“costs that will inevitably occur in the performance of contractualobligations”in an onerous contract should reflect the minimum net cost of rescinding that contract, i.e. thelower of the cost of performing the contract and the compensation or penalty for failure to perform the contract.The cost for the enterprise to perform the contract comprises the incremental cost of performing the contractand the apportioned amount of other costs directly related to the performance of the contract. Among them,the incremental cost of performing the contract includes direct labour, direct materials, etc.; the apportionedamount of other costs directly related to the performance of the contract includes the apportioned amount ofdepreciation expenses of fixed assets used to perform the contract, etc.From 1 January 2022, the Company has implemented the requirement of“Determination of onerous contracts”
under Interpretation No.15, retrospectively adjusted the retained earnings as at 1 January 2022, and did notadjust the comparative financial statements data in the prior period.The adoption of Interpretation No. 15 had no material impact on the financial position and operating results ofthe Company.Interpretation No. 16 of the Accounting Standards for Business EnterprisesThe Ministry of Finance issued Interpretation No. 16 of the Accounting Standards for Business Enterprises (CaiKuai [2022] No. 31) (“Interpretation No. 16”) in November 2022.Interpretation No. 16 stipulates that, for financial instruments such as perpetual bonds classified as equityinstruments, the enterprise shall recognise the income tax effect related to dividends when recognising dividendreceivables. For distributed profits from transactions or events that previously generated profit or loss, theincome tax effect of the dividend shall be included in profit or loss for the period; for distributed profits fromtransactions or events that was previously recognised in owner’s equity, the income tax effect of the dividendshall be included in owner’s equity.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
38. Changes in significant accounting policies and accounting estimates
(Continued)
(1) Changes in significant accounting policies
(Continued)Interpretation No. 16 of the Accounting Standards for Business Enterprises(Continued)If the Company’s recognition of dividend receivable in relation to financial instruments classified as equityinstruments occurs during the year, the income tax effect involved shall be accounted for in accordance with theaforesaid requirements of Interpretation No. 16. If the recognition occurred before 1 January 2022 and relevantfinancial instrument has not been derecognised as at 1 January 2022, the income tax effect shall be adjustedretrospectively.Interpretation No. 16 stipulates that, if an enterprise replaces cash-settled share-based payment with equity-settled share-based payment in accordance with terms and conditions under cash-settled share-basedpayment agreement, on the date of change, equity-settled share-based payment shall be measured at the fairvalue as at the date of grant of such equity instrument, with services received to be included in capital reserve.Meanwhile, recognised liability in relation to cash-settled share-based payment as at the date of change shallbe derecognised, with difference thereof to be included in profit or loss for the current period. If the vestingperiod is extended or shortened due to the revision, the enterprise shall perform the above accounting treatmentaccording to the revised vesting period (without considering the relevant accounting treatment provisions ofadverse revisions).The Company’s cash-settled share-based payment that occurred during the year was changed to an equity-settled share-based payment, and accounting treatment was performed in accordance with the aforesaidrequirements of Interpretation No. 16. For such transactions that occurred before 1 January 2022, the Companyadjusted the retained earnings and other related financial statement items on 1 January 2022, without adjustingthe information for the comparable period.The adoption of Interpretation No. 16 had no material impact on the financial position and operating results ofthe Company.
(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)Taxable income13/9/6Property taxRental income and property price1.2/12Urban maintenance and construction taxTurnover tax payable7Enterprise 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.15Wuhan Chenming Hanyang Paper Holdings Co., Ltd.15Huanggang Chenming Pulp & Paper Co., Ltd.15Kunshan Tuoan Plastic Products Co., Ltd.15Shouguang Wei Yuan Logistics Company Limited20Shouguang Chenming Papermaking Machine Co., Ltd.20Shouguang Xinyuan Coal Co., Ltd.20Shouguang 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, ShouguangMeilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the preferentialtreatment from 2022 to 2024.
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, ShouguangMeilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the preferentialtreatment 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.Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company, received a high andnew technology enterprise certificate with a certification number of GR202042001502 on 1 December 2020.Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax andthe relevant policies, Wuhan Chenming is subject to an enterprise income tax rate of 15% of taxable income,and is entitled to the preferential treatment from 2020 to 2022.Huanggang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and newtechnology enterprise certificate with a certification number of GR202042001471 on 1 December 2020. 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 2020 to 2022.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 2 December 2020. 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 2020 to 2022.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.
XII Financial Report
VI. Taxation(Continued)
2. Tax incentives
(Continued)
(1) Enterprise income tax
(Continued)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 the Implementation of Preferential Income Tax Policies forSmall and Micro Enterprises and Individual Industrial and Commercial Business (Cai Shui [2021] No. 12) and theAnnouncement of the Ministry of Finance and the State Administration of Taxation on Further Implementationof Preferential Income Tax Policies for Small and Micro Enterprises (Cai Shui [2022] No. 13), the annual taxableincome of a small low-profit enterprise that is less than RMB1 million shall be included in its taxable income ata reduced rate of 12.5%, with the applicable enterprise income tax rate of 20%. The annual taxable income of asmall low-profit enterprise that is more than RMB1 million but not exceeding RMB3 million shall be included inits taxable income at a reduced rate of 25%, with the applicable enterprise income tax rate of 20%.Guangdong Chenming Panels Co., Ltd., a subsidiary of the Company, meets the requirements of Rule 99 ofthe Regulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax(Decree No. 512 of the State Council of the People’s Republic of China) and the Announcement of the Ministryof Finance and the State Administration of Taxation on Improvement of the Value-added Tax Policy for theComprehensive Utilisation of Resources (Cai Shui [2021] No. 40): For enterprises that derive income from theproducts listed in the Catalogue which are in line with related national or industry standards by making use ofthe resources listed in the Catalogue as the main raw materials, taxable income will be calculated at a reducedrate of 90% of the total revenue. To be entitled to the above tax benefits, the ratio of the resources listed in theCatalogue and the raw materials used for the product shall be consistent with the required technical standardsstated in the Catalogue.
(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.Pursuant to the Announcement of the Ministry of Finance and the State Administration of Taxation onImprovement of the Value-added Tax Policy for the Comprehensive Utilisation of Resources (Cai Shui [2021] No.40), taxpayers who sell self-produced products and services applying integrated use of resources may enjoy theimmediate VAT refund policy. Guangdong Chenming Panels Co., Ltd., a subsidiary of the Company, producesproducts applying integrated use of resources, and is therefore subject to the immediate VAT refund policy in2022.
XII Financial Report
VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMBItemClosing balanceOpening balance
Treasury cash3,491,219.082,926,080.68Bank deposit2,155,968,930.433,166,431,843.70Other monetary funds11,840,974,836.5710,950,425,015.28Total14,000,434,986.0814,119,782,939.66Of which: Total deposits in overseas banks593,378,097.70462,952,909.20
Total restricted amount due to mortgages, pledges or freezes11,756,140,645.5610,756,936,714.59Other explanations:
Other monetary funds of RMB9,038,936,192.70 were the guarantee deposit for the application for bankacceptance with the banks by the Company;Other monetary funds of RMB2,164,908,904.28 were the guarantee deposit for the application for letter of credit
with the banks by the Company;Other monetary funds of RMB135,702,304.71 were the guarantee deposit for the application for guarantees withthe banks by the Company;Other monetary funds of RMB298,872,520.00 were the guarantee deposit for the application for loans with thebanks by the Company; Other monetary funds of RMB117,550,110.51 were the Company’s statutory reserve deposits at the People’sBank of China;Other monetary funds of RMB170,613.36 were locked-up due to reasons such as litigations or being unused for
a long time, resulting in restriction on the use of that account’s balance; Other monetary funds included accrued interest of RMB84,834,191.01.
2. Financial assets held for trading
Unit: RMBItemClosing balanceOpening balance
Financial assets measured at fair value through profit or loss74,708,444.88110,886,182.88Of which:
Investment in equity instruments74,708,444.88110,886,182.88Total74,708,444.88110,886,182.88Explanation: Financial assets held for trading were shares of Bohai Bank subscribed by the Company.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Category
Closing balanceOpening balanceBook balanceBad debt provisionCarrying
amount
Book balanceBad debt provisionCarrying
amountAmountPercentageAmountPercentageAmountPercentageAmountPercentage
Accounts receivableassessed individually forbad debt provision226,667,597.476.13%226,667,597.47100.00 %224,831,742.247.24%224,831,742.24100.00%Accounts receivableassessed collectively forbad debt provision3,473,893,247.3293.87%261,632,801.367.53 %3,212,260,445.962,880,986,860.2492.76%224,469,709.787.79%2,656,517,150.46Of which:
Due from related partycustomers8,639,295.980.23%1,775,510.0120.55 %6,863,785.97109,385.420.004%109,385.42Due from non-related partycustomers2,081,296,530.2856.24%52,357,160.252.52%2,028,939,370.031,855,021,764.8259.73%84,870,622.114.58%1,770,151,142.71Factoring receivables1,383,957,421.0637.40%207,500,131.1014.99%1,176,457,289.961,025,855,710.0033.03%139,599,087.6713.61%886,256,622.33Total3,700,560,844.79100.00 %488,300,398.8313.20%3,212,260,445.963,105,818,602.48100.00%449,301,452.0214.47%2,656,517,150.46
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(Continued)
(1) Disclosure of accounts receivable by category
(Continued)Items assessed individually for bad debt provision:
Unit: RMBName
Closing balanceBook balance
Bad debts
provision
ProvisionpercentageProvision reason
Hengfeng Hongyuan Real Estate
Holdings Co., Ltd.45,493,811.4045,493,811.40100.00%Long outstandingNingxia Lingwu Baota DaguStorage and TransportationCo., Ltd.27,600,000.0027,600,000.00100.00%Long outstandingFoshan Shunde Xingchen PaperCo., Ltd.26,236,528.7026,236,528.70100.00%Long outstandingZhengzhou Hongyang PaperProducts Co., Ltd.15,113,432.9315,113,432.93100.00%Long outstandingShandong Bisheng PrintingMaterials Co., Ltd.14,813,369.2714,813,369.27100.00%Long outstandingHenan Yibang TechnologyTrading Co., Ltd.13,396,601.2213,396,601.22100.00%Long outstanding91 companies includingShandong Yiming New MaterialTechnology Corp Co., Ltd.84,013,853.9584,013,853.95100.00%Long outstandingTotal226,667,597.47226,667,597.47100.00%Items assessed collectively for bad debt provision: Due from related party customers
Unit: RMBName
Closing balanceBook balanceBad debts provisionProvision percentage
Within 1 year3,578,801.5013,445.830.38%1 to 2 years5,060,494.481,762,064.1834.82%Total8,639,295.981,775,510.0120.55 %
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(Continued)
(1) Disclosure of accounts receivable by category
(Continued)
Items assessed collectively for bad debt provision: Receivables from non-related party customer
Unit: RMBName
Closing balanceBook balanceBad debts provisionProvision percentage
Within 1 year2,018,983,850.8911,339,235.330.56%1 to 2 years4,167,887.95979,453.6723.50%2 to 3 years2,316,203.171,036,515.8744.75%Over 3 years55,828,588.2739,001,955.3869.86%Total2,081,296,530.2852,357,160.252.52%Items assessed collectively for bad debt provision: Factoring receivables
Unit: RMBName
Closing balanceBook balanceBad debts provisionECL rate
Within 1 year458,101,711.0630,899,634.336.75%1 to 2 years720,016,666.64104,101,666.6514.46%2 to 3 years11,785,852.502,892,926.2524.55%Over 3 years194,053,190.8669,605,903.8735.87%Total1,383,957,421.06207,500,131.1014.99%
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(Continued)
(1) Disclosure of accounts receivable by category
(Continued)If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, pleasedisclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balance
Within 1 year (including 1 year)2,555,600,334.262,570,865,124.931 to 2 years729,245,049.07128,884,575.482 to 3 years84,102,055.67196,893,864.00Over 3 years331,613,405.79209,175,038.07Total3,700,560,844.793,105,818,602.48The 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, 3-4 years, 4-5 years and over 5years.
(2) 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
reversalWritten-offOthers
Bad debt provision449,301,452.0290,714,695.7551,857,429.84225,000.00366,680.90488,300,398.83Total449,301,452.0290,714,695.7551,857,429.84225,000.00366,680.90488,300,398.83Explanation: Others represent exchange losses.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(Continued)
(3) Top five accounts receivable based on closing balance of debtors
The total amount of top five accounts receivable based on closing balance of debtors for the period amountedto RMB1,126,114,844.49 in total, accounting for 30.43% of the total closing balance of accounts receivable.The closing balance of the corresponding bad debt provision amounted to RMB112,684,936.03 in total.
Unit: RMB
Name of entity
Closing balance ofaccounts receivable
As a percentage ofthe closing balance ofthe total accounts
receivable
Closing balance ofbad debt provision
Customer 1479,821,566.6512.97%46,022,645.00Customer 2222,656,666.646.02%24,596,930.88Customer 3198,805,660.005.37%27,024,669.68Customer 4121,908,333.333.29%14,629,000.00Customer 5102,922,617.872.78%411,690.47Total1,126,114,844.4930.43%112,684,936.03
4. Accounts receivable financing
Unit: RMBItemClosing balanceOpening balance
Bills receivable924,960,384.16435,459,341.76Total924,960,384.16435,459,341.76Changes (increase or decrease) during the period and change in fair value of accounts receivable financing Applicable √ Not applicableIf the provision for impairment of accounts receivable financing is made in accordance with the general model ofECLs, please disclose the information about provision for impairment with reference to the way of disclosure of otherreceivables:
Applicable √ Not applicable
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
5. Prepayments
(1) Presentation of prepayments according to ageing analysis
Unit: RMBAgeing
Closing balanceOpening balanceAmountPercentageAmountPercentage
Within 1 year749,904,460.4595.14%803,771,958.8190.16%1 to 2 years38,287,166.374.86%87,713,119.659.84%Total788,191,626.82100.00%891,485,078.46100.00%
(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 RMB350,644,860.35, accounting for 44.49% of the closing balance of the total prepayments.Name of entity
Closing balanceof prepayments
As a percentage of theclosing balance of thetotal prepayments
Customer 195,016,586.5312.06%Customer 278,986,431.4210.02%Customer 371,063,593.989.02%Customer 454,496,248.426.91%Customer 551,082,000.006.48%Total350,644,860.3544.49%
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
Unit: RMBItemClosing balanceOpening balanceOther receivables1,717,445,443.442,252,864,083.00Total1,717,445,443.442,252,864,083.00
1) Other receivables by nature
Unit: RMBNatureClosing balanceOpening balance
Open credit2,108,991,172.352,692,253,554.58Reserve and borrowings26,270,269.0011,980,522.29Guarantee deposit and deposit12,230,367.805,125,826.96Others52,332,819.9580,560,739.46Total2,199,824,629.102,789,920,643.29
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMBCategoryBook balance
ECL rate (%)for the next12 months
Bad debtprovision
CarryingamountReason
Bad debt provision assessedindividuallyInterests receivableDividend receivableBad debt provision assessedcollectively610,966,970.7912.04%73,559,281.09537,407,689.70Amount due from governmentagencies18,592,937.4592.49%17,196,725.501,396,211.95Amount due from related parties90,340,892.536.13%5,541,541.6384,799,350.90Other receivables502,033,140.8110.12%50,821,013.96451,212,126.85Total610,966,970.7912.04%73,559,281.09537,407,689.70As at the end of the period, the Group did not have interest receivables, dividends receivables and otherreceivables in phase 2.As at the end of the period, closing bad debt provision at phase 3:
Unit: RMBCategoryBook balance
ECL rate (%)over theentire life
Bad debtprovision
CarryingamountReason
Bad debt provision assessedindividually1,588,857,658.3125.73%408,819,904.571,180,037,753.74Total1,588,857,658.3125.73%408,819,904.571,180,037,753.74
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
2) Particulars of bad debt provision
(Continued)Changes in book balance with significant changes in loss provision for the year Applicable √ Not applicableDisclosure by ageing
Unit: RMBAgeingClosing balanceOpening balance
Within 1 year (including 1 year)617,314,987.00797,531,460.411 to 2 years257,038,289.931,344,225,352.932 to 3 years702,427,199.71484,647,394.76Over 3 years623,044,152.46163,516,435.19Total2,199,824,629.102,789,920,643.29
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-offOthers
Bad debt provision537,056,560.2959,369,839.74114,047,214.37482,379,185.66Total537,056,560.2959,369,839.74114,047,214.37482,379,185.66
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
4) 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 the yearwas RMB1,409,037,406.04, which accounted for 64.05% of the closing balance of the total other receivables.The closing balance of corresponding bad debt provision amounted to RMB283,949,858.78.
Unit: RMB
Name of entityNatureClosing balanceAgeing
As apercentage ofthe closingbalance oftotal otherreceivables
Closing balanceof bad debtprovision
Customer 1Consideration for equity
transfer
493,800,000.002 to 3 years22.45%54,318,000.00Customer 2Consideration for equity
transfer
457,402,316.853 to 4 years20.79%137,220,695.06Customer 3Consideration for equity
transfer
199,054,783.562 to 3 years9.05%21,896,026.19Customer 4Consideration for equity
transfer
143,940,305.63Within 1 year;
1 to 2 years
6.54%64,773,137.53
Customer 5Consideration for equity
transfer
114,840,000.00Within 1 year5.22%5,742,000.00Total1,409,037,406.0464.05%283,949,858.78
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
7. Inventories
Whether the Company needs to comply with the disclosure requirements for real estate industriesNo
(1) Categories of inventories
Unit: RMB
Item
Closing balanceOpening balanceBook balance
Impairmentprovision forinventories orperformance costsCarrying amountBook balance
Impairmentprovision forinventories orperformance costsCarrying amount
Raw materials2,488,652,200.1518,096,641.642,470,555,558.511,734,387,984.2124,660,967.321,709,727,016.89Work-in-process products111,248,779.69111,248,779.69148,489,098.95148,489,098.95Goods in stock1,622,062,893.5516,737,849.961,605,325,043.591,910,051,642.164,941,686.651,905,109,955.51Developing costs1,138,178,959.321,138,178,959.32Consumable biological assets1,496,607,818.841,496,607,818.841,519,305,850.771,519,305,850.77Total6,856,750,651.5534,834,491.606,821,916,159.955,312,234,576.0929,602,653.975,282,631,922.12
Note: Consumable biological assets are forestry assets.
(2) Impairment provision for inventories or performance costs
Unit: RMBItemOpening balance
Increase during the periodDecrease during the period
ClosingbalanceProvisionOthersReversal or
transferOthers
Raw materials24,660,967.32922,116.247,486,441.9218,096,641.64Goods in stock4,941,686.6516,737,849.964,941,686.6516,737,849.96Total29,602,653.9717,659,966.2012,428,128.5734,834,491.60
Item
Basis for recognition of netrealisable value/residual consideration
with future cost
Reason for reversal or written-off ofimpairment provision for inventories/performance costs during the period
Raw materialsThe cost of raw materials is higher
than their net realisable value
Written-off of impairment provisionfor inventories due 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 forinventories due to sales of impaired goods
in stock during the period
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
8. Non-current assets due within one year
Unit: RMBItemClosing balanceOpening balance
Long-term receivables due within one year3,998,724,415.855,216,934,172.61Total3,998,724,415.855,216,934,172.61
Explanations:
Long-term receivables due within one year amounting to RMB3,920,915,510.01 (amount for the beginning of the period:
RMB5,188,103,553.61) were financial lease receivables;Long-term receivables due within one year amounting to RMB77,808,905.84 (amount for the beginning of the period:
RMB28,830,619.00) were deposits receivable.
