SHANDONG CHENMING PAPER HOLDINGS LIMITED
Annual Report 2019
March 2020
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 hereby
warrant the truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no false
representations, misleading statements or material omissions contained in this annual report, and are jointly and severally
responsible 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 accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial report
in the annual report.
All directors have attended the board meeting to review this report.
Notice of non-standard audit opinion
□ Applicable √ Not applicable
Notice of material deficiencies in internal control
□ Applicable √ Not applicable
Whether the Company needs to comply with the disclosure requirements for specific industries
No
The Company is exposed to various risk factors such as macro-economic fluctuation, state policies and regulations and
competition in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factors
likely to be faced and the measures to be taken to address them as set out in the outlook on the future development of the
Company in Discussion and Analysis of Operations.
The proposed dividend distribution plan or the proposed plan on conversion of capital reserves into share capital for the reporting
period was considered and passed by the Board:
√ Applicable □ Not applicable
Whether there is an increase of share capital from reserves
□ Yes √ No
The proposed profit distribution plan of the Company was considered and passed by the Board:
The audited consolidated net profit attributable to equity holders of the Company for 2019 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB1,656,566,584.88. When deducting the
interest on perpetual bonds of RMB194,000,000.00 for 2019 and the fixed dividend on preference shares of RMB214,425,000.00,
the distributable profit realised for 2019 amounted to RMB1,248,141,584.88.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the total ordinary share capital of 2,904,608,200 shares and the 1,162,790,698 simulated ordinary shares
converted from the preference shares using a conversion ratio of 1 share valued at RMB3.87 as at the end of 2019, a cash
dividend of RMB1.5 (tax inclusive) per 10 shares will be distributed to ordinary shareholders, a cash dividend of RMB1.5
(tax inclusive) per 10 simulated ordinary shares converted from the preference shares will be distributed to holders of
preference shares. No bonus shares will be issued and there is no increase of share capital from reserves. A cash dividend of
RMB435,691,230 will be distributed to holders of ordinary shares and a variable cash dividend of RMB174,418,604.70 will be
distributed to holders of preference shares. In other words, a cash dividend of RMB3.87 (tax inclusive) per preference share with a
nominal value of RMB100 each will be distributed to holders of preference shares.
2019 AnnuAl RepoRt 1
I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions .............................................................................................. 3
II Company Profile and Key Financial Indicators ....................................................................................................... 4
III Chairman’s Report .................................................................................................................................................. 10
IV Business Overview .................................................................................................................................................. 12
V Discussion and Analysis of Operations ................................................................................................................... 21
VI Directors’ Report ..................................................................................................................................................... 43
VII Material Matters ...................................................................................................................................................... 51
VIII Changes in Share Capital and Shareholders .......................................................................................................... 79
IX Preference Shares ................................................................................................................................................... 87
X Directors, Supervisors and Senior Management and Staff ..................................................................................... 92
XI Corporate Governance ............................................................................................................................................ 105
XII Corporate Bonds ..................................................................................................................................................... 127
XIII Financial Report ...................................................................................................................................................... 131
XIV Documents Available for Inspection........................................................................................................................ 300
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
I Important Notice, Table of Contents and Definitions
Definitions
Item means Definition
Company, Group, Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries
Group or Chenming Paper
Parent Company or means Shandong Chenming Paper Holdings Limited
Shouguang Headquarters
Chenming Holdings means Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong Limited
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Shanghai Chenming means Shanghai Chenming Industry Co., Ltd.
Huanggang Chenming means Huanggang Chenming Pulp & Paper Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Haiming Mining means Haicheng Haiming Mining Company Limited
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Chenming Leasing means Shandong Chenming Financial Leasing Co., Ltd. and its subsidiaries
Chenming GDR Fund means Weifang Chenming Growth Driver Replacement Equity Investment Fund
Partnership (Limited Partnership)
Chenrong Fund means Weifang Chenrong Growth Driver Replacement Equity Investment Fund
Partnership (Limited Partnership)
Hongtai Real Estate means Shanghai Hongtai Real Estate Co., Ltd.
reporting period or the year means The period from 1 January 2019 to 31 December 2019
the beginning of the year or means 1 January 2019
the period
the end of the year or the period means 31 December 2019
the prior year means The period from 1 January 2018 to 31 December 2018
2019 AnnuAl RepoRt 3
II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation 晨鳴紙業 Stock code 000488
晨鳴B 200488
晨鳴優01 140003
晨鳴優02 140004
晨鳴優03 140005
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Shenzhen Stock Exchange 01812
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Legal short name in Chinese of the Company 山東晨鳴紙業集團股份有限公司
Legal short name in Chinese of the Company 晨鳴紙業
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
Registered address No. 595 Shengcheng Road, Shouguang City, Shandong Province
Postal code of registered addres 262700
Office address No.2199 Nongsheng East Road, Shouguang City, Shandong Province
Postal code of office address 262705
Website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the Board Hong Kong Company Secretary
Name Yuan Xikun Chu Hon Leung
Correspondence Address No. 2199 East Nongsheng Road, 22nd Floor, World Wide House,
Shouguang City, Shandong Province Central, Hong Kong
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email address chenmmingpaper@163.com liamchu@li-partners.com
III. Information disclosure and places for inspection
Designated media for information disclosure China Securities Journal, Shanghai Securities News, Securities Times,
Securities Daily and Hong Kong Commercial Daily
Designated websites for the publication of Domestic: http://www.cninfo.com.cn;
the annual report as approved by CSRC Overseas: http://www.hkex.com.hk
Places for inspection of the Company’s Securities investment department of the Company
annual report
IV. Change in registration
Organisation registration code 913700006135889860
Change of principal activities since its listing (if any) No
Change of the controlling shareholder (if any) No
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile and Key Financial Indicators
V. Other relevant information
CPAs engaged by the Company
Name of CPAs Grant Thornton (Special General Partnership)
CPAs’ Office Address Floor 11, Building No. 4, HuaChuang GuanLi Center, 219 Shunhai Road,
Lixia District, Jinan
Name of the Signing Certified Hu Naizhong and Liu Nana
Public Accountants
Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
□ Applicable √ Not applicable
Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period
□ Applicable √ Not applicable
VI. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company
□ Yes √ No
Increase/decrease
for the year as
compared to the
2019 2018 prior year 2017
Revenue (RMB) 30,395,434,073.35 28,875,756,163.56 5.26% 29,472,453,563.98
Net profit attributable to shareholders of the Company (RMB) 1,656,566,584.88 2,509,828,858.47 -34.00% 3,769,325,450.93
Net profit after extraordinary gains or losses attributable
to shareholders 702,329,086.29 1,953,699,849.75 -64.05% 3,425,779,016.95
Net cash flows from operating activities (RMB) 12,232,707,222.94 14,099,701,887.04 -13.24% 23,766,042.93
Basic earnings per share (RMB per share) 0.33 0.51 -35.29% 1.13
Diluted earnings per share (RMB per share) 0.33 0.51 -35.29% 1.13
Decreased by 2.94
Rate of return on weighted average net assets 5.57% 8.51% percentage points 15.80%
Increase/decrease
as at the end of
the year compared
As at the As at the end to the end of the As at the end
end of 2019 of 2018 prior year of 2017
Total assets (RMB) 97,958,909,935.15 105,318,734,827.82 -6.99% 105,625,096,076.92
Net assets attributable to shareholders of the Company (RMB) 25,169,743,863.75 25,048,731,454.79 0.48% 27,778,529,074.90
Data specification：
Data specification for basic earnings per share, diluted earnings per share, and rate of return on weighted average net
assets: The net profit attributable to shareholders of the Company does not exclude the effect of the interest payment
deferred and accumulated to subsequent periods for perpetual bonds under other equity instruments and the effect of the
dividends on preference shares under other equity instruments that have been considered and approved for distribution.
When calculating financial indicators such as earnings per share and rate of return on weighted average net assets, the
interest on perpetual bonds of RMB194,000,000.00 and the dividends on preference shares of RMB493,494,767.52 during
the reporting period are deducted.
2019 AnnuAl RepoRt 5
II Company Profile and Key Financial Indicators
VI. Major accounting data and financial indicators (Cont’d)
Whether corporate bonds exist
√ Yes □ No
Whether the Company has made losses in recent two years
□ Yes √ No □ Not applicable
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report
□ Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards 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 applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile and Key Financial Indicators
VIII. Key Financial Indicators by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Revenue 6,159,836,579.24 7,188,811,534.46 8,665,530,249.94 8,381,255,709.71
Net profit attributable to shareholders of the Company 38,223,111.21 471,572,461.08 557,960,253.43 588,810,759.16
Net profit after extraordinary gains or losses
attributable to shareholders of the Company –23,652,252.85 326,797,249.06 447,511,508.11 -48,327,418.03
Net cash flows from operating activities 1,424,685,047.04 1,275,085,844.65 3,799,453,249.81 5,733,483,081.44
According to the requirements of New Standards for Financial Instruments, out of consideration for the principle of
prudence, the Company made full provision for impairment during the annual audit, including credit impairment loss of
RMB1,033,867,928.73 and loss on impairment of assets of RMB120,991,683.19, which was the primary cause of the
Q4 net profit after extraordinary gains or losses attributable to shareholders of the Company being a negative number.