9. Other current assets
Unit: RMBItemClosing balanceOpening balance
Input tax amount to be deducted141,038,575.79807,004,437.68Prepaid tax92,806,690.76132,297,740.90Receivables under financial lease due within one year340,546,803.50388,156,667.35Factoring receivables due within one year298,446,276.63303,281,361.74Prepaid expenses241,313,507.50195,453,994.69Other payments66,655,947.4477,735,290.49Total1,180,807,801.621,903,929,492.85
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
10. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMBItem
Closing balanceOpening balance
Discountrate rangeBook balanceBad debtprovision
CarryingamountBook balance
Bad debtprovision
Carryingamount
Finance lease payments6,739,718,184.271,302,116,713.905,437,601,470.378,344,107,765.881,211,551,549.727,132,556,216.164%-12%Less: Unrealisedfinancing income271,455,622.37271,455,622.37366,945,292.53366,945,292.53Equipment leasefinancing351,446,696.64351,446,696.64272,996,696.64272,996,696.64Less: Unrealisedfinancing income32,060,345.3232,060,345.3232,913,472.3132,913,472.31Subtotal6,787,648,913.221,302,116,713.905,485,532,199.328,217,245,697.681,211,551,549.727,005,694,147.96Less: Long-term
receivables due withinone year5,075,152,713.361,076,428,297.513,998,724,415.856,244,230,790.741,027,296,618.135,216,934,172.61Total1,712,496,199.86225,688,416.391,486,807,783.471,973,014,906.94184,254,931.591,788,759,975.35Particulars of bad debt provision impairment
Unit: RMB
Category
Closing balanceOpening balanceBook balanceBad debts provision
Carryingamount
Book balanceBad debts provision
CarryingamountAmountPercentageAmountECLrate (%)AmountPercentageAmount
ECL rate
(%)
Accounts receivable
assessed individuallyfor impairment1,147,177,668.7466.99%222,451,005.5419.39%924,726,663.201,716,394,801.6186.99%183,801,256.5910.71%1,532,593,545.02Of which:
Financial lease
payments1,147,177,668.7466.99%222,451,005.5419.39%924,726,663.201,716,394,801.6186.99%183,801,256.5910.71%1,532,593,545.02Accounts receivable
assessed collectively
for impairment565,318,531.1233.01%3,237,410.850.57%562,081,120.27256,620,105.3313.01%453,675.000.18%256,166,430.33Of which:
Receivables not past
due323,741,085.6418.90%3,237,410.851.00%320,503,674.7945,367,500.002.30%453,675.001.00%44,913,825.00Deposits receivable241,577,445.4814.11%241,577,445.48211,252,605.3310.71%211,252,605.33Total1,712,496,199.86100.00%225,688,416.3913.18%1,486,807,783.471,973,014,906.94100.00%184,254,931.599.34%1,788,759,975.35
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
10. Long-term receivables
(Continued)
(1) Particulars of long-term receivables
(Continued)Accounts receivable assessed collectively for bad debt provision:
Collectively assessed item: receivables not past due
Closing balanceBook balanceBad debt provisionECL rate (%)
Within 1 year1 to 2 years183,235,530.081,832,355.301.00%2 to 3 years140,505,555.561,405,055.551.00%Total323,741,085.643,237,410.851.00%Collectively assessed item: Deposits receivable
Closing balanceBook balanceBad debt provisionECL rate (%)
Within 1 year1 to 2 years108,284,310.812 to 3 years113,937,377.76Over 3 years19,355,756.91Total241,577,445.48Changes in book balance with significant changes in loss provision for the year Applicable √ Not applicable
(2) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMBCategory
Openingbalance
Changes in the period
ClosingbalanceProvisionRecovery or
reversalWrite-offOthers
Bad debt provision184,254,931.59239,636,712.56180,258,987.5717,944,240.19225,688,416.39Total184,254,931.59239,636,712.56180,258,987.5717,944,240.19225,688,416.39
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
11. Long-term equity investments
Unit: RMB
Investee
Openingbalance(carryingamount)
Change for the period
Closingbalance(carryingamount)
Closingbalance ofimpairment
provisionAdditionalcontribution
Withdrawncontribution
Investmentgain or lossrecognisedunder equitymethodAdjustmentof othercomprehensiveincome
Otherchange inequityinterestDistributionof cashdividendor profitdeclaredImpairmentprovisionOthers
I. Joint ventures
Shouguang Chenming Huisen
New-style ConstructionMaterials Co., Ltd.6,902,869.871,989,789.551,000,000.007,892,659.42Weifang Sime Darby West Port
Co., Ltd.77,370,998.75-2,522,428.0274,848,570.73Shouguang Meite
Environmental Technology
Co., Ltd.14,616,124.71-5,694,280.838,921,843.88Shouguang Jintou Industrial
Investment Partnership
(Limited Partnership)2,360,000,000.00-1,338.332,359,998,661.67Weifang Xingxing United
Chemical Co., Ltd.84,623,787.747,250,597.3891,874,385.12Subtotal183,513,781.072,360,000,000.001,022,339.751,000,000.002,543,536,120.82II. Associates
Zhuhai Dechen New Third
Board Equity Investment
Fund Company (Limited
Partnership)36,967,896.31-191,185.4036,776,710.91Ningbo Kaichen Huamei
Equity Investment Fund
Partnership (Limited
Partnership)197,297,485.59-79,166.82197,218,318.77Jiangxi Chenming Port Co.,
Ltd.554,582.45554,582.45Goldtrust Futures Co., Ltd.185,452,462.50-7,063,279.67178,389,182.83Chenming (Qingdao) Asset
Management Co., Ltd.6,933,668.14488,367.55940,000.006,482,035.69Guangdong Nanyue Bank Co.,
Ltd.1,284,074,888.1329,939,682.54596,429.871,314,611,000.54Subtotal1,711,280,983.12554,582.4523,094,418.20596,429.87940,000.001,733,477,248.74Total1,894,794,764.192,360,000,000.00554,582.4524,116,757.95596,429.87–1,940,000.004,277,013,369.56
Other explanation: For the reason for the change of the opening balance of Guangdong Nanyue Bank Co., Ltd., please refer to Note VII. 40 and46.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
12. Other non-current financial assets
Unit: RMBItemClosing balanceOpening balance
Investment in debt instruments663,000,000.00400,000,000.00Investment in equity instruments123,750,761.62119,927,003.25Total786,750,761.62519,927,003.25
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
13. Investment property
(1) Investment property under the cost method
√ Applicable Not applicable
Unit: RMBItem
Housing andbuilding structureLand use rights
Constructionin progressTotal
I. Original carrying amount
1. Opening balance7,196,809,856.627,196,809,856.62
2. Increase during the period
3. Decrease during the period36,595,287.7936,595,287.79
(1) Disposal36,595,287.7936,595,287.79
4. Closing balance7,160,214,568.837,160,214,568.83II. Accumulated depreciation and
accumulated amortisation
1. Opening balance723,271,424.71723,271,424.71
2. Increase during the period196,967,552.86196,967,552.86
(1) Provision or amortisation196,967,552.86196,967,552.86
3. Decrease during the period16,747,521.8916,747,521.89
(1) Disposal16,747,521.8916,747,521.89
4. Closing balance903,491,455.68903,491,455.68III. Impairment provisionIV. Carrying amount
1. Closing carrying amount6,256,723,113.156,256,723,113.15
2. Opening carrying amount6,473,538,431.916,473,538,431.91
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
13. Investment property
(Continued)
(1) Investment property under the cost method
(Continued)Note: Investment properties under the Company primarily include:
Pujiang International Finance Plaze, located at No. 1098, Dongdaming Road, Hongkou District, Shanghai, is a long-termheld office property of Shanghai Hongtai Real Estate Co., Ltd., a subsidiary of the Company, mainly used for externalrental 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, 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, mainly usedfor 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 Financial Leasing Co., Ltd., a subsidiary of theCompany, mainly used for external rental purposes;Shenzhen Zhuoyue Baozhong Times Square (), located at Room 3201-3210, Building C, Zhuoyue
Baozhong Times Square (Phase 2), Xin’an Sub-district, Bao’an District, Shenzhen, is a long-term held office property ofGuangzhou Chenming Financial Leasing Co., Ltd., a subsidiary of the Company, mainly used for external rental purposes.Shanghai Xizang South Road shop, located at No. 518-528 Xizang South Road, Shanghai, is a long-term store held by
Wuhan Junheng Property Management Co. Ltd., a subsidiary, mainly for external rental purposes.
14. Fixed assets
Unit: RMBItemClosing balanceOpening balance
Fixed assets33,527,978,754.7335,653,492,676.15Disposal of fixed assets269,759,940.57Total33,797,738,695.3035,653,492,676.15
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Fixed assets
(Continued)
(1) Particulars of fixed assets
Unit: RMBItem
Housing andbuilding structure
Machinery andequipmentVehicles
Electronicequipment andothersTotal
I. Original carrying amount:
1. Opening balance10,673,297,551.1143,798,170,683.63296,201,440.65457,044,021.4755,224,713,696.86
2. Increase during the period108,552,460.21641,571,341.549,576,094.444,362,101.96764,061,998.15
(1) Acquisition25,384,908.65115,296,460.569,366,494.444,319,542.49154,367,406.14
(2) Transferred from
construction in progress83,167,551.56526,274,880.98609,442,432.54
(3) Not arising from business
combinations209,600.0042,559.47252,159.47
3. Decrease during the period495,040,886.431,333,560,015.5716,975,869.7760,940,651.681,906,517,423.45
(1) Disposal or retirement495,040,886.43442,810,515.1016,975,869.7760,940,651.681,015,767,922.98
(2) Transferred to construction
in progress890,749,500.47890,749,500.47
4. Closing balance10,286,809,124.8943,106,182,009.60288,801,665.32400,465,471.7554,082,258,271.56II. Accumulated amortisation
1. Opening balance2,302,130,749.0916,572,843,548.56190,913,517.71300,377,759.6119,366,265,574.97
2. Increase during the period272,469,044.651,750,539,361.4023,612,986.0511,990,544.472,058,611,936.57
(1) Provision272,469,044.651,750,539,361.4023,570,236.0811,959,197.362,058,537,839.49
(2) Business combinations42,749.9731,347.1174,097.08
3. Decrease during the period244,847,454.17762,222,715.9814,052,395.9953,518,891.881,074,641,458.02
(1) Disposal or retirement244,847,454.17335,197,976.6414,052,395.9953,518,891.88647,616,718.68
(2) Transferred to construction
in progress427,024,739.34427,024,739.34
4. Closing balance2,329,752,339.5717,561,160,193.98200,474,107.77258,849,412.2020,350,236,053.52III. Provision for impairment
1. Opening balance27,808,852.79169,697,469.9013,889.137,435,233.92204,955,445.74
2. Increase during the period
(1) Provision
(2) Other increases
3. Decrease during the period911,982.43911,982.43
(1) Disposal or retirement911,982.43911,982.43
(3) Other deductions
4. Closing balance27,808,852.79168,785,487.4713,889.137,435,233.92204,043,463.31IV. Carrying amount
1. Closing carrying amount7,929,247,932.5325,376,236,328.1588,313,668.42134,180,825.6333,527,978,754.73
2. Opening carrying amount8,343,357,949.2327,055,629,665.17105,274,033.81149,231,027.9435,653,492,676.15
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Fixed assets
(Continued)
(2) Particulars of temporarily idle fixed assets
Unit: RMBItem
Originalcarrying amount
Accumulateddepreciation
Provision forimpairment
CarryingamountRemark
Housing and buildingstructure72,585,434.3723,605,530.663,093,008.6445,886,895.07Machinery andequipment894,040,081.30541,801,642.98148,006,512.04204,231,926.28Electronic equipment478,399.18429,965.757,187.2741,246.16Total967,103,914.85565,837,139.39151,106,707.95250,160,067.51
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMBItemCarrying amount
Reason for not yetobtaining propertyright certificates
Housing and building structure
(Zhanjiang Chenming Pulp & Paper Co., Ltd.)1,016,649,687.58Under applicationHousing and building structure(Huanggang Chenming Pulp & Paper Co., Ltd.)604,754,973.18Under applicationHousing and building structure(Shouguang Meilun Paper Co., Ltd.)538,467,123.04Under applicationHousing and building structure(Jilin Chenming Paper Co., Ltd.)374,746,177.49Under applicationHousing and building structure
(Jiangxi Chenming Paper Co., Ltd.)199,871,987.70Under applicationHousing and building structure
(Shandong Chenming Paper Holdings Limited)106,804,376.97Under application
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Fixed assets
(Continued)
(4) Disposal of fixed assets
Unit: RMBItemClosing balanceOpening balance
Machinery equipment, electronic and other equipment inproduction 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
15. Construction in progress
Unit: RMBItemClosing balanceOpening balance
Construction in progress551,020,785.44189,818,292.48Materials for project7,846,094.927,931,233.57Total558,866,880.36197,749,526.05
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Construction in progress
(Continued)
(1) Particulars of construction in progress
Unit: RMBItem
Closing balanceOpening balanceBook balance
Impairmentprovision
CarryingamountBook balance
Impairment
provision
Carryingamount
Relocation of Wuhan 4800 papermakingmachine project (Zhanjiang)303,942,703.51303,942,703.51Technological transformation project121,193,391.56121,193,391.5647,469,755.7447,469,755.74Integrated forestry, pulp and paperproject (Huanggang Pulp & Paper)45,538,442.7845,538,442.7816,687,683.2916,687,683.29Fly ash cement ceramsite productionproject (Shandong Chenming)54,246,139.1954,246,139.19Relocation of Wuhan household paperproject (Phase II) (Meilun)28,705,483.2528,705,483.25Original OCC technological
transformation (Meilun)3,064,340.303,064,340.30Others101,484,919.3521,138,671.7680,346,247.5960,783,562.4721,138,671.7639,644,890.71Total572,159,457.2021,138,671.76551,020,785.44210,956,964.2421,138,671.76189,818,292.48
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Construction in progress
(Continued)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Project nameBudget
Openingbalance
Increaseduringthe period
Transferto fixedasset during
the period
Otherdeductions
duringthe period
ClosingbalanceAccumulatedinvestmentto budgetConstructionin progressAccumulatedcapitalisedinterest
Of which:
Capitalised
interestamountduringthe period
Capitalisation
rate of the
interestamount forthe period
Sourceof fund
Relocation of Wuhan 4800
papermaking machineproject (Zhanjiang)800,000,000.00303,942,703.51303,942,703.5137.99%37.99%
Self-owned
fundsIntegrated forestry, pulp and
paper project (HuanggangPulp & Paper)320,000,000.0016,687,683.2928,850,759.4945,538,442.7828.10%25.00%
Self-owned
fundsFly ash cement ceramsite
production project(Shandong Chenming)57,000,000.0054,246,139.1954,246,139.1995.17%100.00%
Self-owned
fundsRelocation of Wuhan
household paper project(Phase II) (Meilun)270,000,000.0028,705,483.25240,716,977.99269,422,461.2499.79%100.00%
Self-owned
fundsOriginal OCC technological
transformation (Meilun)110,000,000.003,064,340.30111,649,106.79114,713,447.09104.28%100.00%
Self-owned
fundsTotal1,557,000,000.00102,703,646.03685,159,547.78438,382,047.52349,481,146.29
(3) Materials for project
Unit: RMBProject name
Closing balanceOpening balanceBook balance
Impairment
provision
CarryingamountBook balance
Impairmentprovision
Carryingamount
Special materials7,846,094.927,846,094.927,931,233.577,931,233.57Total7,846,094.927,846,094.927,931,233.577,931,233.57
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
16. Bearer biological assets
Unit: RMBItemTea treesTotalI. Original carrying amount:
1. Opening balance
2. Increase during the period13,697,336.8013,697,336.80
(1) Purchase13,697,336.8013,697,336.80
3. Decrease during the period
4. Closing balance13,697,336.8013,697,336.80II. Accumulated amortisation
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
III. Impairment provision
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
IV. Carrying amount
1. Closing carrying amount13,697,336.8013,697,336.80
2. Opening carrying amount
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
17. Right-of-use assets
Unit: RMBItemLand use rights
Housing andbuilding structureTotal
I. Original carrying amount:
1. Opening balance218,097,859.065,571,378.54223,669,237.60
2. Increase during the period
3. Decrease during the period12,277,636.6524,770.6412,302,407.29
(1) Transfer or held for sale12,029,930.2412,029,930.24
(2) Other decreases247,706.4124,770.64272,477.05
4. Closing balance205,820,222.415,546,607.90211,366,830.31II. Accumulated amortisation
1. Opening balance25,467,932.29772,128.8726,240,061.16
2. Increase during the period7,459,891.32277,392.887,737,284.20
(1) Provision7,459,891.32277,392.887,737,284.20
3. Decrease during the period4,225,214.304,225,214.30
(1) Transfer or held for sale4,225,214.304,225,214.30
4. Closing balance28,702,609.311,049,521.7529,752,131.06III. Impairment provision
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
IV. Carrying amount
1. Closing carrying amount177,117,613.104,497,086.15181,614,699.25
2. Opening carrying amount192,629,926.774,799,249.67197,429,176.44Explanation: The reason for other deductions for the period is that the original recognised amount was tax-included, and as the invoices forleasing have been received, the input tax amount offset the original carrying amount of the right-of-use assets.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
18. Intangible assets
(1) Particulars of intangible assets
Unit: RMBItemLand use rightsSoftwarePatents
Certificates ofthird party rightTotal
I. Original carryingamount:
1. Opening balance2,040,126,983.3521,946,825.6427,358,613.0515,908,674.872,105,341,096.91
2. Increase during
the period307,340,370.39107,606.09135,000.00307,582,976.48
(1) Purchase307,340,370.39107,606.09135,000.00307,582,976.48
3. Decrease during
the period30,181,176.1730,181,176.17
(1) Disposal30,181,176.1730,181,176.17
4. Closing balance2,317,286,177.5722,054,431.7327,493,613.0515,908,674.872,382,742,897.22II. Accumulatedamortisation
1. Opening balance474,004,742.7621,814,590.97940,153.7715,908,674.87512,668,162.37
2. Increase during
the period54,343,146.07239,840.76115,991.6754,698,978.50
(1) Provision54,343,146.07239,840.76115,991.6754,698,978.50
(2) Other increases
3. Decrease during
the period15,963,074.5715,963,074.57
(1) Disposal15,963,074.5715,963,074.57
4. Closing balance512,384,814.2622,054,431.731,056,145.4415,908,674.87551,404,066.30III. Impairment provision
1. Opening balance
2. Increase during
the period
3. Decrease during
the period
4. Closing balance
IV. Carrying amount
1. Closing carrying
amount1,804,901,363.3126,437,467.611,831,338,830.92
2. Opening carrying
amount1,566,122,240.59132,234.6726,418,459.281,592,672,934.54
Explanation:
For details of restricted ownership, please refer to note VII. 65. Certificates of third party right refer to enterprise emission rights.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
19. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Name of investee or eventgenerating goodwill
Openingbalance
Increase during
the period
Decreaseduringthe period
ClosingbalanceArising frombusinesscombinationsDisposal
Jilin Chenming Paper Co., Ltd.14,314,160.6014,314,160.60Kunshan Tuoan Plastic Products Co., Ltd.26,946,905.3826,946,905.38Total41,261,065.9841,261,065.98
(2) Provision for impairment of goodwill
Unit: RMB
Name of investee or eventgenerating goodwill
Openingbalance
Increase duringthe period
Decreaseduringthe period
ClosingbalanceArising frombusinesscombinationsDisposal
Jilin Chenming Paper Co., Ltd.14,314,160.6014,314,160.60Total14,314,160.6014,314,160.60
Explanation:
The Company assessed the recoverable amount of goodwill and determined that the goodwill related to the Company’s plasticbusiness was not impaired. With the category of the principal activities as the basis for determining the reporting segments, theCompany regarded Kunshan Tuoan Plastic Products Co., Ltd. as an asset group. The recoverable amount was determined based onthe present value of the estimated future cash flows. Future cash flows were determined based on the financial budget for 2023 to 2027as approved by the management, and adopted 7.28% as the discount rate which was the interest rate of the 5-year bonds issued bythe Company in 2018. The cash flows for more than 5 years are calculated based on the growth rate of 5%. Other key assumptionsused in estimating future cash flows included the estimated sales and gross profit based on the performance of such asset group inthe past and the expectation to market development by the management. The management believed that any reasonable change inthe above assumptions will not result in the total book value of the asset group Kunshan Tuoan Plastic Products Co., Ltd. exceeding itsrecoverable amount.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
20. Long-term prepaid expenses
Unit: RMBItemOpening balance
Increase duringthe period
Amortisationduring the periodOther deductionsClosing balance
Woodland expenses8,387,048.731,153,220.987,233,827.75Others40,754,724.413,525,700.7137,229,023.70Total49,141,773.144,678,921.6944,462,851.45
21. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB
Item
Closing balanceOpening balanceDeductibletemporarydifference
Deferredincome taxassets
Deductibletemporarydifference
Deferredincome tax
assets
Provision for impairment of assets2,344,419,524.10549,431,097.402,323,311,804.03544,452,793.22Unrealised profit arising from
intra-group transactions47,231,691.3211,807,922.83110,621,031.6027,655,257.90Outstanding payables169,723,942.8826,380,462.69646,596,211.5397,758,308.63Deferred income193,822,821.6529,673,699.36202,273,476.7630,341,021.50Deductible loss4,578,592,243.20716,030,918.972,508,683,883.40409,890,367.80Debt reconstructing30,831.057,707.7618,734,830.914,683,707.73Special reserves15,791,710.952,368,756.59Subtotal7,349,612,765.151,335,700,565.605,810,221,238.231,114,781,456.78
(2) Deferred income tax liabilities before offsetting
Unit: RMB
Item
Closing balanceOpening balanceTaxabletemporarydifferences
Deferredincome tax
liabilities
Taxabletemporarydifferences
Deferredincome tax
liabilities
Asset valuation increment from business
combinations involving entities notunder common control19,104,051.044,776,012.7622,697,097.445,674,274.36Debt reconstructing13,621,006.123,405,251.5330,145,021.527,536,255.38Subtotal32,725,057.168,181,264.2952,842,118.9613,210,529.74
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
21. Deferred income tax assets/deferred income tax liabilities
(Continued)
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMBItemClosing balanceOpening balance
Deductible temporary difference10,365,962.121,671,856.52Deductible loss808,569,643.83871,738,259.31Total818,935,605.95873,410,115.83
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMBYearClosing balanceOpening balanceRemark
2022172,477,313.312023189,187,446.57193,244,812.352024178,453,991.84177,526,329.962025251,671,920.26234,127,550.552026119,959,990.0494,362,253.14202769,296,295.12Total808,569,643.83871,738,259.31
22. Other non-current assets
Unit: RMBItem
Closing balanceOpening balanceBook balance
Impairmentprovision
CarryingamountBook balance
Impairment
provision
Carryingamount
Payments for certificates of third party right2,612,250.682,612,250.68Payments for engineering and equipment981,293,657.32981,293,657.3264,364,443.4264,364,443.42Land transfer fees298,072,250.68298,072,250.68Consideration for acquisition of companies127,500,000.00127,500,000.00Total983,905,908.00983,905,908.00489,936,694.10489,936,694.10
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
23. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMBItemClosing balanceOpening balance
Discounted borrowings16,207,640,000.0016,194,790,000.00Guaranteed borrowings9,757,184,167.657,734,756,765.41Credit borrowings9,613,884,197.488,847,850,884.15Pledged borrowings741,339,929.89675,627,536.66Mortgage borrowings65,000,000.0070,000,000.00Total36,385,048,295.0233,523,025,186.22
Explanation of the classification of short-term borrowings:
For classification and amount of mortgage borrowings and mortgage assets, please see 1. Monetary funds and 65. Assets withrestricted ownerships or right to use in Note VII.For classification and amount of mortgage borrowings and mortgage assets, please see 1. Monetary funds and 65. 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 periodamounted to RMB0.00. Short-term borrowings included accrued interest of RMB32,723,667.40.
24. Bills payable
Unit: RMBItemClosing balanceOpening balance
Bank acceptance bills1,922,361,633.831,690,589,691.19Commercial acceptance bills1,206,234,201.211,398,922,636.21Total3,128,595,835.043,089,512,327.40Total outstanding bills payable due as at the end of the period amounted to RMB0.00.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
25. Accounts payable
(1) Particulars of accounts payable
Unit: RMBItemClosing balanceOpening balance
Payment for goods3,619,549,023.043,074,700,464.48Payment for engineering146,144,102.25307,195,168.83Payment for equipment100,493,461.51249,371,719.69Others248,780,180.96239,863,992.34Total4,114,966,767.763,871,131,345.34
(2) Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balance
Within 1 year (including 1 year)3,746,315,716.203,282,236,529.521 to 2 years98,287,651.12229,465,372.732 to 3 years52,080,919.33164,915,158.41Over 3 years218,282,481.11194,514,284.68Total4,114,966,767.763,871,131,345.34The 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, 3-4 years, 4-5 years and over 5 years.
(3) Significant accounts payable aged over 1 year
Unit: RMBItemClosing balanceReasons
WEIFANG XINGXING UNITED CHEMICAL CO., LTD.26,905,494.34Not due for paymentOMYA HAIMING (NANCHANG) CHEMICAL CO. LTD.16,000,000.00Not due for paymentZHEJIANG JNDIA PIPELINE INDUSTRY CO., LTD.11,477,155.91Not due for paymentVOITH GERMANY5,307,499.40Not due for paymentCSSC 704TH RESEARCH INSTITUTE4,867,627.54Not due for paymentTotal64,557,777.19
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
26. Receipts in advance
(1) Particulars of receipts in advance
Unit: RMBItemClosing balanceOpening balance
Prepaid property rents14,261,436.6738,274,028.20Total14,261,436.6738,274,028.20
27. Contract liabilities
Unit: RMBItemClosing balanceOpening balance
Payment for goods in advance1,306,029,389.801,382,289,597.54Total1,306,029,389.801,382,289,597.54
28. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMBItem
Openingbalance
Increase duringthe period
Decrease duringthe period
Closing
balance
I. Short-term remuneration169,854,249.701,154,738,836.431,225,239,542.7299,353,543.41II. Retirement benefit plan-defined
contribution scheme44,758.31214,495,684.26168,968,098.9845,572,343.59III. Termination benefits26,403,423.6926,403,423.69Total169,899,008.011,395,637,944.381,420,611,065.39144,925,887.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
28. Staff remuneration payables
(Continued)
(2) Particulars of short-term remuneration
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease duringthe period
Closing
balance
1. Salaries, bonuses, allowance and
subsidies160,186,039.82923,106,793.77998,917,968.8284,374,864.77
2. Staff welfare50,934,315.9250,934,315.92
3. Social insurance premium346,948.6897,568,137.6293,842,395.804,072,690.50Of which: Medical insurancepremium344,352.1686,730,174.8586,404,928.46669,598.55
Work-related injuryinsurance premium98.446,797,772.734,283,667.712,514,203.46Maternity insurancepremium2,498.084,040,190.043,153,799.63888,888.49
4. Housing provident funds5,094,807.6756,134,004.6153,727,874.487,500,937.80
5. Union funds and workers
’
education1,488,335.5114,216,192.0715,241,510.11463,017.47
6. Other short-term remuneration2,738,118.0212,779,392.4412,575,477.592,942,032.87Total169,854,249.701,154,738,836.431,225,239,542.7299,353,543.41
(3) Defined contribution
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closing
balance
1. Basic pension insurance premiums43,609.94203,857,697.22160,286,177.7443,615,129.42
2. Unemployment insurance
premiums1,148.3710,637,987.048,681,921.241,957,214.17Total44,758.31214,495,684.26168,968,098.9845,572,343.59
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
29. Tax payables
Unit: RMBItemClosing balanceOpening balance
Value added tax128,305,607.36125,522,336.03Enterprise income tax51,538,384.5589,597,918.41Property tax34,531,806.7613,083,934.41Stamp duty12,987,679.083,456,472.38Land use tax10,659,878.199,240,921.98Urban maintenance and construction tax5,069,014.463,748,576.77Educational surcharges and others3,955,412.992,931,140.78Individual income tax4,765,040.2761,378,163.24Environmental Protection Tax3,674,817.233,959,856.45Resource tax3,500,000.004,500,000.00Land appreciation tax2,024,028.204,076,160.22Total261,011,669.09321,495,480.67
30. Other payables
Unit: RMBItemClosing balanceOpening balance
Other payables1,854,507,978.661,482,575,808.13Interest payable15,895,930.5155,437,777.80Total1,870,403,909.171,538,013,585.93
(1) Interest payable
Unit: RMBItemClosing balanceOpening balance
Interest on corporate bonds15,895,930.5121,132,222.24Interest on medium-term notes34,305,555.56Total15,895,930.5155,437,777.80
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
30. Other payables
(Continued)
(2) Other payables
1) Other payables by nature
Unit: RMBItemClosing balanceOpening balance
Deposit788,792,126.26261,990,665.03Open credit490,279,690.52550,223,956.81Accrued expenses355,492,234.45341,923,505.85The obligation to repurchase shares under the share
incentive scheme129,112,395.74226,860,000.00Others90,831,531.69101,577,680.44Total1,854,507,978.661,482,575,808.13
2) Significant advance receipts for over 1 year
Unit: RMBItemClosing balanceReasons
ZHANJIANG RUNBAO TRADING CO., LTD.160,000,000.00Not due for paymentSHANGHAI SHUILAN PROPERTY MANAGEMENTCO., LTD.136,000,000.00Not due for paymentNINE DRAGONS DAWEI HOLDINGS CO., LTD.30,000,000.00Not due for paymentWEIFANG XINGXING UNITED CHEMICAL CO., LTD.16,860,000.00Not due for paymentWUHAN TIANRUI PAPER CO., LTD.7,941,708.00Not due for paymentTotal350,801,708.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
31. Non-current assets due within one year
Unit: RMBItemClosing balanceOpening balance
Long-term receivables due within one year2,398,150,298.721,543,620,543.60Long-term borrowings due within one year1,920,748,225.562,583,730,366.67Bonds payable due within one year350,000,000.001,270,636,933.46Lease liabilities due within one year4,606,717.584,606,717.58Other non-current liabilities due within one year1,198,716,666.67Total4,673,505,241.866,601,311,227.98
32. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMBItemClosing balanceOpening balance
Mortgage borrowings3,118,508,092.173,921,048,883.74Credit borrowings1,405,855,117.941,910,041,837.91Guaranteed borrowings1,378,621,266.532,028,979,800.00Less: Long-term borrowings due within one year1,920,748,225.562,583,730,366.67Total3,982,236,251.085,276,340,154.98Explanation of the classification of long-term borrowings:
For classification and amount of pledged assets of pledged borrowings, please see 1. Monetary funds and 65. Assets withrestricted ownerships or right to use in Note VII; Long-term borrowings included accrued interest of RMB11,874,827.63.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
33. Bonds payable
(1) Bonds payable
Unit: RMBItemClosing balanceOpening balance
18 Chenming Bond 01 – Chenming Group155,000,000.00Total155,000,000.00
(2) Increase/decrease in bonds payable (excluding other financial instruments such as preference shares and
Perpetual Bonds classified as financial liabilities)
Unit: RMB
Name ofcommercial paperPar value
Date of
issueTermAmount
OpeningbalanceIssueduringtheperiod
Interestat par value
Amortisationof premium/discount
Redemption
during the
period
Changesin foreignexchangegains andlosses
Closingbalance
18 Chenming Bond
01 – ChenmingGroup350,000,000.002018-4-25 years350,000,000.00350,000,000.0020,255,374.9620,255,374.96350,000,000.00Chenming USDBonds1,137,120,600.002019-8-62.6 years1,125,276,863.461,075,636,933.4630,847,102.561,019,717.031,111,571,636.624,067,883.57Less: Bonds
payable duewithin one year1,270,636,933.46350,000,000.00Total1,475,276,863.46155,000,000.0051,102,477.521,019,717.031,131,827,011.584,067,883.57
34. Lease liabilities
Unit: RMBItemClosing balanceOpening balance
Lease payments payable76,929,509.3881,362,458.45Less: Unrecognised financing expenses18,726,744.3419,474,535.06Less: Lease liabilities due within one year4,606,717.584,606,717.58Total53,596,047.4657,281,205.81
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
35. Long-term payables
Unit: RMBItemClosing balanceOpening balance
Long-term payables3,160,771,126.312,358,901,022.99Total3,160,771,126.312,358,901,022.99
(1) By nature
Unit: RMBItemClosing balanceOpening balance
Financial leasing4,928,891,190.813,188,521,566.59China Development Bank Special Fund412,500,000.00488,000,000.00Contributions by other partners211,530,234.22225,000,000.00Retention for the financial leasing operations6,000,000.001,000,000.00Less: Long-term payables due within one year2,398,150,298.721,543,620,543.60Total3,160,771,126.312,358,901,022.99
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.
36. Provisions
Unit: RMBItemClosing balanceOpening balanceReason
Pending litigation325,259,082.28
Losses fromArjo’s lawsuitTotal325,259,082.28
Other explanations including relevant important assumptions and estimates of important provision:
In February 2017, Arjowiggins HKK2 Limited (“HKK2 Company”) submitted a H share winding-up petition against the Company to Hong KongHigh Court due to a joint venture dispute, which required a compensation for economic loss of RMB167 million and interest thereon, and legalcosts of USD3.54 million and arbitration fee of HK$3.3 million and interest thereon to HKK2. The Company made provision of RMB320 millionfor such pending litigation in 2017. On 5 August 2020, the Court of Appeal of the High Court of the HKSAR made the judgment to dismiss theappeal of the Company. On 21 January 2022, Hong Kong Court of Final Appeal accepted the Company’s appeal. On 14 June 2022, Hong KongCourt of Final Appeal rejected the Company’s appeal, and directed that the sum of HK$389,112,432.44, together with interest accrued thereon,previously deposited with the Court as a stay of the conditions of the winding up petition filed by HKK2 against the Company pursuant to theorder of the Judge of the Court of First Instance, Mr. HARRIS Jonathan Russell, shall be paid to HKK2. The Company fulfilled the judgement ofthe litigation during the reporting period.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
37. Deferred income
Unit: RMBItemOpening balance
Increase during
the period
Decrease duringthe periodClosing balanceReason
Government grants1,573,681,684.25104,451,215.791,469,230,468.46Financial provisionTotal1,573,681,684.25104,451,215.791,469,230,468.46Items 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
Project fund for National KeyTechnology Research andDevelopment Program1,123,125.00164,700.00958,425.00
Asset-relatedgovernment grantsInfrastructure and environmental
protection engineering220,099,227.0811,778,260.39208,320,966.69
Asset-relatedgovernment grantsHuanggang forestry-pulp paper
project496,020,740.8525,026,217.80470,994,523.05
Asset-relatedgovernment grantsZhanjiang forestry-pulp paper project
50,806,597.194,094,632.9246,711,964.27
Asset-relatedgovernment grantsFinancial subsidies for technological
transformation project144,150,333.3611,535,807.72132,614,525.64
Asset-relatedgovernment grantsFunding for environmental protection
627,047,425.6850,592,141.88576,455,283.80
Asset-relatedgovernment grantsOthers
34,434,235.091,259,455.0833,174,780.01
Asset-relatedgovernment grantsTotal1,573,681,684.25104,451,215.791,469,230,468.46
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
38. Share capital
Unit: RMB
Opening balance
Increase/decrease during the year (+/-)
Closing balanceRepurchaseof restrictedsharesBonus shares
Sharesconvertedfrom reservesOthersSubtotal
Total number of shares2,984,208,200.00-4,466,000.00-4,466,000.002,979,742,200.00Explanation: Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2022) No. 371C000576) for therepurchase of restricted shares during the period. On 18 July 2022, the second extraordinary meeting of the tenth session of the Board andthe first extraordinary meeting of the tenth session of the Supervisory Committee considered and approved the Resolution on the Adjustmentto the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares.On 18 October 2022, the Company completed the registration of the repurchase and cancellation of certain restricted shares granted to 15participants but yet to be released under the 2020 Restricted A Share Incentive Scheme, with a total of 4,466,000 A shares repurchased andcancelled. The total number of shares of the Company changed from 2,984,208,200 to 2,979,742,200.
39. Other equity instruments
(1) Perpetual Bonds outstanding at the end of the period
Outstanding financialinstruments
Year ofissuance
Accountingclassification
Dividend orinterest rateIssue priceIssue sizeAmount (RMB)
Maturitydate orrenewal status
Condition forconversionConversion
17 Lu Chenming MTN0012017Equity instrument8.97%100.0010,000,000.001,000,000,000.00
No definedmaturity dateNoNon-convertibleTotal10,000,000.001,000,000,000.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
39. Other equity instruments
(Continued)
(2) Changes in preference shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period
Unit: RMBOutstanding financialinstruments
Beginning of the periodIncrease during the periodDecrease during the periodEnd of the periodNumberCarrying amountNumberCarrying amountNumberCarrying amountNumberCarrying amount
17 Lu Chenming MTN00110,000,000.00996,000,000.0010,000,000.00996,000,000.00Total10,000,000.00996,000,000.0010,000,000.00996,000,000.00Changes (increase or decrease) in other equity instruments during the period, the reasons for such changes, and the basis for relevantaccounting treatment:
The Company issued medium-term notes amounting to RMB1,000 million on 12 July 2017 at a coupon rate of 6.80%. Theproceeds net of issue costs amounted to RMB996.00 million.The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of redemption bythe Company. The interest rate of the bills is determined by the basic interest rate + the initial interest rate + 300BP. It has thefeature of capped interest rates and the capped interest rate does not exceed the average interest rate level of the same typeof instruments in the same industry in the same period; The Company has the right to defer any payment of interest. The rightof redemption of the notes is vested in the Company so that it is up to the Company to decide whether to redeem or not; thepriority of repayment of the principal and interest of medium-term notes for the period is the same as other outstanding debtfinancing instruments of the issuers in the event of winding up, because there is low probability of bankruptcy that the Companywill not be liable for contractual obligations to deliver cash or other financial assets expected.Based on the above, the notes do not contain any term giving rise to any contractual obligation to deliver cash or other financialassets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adversecircumstances. Consequently, they are eligible to be recognised and accounted for as equity instruments and included underother equity – Perpetual Bonds.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
40. Capital reserves
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease duringthe period
Closingbalance
Share premium4,471,891,796.08141,082,717.088,262,100.004,604,712,413.16Other capital reserves755,366,304.331,121,804.80756,488,109.13Total5,227,258,100.41142,204,521.888,262,100.005,361,200,522.29
Explanation:
the Company recognised the management fees during the vesting period for the share-based payments with an increase of capitalreserves of RMB1,121,804.80;a capital increase of Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, was contributed on the part ofother investors, causing a decrease in the Company’s shareholding without loss of control, and an increase of capital reserves ofRMB141,082,717.08;due to the failure to fulfil the unlocking conditions, certain restricted shares were repurchased during the year with a decrease in capitalreserves of RMB8,262,100.00; Guangdong Nanyue Bank Co., Ltd. (“Nanyue Bank”), an associate of the Company, implemented the new financial instrument standardsince 2021. The Company made retrospective adjustment based on the change of the accounting policy of Nanyue Bank due to theimplementation of the new financial instrument standard. In accordance with the fifth batch of Q&As on the 2021 ASBEs issued by theAccounting Department of the Ministry of Finance (I) Q&As on the Long-term Equity Investment Standard, the Company adjusted theopening retained earnings for 2021 in its 2021 financial statements using the retrospective adjustment method. The Company restatedthe prior year comparative information in these financial statements due to the differences between the data in the audited financialstatements of Nanyue Bank and the unaudited financial information cited by the Company in preparing the 2021 financial statements. Inparticular, the effect on the opening balance of the capital reserves was a decrease of RMB55,547,014.21.