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
disclosed in the quarterly report or interim report
□ Yes √ No
IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
Rules
Unit: RMB’ 0,000
For the year ended 31 December
2019 2018 2017 2016 2015
Before
adjustment After Before After Before After
adjustment adjustment adjustment adjustment adjustment
Revenue 3,039,543 2,887,576 2,985,174 2,947,245 2,290,711 2,256,692 2,024,191 2,019,264
Profit before tax 204,848 320,632 453,648 453,648 258,317 258,317 141,017 141,017
Tax 29,518 64,158 77,752 77,752 56,056 62,597 43,224 36,683
Profit for the current period attributable
to shareholders of the Company 165,657 250,983 376,933 376,933 206,399 199,858 102,122 108,663
Minority interests 9,673 5,491 –1,036 –1,036 –4,138 –4,138 –4,329 –4,329
Basic earnings per share (RMB/share) 0.33 0.51 1.13 1.13 0.99 0.95 0.5 0.53
Rate of return on weighted average net
assets (%) 5.57% 8.51% 15.80% 15.80% 9.59% 9.23% 6.73% 7.17%
Unit: RMB’ 0,000
For the year ended 31 December
2019 2018 2017 2016 2015
Before After Before After Before After
adjustment adjustment adjustment adjustment adjustment adjustment
Total assets 9,795,891 10,531,873 10,562,510 10,562,510 8,228,535 8,228,535 7,796,170 7,796,116
Total liabilities 7,161,914 7,944,704 7,535,092 7,535,092 5,972,050 5,972,050 6,070,277 6,063,736
Minority interests 117,003 82,296 249,565 249,565 34,605 34,605 38,743 38,743
Equity attributable to shareholders of
the Company 2,516,974 2,504,873 2,777,853 2,777,853 2,221,881 2,221,881 1,687,149 1,693,690
Net current assets (liabilities) -774,633 –1,344,718 –783,090 –783,090 –1,094,182 –1,094,182 –1,347,029 –1,340,488
Total assets less current liabilities 4,526,014 4,390,405 4,837,646 4,837,646 3,557,671 3,557,671 2,932,756 2,939,242
2019 AnnuAl RepoRt 7
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable □ Not applicable
Unit: RMB
Item Amount for 2019 Amount for 2018 Amount for 2017
Profit or loss from disposal of non-current
assets (including write-off of provision
for assets impairment) 135,669,108.82 17,149,722.72 65,853,273.77
Government grants (except for the
government grants closely related to
the normal operation of the company
and granted constantly at a fixed
amount or quantity in accordance with
a certain standard based on state
policies) accounted for in profit or loss
for the current period 623,277,014.49 535,691,291.26 392,774,230.02
Gain arising from investment costs for
acquisition of subsidiaries, associates
and joint ventures by the corporation
being less than its share of fair value of
identifiable net assets of the investees
on acquisition 364,597,001.77 143,867,008.14
Profit or loss from debt restructuring -55,792,548.82 24,309.62
Gains/losses from contingencies irrelevant
to the normal operations of the Company -325,259,082.28
Except for effective hedging business
conducted in the ordinary course of
business of the Company, gain or loss
arising from the change in fair value of
financial assets held for trading, derivative
financial assets, financial liabilities held
for trading and derivative financial
liabilities, as well as investment gains
from disposal of financial assets held for
trading, derivative financial assets,
financial liabilities held for trading,
derivative financial liabilities and other
debt investments 61,750,000.00 94,000,000.00
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses (Cont’d)
Item Amount for 2019 Amount for 2018 Amount for 2017
Gain or loss on external entrusted loans 13,312,368.97
Gain or loss from changes in fair value
of consumable biological assets and
other non-current financial assets
subsequently measured at fair value 26,692,741.61 -21,464,400.65 -21,000,042.33
Income of entrustment fees from entrusted
operations
Other non-operating income and expenses
other than the above items 24,876,982.31 23,291,720.22 33,659,216.99
Less: Effect of income tax 131,148,729.27 52,960,460.82 50,196,013.15
Effect of minority interests (after tax) 33,934,072.32 7,328,864.01 3,488,835.77
Total 954,237,498.59 556,129,008.72 343,546,433.98
Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 – Extraordinary Gains or Losses defined as its recurring gain or loss items
□ Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No. 1 – Extraordinary Gains or Losses were defined by the Company as
its recurring gain or loss items during the reporting period.
2019 AnnuAl RepoRt 9
III Chairman’s Report
Dear Shareholders,
I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2019. On behalf
of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to the Company.
During the reporting period, facing the complicated and changing domestic and international macroeconomic landscape, the
corporate spirit of “uniting in solidarity, willingness to dedicate, striving for excellence, and working diligently” was manifested at
all levels within the Group. Following the guidelines of “innovating management, strengthening skills, making major breakthroughs,
and persevering”, the Company overcome all difficulties and mitigated the risks by using every means with strong determination.
While the results did turn around. a strategic layout of the pulp and paper integration of the Company was formed, thus further
consolidating the Company’s leading position.
I. Results of Operations
In 2019, the Company completed the production of machine-made paper of 5.01 million tonnes and achieved sales of 5.25
million tonnes, representing a year-on-year increase of 9.63% and 21.53%, respectively . The Company achieved revenue
of RMB30,395 million, representing a year-on-year increase of 5.26%. Total profit and net profit attributable to equity
holders of the Company were RMB2,048 million and RMB1,657 million respectively, down by 36.11% and 34.00% year on
year. The Company’s total assets amounted to RMB97,959 million.
II. Corporate Governance
During the reporting period, the Company regulated its operation under the requirements of the Companies Law, the
Securities Law, the Code of Corporate Governance for Listed Companies, the Rules Governing Listing of Stocks on
Shenzhen Stock Exchange, the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and
the related regulations of the China Securities Regulatory Commission. The Company kept on improving and optimising
its legal person governance structure and regulating its operation in practice. The Board considered the status of the
Company’s corporate governance was substantially in compliance with the requirements and requirements of the regulatory
documents such as the Code of Corporate Governance for Listed Companies.
During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
governance. The Company improved its corporate governance system in a timely manner and amended and improved the
amended management systems including the Rules of Procedures for General Meetings, the Rules of Procedures for Board
Meetings, the Rules of Procedures for Supervisory Committee Meetings, and the Articles of Association in accordance with
the regulatory requirements.
Strict enforcement of relevant internal control systems has promoted a regulated operation and healthy development of the
Company, thus protecting the legitimate rights and interests of the investors. The overall status of corporate governance
is in compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development
strives forward, its regulated operation and internal control will continue to improve.
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
III Chairman’s Report
III. Dividend Distribution
Consistent with its long-term goal of pursuing the maximisation of corporate values, the Company has always placed
much emphasis on the benefits of and returns to its shareholders. The audited consolidated net profit attributable to equity
holders of the Company for 2019 prepared in accordance with Accounting Standards for Business Enterprises by the
Company amounted to RMB1,656,566,584.88. When deducting the interest on perpetual bonds of RMB194,000,000.00
and the fixed dividend on preference shares of RMB214,425,000.00 for 2019, the distributable profit realised for 2019
amounted to RMB1,248,141,584.88. In accordance with the requirements of the Articles of Association and the Prospectus
of Non-public Issuance of Preference Shares, the proposed profit distribution plan of the Company for 2019 is as follows:
Based on the total ordinary share capital of 2,904,608,200 shares and the 1,162,790,698 simulated ordinary shares
converted from the preference shares using a conversion ratio of 1 share valued at RMB3.87 as at the end of 2019, a cash
dividend of RMB1.5 (tax inclusive) per 10 shares will be distributed to holders of ordinary shares; a cash dividend of RMB1.5
(tax inclusive) per 10 simulated ordinary shares converted from the preference shares will be distributed to holders of
preference shares. No bonus shares will be issued and there is no increase of share capital from reserves. A cash dividend
of RMB435,691,230 will be distributed to holders of ordinary shares and a variable cash dividend of RMB174,418,604.70
will be distributed to holders of preference shares. In other words, a cash dividend of RMB3.87 (tax inclusive) per preference
share with a nominal value of RMB100 each will be distributed to holders of preference shares.
IV. Future Development
Although the paper making industry has maintained a steady development in recent years, paper making enterprises
experienced challenges as most brick-and-mortar enterprises in China in the face of the complicated and changing
domestic and international economic landscape. From the fourth quarter of 2018 to the first quarter of 2019, the paper
making industry was not booming in general with a significant decline in paper prices due to the macroeconomic situation.
However, since the second quarter, the prices of major paper types of the Company had been on the rise. Moreover, guided
by market demand, the Company continued to strengthen its research and development and innovation in technology and
product and develop high-margin products. The overall profitability greatly improved. Furthermore, the pulp and paper
integration strategic layout of the Company has basically completed this year. The Company has basically enjoyed paper
and pulp self-sufficiency. The gross profit margin of its products significantly improves, further enhancing the profitability
and risk aversion ability of the Company.
Looking forward, the Company will continue to adhere to the main theme of emphasising on environmental protection, low
carbon, recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific
development and quality and efficiency enhancement, the Company, will further reorganise methodology and restructure,
while comprehensively enhancing quality, efficiency, management level, technology application, sense of happiness and
brand image, and concentrating on its principal activities, pushing the Company to be stronger, better and greater, with a
view to becoming a globally competitive world-class paper-making enterprise.
Chen Hongguo
Chairman
27 March 2020
2019 AnnuAl RepoRt 11
IV Business Overview
I. Principal activities of the Company during the Reporting Period
Whether the Company needs to comply with the disclosure requirements of specific industries
No
(I) Principal activities of the Company during the reporting period
1. Business overview
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic
development in finance, forestry, logistics and construction materials. The Company is the only listed company
with A shares, B shares and H shares in China. Its key indicators in respect of business and economic efficiency
have been in a leading position in the industry in China for over 20 consecutive years. The machine-made
paper business is the principal activity and the major source of revenue and profit of the Company. During the
reporting period, there was no significant change in the principal activity of the Company.