41. Treasury shares
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closingbalance
Share incentive226,860,000.0098,079,900.00128,780,100.00Total226,860,000.0098,079,900.00128,780,100.00
Explanation: The first batch of the equity incentives implemented by the Company in 2020 were unlocked during the reporting period, with areduction of RMB85,351,800.00 in treasury shares that fulfilled unlocking conditions and a reduction of RMB12,728,100.00 in treasury sharesthat did not fulfil unlocking conditions and subject to repurchase.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
42. 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 othercomprehensive
income inprior periods toretained earningsduring the period
I. Other comprehensive income that cannot be
reclassified to profit or loss in subsequentperiodsII. Other comprehensive income that will be
reclassified to profit and loss in subsequentperiods-445,582,729.36-376,357,965.21-821,940,694.57
1. Other comprehensive income that may be
reclassified to profit and loss under the equitymethod-10,512,532.56596,429.87-9,916,102.69
2. Translation differences of financial statements
denominated in foreign currency-435,070,196.80-376,954,395.08-812,024,591.88Total other comprehensive income-445,582,729.36-376,357,965.21-821,940,694.57
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
42. Other comprehensive income
(Continued)Other comprehensive income attributable to the parent company in the income statement:
Unit: RMB
Item
During the period
Incurred before
income tax for
the period
Less: Transferred
from othercomprehensiveincome in priorperiods to profit
or loss during
the period
Less: Incometax expenses
Less: Attributable
to minorityshareholders
after tax
Attributable toparent companyafter tax
I. Other comprehensive income that
cannot be reclassified to profit or loss insubsequent periodsII. Other comprehensive income that willbe reclassified to profit and loss insubsequent periods-376,357,965.21-376,357,965.21
1. Other comprehensive income that may be
reclassified to profit and loss under theequity method596,429.87596,429.87
2. Translation differences of financial
statements denominated in foreigncurrency-376,954,395.08-376,954,395.08Total other comprehensive income-376,357,965.21-376,357,965.21
43. Special reserves
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closingbalance
Production safety expenses29,147,795.1713,356,084.2215,791,710.95Total29,147,795.1713,356,084.2215,791,710.95
44. Surplus reserves
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closingbalance
Statutory surplus reserves1,212,009,109.971,212,009,109.97Total1,212,009,109.971,212,009,109.97
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
45. General risk provisions
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease duringthe periodClosing balance
General risk provisions76,825,918.603,074,350.1179,900,268.71Total76,825,918.603,074,350.1179,900,268.71
46. Retained profit
Unit: RMBItemThe periodThe prior period
Retained profit as at the end of the prior year before adjustment9,294,126,706.869,999,764,028.74Adjustment to opening balance of retained earnings (increase +,
decrease -)-1,803,277,670.52Opening balance of retained profit after adjustment9,294,126,706.868,196,486,358.22Plus: Net profit for the period attributable to shareholders of the parent company189,290,120.822,065,513,108.71Less: Transfer of statutory surplus reservesTransfer of discretionary surplus reservesTransfer of general risk provisions3,074,350.112,703,274.40Ordinary dividend payable552,078,517.01Perpetual Bonds interest payable89,700,000.0089,700,000.00Preference shares interest payable323,390,968.66Retained profit as at the end of the period9,390,642,477.579,294,126,706.86
Note: The reason for a decrease in the opening retained earnings of RMB1,803,277,670.52 for the prior period is: Guangdong Nanyue Bank
Co., Ltd. (“Nanyue Bank”), an associate of the Company, implemented the new financial instrument standard since 2021. The Companymade retrospective adjustment based on the change of the accounting policy of Nanyue Bank due to the implementation of the newfinancial instrument standard. In accordance with the fifth batch of Q&As on the 2021 ASBEs issued by the Accounting Department ofthe Ministry of Finance (I) Q&As on the Long-term Equity Investment Standard, the Company adjusted the opening retained earningsfor 2021 in its 2021 financial statements using the retrospective adjustment method. The Company restated the prior year comparativeinformation in these financial statements due to the differences between the data in the audited financial statements of Nanyue Bankand the unaudited financial information cited by the Company in preparing the 2021 financial statements.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
47. Revenue and operating costs
Unit: RMBItem
Amount for the periodAmount for the prior periodRevenueOperating costsRevenueOperating costs
Principal activities31,425,116,857.8326,878,943,649.2831,933,583,202.5424,460,067,257.53Other activities579,250,463.08494,782,057.721,086,229,091.60762,208,537.75Total32,004,367,320.9127,373,725,707.0033,019,812,294.1425,222,275,795.28Whether 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 deductions
Revenue32,004,367,320.91Revenue from sales of materials of
RMB903,160,256.93 and otherrevenue of RMB127,610,203.33
33,019,812,294.14Revenue from sales of materials of
RMB1,649,930,017.77 and otherrevenue of RMB553,971,864.43.Total deductions from revenue1,030,770,460.262,203,901,882.20Proportion of total deductions from revenue torevenue
3.22%6.67%I. Revenue from operations not related to principal
operations
1. Revenue from operations other than normal
operation, such as revenue realised fromleasing fixed assets, intangible assets,packaging materials, sales of materials,exchanges for non-monetary assetswith materials, engaging in entrustedmanagement business, and revenueincluded in revenue from principal operationsbut generated from operations other thannormal operation of the Company.
1,030,770,460.26Revenue from sales of materials of
RMB903,160,256.93 and otherrevenue of RMB127,610,203.33.
2,203,901,882.20Revenue from sales of materials of
RMB1,649,930,017.77 and otherrevenue of RMB553,971,864.43.
Subtotal of revenue from operations not related to
principal operations
1,030,770,460.26Revenue from sales of materials of
RMB903,160,256.93 and otherrevenue of RMB127,610,203.33.
2,203,901,882.20Revenue from sales of materials of
RMB1,649,930,017.77 and otherrevenue of RMB553,971,864.43.II. Commercially non-substantial revenueIII. Sub-total of other revenue from operations not
related to principal operations and commerciallynon-substantial revenueRevenue after deductions30,973,596,860.65Revenue from sales of materials of
RMB903,160,256.93 and otherrevenue of RMB127,610,203.33.
30,815,910,411.94Revenue from sales of materials of
RMB1,649,930,017.77 and otherrevenue of RMB553,971,864.43.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
47. Revenue and operating costs
(Continued)Information related to revenue:
Unit: RMBCategory of contract
Machine-madepaper segmentFinancial services
Hotel and propertyrentalsOthersTotal
Type of goods30,831,898,263.47209,378,132.90252,786,565.21710,304,359.3332,004,367,320.91
Including:
Machine-made paper28,398,850,766.5128,398,850,766.51Chemical pulp1,043,284,411.271,043,284,411.27Processing of moulds308,596,084.40308,596,084.40Electricity and steam288,447,315.51288,447,315.51Construction materials265,496,913.56265,496,913.56Hotel and property rentals238,020,274.82238,020,274.82Paper chemicals169,232,476.00169,232,476.00Others932,083,294.18209,378,132.9014,766,290.39136,211,361.371,292,439,078.84By geographical area30,831,898,263.47209,378,132.90252,786,565.21710,304,359.3332,004,367,320.91Including:
Mainland China22,687,782,292.47209,378,132.90252,786,565.21710,304,359.33 23,860,251,349.91Other countries and regions8,144,115,971.00 8,144,115,971.00By the timing of delivery30,831,898,263.47209,378,132.90252,786,565.21710,304,359.3332,004,367,320.91Including:
Goods (at a point in time)30,535,615,186.372,924,528.2914,656,198.65710,177,248.9131,263,373,162.22Services (within a certainperiod)296,283,077.10206,453,604.61238,130,366.56127,110.42740,994,158.69Breakdown of revenue from principal activities By industry
Unit: RMBName of industry
Amount for the yearAmount for the prior yearRevenueCostsRevenueCosts
Machine-made paper28,398,850,766.5124,448,024,979.3228,822,796,809.3222,046,779,363.89Chemical pulp1,043,284,411.27816,562,733.50248,980,922.18191,806,552.77Processing of moulds308,596,084.40277,645,763.64429,452,007.72357,366,098.62Electricity and steam288,447,315.51270,073,907.31303,940,594.69260,019,123.96Construction materials265,496,913.56228,492,849.08349,945,005.51315,912,453.93Hotel and property rentals238,020,274.82213,632,078.62148,941,357.80124,619,857.81Paper chemicals169,232,476.00146,042,699.79131,104,964.35117,040,239.12Others713,188,615.76478,468,638.021,498,421,540.971,046,523,567.43Total31,425,116,857.8326,878,943,649.2831,933,583,202.5424,460,067,257.53
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
47. Revenue and operating costs
(Continued)
Machine-made paper, by main product type
Unit: RMBName of industry
Amount for the yearAmount for the prior yearRevenueCostsRevenueCosts
White paper board9,061,724,789.417,826,962,810.399,579,581,625.056,540,978,628.51Duplex press paper8,449,759,248.927,407,821,676.667,287,152,353.076,004,341,245.63Coated paper4,149,820,827.473,457,680,224.044,310,744,513.873,130,491,004.15Electrostatic paper4,077,351,284.383,497,341,216.243,857,097,045.493,140,962,690.62Anti-sticking raw paper973,542,096.46791,528,667.301,168,436,835.30872,987,808.22Thermal paper582,687,847.45489,261,009.24540,941,351.36475,188,142.15Others1,103,964,672.42977,429,375.452,078,843,085.181,881,829,844.61Total28,398,850,766.5124,448,024,979.3228,822,796,809.3222,046,779,363.89 Machine-made paper, by geographical segment
Unit: RMBName of industry
Amount for the yearAmount for the prior yearRevenueCostsRevenueCosts
Mainland China20,254,734,795.5117,354,744,592.1424,696,996,168.3818,348,851,562.98Other countries and regions8,144,115,971.007,093,280,387.184,125,800,640.943,697,927,800.91Total28,398,850,766.5124,448,024,979.3228,822,796,809.3222,046,779,363.89 Revenue from top 5 customers
Unit: RMBPeriod
Total revenue fromtop 5 customers
Percentage of thetotal revenue in the
same period (%)
20226,798,742,733.1321.24%20215,259,350,805.4515.93%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 RMB656,446,008.11, which was expected to be recognised in 2023.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
48. Taxes and surcharges
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Property tax84,937,624.0877,555,756.03Stamp duty50,855,100.8435,545,109.19Urban maintenance and construction tax30,844,441.6546,766,679.96Land use tax21,896,525.6840,855,126.39Educational surcharges13,065,472.1720,195,996.39Resource tax12,151,246.7022,892,129.80Local education surcharges9,672,799.8813,463,933.81Water conservation funds941,851.21697,713.50Vehicle and vessel tax100,147.53142,969.16Land appreciation tax27,432.009,175,506.88Others18,646,673.3217,165,291.20Total243,139,315.06284,456,212.31
49. Sales and distribution expenses
Unit: RMBItem
Amount for
the period
Amount forthe prior period
Wages and surcharges120,855,156.29140,614,560.41Business hospitality expenses55,312,453.0559,259,329.16Travel expenses21,514,621.6521,203,755.03Selling commissions11,571,414.6111,490,724.59Depreciation expenses6,524,594.6511,299,358.22Rental expenses6,048,188.508,941,037.14Office expenses2,465,867.662,318,832.06Warehouse expenses669,554.18555,915.72Others17,219,423.5037,826,180.18Total242,181,274.09293,509,692.51
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
50. General and administrative expenses
Unit: RMBItem
Amount for
the period
Amount forthe prior period
Wages and surcharges230,961,622.37287,370,208.75Depreciation expenses92,141,979.66104,079,387.00Business hospitality expenses90,219,924.1775,588,054.15Welfare expenses60,931,519.5467,401,266.74Amortisation of intangible assets and long-term expenses50,808,836.9647,623,471.69Termination benefits expenses26,059,173.1147,005.00Repair cost and consumption of materials24,983,894.6529,577,039.42Legal costs24,306,211.0314,331,466.88Intermediary service expenses21,436,369.479,822,504.05Insurance premium17,343,722.1921,399,854.79Travel expenses10,066,215.4114,082,788.42Office expenses6,827,412.536,016,174.24Audit fees5,628,798.625,211,323.99Production interruption loss153,841,164.26Others88,831,023.63105,969,026.16Total750,546,703.34942,360,735.54
Note: Audit fees include audit fees for annual financial statements and internal control reports of the Company, and other fees for auditmatters of the Company occurring during the reporting period.
51. Research and development expense
Unit: RMBItem
Amount for
the period
Amount forthe prior period
Consumption of materials872,932,892.441,008,124,599.58Utilities181,428,197.66194,161,253.86Wages and surcharges146,671,151.98155,808,154.72Depreciation expenses45,016,402.1953,538,054.01Insurance premium28,028,216.3329,407,238.86Housing provident funds4,848,051.845,375,717.76Welfare expenses4,448,785.762,838,027.33Union funds1,159,873.861,601,052.82Installation expenses940,252.781,423,823.71Travel expenses27,693.3117,449.73Other expenses4,780,021.951,470,999.08Total1,290,281,540.101,453,766,371.46
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
52. Finance expenses
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Interest expenses2,081,067,895.662,348,200,417.05Less: Capitalised interest amount Interest income309,987,478.19287,289,410.33Foreign exchange gains and losses46,654,427.89-9,455,468.81Less: Capitalisation of foreign exchange gains and lossesBank charges and others328,821,303.70336,015,748.55Total2,146,556,149.062,387,471,286.46
53. Other income
Unit: RMBSource of other income
Amount forthe period
Amount forthe prior period
Government grants – directly included in profit or loss136,741,599.83115,896,575.43Government grants – amortised deferred income included inprofit or loss104,451,215.79104,704,060.06Gain on debt restructuring1,030,353.24Total242,223,168.86220,600,635.49
54. Investment income
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Dividend on financial assets held for trading and other non-
current financial assets38,224,826.2119,557,976.67Income from long-term equity investments accounted for using
the equity method24,116,757.9531,476,499.83Investment gain on debt restructuring-62,888.3324,593,731.72Investment gain on disposal of long-term equity investments-856,627.60112,907,083.05Investment gain on derecognition of financial assets-137,464,855.58-258,113,630.19Total-76,042,787.35-69,578,338.92
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
55. Gain on change in fair value
Unit: RMBSource of gain on change in fair value
Amount for
the period
Amount forthe prior period
Gain on change in fair value of consumable biological assets
measured at fair value9,924,233.72-41,899.05Other non-current financial assets5,350,000.001,600,000.00Financial assets held for trading-40,528,162.53-78,631,913.62Total-25,253,928.81-77,073,812.67
56. Credit impairment loss
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Bad debt loss of other receivables54,677,374.62-33,623,255.14Bad debt loss of accounts receivable-38,857,265.9120,880,443.83Bad debt loss of financial lease payments-101,897,077.27-239,469,507.89Others-16,523,042.11Total-86,076,968.56-268,735,361.31
57. Loss on impairment of assets
Unit: RMBItemAmount for the period
Amount for the priorperiod
Loss on inventory impairment-17,659,966.20-11,285,890.45Total-17,659,966.20-11,285,890.45
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
58. Asset disposal income
Unit: RMBSource of asset disposal incomeAmount for the period
Amount for the priorperiod
Gain on disposal of intangible assets (“-” denotes loss)106,837,281.4742,184,387.73Gain on disposal of fixed assets (“-” denotes loss)54,255,232.299,375,163.93Total161,092,513.7651,559,551.66
59. Non-operating income
Unit: RMB
Item
Amount forthe period
Amount forthe prior period
Amount included inextraordinary gains
or losses for
the period
Government grants73,741,500.0042,486,362.1073,741,500.00Fine income2,334,679.245,723,762.722,334,679.24Exempted debts94,894.9612,729,703.0794,894.96Gain on damage and retirement of non-current
assets82,413.791,035,196.6682,413.79Others995,197.779,719,362.26995,197.77Total77,248,685.7671,694,386.8177,248,685.76Government grants included in profit or loss for the period:
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Asset-related/income-related
Grant income73,741,500.0042,486,362.10Income-relatedTotal73,741,500.0042,486,362.10
(1) For details of government grant, please see Note VII. 67.
(2) For the specific reason for government grants as recurring profit or loss, please refer to Note XVIII.1.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
60. Non-operating expenses
Unit: RMB
Item
Amount for
the period
Amount forthe prior period
Included innon-recurringprofit or loss in
the period
Trading of carbon emission quota23,662,741.8142,396,793.4223,662,741.81Litigation16,348,160.2516,348,160.25Loss on damage and retirement of non-currentassets10,382,099.663,338,528.8710,382,099.66Donation805,000.001,142,550.00805,000.00Others95,188.91Total51,198,001.7246,973,061.2051,198,001.72
61. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMBItem
Amount for
the period
Amount forthe prior period
Current income tax calculated according to tax law and
related regulations90,855,030.56185,879,510.90Deferred income tax expenses-225,948,373.9730,616,777.64Total-135,093,343.41216,496,288.54
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
61. Income tax expenses
(Continued)
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMBItem
Amount for
the period
Total profit182,269,348.00Income tax expenses calculated at statutory (or applicable) tax rates27,340,402.20Effect of different tax rates applicable to certain subsidiaries127,578,481.49Adjustments to income tax for prior periods22,095,145.12Profit and loss of joint ventures and associates accounted for using the equity method-739,743.25Income not subject to tax (listed with“-”)-99,806,424.77Non-deductible costs, expenses and losses16,981,499.31Tax effect of utilisation of unrecognised deductible losses and deductible temporary
differences in the previous year (listed with“-”)-45,056,645.61Tax effect of utilisation of unrecognised deductible losses and deductible temporarydifferences60,076,736.82Tax effect of R&D fee deduction (listed with“-”)-129,166,798.89The pre-tax deduction of the interest on Perpetual Bonds accounted as equity-13,455,000.00Tax incentives such as equipment credits-100,940,995.83Income tax expense-135,093,343.41
62. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMBItem
Amount for
the period
Amount forthe prior period
Open credit and other income745,295,349.96579,416,906.77Finance expenses – Interest income305,772,280.83276,274,390.31Government grants actually received202,165,244.17199,176,622.64Net proceedings from the financial leasing business184,749,056.181,153,242,827.87Default penalty and fine969,634.6511,844,722.79Total1,438,951,565.792,219,955,470.38
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
62. Items on statements of cash flow
(Continued)
(2) Cash paid relating to other operating activities
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Transportation expenses944,022,266.88961,442,438.95Litigation368,296,784.840.00Net investment in factoring business250,000,000.00737,000,000.00Financial institutions charge241,125,513.70210,288,974.16Business hospitality expenses117,853,387.22106,007,628.02Intermediary service expenses54,437,645.9439,555,241.62Travel expenses32,480,740.1735,150,617.24Repair expenses23,053,205.9833,427,722.45Cargo handling charges21,869,006.2730,088,978.09Waste disposal expenses15,891,052.2020,081,650.19Insurance premium15,288,347.7822,171,792.20Leasing expenses12,038,349.8617,039,644.42Office expenses10,681,717.8128,618,557.15Others186,617,859.65167,760,474.48Total2,293,655,878.302,408,633,718.97
(3) Cash received relating to other investing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Recovery of consideration for equity transfer493,655,373.48Net cash received from subsidiaries44,674.62Total493,700,048.10
(4) Cash paid relating to other investing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Payment for acquisition of companies127,500,000.00Total127,500,000.00
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
62. Items on statements of cash flow
(Continued)
(5) Cash received relating to other financing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Equipment leaseback3,684,590,394.822,071,358,708.00Deposit for finance lease34,500,000.0060,000,000.00Short-term commercial paper and others200,000,000.00Net recovery of guarantee deposit2,286,599,788.67Contributions by other partners190,790,000.00Total3,719,090,394.824,808,748,496.67
(6) Cash paid relating to other financing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior period
Repayment of equipment leaseback2,237,763,312.312,252,587,404.38Repayment of short-term commercial paper and MTN1,200,000,000.002,745,000,000.00Repayment of bonds1,078,685,100.0090,000,000.00Net expense of guarantee deposit919,816,742.13Payment of Perpetual Bonds interest89,700,000.0089,700,000.00Security deposit for financial leasing76,000,000.0096,696,696.64Payment for equity in China Development Bank funds75,500,000.0029,500,000.00Share repurchase under the share incentive scheme11,757,730.78Redemption of preference shares4,500,000,000.00Payment of preference shares dividend323,390,968.66Acquisition of non-controlling interests300,000,000.00Total5,689,222,885.2210,426,875,069.68
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMBSupplementary information
Amount forthe period
Amount forthe prior period
1. Reconciliation of net profit as cash flows from operating
activities:
Net profit317,362,691.412,089,684,021.45Plus: Provision for impairment of assets103,736,934.76280,021,251.76Depreciation of fixed assets, depletion of oil and gasassets, and depreciation of bearer biological assets2,255,505,392.352,366,091,653.76Depreciation of right-of-use assets7,737,284.207,972,781.72Amortisation of intangible assets54,698,978.5051,351,628.42Amortisation of long-term prepaid expenses4,678,921.693,964,046.48Loss on disposal of fixed assets, intangible assets andother long-term assets (“-” denotes gain)-161,092,513.76-51,559,551.66Loss on scrapped fixed assets (“-” denotes gain)10,299,685.872,303,332.21Loss on changes in fair value (“-” denotes gain)25,253,928.8177,073,812.67Investment loss (“-” denotes gain)2,081,067,895.662,348,200,417.05Investment loss (“-” denotes gain)76,042,787.3569,578,338.92Decrease in deferred income tax assets (“-”denotesincrease)-220,919,108.82-30,616,777.64Increase in deferred income tax liabilities (“-”denotesdecrease)-5,029,265.456,637,993.77Decrease in inventories (“-” denotes increase)-406,337,116.14-156,406,209.61Decrease in operating receivables (“-” denotes increase)332,267,872.353,208,289,966.45Increase in operating payables (“-” denotes decrease)-1,025,450,126.41-1,690,698,513.11OthersNet cash flows from operating activities3,449,824,242.378,581,888,192.64
2. Major investing and financing activities not involving cash
settlements:
Capital converted from debtsConvertible bonds of the Company due within one yearFinance leases of fixed assets
3. Net change in cash and cash equivalents:
Closing balance of cash2,159,460,149.513,168,915,847.02Less: Opening balance of cash3,168,915,847.024,389,169,963.79Plus: Closing balance of cash equivalentsLess: Opening balance of cash equivalentsNet increase in cash and cash equivalents-1,009,455,697.51-1,220,254,116.77
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Supplementary information on cash flow statement
(Continued)
(2) Net Cash of Acquisition Subsidiaries Paid in Current Period
Unit: RMBAmount
Cash or cash equivalents paid in the current period for business combinations that
occurred during the period:368,000,000.00Of which: Shanxi Fuyin Industrial Trading Co., Ltd.368,000,000.00Less: Cash and cash equivalents held by the subsidiary on the acquisition date2,081.22Of which: Shanxi Fuyin Industrial Trading Co., Ltd.223.60Chongmin Culture Development (Shanghai) Co., Ltd.1,857.62Plus: Cash or cash equivalents paid in the current period for business combinationsthat occurred during previous periodsOf which:
Net cash paid for acquisition of subsidiaries367,997,918.78
(3) Cash and cash equivalents composition
Unit: RMBItemClosing balanceOpening balance
I. Cash2,159,460,149.513,168,915,847.02
Of which: Treasury cash3,491,219.082,926,080.68Bank deposit that can be used for payment at any time2,155,968,930.433,165,989,766.34Other monetary funds that can be used for payment atany timeDeposit at central bank deposit that can be used for
paymentAmount due from banksAmount due to banksII. Cash equivalents
Of which: Bond investment with maturity within 3 monthsIII. Balance of cash and cash equivalent at end of period2,159,460,149.513,168,915,847.02Of 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. Notes to items of statements of changes in owners
’ equityFor the nature of the adjustment to the opening balance for the prior year under the item“Others”and the reason forthe adjusted amount, please refer to Note VII. 40 and 46.