The Company has committed itself to implementing a pulp and paper integration strategy, introduced
world-leading pulp production and paper making technology and equipment. Its product series include high-end
offset paper, white paper board, coated paper, light weight coated paper, household paper, electrostatic copy
paper and thermal paper, glassine paper, with each major product ranking among the highest in terms of market
share in China. The Company has scientific research institutions including the national enterprise technology
centre, the postdoctoral working station as well as state certified CNAS pulp and paper testing centre and
has obtained 213 national patents including 18 patents for invention, with 7 products selected as national
new products. The Company has obtained 13 science and technology progress awards above the provincial
level and undertaken five national science and technology projects and 54 provincial technological innovation
projects. The Company has pioneered to obtain the ISO9001 quality certification, ISO14001 environmental
protection certification and FSC-COC certification among its industry peers.
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(I) Principal activities of the Company during the reporting period (Cont’d)
2. Main products
Category Major brands and types Characteristics of products Product illustration Range of application
Culture paper BIYUNTIAN, CLOUDY High whiteness, good Suitable for printing
MIRROR, and CLOUDY stiffness, high intensity publications, textbooks,
LEOPARD all-wood pulp index, smooth surface, magazines, covers,
offset paper; “CLOUDY accurate registering and illustrations, notebooks, test
LION” and “CLOUDY clear printing papers, teaching materials,
CRANE” offset paper; and reference books, etc.
“CEDAR” and “GREEN
PINE” light weight paper.
Coated paper “SNOW SHARK” and Good glossiness and bulk, Double-side coated paper
“EAGLE” one-sided coated high stiffness and printing is suitable for high quality
paper, “SNOW SHARK”, quality grade; even and fine printing, such as high-grade
“EAGLE”, “RABBIT” and coating, good reduction picture albums, picture,
“SNOW SWALLOW” double- for the printing dot and magazines and so on. One-
sided coated paper, and bright colour; and high side coated paper is suitable
EAGLE, RABBIT and SNOW intensity, good whiteness, for large format printing and
SWALLOW matte coated strong layering sense and business printing, such as
paper. verisimilitude image. upscale tobacco package
paper, adhesive sticker,
shopping bags, slipcases,
envelopes, gift wrapping and
so on.
White cardboard White cardboard and Consistent substance and High-end gift boxes, cosmetics
ivory cardboard of ZITAN callipers, high bulk with boxes, tags, shopping bags,
series and POPLAR series, good stiffness, good die- publicity pamphlets, high-end
super high bulk cardboard, cutting box performance; postcards; cigarette package
Chenming cigarette high whiteness, stable printing of medium and
cardboard, fluid inclusion hue, even and fine coating, high quality; milk package,
cardboard, and base paper Good reproduction of beverage package, disposable
for mugs. printing dot, smooth and paper cups, milk tea cups, and
fine paper surface, high noodle bowls.
folding endurance, in favour
of securing bulking without
damage.
Light weight coated Jinzhou high-grade light The brightness of product Mainly suitable for printing
paper weight coated paper and and printing is high, and the advertisements, high-end
refined light weight coated printed products are bright publications, magazine inner
paper and beautiful; and the paper pages, and picture albums
has good uniformity, good suitable for high-speed sheet-
bulk, high opacity, and clear fed press or high-speed rotary
print dot. speed press.
2019 AnnuAl RepoRt 13
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(I) Principal activities of the Company during the reporting period (Cont’d)
2. Main products (Cont’d)
Category Major brands and types Characteristics of products Product illustration Range of application
Industrial paper High-grade yellow anti- Good evenness, high Anti-stick base paper is mainly
sticking base paper, ordinary bursting strength, good used for producing the paper
yellow/white anti-sticking surface smoothness, and base of stripping paper or
base paper, bill base paper, compound and crosscutting anti-sticking base paper. Cast
cast coated base paper, PE performance. coated base paper is suitable
paper, stripping base paper, for producing adhesive paper
and white kraft paper or playcard compound paper
after coating.
Copy paper GOLDEN MINGYANG and Soft whiteness and visually Suitable for printing and
GOLDEN CHENMING comfortable; flat and smooth copying business documents,
copy paper, BOYA and surface, and clear writing training materials, and writing.
BIYUNTIAN copy paper, and vivid colour in printing
MINGYANG, LUCKY and copying suitable for
CLOUDS, BOYANG, and double-sided use, energy
SHANYIN copy paper, and saving and environmental
GONGHAO, and TIANJIAN protection; and durable
copy paper printing and copying effect.
Special paper Thermal paper and glassine High density of colour Mainly used in electronics,
paper development, clear medicine, food, washing
coloration; made of base supplies, supermarket labels,
paper of all wood pulp, good double-sided tape and other
in appearance and texture; high-end adhesive base paper.
strong surface intensity,
good adaptability to printing
and processing; good wear
resistance, non-stick to
printing head, stable quality;
smooth and fine surface;
and high-grade.
Household paper Toilet paper, facial tissue, Fine Wrinkles and good Daily toilet supplies; used in
pocket tissue, napkin, paper water absorption; soft and restaurants and other catering
towels, “XINGZHILIAN”, comfortable enough for industries, and used in public
“FOREST LOVE”, and maternal and infant skin; toilets in hotels, guesthouses,
“BEIYING” and fine wrinkles, and good and office buildings, and also
feeling without scraps after suitable for home and other
wiping. environment.
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(I) Principal activities of the Company during the reporting period (Cont’d)
3. Operation model
(1) Purchase model
The Company strives to promote the construction of procurement information systems, establishes
an enterprise network bidding platform, improves the contract management module, optimises the
SAP three-level authority approval process, and effectively establishes a standardised procurement
management system. Meanwhile, the Company cooperates with financial institutions and third parties in
the supply chain financial business to enhance business reputation, establishes synergistic relationships,
leverages core enterprise scale advantages, and improves the competitiveness of the supply chain;
establishes futures hedging management structures and institutional systems, and formulates hedging
business processes and risk management and control processes; uses futures tools to optimise raw
material pricing, prevents price risks, and improves corporate management and anti-risk capabilities.
(2) Production model
The Company strives for a new production model with high technology content, low energy consumption
and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In addition, the
Company endeavours to facilitate business development in line with ecological development, enhance its
competitiveness in economic development and environmental protection, and establish its economic and
ecological culture.
The Company adheres to the clean production model and relies on advanced production technology and
manufacturing equipment to achieve low emissions with low consumption and achieve the reduction in
consumption through recycling. The Company adheres to energy conservation and emission reduction,
and pays close attention to the “three wastes” treatment. The Company has built a wastewater treatment
system and middle water reuse system, establishing itself as a resource-saving and environmentally
friendly benchmarking enterprise. The Company adheres to the pulp and paper integration strategy with
the four major projects put into operation, which effectively alleviates the pressure on raw materials and
improves its core competitiveness.
(3) Marketing model
At present, the Company has a relatively mature sales network, and has set up specialised sales
companies responsible for the development of domestic and overseas markets, product sales, and
formulation of sales policies and selling prices. Since 2018, the Company has changed its sales network
from regional division to product line division in order to provide more professional sales services. The
sales companies are divided into product companies of cultural paper series, coated 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 administrative district, under which branch companies
are set up. The chief representatives of the branch companies have full authority to deal with branch
business.
In 2019, the Company innovated a three-level scheduling mechanism for implementation. Branch offices,
administrative districts, and sales companies assign specialised personnel to schedule task indicators
daily to ensure the effective implementation of the plans.
2019 AnnuAl RepoRt 15
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(I) Principal activities of the Company during the reporting period (Cont’d)
3. Operation model (Cont’d)
(4) Research and Development management model
The Company has strong research and development capabilities and rank among the first in the industry.
The Company has set up scientific research institutions including the national enterprise technology
centre, the postdoctoral working station as well as state certified CNAS pulp and paper testing centre.
The Company owns a national technology development centre. In addition to its own technological
innovation, the Company has also established technology development and talent training cooperation
relationships with domestic and overseas units such as Nanjing Forestry University, China Pulp and Paper
Research Institute and The Dow Chemical Company.
The Company has obtained 213 national patents including 18 patents for invention, with 7 products
selected as national new products. The Company has obtained 13 science and technology progress
awards above the provincial level and undertaken five national science and technology projects and 54
provincial technological innovation projects. The Company has pioneered to obtain the ISO9001 quality
certification, ISO14001 environmental protection certification and FSC-COC certification among its
industry peers.
(II) Performance drivers
1. Prominent industry concentration
Environmental protection policies have been issued intensively in recent years, which further phases out
outdated production capacity, and significantly increases industrial concentration. The elimination of outdated
production capacity provides scope for concentration among leading enterprises. With strong financial strength,
advanced production equipment and economies of scale in production, large paper making enterprises in the
industry continue to increase entry barriers and enjoy huge profits from the industry’s new profit cycle. The
industry will continue to boom.
2. Perfect marketing model and leading market share in China
The Company has a relatively mature sales network, and has set up specialised sales companies responsible for
the development of domestic and foreign markets, product sales, and formulation of sales policies and selling
prices. Relying on the customer resources established for many years and good sales networks, the Company
has successfully expanded its overseas markets. The major sales areas include the United States, Hong Kong,
Japan, South Africa and other countries and regions.
At present, the Company offers the widest product range in the paper making industry, and its major products,
including culture paper, electrostatic paper, white paper board and coated paper ranking among the highest in
terms of market share in China.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(II) Performance drivers (Cont’d)
3. Focus on principal activities to achieve perfect complementary pulp and paper production capacity
The paper making industry is a large-scale industry with large inflows and outflows. Whoever controls the raw
materials has the market initiative. As the chemical wood pulp projects of Huanggang Chenming and Shouguang
Meilun commence production, the Company currently has three major pulp mills in Zhanjiang, Huanggang and
Shouguang. It has become the first domestic paper making enterprise to have fully complementary pulp and
paper production capacity, and has absolute competitiveness in terms of cost.
At present, the advantages of the Company’s self-produced pulp have not been fully utilised, and there is still
much scope and potential for development. As the market price of wood pulp gradually returns to normal, the
core advantages of the Company’s pulp and paper balance will be further brought into play, and corporate
efficiency will be greatly improved.
4. Strong research and development capabilities
The Company had been closely following the economic and market conditions in China and in the industry
since 2019. Driven by customers’ demand with a view to enhancing economic benefits, the Company
continued to put more efforts into technical innovation and developed new technology-based products with
more economic benefits. The Company was also committed to researching and developing for the purpose
of product differentiation and refining. 5 R&D projects including the “technology development of highly stiff
book and paper” and “technology development of coated paper for high temperature labels” were listed
on the technological innovative project plans of Shandong Province. The Company also collaborated with
Qilu University of Technology for industry-university innovation, and their organised and declared “Key
Technology and Application of Green Preparation of High Performance Wood Chemical Pulp” was awarded
the First Prize of Science and Technology Progress Award by the Ministry of Education. The new products
and new achievements including the “high-end social cardboard” and the “baby base paper” were awarded
three Excellent New Product and Outstanding Achievement Second Prizes in the 2019 Shandong Province
Technological Innovation Award. Meanwhile, the Company strengthened the protection of intellectual
property rights. In 2019, the Company applied for 19 patents and obtained 26 licences, which accelerated the
restructuring of its product mix and facilitated the corporate restructuring and upgrade.
5. Strengthening social responsibility works and fulfilling environmental protection obligations
As a leading paper making enterprise in China, the Company has the world’s most advanced paper making
production lines. While ensuring production efficiency and product quality, the Company always adheres to the
concept of “placing green development and environmental as the first” and regards environmental protection as
a life project. As of the end of 2019, the Company had invested more than RMB8,000 million in environmental
protection projects. The Group comprehensively implemented environmental protection governance, actively
promoted clean production, vigorously implemented energy conservation and emission reduction, and
embarked on the road of green, clean, and low-carbon development. At present, the Company adopts the
world’s most advanced “ultrafiltration membrane+reverse osmosis membrane” technology to complete the
reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reaches more than
75%. The reclaimed water quality meets drinking water standards, which can save fresh water every day
170,000 cubic meters.
2019 AnnuAl RepoRt 17
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(III) General information of the industries where the Company operated in, business cycle characteristics
and the Company’s position in the industries during the reporting period
As an important basic raw material industry, the paper making industry plays an important role in the national
economy, and is related to, among others, the economy, culture, production and national defence of a country.
Its products are used in various sectors including culture, education, technology and the national economy. The
paper making industry has the typical characteristics of large-scale industrial production, such as continuous and
efficient operation, and significant economies of scale: more raw material requirements, larger equipment investment,
and longer industrial chains, involves forestry, agriculture, chemicals, publishing, packaging, printing, machinery
manufacturing, and environmental protection, and is relatively intensive in terms of technology, capital, resources, and
energy.
The Chinese government stated in the report delivered at the 19th National Congress that “the focus must be
placed on the real economy and priority must be given to the improvement of the quality of the supply system in
the development of a modernised economy”. Facing this major strategic decision based on the overall current and
future situation, the paper making industry has to play a role in enhancing Chinese economic quality advantages.
However, the development of the paper making industry is obviously characterised by its cyclical nature. Cyclical
macroeconomic fluctuations will cause fluctuations in the supply and demand of paper products.
As a leading player in the paper making industry of China, the Company offers the widest product range in the paper
making industry, and its major products, including culture paper, electrostatic paper, white paper board and coated
paper rank among the highest in terms of market share in China. At present, the domestic wood pulp production
capacity is more than 11 million tonnes, and the Company’s pulp production capacity exceeds 4.2 million tonnes. The
Company’s advantages of pulp and paper integration are obvious. The Company is currently the only paper making
enterprise in China that achieves a complementary paper and pulp production capacity.
II. Material Changes of Major Assets
1. Material Changes of Major Assets
Major assets Description
Equity During the reporting period, the Company increased 16.62% equity interest in
Guangdong Nanyue Bank Co., Ltd., 49% equity interest in Shouguang Meite
Environmental Technology Co., Ltd. (壽光美特環保科技有限公司), 44.45% equity interest
in Weifang Chenrong New and Old Kinetic Energy Conversion Equity Investment Fund
Partnership (Limited Partnership) (濰坊晨融新舊動能轉換股權投資基金合夥企業（有限合
夥)) and 35.43% equity interest in Goldtrust Futures Co., Ltd.
Financial leasing assets During the reporting period, the Company continuously reduced the scale of the
financial leasing business, which decreased to 13,600 million, with net recovery of
RMB5.9 billion.
Fixed assets During the reporting period, the assets of Shouguang Headquarters cultural paper
transformation project and the Shouguang Meilun 510,000 tonne high-end cultural
paper project and chemical pulp project were transferred.
Construction in progress During the reporting period, the assets of Shouguang Headquarters cultural paper
transformation project and the Shouguang Meilun 510,000 tonne high-end cultural
paper project and chemical pulp project were transferred.
Inventories During the reporting period, the Company strengthened internal management, increased
inventory turnover and reduced capital occupation.
2. Major Assets Overseas
□ Applicable √ Not applicable
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Business Overview
III. Analysis of Core Competitiveness
Whether the Company needs to comply with the disclosure requirements of specific industries
No
The Company is a leading player in the paper making industry of China. After innovation and development for more than
half a century, it has developed into a large conglomerate principally engaging in pulp production and paper making with
synergistic development in finance, forestry, logistics and construction materials. It is also the first company in the paper
making industry to own a financial company, as well as the only listed company in China with three types of shares in issue,
namely A shares, B shares and H shares. Compared with other enterprises in the industry, the Company has the following
advantages:
1. Advantages of pulp and paper integration
The Company has basically enjoyed wood pulp self-sufficiency due to the completion of the pulp and paper
integration layout during the year. As at the end of 2019, the Company had 4,200,000-tonne wood pulp production
capacity on its own. Self-produced pulp enjoys significant cost advantage over purchased wood pulp, which enables
the gross profit of the Company’s paper products to consistently rank among the top of the industry; on the other
hand, the price of wood chips, the raw material for pulp making, is relatively stable. Therefore, the procurement
advantage of bulk supplies and the application of ancillary logistics services have significantly reduced the logistics
and transportation costs of raw material and finished products, considerably increasing the Company’s cost
advantage and quality stability
2. Scale advantages
After years of development, the Company, being a leading player in the paper making industry in China, has achieved
annual pulp and paper production capacity of over 11 million tonnes and is capable to compete with international
paper making enterprises in scale. The large-scale centralised production and operation model has provided
the Company with obvious economic benefits. The Company also has strong market influence over raw material
procurement, product pricing and industry policymaking.
3. Product advantages
The Company has implemented the “forestry, pulp and paper integration” strategy, introduced world-leading pulp
and paper production technology, and set up the largest integrated forestry, pulp and paper project with the most
advanced technology in the world. The Company is the enterprise that offers the widest product range in the paper
making industry, and its five largest product series include high-end offset paper, white paper board, coated paper,
light weight coated paper, household paper, electrostatic copy paper and thermal paper, glassine paper, with each
major product ranking among the best in terms of market share.
4. Advantages in technical equipment
Currently, the Company has the largest integrated forestry, pulp and paper project with the most advanced technology
in the world and dozens of pulp and paper production lines of international advanced standards. The Company’s
overall technical equipment has reached the advanced international level. The major production equipment has been
imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of Finland, Voith of
Germany and TBC of the United States.
The technical equipment used by the Company generally reflects the characteristics of being technology-intensive
and the integration of mechanical and electrical in the paper making industry nowadays. The degassing technology,
wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet
coating technology, multi-nip pressure balanced calender technology and the technical processes independently
developed by the Company of the pulp systems have all reached the international advanced level.
2019 AnnuAl RepoRt 19
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
5. Advantages in research and innovation and new product development
The Company, Zhanjiang Chenming, Shouguang Meilun, Jiangxi Chenming and Jilin Chenming are high and
new-technology enterprises and are able to give full play to their strong research capability. Supported by the national
enterprise technology centre and the post-doctoral working station, the Company has established a comprehensive
intellectual property system and put more and more efforts in technical innovation and scientific research and
development to develop new products with high technology contents and high added value as well as proprietary
technologies. Meanwhile, the technology centre of the Company has actively engaged in technical cooperation
with schools, research institutions and international advanced enterprises. The Company has obtained 213 national
patents including 18 patents for invention and 7 products selected as national new products. The Company has
obtained 13 science and technology progress awards above the provincial level and undertaken five national science
and technology projects and 54 provincial technological innovation projects. The Company has pioneered to obtain
the ISO9001 quality certification, ISO14001 environmental protection certification and FSC-COC certification among
its industry peers. The Company was awarded honours including “China Patent Shandong Star Enterprise”, becoming
the “green engine” of the transformation and upgrading in the paper making industry and leading the direction of the
latest and most advanced technology in the paper making industry in China.
6. Team advantages
The key management members and the core personnel of the Company remain stable. In the business development
of the Company, an internal corporate culture developed by the stable core staff team favourable to the growth of
the Company consolidates the management experience specific to the industry, thus resulting in a team advantage
blended with management and culture. Meanwhile, the Company has attracted experienced professionals with
production, sales, financial, legal, financial management backgrounds through its advanced management philosophy
and ample room for development. The high quality and professional team secures the sustainable development of the
Company with a solid supply of talents.