65. Assets with restricted ownerships or right to use
Unit: RMBItemClosing carrying amountReason for such restrictions
Monetary funds11,840,974,836.57As bank acceptance bills, deposits for letters
of credit, deposits for letters of guarantee, loandeposits, deposit reserves, and interests receivable,etc. (Note VII. 1)Fixed assets10,063,641,052.69As collateral for bank borrowings and long-term
payables (Note VII. 14)Investment property4,895,514,630.65As collateral for bank borrowings (Note VII. 13)Intangible assets1,033,897,418.27As collateral for bank borrowings and long-term
payables (Note VII. 18)Accounts receivable100,000,000.00As deposits to obtain loans (Note VII. 3)Accounts receivable financing/billsreceivable
8,497,931.30As collateral for letters of credit (Note VII. 4)Total27,942,525,869.48
Other explanation:
As at 31 December 2022, housing, building structure and equipment with the carrying amount of RMB10,063,641,052.69 (31 December 2021:
carrying amount of RMB12,866,125,795.19), investment properties with the carrying amount of RMB4,895,514,630.65 (31 December 2021:
carrying amount of RMB5,033,765,366.00) and intangible assets with the carrying amount of RMB1,033,897,418.27 (31 December 2021:
carrying amount of RMB1,210,395,050.42) were pledged as collateral for long-term borrowings of RMB3,118,508,092.17 (31 December 2021:
RMB3,921,048,883.74) and short-term borrowings of RMB65,000,000.00 (31 December 2021: RMB70,000,000.00).
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
66. Foreign currency items
(1) Foreign currency items
Unit: RMBItem
Closing foreigncurrency balanceExchange rate
Closing balance
in RMB
Monetary fundsOf which: USD94,101,812.266.9646655,381,481.67
EUR10,574,902.807.422978,496,445.99HKD1,127,396.510.89331,007,103.30GBP1,631.588.394113,695.65JPY1,197.000.052462.72Accounts receivableOf which: USD32,658,569.026.9646227,453,869.80
EUR9,289,176.647.422968,952,629.28JPY146,734,998.000.05247,688,913.90Other receivablesOf which: USD8,727.396.964660,782.78Accounts payableOf which: USD133,923,367.506.9646932,722,685.29
EUR1,954,737.997.422914,509,824.63Other payablesOf which: USD801,010.526.96465,578,717.87
EUR1,487,870.927.422911,044,317.05Short-term borrowingsOf which: USD51,212,401.046.9646356,673,888.28
EUR23,546,000.007.4229174,779,603.40Long-term borrowingsOf which: USD1,589,708.506.964611,071,683.82
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 ofbusinessPlace of incorporationFunctional currency
1Chenming 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
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
67. Government grants
General information of government grants
Unit: RMBTypeAmountReporting item
Amount included inthe current profit andloss
Special subsidy from the Bureau of Finance73,730,000.00Non-operating income73,730,000.00Enterprise reform and development subsidies66,394,161.00Other income66,394,161.00Financial subsidies for technologicaltransformation project52,395,702.39Other income52,395,702.39Funding for environmental protection50,592,141.88Other income50,592,141.88Huanggang forestry-pulp-paper project25,026,217.80Other income25,026,217.80Sewage treatment and water conservationtransformation project11,778,260.39Other income11,778,260.39Immediate VAT refund8,346,328.57Other income8,346,328.57Government rewards4,704,600.00Other income4,704,600.00Zhanjiang forestry-pulp-paper project4,094,632.92Other income4,094,632.92Refund of tax4,052,553.33Other income4,052,553.33Employment stabilisation subsidies3,012,954.63Other income3,012,954.63Afforestation subsidy2,695,823.49Other income2,695,823.49One-time job retention subsidies2,125,800.00Other income2,125,800.00Subsidies for foreign trade projects1,000,000.00Other income1,000,000.00R&D subsidy500,000.00Other income500,000.00Project Funding for National Key Technology
Research and Development Program164,700.00Other income164,700.00Subsidies for social insurance116,915.50Other income116,915.50Others4,203,523.72
Other income and non-operating income4,203,523.72Total314,934,315.62314,934,315.62
XII Financial Report
VIII. Change in scope of consolidationDuring the year, 2 subsidiaries were newly established, namely Jiangxi Chenming Tea Co., Ltd. and Shouguang MeichenEnergy Technology Co., Ltd., and 1 subsidiary was deregistered, namely Qingdao Chenming Pulp & Paper ElectronicCommodity Spot Trading Co., Ltd. 2 subsidiaries were acquired not within the definition of business, namely Shanxi FuyinIndustrial Trading Co., Ltd. and Chongmin Culture Development (Shanghai) Co., Ltd.
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Name of subsidiary
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issueddebtsecurities
Issuedshare capitalDirectIndirectZhanjiang Chenming Pulp & Paper Co., Ltd.
ZhanjiangZhanjiangPaper makingFor-profit corporation82.67%Establishment00Shouguang Meilun Paper Co., Ltd.ShouguangShouguangPaper makingFor-profit corporation62.4864%Establishment00Jilin Chenming Paper Co., Ltd.JilinJilinPaper makingFor-profit corporation100%Acquisition00Huanggang Chenming Pulp & Paper Co., Ltd.
HuanggangHuanggangPulp productionFor-profit corporation70.15%29.85%Establishment00Shandong Chenming Paper Sales Co., Ltd.
ShouguangShouguangSales of paper
product
For-profit corporation100%Establishment00Shouguang Chenming Import and Export Trade Co., Ltd.
ShouguangShouguangTradingFor-profit corporation100%Establishment00Jiangxi Chenming Supply Chain Management Co., Ltd.
JiangxiJiangxiTradingFor-profit corporation70%Establishment00Chenming GmbHGermanyGermanyPaper product
trading
For-profit corporation100%Establishment00Shouguang Chenming Papermaking Machine Co., Ltd.
ShouguangShouguangMachinery
manufacturing
For-profit corporation100%Establishment00Shouguang Hongxiang Printing and Packaging Co., Ltd.
ShouguangShouguangPrinting and
packaging
For-profit corporation100%Acquisition00Shouguang Chenming Modern Logistic Co., Ltd.
ShouguangShouguangTransportationFor-profit corporation100%Establishment00Jinan Chenming Paper Sales Co., Ltd.JinanJinanInvestment
management/Paper product
trading
For-profit corporation100%Establishment00Huanggang Chenming Arboriculture Development Co., Ltd.
HuanggangHuanggangArboricultureFor-profit corporation100%Establishment00Chenming Arboriculture Co., Ltd.WuhanWuhanArboricultureFor-profit corporation100%Establishment00Chenming Paper Korea Co., Ltd.KoreaKoreaPaper product
trading
For-profit corporation100%Establishment00
XII Financial Report
Name of subsidiary
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued
debtsecurities
Issuedshare capitalDirectIndirectShouguang Shun Da Customs Declaration Co, Ltd.
ShouguangShouguangCustoms
declaration
For-profit corporation100%Establishment00Shanghai Chenming Industry Co., Ltd.ShanghaiShanghaiProperty
investment andmanagement
For-profit corporation100%Establishment00Shanghai Chenyin Trading Co., Ltd.ShanghaiShanghaiTradingFor-profit corporation51%Establishment00Shandong Chenming Group Finance Co., Ltd.
JinanJinanFinanceFor-profit corporation80%20%Establishment00Jiangxi Chenming Paper Co., Ltd.NanchangNanchangPaper makingFor-profit corporation100%Establishment00Nanchang Shengheng Trading Co., Ltd.NanchangNanchangTradingFor-profit corporation100%Establishment00Nanchang Kunheng Trading Co., Ltd.NanchangNanchangTradingFor-profit corporation100%Establishment00Shouguang Chenming Art Paper Co., Ltd.
ShouguangShouguangPaper makingFor-profit corporation75%Establishment00Hailaer Chenming Paper Co., Ltd.HailaerHailaerPaper makingFor-profit corporation75%Establishment00Shandong Grand View Hotel Co., Ltd.ShouguangShouguangCateringFor-profit corporation70%Establishment00Wuhan Chenming Hanyang Paper Holdings Co., Ltd
WuhanWuhanPaper makingFor-profit corporation65.205%34.64%Establishment00Shandong Chenming Financial Leasing Co., Ltd.
JinanJinanFinancial leasingFor-profit corporation100%Establishment00Qingdao Chenming Nonghai Financial Leasing Co., Ltd
QingdaoQingdaoFinancial leasingFor-profit corporation100%Establishment00Chenming (HK) LimitedHong KongHong KongPaper product
trading
For-profit corporation100%Establishment00Shouguang Hongyi Decorative Packaging Co., Ltd.
ShouguangShouguangPackagingFor-profit corporation100%Merger and
acquisition
Shouguang Xinyuan Coal Co., Ltd.ShouguangShouguangCoalFor-profit corporation100%Merger and
acquisition
Shouguang City Run Sheng Wasted Paper Recycle Co., Ltd.
ShouguangShouguangPurchase and
sale of waste
For-profit corporation100%Merger and
acquisition
Shouguang Wei Yuan Logistics Company Limited
ShouguangShouguangLogisticsFor-profit corporation100%Merger and
acquisition
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
Name of subsidiary
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issueddebtsecurities
Issuedshare capitalDirectIndirectWuhan Chenming Qianneng Electric Power Co., Ltd.
WuhanWuhanThermal powerFor-profit corporation51%Establishment00Shandong Chenming InvestmentJinanJinanInvestmentFor-profit corporation100%Establishment00Chenming Paper Japan Co., Ltd.JapanJapanPaper product
tradingFor-profit corporation100%Establishment00Chenming International Co., Ltd.the United
Statesthe United StatesPaper product
tradingFor-profit corporation100%Establishment00Zhanjiang Chenming Arboriculture Development Co., Ltd.
ZhanjiangZhanjiangArboricultureFor-profit corporation100%Establishment00Yangjiang Chenming Arboriculture
Development Co., Ltd.
YangjiangYangjiangArboricultureFor-profit corporation100%Establishment00Nanchang Chenming Arboriculture
Development Co., Ltd.
NanchangNanchangArboricultureFor-profit corporation100%Establishment00Guangdong Huirui Investment Co., Ltd.ZhanjiangZhanjiangInvestmentFor-profit corporation100%Establishment00Jilin Chenming New-style Wall Materials Co., Ltd
JilinJilinWall materialsFor-profit corporation100%Establishment00Jilin Chenming Logistics Co., Ltd.JilinJilinLogisticsFor-profit corporation100%Establishment00Jiangxi Chenming Logistics Co., Ltd.NanchangNanchangLogisticsFor-profit corporation100%Establishment00Fuyu Chenming Paper Co., Ltd.FuyuFuyuPaper makingFor-profit corporation100%Establishment00Zhanjiang Meilun Pulp & Paper Co., Ltd.ZhanjiangZhanjiangPaper makingFor-profit corporation100%Establishment00Shanghai Chenming Financial Leasing Co., Ltd.
ShanghaiShanghaiFinancial
leasing
For-profit corporation100%Establishment00Wuhan Junheng Property Management Co. Ltd.
WuhanWuhanPropertyFor-profit corporation100%Merger and
acquisition
Guangzhou Chenming Financial Leasing
Co., Ltd.
GuangzhouGuangzhouFinancial
leasing
For-profit corporation100%Establishment00Shanghai Hongtai Real Estate Co., Ltd.ShanghaiShanghaiReal estateFor-profit corporation100%Merger and
acquisition
Shanghai Hongtai Property Management Co., Ltd.
ShanghaiShanghaiPropertyFor-profit corporation100%Merger and
acquisition
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
Name of subsidiary
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issueddebtsecurities
Issuedshare capitalDirectIndirectShandong Chenming Commercial Factoring Co., Ltd
JinanJinanBusiness
factoringFor-profit corporation100%Establishment00Guangzhou Chenming Commercial Factoring Co., Ltd.
GuangzhouGuangzhouBusiness
factoring
For-profit corporation51%Establishment00Jiangxi Chenming Tea Co., Ltd.JiangxiJiangxiTea businessFor-profit corporation100%Establishment00Zhanjiang Chenming Port Co., Ltd.ZhanjiangZhanjiangPort servicesFor-profit corporation100%Establishment00Beijing Chenming Financial Leasing Co., Ltd.
BeijingBeijingFinancial
leasing
For-profit corporation100%Establishment00Chenming Paper United States Co., Ltd.the United
States
the United
States
Paper product
trading
For-profit corporation100%Establishment00Guangdong Chenming Panels Co., Ltd.GuangdongGuangdongPanelsFor-profit corporation100%Establishment00Shanghai Chenming Pulp & Paper Sales Co., Ltd.
ShanghaiShanghaiPaper product
trading
For-profit corporation100%Establishment00Meilun (BVI) LimitedCaymanCaymanCommerceFor-profit corporation100%Establishment00Weifang Chenming Growth DriverReplacement Equity Investment Fund Partnership (Limited Partnership)
WeifangWeifangFundFor-profit corporation79%Establishment00Nanjing Chenming Culture Communication Co., Ltd.
NanjingNanjingMarketingFor-profit corporation100%Establishment00Chenming (Overseas) LimitedHong KongHong KongPaper product
trading
For-profit corporation100%Establishment00Chenming (Singapore) LimitedSingaporeSingaporePaper product
trading
For-profit corporation100%Establishment00Kunshan Tuoan Plastic Products Co., Ltd.
KunshanKunshanRubber and
plastic
For-profit corporation100%Merger and
acquisition
Hubei Changjiang Chenming HuanggangEquity Investment Fund Partnership (Limited Partnership)
HuanggangHuanggangFundFor-profit corporation59.97%Establishment00Hainan Chenming Technology Co., Ltd.HaikouHaikouWholesale
and retail
For-profit corporation100%Establishment00
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
Name of subsidiary
Principleplace ofbusiness
Place ofincorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued
debtsecurities
Issuedshare capitalDirectIndirectFoshan Chenming Import and Export Trade Co., Ltd.
FoshanFoshanTradingFor-profit corporation100%Establishment00Shanghai Herui Investment Co., Ltd.ShanghaiShanghaiBusiness
servicesFor-profit corporation100%Merger and
acquisition
Hubei Huanggang Chenming EquityInvestment Fund Management Co., Ltd.
HuanggangHuanggangCapital market
servicesFor-profit corporation60%Establishment00Shandong Dingkun Asset Management Partnership (Limited Partnership)
ShouguangShouguangBusiness servicesFor-profit corporation100%Establishment00Huanggang Chenming Paper Technology Co., Ltd.
HuanggangHuanggangPaper makingFor-profit corporation100%Establishment00Huanggang Chenming Port Co., Ltd.HuanggangHuanggangPort servicesFor-profit corporation51%Establishment00Huanggang Chenming Pulp & Fiber Trading Co., Ltd.
HuanggangHuanggangTradingFor-profit corporation100%Establishment00Weifang Chendu Equity Investment
Partnership (Limited Partnership)
ShouguangShouguangCapital market
services
For-profit corporation79.75%Establishment00Shanxi Fuyin Industrial Trading Co., Ltd.TaiyuanTaiyuanWholesale and
retail
For-profit corporation100%Acquisition00Chongmin Culture Development (Shanghai) Co., Ltd.
ShanghaiShanghaiLeasing and
businessservices
For-profit corporation100%Acquisition00Shouguang Meichen Energy Technology Co., Ltd.