7. Advantages in environmental governance capacity
In recent years, the Company and its subsidiaries have constructed 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. The environmental indicators of the Company rank high in the country and
in the world. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse osmosis
membrane” technology to complete the reclaimed water recycling membrane treatment project. The reclaimed water
recycle rate reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save
fresh water every day 170,000 cubic meters.
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
I. Overview
During the reporting period, although the general operation of the Company was in good condition, the Company
experienced huge challenges as other paper making enterprises in the face of the complicated and changing domestic
and international economic landscape. Affected by various factors such as economic downturn, reduced market demand,
and tight supply and rising prices of raw materials, the paper making industry experienced a decline in economic returns,
increased difficulties in production and operation, and falling paper prices. Accordingly, the Company achieved net profit
of only RMB38.22 million in the first quarter. Since the second quarter, the market improved significantly. The prices of
the major paper types had been on the rise, and the benefits of the paper price rise were obvious. The Shouguang Meilun
510,000 tonne high-ended cultural paper project, the Shouguang Headquarters cultural paper transformation project, the
Shouguang Meilun 1,000,000 tonne chemical pulp project, the Huanggang Chenming chemical pulp project and others
invested and constructed by the Company were successively put into operation with smooth operation in the second
quarter, and gradually began to play their role. The profitability of the Company improved significantly in the second quarter
with a quarter-on-quarter increase of 1,157.95%.
As the traditional peak season in the printing industry in the third and fourth quarter approached, the market demand for
paper further increased. The Company raised the prices and recorded quarter-on-quarter growth in net profit during the
third and fourth quarter.
In 2019, the Company produced 5.01 million tonne machine-made paper with sales of 5.25 million tonne, representing
a year-on-year increase of 9.63% and 21.53% respectively. The Company recorded revenue of RMB30,395 million,
representing a year-on-year increase of 5.26%. Total profit and net profit attributable to equity holders of the Company
amounted to RMB2,048 million and RMB1,657 million respectively, representing a year-on-year decrease of 36.11% and
34.00%. Total asset of the Company amounted to RMB97,959 million. The operation and management results were mainly
reflected in the following aspects:
(I) Strengthening finance management
As affected by financial policies and unsatisfactory results in the first quarter, corporate financing was affected to a
certain extent. Under such circumstances, the Company enhanced leadership and management. It adopted effective
measures to proactively broaden financing channels. The gearing ratio dropped to 73.11% from 75.43% as at the
beginning of the year. This not only secured the normal operation of the Company but greatly improved its financial
position. Firstly, the Company adjusted and reinforced the financial team. Financial meetings were held on a regular
basis to discuss and formulate financing proposals. Meanwhile, the Company put greater efforts into assessment,
and fully revitalised initiative in work. Hence, the management works were further enhanced. Secondly, the Company
deepened its connection with banks, thus creating an excellent financing environment and having a better relationship
with banks. Thirdly, the scale of leasing business continued to shrink. Net recovery of proceeds realised during
the year amounted to RMB5,900 million. The scale of the financial leasing business was reduced to approximately
RMB13.6 billion, which effectively put risk exposures under control.
2019 AnnuAl RepoRt 21
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(II) Innovating sales management
In 2019, the sales work achieved satisfactory results. Inventories were further reduced and returns were improved
due to the rising prices. A historical highest monthly recovery of proceeds was recorded. The progress was mainly
reflected in the following aspects:
1. The Company proactively implemented the strategy of price rising, enhanced market operation, and rose
prices on a continuous basis. It enhanced customer management and facilitated capital flows. The Company
implemented new methods for order acceptance, which released the limits in existing order acceptance mode,
facilitated business development and deepened the relationship with customers. The Company screened out
leading and quality major agencies, and increased its trading volume with them. In addition, the Company put
greater efforts into scheduling management, and implemented three-level scheduling mechanism, thus ensuring
effective implementation of its plans.
2. The Company enhanced team building, and trained and assigned senior positions for young employees, thus
stimulating vitality of its team. The Company reserved stand-by talents at different levels, and eliminated
mediocre employees, thereby establishing a quality marketing team. The Company also put greater efforts
into assessment and incentive, fully implemented regular assessment, and incentivised balanced distribution.
The Company implemented numerous incentive assessment measures, which greatly enhanced employees’
initiative in work.
(III) Enhancing production management
In 2019, the production system achieved improvement to a certain extent while generally remained stable, which was
mainly reflected in: stable operation in production, gradual reduction in cost and increasing production volume. During
the year, the Company completed the production of machine-made paper of 5.01 million tonnes, which increased by
more than 400,000 tonnes. The Company mainly implemented the following measures:
1. The Company fully implemented major measures at all levels of work. It strictly implemented the assessment
and appraisal measures, thereby promoting employees with excellent performance, improving the performance
of employees with poor performance or eliminating such employees. The Company also optimised and
amended management systems and controlling procedures, thereby making procedures more simple,
effective and easy to implement. The Company conducted comprehensive inspection and optimisation on
production procedures. Hence, the level of production scheduling, management and operation automation and
informationisation were improved.
2. The Company adjusted product structure, and focused on the production of products with high profit margin.
The Company also optimised the proportion of paper pulp, reduced chemical usage, and actively promoted
new technology and raw materials application. The Company strictly implemented production based on orders
made, scientific production and strict control over inventory, thus greatly reducing capital utilisation.
3. During the reporting period, the four major projects were put into production upon construction completion.
The projects in respect of membrane treatment for reclaimed water recycling in Shouguang, Huanggang and
Zhanjiang were put into production, which ensured clean water utilisation remaining basically steady while
adding new projects. The social and economic benefits were obvious.
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(IV) Strictly implementing corporate management
Corporate management is essential. In 2019, the Company further standardised its corporate management, which
mainly reflected in:
1. Basic management further improved: The Company improved its corporate system, making it more simple and
practical. The Company also developed several working procedures, and implemented online operation for
training examination and assessment, thus greatly improved efficiency. The Company strived to conduct regular
meetings and reschedule key work on weekly basis, thus ensure implementation of various works. Leveraging
the functions of different departments, the Company enhanced supervision and inspection, defined scope of
inspection for different departments, and conducted key inspection on several violations of laws and negligence
of duty, which posted deterrent effects of disciplining.
2. Team building was enhanced: Adhering to the philosophy of “eliminating employees that are lagged behind,
refusing mediocre employees, and incentivising talents”, the Company stimulated the vitality of its management
team. By introducing quality professions, the Company enriched its technology and management capability.
The Company refined standards and focused on appraisal, thus achieving better incentive effects. The
Company also proactively optimised remuneration system, and put greater efforts into offering incentives, which
significantly increased the motivation of senior management.
(V) Significant effects of supply chain management
The Company explored quality customers at source, and established strategic cooperation with quality major
suppliers, thereby stabilising supply channels of raw materials. The Company closely monitored market conditions,
kept an eye on market low, and maintained efficient source procurement. The Company greatly promoted the use
of corporate commercial notes and financial institution notes. The Company also put greater efforts in handling idle
equipment and overstock. While minimising the effects of tariff rise as a result of the trade war between China and the
United States, the Company timely optimised and adjusted import channels. The Company studied the new policy
of “Simplification of Administrative Procedures, Decentralization of Powers, Combination of Decentralization with
Appropriate Control, and Optimization of Services” implemented by the government, and established centralised
custom monitor model on group basis. Hence, the Company became the first pilot enterprise in Shandong Province.