ShouguangShouguangElectricityFor-profit corporation100%Establishment00
(2) Major non-wholly owned subsidiaries
Unit: RMB
Name of subsidiaryMinority interest
Gain or lossattributable tominority interestduring the period
Dividend tominority interestdeclared during
the period
Closing balanceof minority interestShouguang Chenming Art Paper Co., Ltd.25.00%2,558,964.7397,853,155.20Shouguang Meilun Paper Co., Ltd.37.5136%144,054,427.69207,029,589.032,496,523,309.62Zhanjiang Chenming Pulp & Paper Co., Ltd.17.33%3,406,584.2031,895,890.421,514,063,354.36
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMBName of subsidiary
Closing balanceOpening balanceCurrent assets
Non-current
assetsTotal assets
Currentliabilities
Non-currentliabilitiesTotal liabilitiesCurrent assets
Non-currentassetsTotal assets
Currentliabilities
Non-currentliabilitiesTotal liabilitiesShouguang Chenming Art Paper Co., Ltd.592,821,595.68455,020,296.411,047,841,892.09656,429,271.34656,429,271.34664,927,705.80499,632,230.381,164,559,936.18783,383,174.36783,383,174.36Shouguang Meilun Paper Co., Ltd.5,271,560,197.7410,517,781,981.2215,789,342,178.965,706,873,517.181,592,276,073.167,299,149,590.347,009,260,465.1110,720,374,440.3617,729,634,905.477,685,982,114.281,735,946,459.159,421,928,573.43Zhanjiang Chenming Pulp & Paper Co., Ltd.12,177,003,083.1513,209,726,474.8125,386,729,557.9614,522,121,479.881,696,026,289.0916,218,147,768.9711,650,935,934.5712,965,150,000.4124,616,085,934.9814,550,859,440.021,994,649,794.0316,545,509,234.05
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 Chenming Art Paper Co., Ltd.695,350,440.9810,235,858.9310,235,858.93140,865,909.67689,339,213.30-13,823,985.26-13,823,985.26-437,908,937.70Shouguang Meilun Paper Co., Ltd.8,877,750,999.39384,015,682.06384,015,682.061,662,815,139.808,705,143,361.05244,940,482.34244,940,482.341,502,100,611.93Zhanjiang Chenming Pulp & Paper Co., Ltd.12,333,411,837.39162,214,497.02162,810,926.891,863,903,466.3413,110,229,643.091,093,678,580.621,095,525,191.562,993,663,137.46
XII Financial Report
IX. 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 96.26% equity interest in Zhanjiang Chenming Pulp & Paper Co., Ltd. InJune 2022, Xiamen International Trade Industry Development Equity Investment Fund Partnership (LimitedPartnership) (“Xiamen International Trade“) made a unilateral capital contribution of RMB400 million toZhanjiang Chenming Pulp & Paper Co., Ltd. (“Zhanjiang Chenming”). Upon completion of the capital increase,its equity interest in Zhanjiang Chenming was 4.40%, and the transaction did not result in the loss of controlover Zhanjiang Chenming by the Company. The transaction resulted in an increase in capital reserves ofRMB29.6768 million. In July 2022, BOCOM Financial Assets Investment Co., Ltd. and Jiaohui Chenming Zhuli(Suzhou) Emerging Industry Development Fund Partnership (Limited Partnership) (“BOCOM Investment andJiaohui Chenming Fund”) made a unilateral capital contribution of RMB1,000 million to Zhanjiang Chenming.Upon completion of the capital increase, its equity interest in Zhanjiang Chenming was 9.92%, and thetransaction did not result in the loss of control over Zhanjiang Chenming by the Company. The transactionresulted in an increase in capital reserves of RMB111.4059 million.
(2) Effect of the transactions on minority interest and equity attributable to the owners of the parent company
Unit: RMBCapital contributioninto Zhanjiang
Chenming byXiamen International
Trade
Capital contributioninto ZhanjiangChenming byBOCOM Investment
and JiaohuiChenming FundAmount of capital increase400,000,000.001,000,000,000.00Share of net assets of the Company after the capital increase7,262,988,678.167,323,064,813.76Share of net assets of the Company before the capital increase7,233,311,863.477,211,658,911.37Difference29,676,814.69111,405,902.39Of which: Capital reserve adjustment29,676,814.69111,405,902.39
XII Financial Report
IX. 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 place of business
Place ofincorporationNature of business
Shareholding
Accounting methodfor investment in jointventures or associatesDirectIndirectI. Joint ventureWeifang Sime Darby West Port Co.,Ltd.WeifangWeifangPort construction50.00%Equity methodShouguang Jintou Industrial
Investment Partnership (LimitedPartnership)ShouguangShouguangInvestment49.57%Equity methodII. Associate
Ningbo Kaichen Huamei Equity
Investment Fund Partnership(Limited Partnership)NingboNingboInvestment40.00%Equity methodZhuhai Dechen New Third BoardEquity Investment Fund Company(Limited Partnership)ZhuhaiZhuhaiInvestment50.00%Equity methodGoldtrust Futures Co., Ltd.ChangshaChangshaFutures35.43%Equity methodGuangdong Nanyue Bank Co., Ltd.GuangdongGuangdongBank6.76%Equity method
XII Financial Report
IX. 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 periodWeifang Sime Darby
West Port Co., Ltd.
Weifang Sime Darby
West Port Co., Ltd.Current assets27,197,876.0621,774,345.85Of which: Cash and cash equivalents4,280,737.427,054,019.11Non-current assets489,392,605.54507,959,459.20Total assets516,590,481.60529,733,805.05Current liabilities24,865,100.4812,094,403.33Non-current liabilities357,300,969.89377,812,252.49Total liabilities382,166,070.37389,906,655.82Net assets134,424,411.23139,827,149.23Of which: Minority interestEquity interest attributable to owners of the parent company134,424,411.23139,827,149.23Share of net assets based on shareholding67,212,205.6269,913,574.62AdjustmentsOf which: Others
Unrealised gain or loss arising from intra-group transactions7,636,365.127,457,424.13Carrying amount of equity investment in joint ventures74,848,570.7377,370,998.75Revenue64,379,368.8062,902,209.91Finance expenses21,287,196.6721,543,430.57Income tax expensesNet profit-5,044,856.04-9,145,016.34Total comprehensive income-5,044,856.04-9,145,016.34Dividends received from joint ventures during the period
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(2) Key financial information of major joint ventures
(Continued)
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodShouguang JintouIndustrial InvestmentPartnership (Limited
Partnership)
Shouguang JintouIndustrial InvestmentPartnership (Limited
Partnership)Current assets1,373,114,822.27[?]Of which: Cash and cash equivalents98,300.08[?]Non-current assets992,000,000.00[?]Total assets2,365,114,822.27[?]Current liabilities1,000.00[?]Non-current liabilitiesTotal liabilities1,000.00[?]Net assets2,365,113,822.27[?]Of which: Minority interestEquity interest attributable to owners of the parent company2,365,113,822.27[?]Share of net assets based on shareholding1,172,372,731.02[?]AdjustmentsOf which: Others1,187,625,930.65[?]
Unrealised gain or loss arising from intra-group transactionsCarrying amount of equity investment in joint ventures2,359,998,661.67[?]RevenueFinance expenses2,699.92[?]Income tax expensesNet profit-2,699.92[?]Total comprehensive income-2,699.92[?]Dividends received from joint ventures during theperiod
XII Financial Report
IX. 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 periodNingbo Kaichen HuameiEquity Investment Fund
Partnership (Limited
Partnership)
Ningbo Kaichen Huamei
Equity Investment
Fund Partnership(Limited Partnership)Current assets4,330,644.904,378,938.81Non-current assets189,276,814.94189,276,706.00Total assets193,607,459.84193,655,644.81Current liabilities149,740.00Non-current liabilitiesTotal liabilities149,740.00Net assets193,457,719.84193,655,644.81Of which: Minority interestEquity interest attributable to owners of the parent company193,457,719.84193,655,644.81Share of net assets based on shareholding77,379,992.6177,459,159.43AdjustmentsOf which: Goodwill
Others119,838,326.16119,838,326.16Carrying amount of equity investment in associates197,218,318.77197,297,485.59Fair value of equity investment where publicly quoted prices existRevenueNet profit-197,924.97-3,131,226.94Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-197,924.97-3,131,226.94Dividends received from associates during theperiod
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(3) Key financial information of major associates
(Continued)
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodZhuhai Dechen New ThirdBoard Equity InvestmentFund Company (Limited
Partnership)
Zhuhai Dechen New ThirdBoard Equity InvestmentFund Company (Limited
Partnership)Current assets42,352,069.897,991,295.94Non-current assets31,213,708.0065,956,891.00Total assets73,565,777.8973,948,186.94Current liabilities5,000.005,000.00Non-current liabilitiesTotal liabilities5,000.005,000.00Net assets73,560,777.8973,943,186.94Of which: Minority interestEquity interest attributable to owners of the parent company73,560,777.8973,943,186.94Share of net assets based on shareholding36,776,710.9136,967,896.31AdjustmentsOf which: Goodwill
OthersCarrying amount of equity investment in associates36,776,710.9136,967,896.31Fair value of equity investment where publicly quoted prices existRevenueNet profit-382,409.05-857,132.26Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-382,409.05-857,132.26Dividends received from associates during the period15,000,000.00
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(3) Key financial information of major associates
(Continued)
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodGoldtrust Futures
Co., Ltd.
Goldtrust Futures
Co., Ltd.Current assets577,035,187.04537,410,385.00Non-current assets297,668,426.77248,262,317.12Total assets874,703,613.81785,672,702.12Current liabilities665,847,237.87556,373,303.71Non-current liabilities33,761,891.2734,269,041.10Total liabilities699,609,129.14590,642,344.81Net assets175,094,484.67195,030,357.31Of which: Minority interestEquity interest attributable to owners of the parent company175,094,484.67195,030,357.31Share of net assets based on shareholding62,035,975.9269,099,255.59AdjustmentsOf which: Goodwill104,073,292.25104,073,292.25
Others12,279,914.6612,279,914.66Carrying amount of equity investment in associates178,389,182.83185,452,462.50Fair value of equity investment where publicly quoted prices existRevenue47,154,604.43103,690,500.67Net profit-19,368,875.41-9,202,201.83Other comprehensive incomeTotal comprehensive income-19,368,875.41-9,202,201.83Dividends received from associates during the period
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(3) Key financial information of major associates
(Continued)
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodGuangdong Nanyue
Bank Co., Ltd.
Guangdong NanyueBank Co., Ltd.Current assets153,109,778,598.66134,934,115,453.54Non-current assets74,753,438,649.1272,204,594,882.39Total assets227,863,217,247.78207,138,710,335.93Current liabilities181,929,537,932.08164,397,178,593.78Non-current liabilities26,407,317,751.3523,586,782,719.67Total liabilities208,336,855,683.43187,983,961,313.45Net assets19,526,361,564.3519,154,749,022.48Of which: Minority interest65,058,817.6868,522,745.46Equity interest attributable to owners of the parent company19,461,302,746.6719,086,226,277.02Share of net assets based on shareholding1,314,611,000.541,289,274,585.01AdjustmentsOf which: Goodwill
Others-5,199,696.88Carrying amount of equity investment in associates1,314,611,000.541,284,074,888.13Fair value of equity investment where publicly quoted prices existRevenue2,704,071,331.523,263,061,517.88Net profit383,800,672.37367,289,477.13Other comprehensive income9,399,591.6591,344,112.09Total comprehensive income393,200,264.02458,633,589.22Dividends received from associates during the period28,000,000.00
XII Financial Report
IX. 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 investment108,688,888.4221,518,994.58Total amount of the following items based on shareholding3,546,106.10486,060.11 – Net profit3,546,106.10486,060.11 – Other comprehensive income – Total comprehensive income3,546,106.10486,060.11Associates:
Total carrying amount of investment6,482,035.697,488,250.59Total amount of the following items based on shareholding488,367.55-610,886.24 – Net profit488,367.55-610,886.24 – Other comprehensive income – Total comprehensive income488,367.55-610,886.24
X. Risk relating to financial instrumentsMain financial instruments of the Group include monetary funds, accounts receivable, accounts receivable financing, otherreceivables, non-current assets due within one year, other current assets, long-term receivables, bills payable, accountspayable, other payables, short-term borrowings, non-current liabilities due within one year, long-term borrowings, bondspayable, lease liabilities and long-term payables. Details of financial instruments refer to related notes. The risks associatedwith these financial instruments and the risk management policies adopted by the Company to mitigate these risks aredescribed below. The management of the Company manages and monitors these exposures to ensure that the above risksare 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
X. 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 30.43% (2021: 24.95%) of theCompany’s total accounts receivables. The amount of top 5 other receivable of the Company accounted for
64.05% (2021: 72.71%) of the Company
’s total other receivables.
XII Financial Report
X. 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 2022, the Company’s unused bank loan credit was RMB42,790.5456 million (31 December 2021:
RMB42,832.188 million).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 funds1,400,043.501,400,043.50Accounts receivable370,056.08370,056.08Accounts receivable financing92,496.0492,496.04Other receivables219,982.47219,982.47Long-term receivables139,749.8534,634.23174,384.08Other current assets79,590.3979,590.39Non-current assets due within one year492,071.00492,071.00Total financial assets2,654,239.48139,749.8534,634.232,828,623.56Financial liabilities:
Short-term borrowings3,638,504.833,638,504.83Bills payable312,859.58312,859.58Accounts payable411,496.68411,496.68Other payables185,450.80185,450.80Non-current assets 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 payables169,345.00 105,959.87 59,653.02 334,957.89Total financial liabilities and contingent liabilities5,035,921.63272,082.73288,546.24179,784.835,776,335.43
XII Financial Report
X. 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 funds1,411,978.291,411,978.29Accounts receivable310,581.86310,581.86Accounts receivable financing43,545.9343,545.93Other receivables278,992.06278,992.06Long-term receivables201,047.5113,929.67214,977.18Other current assets124,691.54124,691.54Non-current assets due within one year684,643.44684,643.44Total financial assets2,854,433.12201,047.5113,929.673,069,410.30Financial liabilities:
Short-term borrowings3,352,302.523,352,302.52Bills payable308,951.23308,951.23Accounts payable387,113.13387,113.13Other payables148,257.58148,257.58Non-current assets due within one year694,976.96694,976.96Bonds payable15,500.0015,500.00Long-term borrowings124,525.02217,524.54185,584.46527,634.02Long-term payables119,406.55107,518.1022,500.00249,424.65Lease liabilities472.831,942.755,277.367,692.94Total financial liabilities and contingent liabilities4,891,601.42259,904.40326,985.39213,361.825,691,853.03The 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.
XII Financial Report
X. 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 ten thousand RMB):
Item
Balance for
the year
Balance forthe prior yearFinancial instrument with fixed interest rateFinancial liabilitiesOf which: Short-term borrowings3,638,504.833,352,302.52
Long-term borrowings398,223.63527,634.02Bonds payable15,500.00Long-term borrowings due within one year192,074.82258,373.04Bonds payable due within one year35,000.00127,063.69Total4,263,803.284,280,873.27Financial instrument with float interest rateFinancial assetsOf which: Monetary funds215,596.89316,598.98Total215,596.89316,598.98
XII Financial Report
X. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(3) Market risk
(Continued)Interest rate risk(Continued)
As at 31 December 2022, 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 RMB105,720,100 (31 December 2021: RMB103,457,700).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 2022 are as follows (in RMB ten thousands):
Item
Liabilities denominated
in foreign currency
Asset denominatedin foreign currencyAs at theend of the
period
As at thebeginning ofthe period
As at the
end ofthe period
As at thebeginning of
the periodUSD130,604.70361,192.8488,289.6167,590.57EUR20,033.371,910.4114,744.913,929.49HKD4,055.52100.7169.89KRW7.04JPY768.90812.91GBP1.37Total150,638.07367,158.77103,905.5072,409.90The 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.
XII Financial Report
X. 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 ten thousands):
Increase (decrease) in after-tax profitsBalance for the periodBalance for the prior periodIncrease in exchange rate of USD5%-2,115.755%-14,680.11Decrease in exchange rate of USD-5%2,115.75-5%14,680.11Increase in exchange rate of Euro5%-264.425%100.95Decrease in exchange rate of Euro-5%264.42-5%-100.95Other 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 -32.63% (last year: -42.52%) in equitysecurities investment prices on the Company’s current profit and loss and other comprehensive income is asfollows (unit: RMB ten thousand):
Item
Increase (decrease) in
after-tax profits
Increase (decrease) in othercomprehensive incomeBalance for
the period
Balance for
the 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-3,617.77-8,202.16
XII Financial Report
X. 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 2022, the Company’s gearing ratio is 71.85% (31 December 2021: 72.76%).XI. 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 threehierarchies as set out above:
Unit: RMBFair value measurements categorised intoItemLevel 1Level 2Level 3TotalI. Continuous measurement of fair value
(i) Financial assets held for trading74,708,444.8874,708,444.88
1. Debt instruments investments
2. Equity instrument investments74,708,444.8874,708,444.88(ii) Accounts receivable financing924,960,384.16924,960,384.16(iii) Other non-current financial assets786,750,761.62786,750,761.62(iv) Biological assets1,496,607,818.841,496,607,818.84
1. Consumable biological assets1,496,607,818.841,496,607,818.84Total assets continuously measured at fair value74,708,444.883,208,318,964.623,283,027,409.50
XII Financial Report
XI. Fair value disclosure(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.77,860,000.00Cost methodConsumable biological assets:
Forestry1,496,607,818.84Replacement cost
method
Cost per mu for the first year of EucalyptusCost per mu for the first year of Pines
854.36(RMB/tonne)
627.52(RMB/tonne)
Roll back method of market price
Unit price per tonne of Eucalyptus woodUnit price per tonne of wet pineUnit price per tonne of fir wood
575.00(RMB/tonne)
585.00(RMB/tonne)
695.00(RMB/tonne)
XII. 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 theparent companyin the CompanyChenming Holdings Co., Ltd.ShouguangInvestment in manufacture of paper, electricity,
steam, and arboriculture
1,238,787,70027.57%27.57%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.
XII Financial Report
XII. 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 Sime Darby West Port 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 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 CompanyAnhui Time Source CorporationOther investee 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
XII. 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 Sime Darby West Port Co., Ltd.
Port miscellaneousexpenses63,328,942.04100,000,000.00No64,351,915.96Table on sales of goods/providing of services
Unit: RMBRelated party
Details of related partytransaction
Amount for
the period
Amount forthe prior periodShouguang Chenming HuisenNew-style Construction Materials Co., Ltd.Sales of electricity and steam18,254,341.509,729,537.52Shouguang Huixin ConstructionMaterials Co., Ltd.Sales of cement, coal, oil, etc.190,846.212,686,019.84Related party transactions regarding purchase and sale of goods and provision and receipt of services.