2019 AnnuAl RepoRt 23
V Discussion and Analysis of Operations
II. Analysis of principal operations
1. Overview
Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2019 2018 Increase/
Amount % of revenue Amount % of revenue decrease
Total revenue 30,395,434,073.35 100% 28,875,756,163.56 100% 5.26%
By industry
Machine-made paper 25,911,568,864.47 85.25% 24,303,557,365.13 84.17% 6.62%
Financial leasing 1,815,459,714.28 5.97% 2,202,061,690.16 7.63% -17.56%
Construction materials 311,264,909.38 1.02% 288,669,257.79 1.00% 7.83%
Magnesite mining 278,633,403.31 0.92% 416,152,447.97 1.44% -33.05%
Electricity and steam 143,725,243.14 0.47% 154,541,407.23 0.54% -7.00%
Chemicals 126,550,115.28 0.42% 110,998,714.22 0.38% 14.01%
Others 1,808,231,823.48 5.95% 1,399,775,281.06 4.76% 29.18%
By product
Duplex press paper 7,728,877,039.07 25.43% 6,155,644,742.23 21.32% 25.56%
White paper board 6,908,899,578.15 22.73% 6,440,247,745.66 22.30% 7.28%
Coated paper 3,779,487,348.44 12.43% 4,697,177,229.03 16.27% -19.54%
Electrostatic paper 3,270,064,358.54 10.76% 2,404,374,935.48 8.33% 36.00%
Anti-sticking raw paper 1,238,578,315.18 4.07% 1,208,193,494.70 4.18% 2.51%
Household paper 620,993,038.46 2.04% 749,151,937.19 2.59% -17.11%
Other machine-made paper 2,364,669,186.64 7.78% 2,648,767,280.84 9.17% -10.73%
Financial leasing 1,815,459,714.28 5.97% 2,202,061,690.16 7.63% -17.56%
Construction materials 311,264,909.38 1.02% 288,669,257.79 1.00% 7.83%
Magnesite mining 278,633,403.31 0.92% 416,152,447.97 1.44% -33.05%
Electricity and steam 143,725,243.14 0.47% 154,541,407.23 0.54% -7.00%
Chemicals 126,550,115.28 0.42% 110,998,714.22 0.38% 14.01%
Others 1,808,231,823.48 5.95% 1,399,775,281.06 4.76% 29.18%
By geographical segment
Mainland China 26,788,134,394.76 88.13% 24,560,408,181.92 85.06% 9.07%
Other countries and regions 3,607,299,678.59 11.87% 4,315,347,981.64 14.94% -16.41%
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(2) Industries, products or regions accounting for over 10% of revenue or operating profit of the Company
√ Applicable □ Not applicable
Whether the Company needs to comply with the disclosure requirements of specific industries
No
Unit: RMB
Increase/decrease Increase/decrease of
Increase/decrease of operating costs gross profit margin as
of revenue as compared as compared to the compared to the
to the corresponding corresponding period corresponding period
Revenue Operating costs Gross profit margin period of the prior year of the prior year of the prior year
By industry
Machine-made paper 25,911,568,864.47 19,455,165,308.40 24.92% 6.62% 8.99% -1.64%
Financial leasing 1,815,459,714.28 119,934,602.87 93.39% -17.56% -28.56% 1.02%
By product
Duplex press paper 7,728,877,039.07 5,734,589,199.80 25.80% 25.56% 26.91% -0.79%
White paper board 6,908,899,578.15 5,755,130,694.57 16.70% 7.28% 6.67% 0.47%
Coated paper 3,779,487,348.44 2,722,530,177.96 27.97% -19.54% -20.09% 0.50%
Electrostatic paper 3,270,064,358.54 2,295,436,749.00 29.80% 36.00% 59.40% -10.30%
Anti-sticking raw
paper 1,238,578,315.18 846,933,499.50 31.62% 2.51% 16.32% -8.12%
Financial leasing 1,815,459,714.28 119,934,602.87 93.39% -17.56% -28.56% 1.02%
By geographical
segment
Mainland China 26,788,134,394.76 18,498,557,678.96 30.94% 9.07% 17.54% -4.98%
Other countries and
regions 3,607,299,678.59 3,275,326,606.43 9.20% -16.41% -20.27% 4.40%
Under the circumstances that the statistics specification for the Company’s principal operations data
experienced adjustment in the reporting period, the principal activity data upon adjustment of the statistics
specification as at the end of the reporting period in the latest year
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 25
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes □ No
Increase/
By industry Item Unit 2019 2018 decrease
Machine-made paper Sales ’ 0,000 tonnes 525 432 21.53%
Production output ’ 0,000 tonnes 501 457 9.63%
Inventories ’ 0,000 tonnes 24 48 -50%
Explanation on why the related data varied by more than 30%
√ Applicable □ Not applicable
As at the end of 2019, the inventories of machine-made paper decreased by 50% from 480,000 tonnes to
240,000 tonnes at the end of 2018, primarily due to that the Company strengthened internal management and
increased inventory turnover during the reporting period.
(4) Performance of material sales contracts of the Company during the reporting period
□ Applicable √ Not applicable
(5) Composition of operating costs
By industry
Unit: RMB
2019 2018 Increase/
By industry Item Amount % of operating costs Amount % of operating costs decrease
Machine-made paper Raw materials 11,895,067,318.85 61.14% 10,868,034,213.18 60.89% 9.45%
Chemicals 2,919,986,264.98 15.01% 2,809,021,253.78 15.74% 3.95%
Energy and power 2,258,151,625.63 11.61% 1,969,433,608.33 11.03% 14.66%
Depreciation 998,944,171.58 5.13% 803,728,940.46 4.50% 24.29%
Labour costs 302,162,995.36 1.55% 252,589,989.30 1.42% 19.63%
Other production costs 1,080,852,932.00 5.56% 1,147,065,909.50 6.43% -5.77%
Subtotal 19,455,165,308.40 100.00% 17,849,873,914.56 100.00% 8.99%
Power and steam Raw materials 93,231,639.91 81.42% 94,793,908.60 81.90% -1.65%
Depreciation 8,188,723.61 7.15% 8,307,708.78 7.18% -1.43%
Labour costs 3,266,996.70 2.85% 3,443,963.29 2.98% -5.14%
Energy and power 3,133,240.96 2.74% 2,875,214.19 2.48% 8.97%
Chemicals 201,122.01 0.18% 246,573.81 0.21% -18.43%
Other production costs 6,485,517.59 5.66% 6,072,545.25 5.25% 6.80%
Subtotal 114,507,240.78 100.00% 115,739,913.92 100.00% -1.07%
Construction materials Raw materials 186,642,183.80 73.98% 171,263,506.98 74.83% 8.98%
Energy and power 22,421,006.56 8.89% 21,374,540.73 9.34% 4.90%
Labour costs 15,055,767.95 5.97% 14,460,145.11 6.32% 4.12%
Depreciation 7,047,835.66 2.79% 6,626,767.96 2.90% 6.35%
Other production costs 21,130,132.76 8.38% 15,148,057.14 6.62% 39.49%
Subtotal 252,296,926.73 100.00% 228,873,017.91 100.00% 10.23%
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(6) Change of scope of consolidation during the reporting period
√ Yes □ No
During the reporting period, the scope of consolidation had 4 newly established subsidiaries, namely Shanghai
Sales Co., Ltd., Meilun (BVI) Limited, Guangdong Chenming Panels Co., Ltd. and Weifang Chenming Growth
Driver Replacement Equity Investment Fund Partnership (Limited Partnership).
During the reporting period, 3 companies were reduced from the scope of consolidation: The Company
disposed of 60% equity interest in Haicheng Haiming Mining Co., Ltd., 100% equity interest in Beijing Chenming
Meilun Technology Co., Ltd. and 100% equity interest in Wuxi Song Ling Paper Co., Ltd., and such companies,
was excluded from the scope of consolidation.
(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 Company
Total sales to top 5 customers (RMB) 3,193,575,635.94
Total sales to top 5 customers as a percentage of the total sales for the year 10.51%
Sales to top 5 customers who are related parties as a percentage of the total sales
for the year 0.00%
Information on top 5 customers of the Company
As a percentage
of the total sales
No. Name of customer Sales (RMB) for the year (%)
1 Customer A 1,004,528,563.37 3.30%
2 Customer B 737,221,427.15 2.43%
3 Customer C 534,837,371.02 1.76%
4 Customer D 484,962,677.88 1.60%
5 Customer E 432,025,596.52 1.42%
Total — 3,193,575,635.94 10.51%
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 4,006,266,255.83
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 18.40%
Total purchases from top 5 suppliers who are related parties as a percentage of the total
purchases for the year 0.00%
Information on top 5 suppliers of the Company
As a percentage of
the total purchases
No. Name of supplier Purchases (RMB) for the year (%)
1 Supplier A 1,264,301,570.06 5.81%
2 Supplier B 948,050,347.89 4.35%
3 Supplier C 678,659,115.97 3.12%
4 Supplier D 577,531,818.77 2.65%
5 Supplier E 537,723,403.14 2.47%
Total — 4,006,266,255.83 18.40%
2019 AnnuAl RepoRt 27
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
3. Expenses
Unit: RMB
Increase/
2019 2018 Decrease (%) Reasons for material changes
Selling and distribution 1,297,196,188.84 1,190,499,238.49 8.96% Mainly due to the increase in
expenses employee’s salary during the
General and 1,134,725,391.84 967,840,641.90 17.24% reporting period.
administrative
expenses
Finance expenses 2,916,029,154.37 2,741,486,438.03 6.37%
Research and 992,312,956.74 929,873,688.40 6.71%
development
expenditure
4. Research and development expenditure
√ Applicable □ Not applicable
The Company had been closely following the economic and market conditions in China and in the industry since
2019. Driven by customers’ demand with a view to enhancing economic benefits, the Company continued to put more
efforts into technical innovation, develop new products with high level of technology applied and more economic
benefits, and proactively enhance the research on product differentiation and refining. In particular, 5 R&D projects,
including the “technical development of bulk coated paper for sketching books” and the “technical development of
special coated paper for thermostat tags”, were listed on the technological innovative project plans of Shandong
Province. The Company also collaborated with Qilu University of Technology for industry-university innovation, and
their organised and declared “Key Technology and Application of Green Preparation of High Performance Wood
Chemical Pulp” was awarded the First Prize of Science and Technology Progress Award by the Ministry of Education.
The new products and new achievements including the “high-end social cardboard” and the “baby base paper” were
awarded three Excellent New Product and Outstanding Achievement Second Prizes in the 2019 Shandong Province
Technological Innovation Award. Meanwhile, the Company strengthened the protection of intellectual property rights.
In 2019, the Company applied for 19 patents and obtained 26 licences, which accelerated the restructuring of its
product mix and facilitated the corporate restructuring and upgrade.
Research and development expenditure of the Company
Percentage
2019 2018 of change
R&D headcount 1,925 1,863 3.33%
Ratio of R&D personnel 14.07% 12.26% 1.81%
R&D expenditure (RMB) 992,312,956.74 929,873,688.40 6.71%
R&D expenditure to revenue 3.26% 3.22% 0.04%
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
4. Research and development expenditure (Cont’d)
Reasons for significant change in total R&D expenditure to revenue
□ Applicable √ Not applicable
Reasons for and reasonableness of the significant change of the capitalisation rate of R&D expenditure
□ Applicable √ Not applicable
5. Cash flows
Unit: RMB
Increase/
Item 2019 2018 decrease (%)
Subtotal of c ash inflows from operating activities 41,633,562,986.95 39,069,129,483.14 6.56%
Subtotal of cash outflows from operating activities 29,400,855,764.01 24,969,427,596.10 17.75%
Net cash flows from operating activities 12,232,707,222.94 14,099,701,887.04 -13.24%
Subtotal of cash inflows from investing activities 1,135,086,731.00 2,785,950,020.88 -59.26%
Subtotal of cash outflows from investing activities 3,160,639,742.95 4,564,941,039.27 -30.76%
Net cash flows from investing activities -2,025,553,011.95 -1,778,991,018.39 -13.86%
Subtotal of cash inflows from financing activities 34,920,351,820.10 61,785,793,427.64 -43.48%
Subtotal of cash outflows from financing activities 44,407,779,477.64 74,638,951,528.02 -40.50%
Net cash flows from financing activities -9,487,427,657.54 -12,853,158,100.38 26.19%
Net increase in cash and cash equivalents 508,769,784.89 -422,850,131.94 220.32%
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 13.24% as compared to the corresponding period of the
prior year mainly due to decrease in the profit of the Company during the reporting period.
(2) Net cash flows from investing activities decreased by 13.86% as compared to the corresponding period of
the prior year mainly due to the disposal of the equity interest in Guangdong Dejun Investment Co., Ltd. by the
Company during the corresponding period of the prior year.
(3) Net cash flows from financing activities increased by 26.19% mainly due to less reduction of the Company’s
financing scale compared with the corresponding period of the prior year.
Explanation on reasons leading to the material difference between net cash flows from operating activities during the
reporting period and net profit for the year
√ Applicable □ Not applicable
The main reason is the continuous reduction of the scale of the Company’s financial leasing business, with net
recovery of proceeds of RMB5.9 billion.
III. Analysis of non-principal operations
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 29
V Discussion and Analysis of Operations
IV. Assets and liabilities
1. Material changes of asset items
As of the end of 2019 As of the beginning of 2019
As a As a
percentage percentage Percentage
Amount of total assets Amount of total assets change Description
Accounts receivable 2,525,083,311.03 2.58% 3,404,487,004.59 3.23% -0.65% Mainly due to the Company stepping up
its efforts to recover its receivables
and increased its account receivable
turnover rate.
Prepayments 603,573,549.08 0.62% 863,739,020.74 0.82% -0.20% Mainly due to the decrease of
the Company’s raw material
prepayment.
Inventories 4,774,430,110.81 4.87% 6,771,488,433.74 6.43% -1.56% Mainly due to the Company
strengthening internal management,
increasing inventory turnover and
reducing capital occupation.
Non-current assets due 6,974,539,613.30 7.12% 4,007,503,281.86 3.81% 3.31% Mainly due to the increase in lease
within one year receivables due within one year.
Other current assets 8,108,707,394.70 8.28% 10,281,312,825.13 9.76% -1.48% Mainly due to reduction of the scale of
the financial leasing business.
Long-term receivables 1,200,575,810.95 1.23% 7,926,610,770.86 7.53% -6.30% Increase in lease receivables due within
one year, and reclassified to non-
current assets due within one year.
Long-term equity 3,606,339,023.74 3.68% 484,674,282.77 0.46% 3.22% Mainly due to the increase in equity
investments investment of Nanyue Bank and
other companies in the current
period.
Construction in progress 5,476,122,928.95 5.59% 11,871,350,821.55 11.27% -5.68% Mainly due to the assets of Shouguang
Headquarters cultural paper
transformation project and the
Shouguang Meilun 510,000 tonne
high-end cultural paper project
and chemical pulp project being
transferred.
Other non-current assets 173,875,826.67 0.18% 1,522,493,129.66 1.45% -1.27% Mainly due to the obtaining of the Reply
on the Qualification of Shareholders
of Zhanjiang Chenming Pulp &
Paper Co., Ltd. (關於湛江晨鳴
漿紙有限公司股東資格的批復》
from the Guangdong Bureau of
China Banking and Insurance
Regulatory Commission during the
reporting period being approved
and transferred to long-term equity
investments.
Contract liabilities 968,082,063.13 0.99% 419,540,133.74 0.40% 0.59% Mainly due to the increase in
prepayment for the period.
Other payables 2,594,249,626.54 2.65% 1,777,718,017.48 1.69% 0.96% Mainly due to the increase infinancial
assistance provided by Chenming
Holdings to the Company during the
reporting period.
Other current liabilities 222,402,500.00 0.23% 2,816,956,481.68 2.67% -2.44% Mainly due to the repayment of the
matured short-term commercial
paper.
Bonds payable 1,258,270,909.49 1.28% 2,097,562,500.00 1.99% -0.71% Mainly due to the repayment of the
matured corporate bonds.
Other non-current 3,042,841,328.86 3.11% 2,047,948,069.73 1.94% 1.17% This is mainly due to the issue of
liabilities RMB1,200 million of medium-term
notes.
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IV. Assets and liabilities (Cont’d)
2. Assets and liabilities measured at fair value
√ Applicable □ Not applicable
Unit: RMB
Profit or loss Increase
from change in Cumulative fair Impairment in breeding Disposal
fair value during value change provided during during during
Item Opening balance the period charged to equity the period the period the period Closing balance
Consumable biological assets
measured at fair value 1,511,542,610.36 -19,752,911.94 41,743,320.41 79,652,771.18 30,437,836.18 1,541,004,633.42
Whether there were any material changes on the measurement attributes of major assets of the Company during the
reporting period
□ Yes √ No
3. Restriction on asset rights as at the end of the reporting period
Carrying amount
as at the end
Item of the year Reasons for such restriction
Other monetary funds 16,176,241,805.78 As deposits for bank acceptance bills and letters of credit, and
deposit reserves
Bills receivable/Accounts 152,714,290.24 As collateral for letters of guarantee and letters of credit
receivable financial
Fixed assets 10,573,696,190.50 As collateral for bank borrowings and long-term payables
Intangible assets 880,676,428.58 As collateral for bank borrowings and long-term payables
Investment properties 4,519,487,976.25 As collateral for bank borrowings
Total 32,302,816,691.35
2019 AnnuAl RepoRt 31
V Discussion and Analysis of Operations
V. Investments
1. Overview
√ Applicable □ Not applicable
Investments during the
Investments during the corresponding period
reporting period (RMB) of prior year (RMB) Change
3,601,194,479.24 6,770,571,000.00 -46.81%
2. Material equity investments during the reporting period
√ Applicable □ Not applicable
Unit: RMB
Progress as Profit or l ss Date of
Form of Investment Source of Period of at the date of Estimated from i vestment Involvement disclosure Disclosure i dex
Name of i vestee Principal activ t es i vestment amount Sharehold ng fund Partner(s) i vestment Product type balance sheet return for the period i l wsuit (if any) (if any)
Huanggang Chenming Pulp production and paper Capital 1,000,000,000.00 100% Self-owned Subsid ary 26 September 2008 Pulp, cogeneration Completed — -146,423,436.09 No 22 January 2019 http://www.cninfo.com.cn
Pulp & Paper making i crease funds – 26 September project, viscose
Co., Ltd. 2058 fibre and anci l ry
chemicals
Shanghai Pulp & Paper Sales of pulp and paper Newly 100,000,000.00 100.00% Funds Whol y-owned 29 January Sale of pulp Completed — 20,463,811.04 No 22 January 2019 http://www.cninfo.com.cn
Sales Co., Ltd. products establ shed subsid ary 2019 – products
Long-term
Weifang Chenming Equity i vestment Newly 158,000,000.00 79% Self-owned Weifang Hengxin Capital 7 March 2019 – Equity i vestment, Incomplete — 319,602.78 No 7 March 2019 http://www.cninfo.com.cn
Growth Driver establ shed funds Management Co., 6 March 2026 i vestment
Replacement Equity Ltd., Weifang Financia consultancy
Investment Fund Hold ng Group Co., business
Partnership (Lim ted Ltd., Shouguang Jintou
Partnership) Asset Management
Co., Ltd. and Chenming
(Qingdao) Asset
Management Co., Ltd.
Guangdong Nanyue Banking financia services Acquis t on 2,333,194,479.24 16.62% Self-owned Guangdong Nanyue 5 May 2018 – no Banking financia Incomplete — 364,597,001.77 No 19 December 2019 http://www.cninfo.com.cn
Bank Co., Ltd. funds Bank Co., Ltd., China fixed deadl ne services
Del x Hold ng Group
Co., Ltd., Shandong
Hexin Chemical Group
Co., Ltd., Chib Chenl
Paper Co., Ltd., Foshan
Nanhai Quanhui Metal
Materia s Trading Co.,
Ltd.
Guangdong Chenming Production and sales of panels Newly 10,000,000.00 100.00% Self-owned A whol y-owned Long-term Chipboard, furniture, Completed 1,154,263.89 No Not appl cable Not appl cable
Panels Co., Ltd. establ shed funds subsid ary wood products
(廣東晨鳴板材有限責任
公司)
Total — — 3,601,194,479.24 — — — — — — — 240,111,243.39 — — —
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
V. Investments (Cont’d)
3. Material non-equity investments during the reporting period
√ Applicable □ Not applicable
Unit: RMB
Accumulated
Industry in Accumulated realised
which the Investment actual return as of Reasons for
Fixed assets investment amount amount invested the end of failure in meeting
Form of investment or project during the as of the end of the reporting scheduled progress Date of
Project name investment not operates reporting period reporting period Source of fund Progress Estimated return period and estimated return disclosure Disclosure index
Chemical pulp Self- Yes Pulp 102,758.38 460,184.46 Self-owned funds 100% RMB400 mi l on/year — Tria production 2 August 2013 http://www.cninfo.com.cn
project i constructed production and borrowings phase
Huanggang
Total — — — 102,758.38 460,184.46 — — — — — — —
4. Financial asset investment
(1) Security investments
□ Applicable √ Not applicable
The Company did not have any security investments during the reporting period.
(2) Derivatives investments
□ Applicable √ Not applicable
The Company did not have any derivative investments during the reporting period.
5. Use of proceeds
□ Applicable √ Not applicable
The Company did not use any proceeds during the reporting period.