(2) Related party leaasing
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 ManagementCo., Ltd.Housing769,053.72297,247.72Lide Technology Co., Ltd.Housing1,795,618.081,239,653.23Shouguang Chenming Huisen New-style
Construction Materials Co., Ltd.Land220,183.49220,183.49Shouguang Huixin Construction
Materials Co., Ltd.Land123,853.21135,000.00
XII Financial Report
XII. 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 completedChenming (HK) Limited28,181,785.952022-9-262023-3-17NoChenming (HK) Limited28,722,558.442022-9-262023-3-17NoChenming (HK) Limited25,525,790.822022-9-262023-3-17NoChenming (HK) Limited11,960,788.562022-9-262023-3-17NoChenming (HK) Limited10,479,767.452022-9-282023-3-17NoChenming (HK) Limited15,123,876.512022-9-292023-3-17NoChenming (HK) Limited7,644,387.862022-9-292023-3-17NoChenming (HK) Limited26,514,474.712022-10-102023-3-17NoChenming (HK) Limited19,961,569.692022-10-142023-3-17NoChenming (HK) Limited63,935,028.002022-3-172023-3-7NoHainan Chenming Technology Co., Ltd.50,000,000.002022-5-162023-5-16NoHainan Chenming Technology Co., Ltd.30,000,000.002022-9-202023-9-20NoHuanggang Chenming Pulp & Paper Co., Ltd.90,000,000.002022-5-192023-5-18NoHuanggang Chenming Pulp & Paper Co., Ltd.20,000,000.002022-4-222023-4-21NoHuanggang Chenming Pulp & Paper Co., Ltd.30,000,000.002022-7-272023-7-26NoHuanggang Chenming Pulp & Paper Co., Ltd.45,000,000.002022-8-192023-8-18NoHuanggang Chenming Pulp & Paper Co., Ltd.200,000,000.002022-8-242023-8-23NoHuanggang Chenming Pulp & Paper Co., Ltd.200,000,000.002022-12-232023-12-22NoHuanggang Chenming Pulp & Paper Co., Ltd.20,000,000.002022-8-172023-8-17NoHuanggang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-9-272023-9-26NoHuanggang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-10-132023-10-13NoJilin Chenming Paper Co., Ltd.98,580,000.002022-11-142023-5-10NoJilin Chenming Paper Co., Ltd.18,000,000.002022-5-232023-5-8NoJiangxi Chenming Paper Co., Ltd.2,000,000.002022-1-192023-1-18NoJiangxi Chenming Paper Co., Ltd.28,000,000.002022-2-142023-1-18NoJiangxi Chenming Paper Co., Ltd.150,000,000.002022-2-222023-2-21NoJiangxi Chenming Paper Co., Ltd.94,450,000.002022-3-162023-3-15NoJiangxi Chenming Paper Co., Ltd.99,000,000.002022-3-192023-3-18NoJiangxi Chenming Paper Co., Ltd.10,000,000.002022-3-312023-3-31NoJiangxi Chenming Paper Co., Ltd.70,000,000.002022-4-252023-4-24NoJiangxi Chenming Paper Co., Ltd.49,000,000.002022-4-252023-4-24NoJiangxi Chenming Paper Co., Ltd.270,000,000.002022-5-192023-5-17No
XII Financial Report
Party being guaranteed
Amount underguarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedJiangxi Chenming Paper Co., Ltd.73,000,000.002022-5-272023-5-26NoJiangxi Chenming Paper Co., Ltd.80,000,000.002022-6-172023-6-16NoJiangxi Chenming Paper Co., Ltd.10,000,000.002022-6-142023-6-12NoJiangxi Chenming Paper Co., Ltd.20,000,000.002022-6-212023-6-16NoJiangxi Chenming Paper Co., Ltd.28,317,695.392022-6-242023-6-20NoJiangxi Chenming Paper Co., Ltd.250,000,000.002022-6-272023-6-24NoJiangxi Chenming Paper Co., Ltd.100,000,000.002022-6-302023-6-30NoJiangxi Chenming Paper Co., Ltd.300,000,000.002022-7-12023-6-19NoJiangxi Chenming Paper Co., Ltd.1,682,304.612022-8-92023-6-20NoJiangxi Chenming Paper Co., Ltd.10,000,000.002022-8-102023-8-7NoJiangxi Chenming Paper Co., Ltd.10,000,000.002022-8-292023-8-28NoJiangxi Chenming Paper Co., Ltd.10,000,000.002022-8-302023-8-28NoJiangxi Chenming Paper Co., Ltd.12,100,000.002022-9-292023-3-28NoJiangxi Chenming Paper Co., Ltd.10,000,000.002022-9-92023-9-4NoJiangxi Chenming Paper Co., Ltd.20,893,800.002022-7-182023-1-18NoJiangxi Chenming Paper Co., Ltd.15,400,000.002022-12-202023-6-18NoJiangxi Chenming Paper Co., Ltd.20,000,000.002022-12-292023-6-28NoJiangxi Chenming Paper Co., Ltd.1,500,000.002022-12-292023-6-28NoShandong Chenming Paper Sales Co., Ltd.459,968,037.612022-4-72023-4-3NoShandong Chenming Paper Sales Co., Ltd.290,687,996.312022-8-162023-2-13NoShandong Chenming Paper Sales Co., Ltd.150,000,000.002022-8-192023-8-22NoShandong Chenming Paper Sales Co., Ltd.100,000,000.002022-9-162023-9-19NoShandong Chenming Paper Sales Co., Ltd.80,000,000.002022-9-162023-9-19NoShandong Chenming Paper Sales Co., Ltd.165,854,444.582022-10-92023-10-8NoShandong Chenming Paper Sales Co., Ltd.379,780,113.162022-10-92023-10-8NoShandong Chenming Paper Sales Co., Ltd.160,000,000.002022-12-232023-12-18NoShandong Chenming Paper Sales Co., Ltd.260,000,000.002022-12-232023-12-18NoShanghai Chenming Pulp & Paper Sales Co., Ltd.10,000,000.002022-5-312023-5-31NoShanghai Chenming Pulp & Paper Sales Co., Ltd.80,000,000.002022-6-12023-5-22NoShanghai Chenming Pulp & Paper Sales Co., Ltd.10,000,000.002022-6-22023-5-22NoShanghai Chenming Pulp & Paper Sales Co., Ltd.30,000,000.002022-7-272023-1-27NoShanghai Chenming Pulp & Paper Sales Co., Ltd.5,000,000.002022-10-262023-10-25NoShouguang Chenming Import and Export Trade Co., Ltd.100,000,000.002022-1-142023-1-13NoShouguang Meilun Paper Co., Ltd.49,000,000.002022-4-302023-4-18NoShouguang Meilun Paper Co., Ltd.79,759,923.642022-7-62023-7-3NoShouguang Meilun Paper Co., Ltd.197,973,928.222022-7-82023-1-4NoShouguang Meilun Paper Co., Ltd.72,196,664.052022-7-212023-1-17No
XII. 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 completedShouguang Meilun Paper Co., Ltd.44,000,000.002022-7-312023-7-30NoShouguang Meilun Paper Co., Ltd.285,000,000.002022-7-222023-1-18NoShouguang Meilun Paper Co., Ltd.125,627,758.082022-7-272023-1-28NoShouguang Meilun Paper Co., Ltd.100,164,057.082022-7-292023-7-24NoShouguang Meilun Paper Co., Ltd.162,657,651.112022-12-162023-6-16NoShouguang Meilun Paper Co., Ltd.131,457,656.702022-12-82023-6-7NoShouguang Meilun Paper Co., Ltd.20,000,000.002022-8-312023-8-31NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,000,000.002022-1-132023-1-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.63,000,000.002022-1-202023-1-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.125,000,000.002022-1-212023-1-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.5,000,000.002022-1-272023-1-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002022-1-302023-1-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002022-2-152023-2-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.70,000,000.002022-2-222023-2-21NoZhanjiang Chenming Pulp & Paper Co., Ltd.20,000,000.002022-3-32023-3-2NoZhanjiang Chenming Pulp & Paper Co., Ltd.30,040,000.002022-3-222023-3-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-3-162023-3-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-3-72023-3-2NoZhanjiang Chenming Pulp & Paper Co., Ltd.20,000,000.002022-4-212023-4-11NoZhanjiang Chenming Pulp & Paper Co., Ltd.43,000,000.002022-4-272023-4-21NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-5-72023-4-28NoZhanjiang Chenming Pulp & Paper Co., Ltd.26,000,000.002022-5-132023-5-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.167,000,000.002022-5-122023-5-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.70,000,000.002022-6-242023-6-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.48,500,000.002022-6-282023-6-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-7-222023-7-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.81,200,000.002022-7-262023-6-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.65,000,000.002022-7-212023-7-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002022-8-92023-8-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002022-8-122023-8-11NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-8-192023-2-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002022-8-122023-2-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002022-8-172023-8-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.67,000,000.002022-8-182023-8-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.59,000,000.002022-8-192023-8-18NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-9-142023-9-13No
XII. 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.45,000,000.002022-9-222023-3-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002022-10-92023-10-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.47,000,000.002022-10-252024-10-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.60,000,000.002022-10-182023-10-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.30,000,000.002022-11-72023-11-6NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002022-11-102023-5-9NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-11-162023-11-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,000,000.002022-11-182023-5-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-11-292023-11-28NoZhanjiang Chenming Pulp & Paper Co., Ltd.230,000,000.002022-12-92023-6-7NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002022-12-62023-6-3NoZhanjiang Chenming Pulp & Paper Co., Ltd.41,500,000.002022-12-142023-6-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.67,000,000.002022-12-222023-6-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,200,000.002022-12-222023-6-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.47,382,000.002022-12-212023-12-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,002,452.972022-10-122023-3-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.12,035,031.472022-11-302023-2-28NoZhanjiang Chenming Pulp & Paper Co., Ltd.78,000,000.002020-10-162023-10-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.113,000,000.002020-11-112023-11-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.98,000,000.002020-12-102023-12-9NoZhanjiang Chenming Pulp & Paper Co., Ltd.99,000,000.002021-1-52024-1-4NoZhanjiang Chenming Pulp & Paper Co., Ltd.140,000,000.002021-12-232023-12-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.95,000,000.002022-6-172025-6-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.95,000,000.002022-6-172025-6-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.95,000,000.002022-5-312024-5-30NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002022-1-262023-12-22NoShouguang Meilun Paper Co., Ltd.304,000,000.002020-12-42023-10-30NoWuhan Chenming Hanyang Paper Holdings Co., Ltd6,000,000.002020-12-42023-10-30NoHuanggang Chenming Pulp & Paper Co., Ltd.200,000,000.002020-12-42023-10-30NoWeifang Sime Darby West Port Co., Ltd.114,800,000.002017-12-202027-12-20NoTotal11,221,761,542.97
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party guarantee
(Continued)
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(4) Related party lending and borrowing
Unit: RMBRelated partyBorrowing amount
Commencement dateExpiry dateDescriptionBorrowingChenming Holdings Co., Ltd.235,000,000.002022-1-12022-12-31Controlling
shareholderGuangdong Nanyue Bank Co., Ltd.1,909,100,000.002022-1-12022-12-31Associate
(5) Remuneration of key management staff
The Company has 24 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 staff2,752.063,051.59
(6) Other related party transactions
Distribution band of remuneration of key management staff
Band of annual remuneration
Amount during
the year(RMB’0,000)
Amount duringthe prior year(RMB’0,000)Total2,752.063,051.59Of which: (number of staff in each band of amount)RMB4.80-5.20 million12RMB4.00-4.80 millionRMB3.60-4.00 millionRMB3.20-3.60 million11RMB2.80-3.20 million2RMB2.40-2.80 million1RMB2.00-2.40 million11RMB1.60-2.00 million52RMB1.20-1.60 million1RMB0.80-1.20 million3Below RMB0.80 million1413
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(6) Other related party transactions
(Continued) Breakdown of remuneration of key management staff
Key management staffFees
Amount during the year (RMB’0,000)
Total(RMB’0,000)Salaries,allowancesand benefitsBonuses
Social welfare contribution
Housing
fundSocialinsurance
Of which:
PensioninsuranceYin Meiqun20.0020.00Yang Biao20.0020.00Sun Jianfei20.0020.00Li Zhihui10.0010.00Subtotal of independent non-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 Management members904.9339.6124.889.80954.34Total2,644.1784.8553.0423.042,752.06
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(6) Other related party transactions
(Continued)Breakdown of remuneration of key management staff(Continued)
Key management staffFees
Amount during the prior year (RMB’0,000)
Total(RMB’0,000)Salaries,allowances and benefitsBonuses
Social insurance
Housing fundSocialinsurance
Of which:
PensioninsuranceYin Meiqun20.0020.00Yang Biao20.0020.00Sun Jianfei20.0020.00Subtotal of independent non-executive Directors60.0060.00Li Chuanxuan20.0020.00Han Tingde20.0020.00Subtotal of non-executive Directors40.0040.00Chen Hongguo491.925.663.571.42499.00Hu Changqing340.987.064.471.96350.00Li Xingchun480.00480.00Li Feng288.905.663.571.42295.98Subtotal of executive Directors1,601.8018.3811.614.801,624.98Li Kang93.425.733.601.42100.57Pan Ailing10.0010.00Zhang Hong10.0010.00Qiu Lanju53.255.763.600.9759.98Sang Ailing20.713.532.240.6324.87Li Xinggui2.430.760.480.223.41Total of Supervisors189.8115.789.923.24208.83Subtotal of other Senior
Management members1,071.2538.3224.468.211,117.78Total2,962.8672.4845.9916.253,051.59
Note: Social welfare contribution includes basic pension insurance, medical insurance, work-related injury insurance, maternity
insurance, and unemployment insurance.
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(6) Other related party transactions
(Continued) The 5 highest paid individuals of the Company during the year comprised of 5 Directors.
A. Remuneration of the five highest paid individualsItem
Amounts during
the period(RMB’0,000)
Amounts duringthe prior year(RMB’0,000)Salaries, allowances and benefits1,477.181,904.07Housing provident fund9.335.48Social welfare contribution29.2025.93 Of which: Pension insurance18.1116.37Total1,515.711,935.48B. Distribution band of remuneration of the five highest paid individualsBand of annual remuneration
Number of individuals
during the year
Number of individuals
during the prior yearRMB4.80-5.20 million12RMB3.20-3.60 million11RMB2.80-3.20 million2RMB2.40-2.80 million1RMB2.00-2.40 million1RMB1.60-2.00 million1RMB1.20-1.60 millionFor the financial year ended 31 December 2022, no other bonuses, which are discretionary or are basedon 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
XII. 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 Newstyle
Construction Materials Co., Ltd.
1,856,833.501,392.06Accounts receivableShouguang Meite Environmental
Technology Co., Ltd.
6,782,462.481,774,117.95Accounts receivableJiangxi Chenming Port Co., Ltd.109,385.42–Other receivablesWeifang Sime Darby West Port Co., Ltd.71,722,249.853,755,227.1580,667,961.327,423,984.26Other receivablesShouguang Meite Environmental
Technology Co., Ltd.
18,291,242.681,779,523.2022,740,159.3221,348.76Other receivablesXuchang Chenming Paper Co., Ltd.327,400.006,791.28Payments in advanceShouguang Meite Environmental
Technology Co., Ltd.
6,370,726.99
(2) Accounts payable
Unit: RMBItemRelated partyClosing balanceOpening balanceAccounts payableWeifang Sime Darby West Port Co., Ltd.19,479,518.827,609,782.51Accounts payableWeifang Xingxing United Chemical
Co., Ltd.
26,905,494.3426,905,494.34Other payablesWeifang Xingxing United Chemical
Co., Ltd.
16,860,000.0016,860,000.00Other payablesLide Technology Co., Ltd.508,619.46508,619.46Other payablesChenming (Qingdao) Asset Management
Co., Ltd.
116,656.55115,633.42Contract liabilitiesAnhui Time Source Corporation1,570.10Contract liabilitiesShouguang Huixin Construction
Materials Co., Ltd.
20,000.00Payments in advanceChenming (Qingdao) Asset Management
Co., Ltd.
2,000.0049,539.63
XII Financial Report
XII. 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.10,069,515.5142,791.18Other monetary fundsGuangdong Nanyue Bank Co., Ltd.927,400,000.001,219,300,000.00
(4) Loans from related parties
Unit: RMBItemRelated partyClosing balanceOpening balanceShort-term borrowingsGuangdong Nanyue Bank Co., Ltd.1,909,100,000.002,201,000,000.00
XII Financial Report
XIII. Share-based payment
1. General information of share-based payment
√ Applicable Not applicable
Unit: RMBTotal equity instruments of the Company granted during the period0Total exercised equity instruments of the Company during the period0Total invalid equity instruments of the Company during the period24,176,200.00Range of exercise prices and contractual remaining period for share options issued by the Company at the end of the period
See explanationfor detailsRange of exercise prices and remaining contractual maturity of other equity instruments issued by the Company at the end of the periodOther explanation:
Other explanation: On 29 May 2020, the Resolution on the Matters Relating to Adjustments to the 2020 RestrictedA Share Incentive Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to theParticipants were considered and approved at the tenth extraordinary meeting of ninth session of the Board and thefifth extraordinary meeting of the ninth session of the Supervisory Committee of the Company, by which 79.60 millionrestricted shares were granted. The grant date was 29 May 2020, and the fair value of the restricted shares was theex-rights price of the shares on the grant date. The Restricted Shares to be granted under the Incentive Scheme were“granted once and unlocked in batches”. For the period commencing from the first trading day after expiry of the24-month period from the date on which the registration of the grant of the Restricted Shares is completed and endingon the last trading day of the 36-month period from the date on which the registration of the grant of the RestrictedShares is completed, 40% of the Restricted Shares will be unlocked; for the period commencing from the first tradingday after expiry of the 36-month period from the date on which the registration of the grant of the Restricted Sharesis completed and ending on the last trading day of the 48-month period from the date on which the registrationof the grant of the Restricted Shares is completed, 30% of the Restricted Shares will be unlocked; for the periodcommencing from the first trading day after expiry of the 48-month period from the date on which the registrationof the grant of the Restricted Shares is completed and ending on the last trading day of the 60-month period fromthe date on which the registration of the grant of the Restricted Shares is completed, 30% of the Restricted Shareswill be unlocked. Meanwhile, during the three accounting years from 2021 to 2023, the Restricted Shares grantedunder the Incentive Scheme shall be subject to annual performance appraisal for unlocking (for details of specificperformance evaluation conditions, please refer to the announcement of the Company). The Company estimated thatthe performance indicators for 2022 cannot be fulfilled, and the corresponding second batch of the 30% RestrictedShares cannot be unlocked. In addition, 27,006,200 shares lapsed due to the resignation of some Senior Managementmembers. 4,460,000 shares were actually repurchased and completed for cancellation during the period.
XII Financial Report
XIII. Share-based payment(Continued)
2. Equity-settled share-based payment
√ Applicable Not applicable
Unit: RMBThe method of determining the fair value of equity instrument on the grant dateEx-right price of
grant of shareBasis for determining the quantity of exercisable equity instrumentsSee explanation
for detailsReasons for significant difference between the current estimate and previous estimateNoneAccumulated amount of equity-settled share-based payment included in the capital reserve86,165,601.92Total amount of equity-settled share-based payment recognised in the current period1,121,804.80Other explanation: At each balance sheet date during the vesting period, the Company, based on the latestinformation such as the latest update on the change in the number of entitled employees, will make best estimatesto adjust the expected number of equity instruments that can be vested. As at the exercise date, the final estimatednumber of exercisable equity instruments should equal the actual number of exercisable equity instruments.XIV. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
Unit: RMBCapital commitments contracted for but not yet necessaryto be recognised on the balance sheetClosing balanceOpening balanceCommitments in relation to acquisition and construction of long-term assets184,833,000.27181,254,971.61
XII Financial Report
XIV. Undertaking and contingency(Continued)
2. Other commitments
In 2022, the Company entered into a restructuring agreement with Chongqing International Trust Inc. (“ChongqingTrust”), Dongxing Securities Investment Co., Ltd. (“Dongxing Investment”) and Chenming (Qingdao) AssetManagement Co. Ltd. (“Chenming Asset Management”) for the issuance of shares and payment of cash for theacquisition of assets. Pursuant to the relevant agreement, the Company intended to acquire 1.19% equity interest inShouguang Meilun Paper Co., Ltd. held by Dongxing Investment and 44.44% limited partnership interest and 0.22%general partnership interest in Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership(Limited Partnership) (“Chenrong Fund“) by means of issuance of shares and payment of cash. For the details of thetransaction price, the issuance size and the lock-up period arrangement for the issue of shares, please refer to theCompany’s disclosure on CNINFO on 28 February 2023.Whether the transaction can obtain approval or authorisation from the Shenzhen Stock Exchange or the CSRC isuncertain. There is also uncertainty as to the time when the final approval or authorisation will be obtained.
3. Contingency
As at 31 December 2022, the Company had no contingent items such as outstanding litigation and externalguarantees that should be disclosed.XV. Post-balance sheet event
As of 30 March 2023, the Company has no undisclosed event that should be disclosed after the balance sheet date.XVI. Other material matters
1. 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
XVI. Other material matters(Continued)
1. Segment information
(Continued)
(2) Financial Information of Reporting Segment
Unit: RMB’0,000Current period or end of current period
Machine-made
paper
Financialservices
Hotels andproperty rentalsOthersOffsetTotalRevenue3,106,090.2151,373.7540,770.86107,842.57105,640.663,200,436.73Of which: Revenue from external transactions3,083,189.8220,937.8125,278.6671,030.443,200,436.73Revenue from inter-segment transactions22,900.3930,435.9415,492.2036,812.13105,640.66Of which: Revenue from principal activities3,035,133.5051,081.2939,294.23104,059.9087,057.233,142,511.69Operating costs2,651,930.402,412.7624,576.7598,165.9839,713.322,737,372.57Of which: Costs of principal activities2,614,167.202,412.7624,357.8892,829.9445,873.422,687,894.36Operating expenses33,086.20202.782,078.13737.8111,886.7924,218.13Of which: Wages11,195.94108.40501.10280.0812,085.52Depreciation expenses276.222.11372.691.44652.46Office expenses245.750.010.800.03246.59Travel expenses2,073.9629.352.2445.912,151.46Selling commissions518.62571.9366.591,157.14Rental expenses596.328.50604.82Hospitality expenses5,390.9062.924.5572.885,531.25Warehouse expenses11.0755.8966.96Others12,777.43624.81206.5011,886.791,721.94Operating profit/(loss)18,503.0117,705.95-5,076.03-845.5414,665.5215,621.87Total assets9,338,157.451,983,640.56769,184.87991,804.794,652,685.938,430,101.74Total liabilities6,828,271.88649,202.13371,242.44344,249.222,135,689.316,057,276.36Total cost of construction in progress incurred for the current period77,372.5849.9677,422.54Fixed assets purchased15,050.779.6717.30358.9915,436.74Intangible assets purchased30,700.4957.8130,758.30
XII Financial Report
XVI. Other material matters(Continued)
1. Segment information
(Continued)
(2) Financial Information of Reporting Segment
(Continued)
Unit: RMB’0,000Prior period or end of prior period
Machine-madepaper
Financialservices
Hotels andproperty rentalsOthersOffsetTotalRevenue3,174,975.0065,440.3940,526.16133,313.93112,274.253,301,981.23Of which: Revenue from external transactions3,168,198.6535,210.2216,635.5581,936.810.003,301,981.23Revenue from inter-segment transactions6,776.3530,230.1823,890.6051,377.12112,274.250.00Of which: Revenue from principal activities3,084,442.2265,195.1123,111.51127,829.53107,220.053,193,358.32Operating costs2,566,477.1424,602.3412,939.43123,637.48205,428.812,522,227.58Of which: Costs of principal activities2,414,343.7424,602.347,362.71118,084.03118,386.092,446,006.73Operating expenses49,085.83339.022,345.00903.4023,322.2829,350.97Of which: Wages12,743.31 163.80 670.56 483.7814,061.46Depreciation expenses745.654.64369.2910.341,129.94Office expenses231.420.090.47-0.11231.88Travel expenses2,021.4243.322.5453.102,120.38Selling commissions440.61708.471,149.07Rental expenses808.4585.66894.10Hospitality expenses5,673.35106.6413.92132.025,925.93Warehouse expenses44.5711.0255.59Others26,377.05 20.52 579.74 127.59 23,322.283,782.62Operating profit/(loss)330,978.2111,821.37468.23-8,164.59106,957.32228,145.90Total assets9,072,803.272,039,544.30794,932.41969,230.154,589,543.968,286,966.17Total liabilities6,622,082.54791,449.37411,845.72297,958.832,093,873.916,029,462.55Total cost of construction in progress incurred for the current period10,567.1310,567.13Fixed assets purchased21,099.63102.64164.84443.5421,810.65Intangible assets purchased40.092.9143.00
XII Financial Report
XVI. Other material matters(Continued)
2. Government grants
(1) Government subsidies included in deferred income will be subsequently measured using the gross method
Unit: RMB
Item of subsidiesType
Openingbalance
New subsidy
amount forthe period
Amounttransferred toprofit or lossfor the period
Othermovements
Closingbalance
Presentableitemstransferred toprofit or lossfor the period
Asset-related/income-relatedProject Funding for NationalKey Technology Research and Development Program
Financial appropriation
1,123,125.00164,700.00958,425.00Other incomeAsset-related
government grantsInfrastructure andenvironmental protectionengineering transformation project
Financial appropriation
220,099,227.0811,778,260.39208,320,966.69Other incomeAsset-related
government grantsHuanggang pulp-forestry-paper project
Financial appropriation
496,020,740.8525,026,217.80470,994,523.05Other incomeAsset-related
government grantsZhanjiang forestry-pulp-paper project
Financial appropriation
50,806,597.194,094,632.9246,711,964.27Other incomeAsset-related
government grantsFinancial subsidies for technical transformation project
Financial appropriation
144,150,333.3611,535,807.72132,614,525.64Other incomeAsset-related
government grantsFunding for environmental protection
Financial appropriation
627,047,425.6850,592,141.88576,455,283.80Other incomeAsset-related
government grantsOthersFinancial
appropriation
34,434,235.091,259,455.0833,174,780.01Other incomeAsset-related
government grantsTotal1,573,681,684.25104,451,215.791,469,230,468.46
XII Financial Report
XVI.Other material matters(Continued)
2.Government grants
(Continued)
(2)Government subsidies calculated into the current profit and loss using the total method
Unit: RMBSubsidy ItemType
Amount creditedto profit or lossfor the prior period
Amount creditedto profit or lossfor the period
Presentable itemsincluded inprofit or loss
Asset-related/income-relatedFinancial appropriation40,640,000.0073,730,000.00Non-operating incomeIncome-relatedFinancial appropriation33,657,897.2066,394,161.00Other incomeIncome-relatedFinancial appropriation38,603,317.7252,395,702.39Other incomeAsset-related and
revenue relatedFinancial appropriation50,794,311.5250,592,141.88Other incomeAsset-related and
revenue relatedFinancial appropriation24,200,216.2425,026,217.80Other incomeAsset-relatedFinancial appropriation12,835,606.2211,778,260.39Other incomeAsset-relatedFinancial appropriation4,094,632.924,094,632.92Other incomeAsset-related
768,780.568,346,328.57Other incomeIncome-relatedFinancial appropriation6,821,907.004,704,600.00Other incomeIncome-relatedFinancial appropriation8,149,743.764,052,553.33Other incomeIncome-relatedFinancial appropriation1,626,174.633,012,954.63Other incomeIncome-relatedFinancial appropriation1,404,769.002,695,823.49Other incomeIncome-relatedFinancial appropriation2,125,800.00Other incomeIncome-relatedFinancial appropriation1,000,000.00Other incomeIncome-relatedFinancial appropriation2,476,800.00500,000.00Other incomeIncome-relatedFinancial appropriation164,700.00164,700.00Other incomeAsset-relatedFinancial appropriation345,163.82116,915.50Other incomeIncome-relatedFinancial appropriation576,300.00Other incomeIncome-relatedFinancial appropriation22,921,843.36Other incomeIncome-relatedFinancial appropriation660,000.00Other incomeIncome-relatedFinancial appropriation200,000.00Non-operating incomeIncome-related
Special subsidy from the Bureau of FinanceEnterprise reform and development subsidiesFinancial subsidies for technical transformation projectFunding for environmental protectionHuanggang pulp-forestry-paper projectSewage treatment and water conservation transformation projectZhanjiang forestry-pulp-paper projectImmediate VAT refundFinancial appropriationGovernment awardsRefund of taxEmployment stabilisation subsidyAfforestation subsidyOne-time job retention subsidiesSubsidies for foreign trade projectsR&D subsidyProject Funding for National Key TechnologyResearch and Development ProgramSubsidies for social insuranceFinancing subsidyInvestment promotion subsidyLeading talent subsidyeconomic environment subsidyOthersFinancial appropriation12,144,833.644,203,523.72Other income and
non-operating income
Asset-related and
revenue relatedTotal263,086,997.59314,934,315.62
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements
1. Bills receivable
Unit: RMBClosing balanceOpening balanceTypeBook balanceBad debt provisionCarrying valueBook balanceBad debt provisionCarrying valueBank acceptance bills3,343,052,426.803,343,052,426.803,091,000,000.003,091,000,000.00Commercial acceptance bills139,770,000.00139,770,000.00534,270,000.00534,270,000.00Total3,482,822,426.803,482,822,426.803,625,270,000.003,625,270,000.00
(1) Bills receivable pledged by the Company as at the end of the period
Unit: RMBType
Amount pledgedas at the endof the periodBank acceptance bills8,497,931.30Total
(2) Bills receivable endorsed or discounted but not yet due as at the end of the period
Unit: RMB
Type
Amountderecognisedas at the end ofthe period
Amountnot yetderecognisedas at the end of
the periodBank acceptance bills5,474,558,821.063,176,190,000.00Commercial acceptance bills139,770,000.00Total5,474,558,821.063,315,960,000.00
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements
2. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Type
Closing balanceOpening balanceBook balanceBad debt provision
Carrying value
Book balanceBad debt provision
Carrying valueAmountPercentageAmountProvisionproportionAmountPercentageAmount
ProvisionproportionAccounts receivableassessed individually forbad debt provisionAccounts receivable
assessed collectively forbad debt provision139,392,924.13100.00%4,637,396.403.33%134,755,527.73146,213,282.74100.00%4,612,037.233.15%141,601,245.51Of which:
Accounts receivable fromrelated party customers101,246,295.7472.63%101,246,295.74126,108,166.7586.25%126,108,166.75Accounts receivable
from non-related partycustomers38,146,628.3927.37%4,637,396.4012.16%33,509,231.9920,105,115.9913.75%4,612,037.2322.94%15,493,078.76Total139,392,924.13100.00%4,637,396.403.33%134,755,527.73146,213,282.74100.00%4,612,037.233.15%141,601,245.51Accounts receivable assessed collectively for bad debt provision: Accounts receivable from related partycustomers
Unit: RMBAgeing
Closing balanceBook balanceBad debt provisionProvision proportionWithin 1 year101,246,295.741 to 2 yearsTotal101,246,295.74
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial StatementsContinued
2. Accounts receivable
Continued
(1) Disclosure of accounts receivable by category
ContinuedAccounts receivable assessed collectively for bad debt provision: Accounts receivable from non-related partycustomers
Unit: RMBAgeing
Closing balanceBook balanceBad debt provisionProvision proportionWithin 1 year35,143,807.221,634,575.234.65%1 to 2 years2 to 3 yearsOver 3 years3,002,821.173,002,821.17100.00%Total38,146,628.394,637,396.4012.16%If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, pleasedisclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year (including 1 year)136,390,102.96143,210,461.571 to 2 years2 to 3 yearsOver 3 years3,002,821.173,002,821.17Total139,392,924.13146,213,282.74
(2) 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 provision4,612,037.2325,359.174,637,396.40Total4,612,037.2325,359.174,637,396.40
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
2. Accounts receivable
Continued
(3) Top five account receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for theperiod was RMB139,312,702.96, which accounted for 99.95% of the closing balance of the total accountsreceivable. The closing balance of corresponding bad debt provision amounted to RMB4,557,175.23.
Unit: RMBName
Closing balance ofaccounts receivable
As a percentage of theclosing balance ofaccounts receivable
Closing balance ofbad debt provisionCustomer 187,524,781.9362.79%Customer 233,643,807.2224.14%134,575.23Customer 38,721,513.816.26%Customer 45,000,000.003.59%Customer 54,422,600.003.17%4,422,600.00Total139,312,702.9699.95%4,557,175.23
3. Other receivables
Unit: RMBItemClosing balanceOpening balanceInterest receivableDividend receivable126,325,018.50Other receivables9,337,019,470.138,773,854,244.04Total9,337,019,470.138,900,179,262.54
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMBItem (or investee)Closing balanceOpening balanceJiangxi Chenming Paper Co., Ltd.72,896,218.50Zhanjiang Chenming Pulp & Paper Co., Ltd.53,428,800.00Total126,325,018.50
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables
(Continued)
(2) Other receivables
1) Classification of other receivables by nature
Unit: RMBNatureClosing book balanceOpening book balanceOpen credit9,391,199,670.388,849,264,265.13Guarantee deposit and deposit850,000.00240,000.00Reserve and borrowings15,112,113.606,103,279.46Others13,027,863.1611,961,652.43Total9,420,189,647.148,867,569,197.02
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMBCategoryBook balance
ECL rate (%)for the next12 months
Bad debtprovisionCarrying amountReasonBad debt provision assessed
collectively9,371,228,215.860.37%34,208,745.739,337,019,470.13Amount due from government
agencies16,006,345.4799.18%15,875,454.32130,891.15Amount due from related parties9,299,308,929.520.04%3,755,227.159,295,553,702.37Other receivables55,912,940.8726.07%14,578,064.2641,334,876.61Total9,371,228,215.860.37%34,208,745.739,337,019,470.13Closing 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.
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables
(Continued)
(2) Other receivables
(Continued)
2) Particulars of bad debt provision
(Continued)Closing bad debt provision at phase 3:
Unit: RMBCategoryBook balance
Lifetime ECL
rate (%)
Bad debtprovisionCarrying amountReasonBad debt provision assessedindividually48,961,431.28100.00%48,961,431.280.00Total48,961,431.28100.00%48,961,431.280.00Bad debt provision assessed individually
Unit: RMBCategoryBook balance
Lifetime ECL
rate (%)
Bad debtprovisionCarrying amountReasonValtra Inc. of Finland5,526,048.24100.00%5,526,048.240.00Overdue for a
prolongedperiod andunlikely to berecoveredMetso Paper Machinery (China)
Co., Ltd.
4,725,039.89100.00%4,725,039.890.00Overdue for a
prolongedperiod andunlikely to berecovered71 entities including Andritz38,710,343.15100.00%38,710,343.150.00Overdue for a
prolongedperiod andunlikely to berecoveredTotal48,961,431.28100.00%48,961,431.280.00
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables
(Continued)
(2) Other receivables
(Continued)
2) Particulars of bad debt provision
(Continued)
Changes in carrying book balances with significant changes in loss provision for the period Applicable √ Not applicableDisclosed by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year9,332,813,880.837,121,706,162.101 to 2 years7,536,768.101,468,300,735.772 to 3 years4,626,771.34190,900,767.76Over 3 years75,212,226.8786,661,531.39Total9,420,189,647.148,867,569,197.02
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 or
reversalWrite-offOthersBad debt provision93,714,952.9810,544,775.9783,170,177.01Total93,714,952.9810,544,775.9783,170,177.01
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables
(Continued)
(2) Other receivables
(Continued)
4) 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 theperiod was RMB5,839,760,811.51, which accounted for 61.99% of the closing balance of the total otherreceivables. The closing balance of corresponding bad debt provision amounted to RMB0.00.
Unit: RMBName of entityNatureClosing balanceMaturity
As a percentage of the
closing balanceof other receivables
Closing balance ofbad debt provisionCustomer 1Open credit1,282,383,356.23Within 1 year13.61%Customer 2Open credit1,248,900,000.00Within 1 year13.26%Customer 3Open credit1,172,617,380.28Within 1 year12.45%Customer 4Open credit1,141,900,000.00Within 1 year12.12%Customer 5Open credit993,960,075.00Within 1 year10.55%Total5,839,760,811.5161.99%
4. Long-term equity investments
Unit: RMBItem
Closing balanceOpening balanceBook balance
ImpairmentprovisionBook valueBook balance
Impairment
provisionBook valueInvestment in subsidiaries18,502,944,740.8118,502,944,740.8118,480,556,896.5218,480,556,896.52Investment in joint ventures82,741,230.1582,741,230.1584,273,868.6284,273,868.62Investment in associates246,471,611.335,994,545.96240,477,065.37247,193,596.005,994,545.96241,199,050.04Total18,832,157,582.295,994,545.9618,826,163,036.3318,812,024,361.145,994,545.9618,806,029,815.18
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
4. Long-term equity investments
(Continued)
(1) Investment in subsidiaries
Unit: RMBInvestee
Opening balance(Book value)
Change for the period
Closing balance(Book value)
Closing balance
of impairmentprovisionAdditionalcontribution
Withdrawncontribution
Impairment
provisionOthersChenming 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.2,302,000,000.0048,000,000.002,350,000,000.00Huanggang Chenming Arboriculture Development Co., Ltd.70,000,000.0070,000,000.00Jinan Chenming Investment and Management
Co., Ltd.100,000,000.00100,000,000.00Wuhan Chenming Hanyang Paper Holdings
Co., Ltd.264,493,210.21264,493,210.21Shandong Grand View Hotel Co., Ltd.80,500,000.0080,500,000.00Zhanjiang Chenming Pulp & Paper Co., Ltd.5,110,000,000.0027,500,000.005,137,500,000.00Shouguang Chenming Modern Logistic
Co., Ltd.10,000,000.0010,000,000.00Shouguang Chenming Art Paper Co., Ltd.113,616,063.80113,616,063.80Shouguang Meilun Paper Co., Ltd.4,449,441,979.314,449,441,979.31Shouguang 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 Export
Trade Co., Ltd.250,000,000.00250,000,000.00Shouguang Chenming Papermaking Machine
Co., Ltd.2,000,000.002,000,000.00Shouguang Chenming Hongxiang 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 ReplacementEquity Investment Fund Partnership (Limited Partnership)632,000,000.0039,499,659.47592,500,340.53Weifang Chendu Equity Investment Partnership (Limited Partnership)255,000,000.0013,612,496.24241,387,503.76Total18,480,556,896.5275,500,000.0053,112,155.7118,502,944,740.81
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
4. Long-term equity investments
(Continued)
(2) Investment in associates and joint ventures
Unit: RMB
Investee
Openingbalance(book value)
Change for the period
Closingbalance(book value)
Closingbalance ofimpairmentprovisionAdditionalcontribution
Withdrawncontribution
Investmentgain or lossrecognisedunder equitymethod
Adjustment
of othercomprehensive
incomeOtherchangein equityinterestDistribution ofcash dividendor profitdeclaredImpairmentprovisionOthersI. AssociatesZhuhai Dechen New ThirdBoard Equity InvestmentFund Company (LimitedPartnership)36,967,896.31-191,185.4036,776,710.91Ningbo Kaichen Huamei
Equity Investment FundPartnership (LimitedPartnership)197,297,485.59-79,166.82197,218,318.77Chenming (Qingdao) Asset
Management Co., Ltd.6,933,668.14488,367.55940,000.006,482,035.69Xuchang Chenming Paper
Co., Ltd.5,994,545.96Subtotal241,199,050.04218,015.33940,000.00240,477,065.375,994,545.96II. Joint ventures
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd.6,902,869.871,989,789.551,000,000.007,892,659.42Weifang Sime Darby West
Port Co., Ltd.77,370,998.75-2,522,428.0274,848,570.73Subtotal84,273,868.62-532,638.471,000,000.0082,741,230.15Total325,472,918.66-314,623.141,940,000.00323,218,295.525,994,545.96
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
5. Revenue and operating costs
Unit: RMBItem
Amount for the periodAmount for the prior period
RevenueOperating costsRevenueOperating costsPrincipal activities6,270,637,334.306,040,121,665.127,457,655,880.746,282,245,216.89Other activities1,249,427,268.181,005,967,022.321,303,835,529.341,075,724,228.66Total7,520,064,602.487,046,088,687.448,761,491,410.087,357,969,445.55Information related to the transaction price allocated to the remaining performance obligations:
As at the end of the reporting period, the amount of income corresponding to the agreements that have been enteredinto but have not yet fulfilled or not fully fulfilled their performance obligations amounted to RMB1,503,256,921.15,which is expected to be recognised in 2023.
6. Investment income
Unit: RMBItem
Amount forthe period
Amount for the
prior periodIncome from long-term equity investments accounted for using the cost method731,666,286.452,552,823,636.61Income from long-term equity investments accounted for using the equity method-314,623.14-3,156,467.36Investment gain on disposal of long-term equity investments751,679.56379,035,504.15Investment gain on derecognition of financial assets-63,403,215.00-13,074,419.85Investment gain on debt restructuring472,886.50Investment gain on holding other non-current financial assets4,746,821.3716,205,276.87Total673,446,949.242,932,306,416.92
XII Financial Report
XVIII. 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 ofprovision for assets impairment)161,509,859.17Government grants (except for the government grants closely related tothe normal operation of the Company and granted constantly at a fixedamount or quantity in accordance with a certain standard based onstate policies) accounted for in profit or loss for the current period314,934,315.62Profit or loss from debt restructuring967,464.91Except for effective hedging business conducted in the ordinary courseof business of the Company, gain or loss arising from the change in fairvalue of financial assets held for trading and financial liabilities held fortrading, as well as investment gains from disposal of financial assetsheld for trading, financial liabilities held for trading and financial assetsavailable for sale-35,178,162.53Reversal of provision for impairment of receivables individually tested for
impairment275,585,463.86Gain or loss arising from fair value change of consumable biological
assets subsequently measured at fair value9,924,233.72Other gain or loss items within the definition of extraordinary gain or loss-37,391,130.09Total extraordinary gains or losses690,352,044.66Less: Effect of income tax of extraordinary gains or losses137,333,913.66Net extraordinary gains or losses553,018,131.00Less: Net effect of extraordinary gains or losses attributable to minority
interest (after tax)2,268,633.02Extraordinary gains or losses attributable to ordinary shareholders of the
Company550,749,497.98Other 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
XII Financial Report
XVIII. Supplementary information (Continued)
2. Return on net assets and earnings per share
Profit for the reporting period
Rate of return on net assetson weighted average basis
Earnings per shareBasic(RMB per share)
Diluted(RMB per share)Net profit attributable to ordinary shareholders of theCompany0.55%0.030.03Net profit after extraordinary gains or losses attributable to
ordinary shareholders of the Company-2.51%-0.15-0.15
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
The Board of Shandong Chenming Paper Holdings Limited
30 March 2023