2019 AnnuAl RepoRt 33
V Discussion and Analysis of Operations
VI. Disposal of material assets and equity interest
1. Disposal of material assets
□ Applicable √ Not applicable
2. Disposal of material equity interest
√ Applicable □ Not applicable
Net profit Net profit
contribution to contribution to
the Company the Company Carried out on
from the on equity schedule or
beginning of the disposal Relevant not, i not, the
Transaction period up to the as a percentage Pric ng basis of Related party Relationship asset tit e ful y reasons and
Equity i terest consideration disposal date Effect of disposal on the of total net disposal of equity transaction or with transferred or measures taken
Counterparty(ies) disposed of Disposal date (RMB’0,000) (RMB’0,000) Company profit (%) i terest not counterparty(ies) not by the Company Disclosure date Disclosure i dex
Jiangsu Fuda Haicheng Haim ng 31 August 42,100.00 3,829.45 Benefic a for resources 7.35% Appraised value No Not related party Yes Transfer 9 August 2019 http://.wwwcninfo.com.cn
Enterprise Min ng Company 2019 i tegration of the Company, completed
Investment Lim ted asset portfol o optim sation,
Co., Ltd. and concentration of
competit ve edges on
princip e businesses
to i prove qual ty and
effic ency.
VII. Analysis of major subsidiaries and investees
√ Applicable □ Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMB
Name of company Type of company Principal activities Registered capital Total assets Net assets Revenue Operating profit Net profit
Zhanjiang Chenming Subsidiary Production and sale of duplex 5,550,000,000.00 24,415,081,134.28 8,955,402,187.59 10,405,501,722.56 944,692,174.89 1,210,677,444.05
Pulp & Paper Co., press paper, electrostatic
Ltd. paper, and white paper board
Shandong Chenming Subsidiary Financial services 5,000,000,000.00 13,533,122,320.21 5,587,449,519.99 493,267,441.06 315,799,274.74 278,016,515.92
Group Finance
Co., Ltd.
Shouguang Meilun Subsidiary Production and sale of coated 3,261,000,000.00 21,624,765,003.88 5,390,385,684.21 5,199,154,922.05 237,079,007.60 264,128,840.64
Paper Co., Ltd. paper, cultural paper,
household paper and chemical
pulp
Shandong Chenming Subsidiary Financial leasing 5,872,000,000.00 17,078,476,784.93 9,965,490,962.02 1,867,418,251.74 365,560,396.41 326,022,791.24
Financial Leasing
Co., Ltd.
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees (Cont’d)
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ Not applicable
Methods to acquire and
dispose of subsidiaries during Impact on overall production
Name of company the reporting period and operation and results
Shanghai Pulp & Paper Sales Co., Ltd. Newly established Net profit increased by RMB20.46 million.
Meilun BVI Co., Ltd. Newly established Net profit increased by RMB4.97 million.
Guangdong Chenming Panels Co., Ltd. Newly established Net profit increased by RMB1.15 million.
Weifang Chenrong New and Old Kinetic Newly established Net profit increased by RMB0.32 million.
Energy Conversion Equity Investment
Fund Partnership (Limited Partnership)
Haicheng Haiming Mining Co., Ltd. Transfer of 60% equity interest Net profit increased by RMB121.7502
million.
Beijing Chenming Meilun Technology Transfer of 100% equity interest Net profit increased by RMB4.992 million.
Co., Ltd.
Wuxi Song Ling Paper Co., Ltd. Transfer of 100% equity interest Net profit increased by RMB5.3176 million.
Particulars of major subsidiaries and investees
1. For the integrated forestry, pulp and paper project of Zhanjiang Chenming, the gross profit margin of its main
products, electrostatic paper and culture paper, reached a high level, showing strong profitability.
2. The Finance Company, as the financial institution serving the Group’s companies, saved financial costs for the
Company and recorded sound profitability.
3. Shouguang Meilun is responsible for the production and sales of coated paper and culture paper, and its profitability
will further improve after its 1,000,000 tonne chemical pulp project commences operation.
4. The Financial Leasing Company strengthened its business management with stable profitability.
VIII. Structured entities controlled by the Company
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 35
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company
(I) Competition overview and development trend of the industry
China is the world’s largest producer of paper and board, as well as the world’s largest consumer. Despite the
strong overall demand, the concentration of the domestic paper making industry is still significantly lower than that
of developed countries in Europe and the United States. With reference to the historical development and current
situation of the paper making industry in developed markets such as Europe and the United States, the domestic
paper making enterprises still enjoy economies of scale. However, the supply of pulp, a raw material, is an obvious
shortcoming which prevents a paper making behemoth to emerge in China.
On the other hand, the supply-side reform prompts the market to phase out outdated production capacity and
accelerate the elimination of redundant production capacity. With the implementation of more stringent environmental
protection measures, the licensing system for pollutant discharge and the external waste control policy, the pollution
control of the paper making industry is strengthened from various aspects. Relevant policies on the supply side of the
industry remained tight in 2019. Due to continuous investments in environmental protection and advantages in raw
material cost and production scale, large factories will become more competitive, which can promote the centralised
management and scale of enterprises, and accelerate the concentration of production capacity.
With the completion of the pulp and paper integration strategy, the Company’s self-sufficiency rate of wood pulp
will be further increased, which will reduce production costs significantly, address the constraints of raw materials,
enhance the core competitiveness of the Company, and provide strong support and safeguarding for the Company’s
future development.
(II) Development strategy
The Company will adhere to the main theme of emphasising on environmental protection, low carbon, recycling and
sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific development
and quality and efficiency enhancement, the Company will comprehensively improve its quality and efficiency,
management level, technology application, sense of happiness and brand image through the incorporation of smart
technology into its industrial activities, reorganised methodology and restructuring so as to expand and improve itself
and strive to become one of the world-class companies with the highest growth rate.
Transformation and upgrade strategy: The Company will comprehensively improve the industrial structure and regional
layout; emphasise on the development of its leading businesses, namely, among other things, pulp production, paper
making and forestry; and construct an efficient industrial system with synergies.
Green development strategy: Remaining steadfast in the operation philosophy of “pulp and paper integration”; with
technical progress, advanced equipment and strict and prudent management, the Company will promote clean
production and recycling economy, become a low-energy consumption and environmentally-friendly enterprise. The
Company seeks for development while protecting the environment and maintains higher environmental protection
standards while seeking for scientific development, thus achieving a “win-win” situation in economic development
and environmental protection.
International operation strategy: The Company, based in China with a global reach, will follow the national strategy of
the “Belt and Road” initiative, accelerate its pace of “going global”, reinforce global exchanges and communication
and gradually expand its overseas market.
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(II) Development strategy (Cont’d)
Operational excellence strategy: By adhering to the management policy of “efficient management, structural
adjustment, market development and risk control”, the Company will constantly heighten its whole process
management including production and operation, marketing, financial costs and project construction, effectively
integrate its systems and resources, and strive to upgrade the Company’s management capacity and profitability.
Strengthening the Company through talent strategy: By improving talent development, introduction, application and
incentive mechanisms, and nurturing high-end, versatile, innovative and international talents, Chenming will become
one of the world-class companies with the highest growth rate.
Harmonious development strategy: By comprehensively enhancing enterprise culture building, caring for the
employees, acting on its corporate social responsibilities, and elevating its integrated value-creating ability in terms of
economy, society and environment, Chenming will create a positive corporate image for itself and strive to become a
harmonious enterprise.
(III) Operation plans for 2020
2020 is a turning point year for the development of the Company. Through cultivating the new operating philosophy
of “maintaining steady operation and quality development” across the Company, adhering to the working direction of
“innovating management, strengthening skills, making major breakthroughs, and persevering”, and carrying forward
its corporate style of “tackling problems once discovered”, the Company will focus on fundamental management, fully
enhance corporate management and strive to create a new chapter for quality corporate development. The specific
measures are as follows:
1. Further enhance financial segment management
Firstly, the Company will enhance credit management and deepen its cooperation with banks, especially the
cooperation with policy banks, state-owned banks and joint-stock banks. Secondly, the Company will optimise
financing structure, reduce gearing ratio, implement debt-to-equity swaps and GDR Fund, and continue to
reduce the scale of the financial leasing business. Thirdly, the Company will enhance capital plan management,
thereby improving capital utilisation efficiency. Fourthly, the Company will strengthen team building and training,
recruit talents, and broaden financing channels, thus improving business standard of the whole team and
ensuring orderly performance of various works.
2. Further improve sales quality
Adhering to the new operation management concept of “achieving targets, setting time schedule, defining
responsibility, and focusing on implementation”, the Company will enhance scheduling functions, improve
business skills, optimise appraisal incentives, and further revitalise initiative of all employees. Firstly, the
Company will optimise appraisal allocation, define appraisal directions, and conduct appraisal on key indicators.
Secondly, the Company will improve the scheduling standards, and treat 3-level scheduling mechanism as
an important mean for business enhancement indicator. Thirdly, the Company will focus on key businesses,
further facilitate the plant-trader-bank business, and increase business cooperation. Fourthly, the Company will
strengthen team building, and duly conduct talent appraisal and allocation. Fifthly, the Company will increase
training on risk and legal knowledge, thereby enhancing risk control capability.
2019 AnnuAl RepoRt 37
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2020 (Cont’d)
3. Further enhance production management level
For production system, the Company will strictly implement the concept of “stabilising operation, increasing
production capability, improving quality and reducing costs”. The Company will focus on basic management,
and improve skills of its employees, thus ensuring significant improvement in production management
standards. Firstly, the Company will strengthen its basic management, strictly control management at different
levels of the Company, and define scope of duty. Secondly, the Company will follow the standards of leading
international peers. Through enhancing the level of automation and informationisation of equipment, the
Company will consolidate job duties, thereby reducing labour cost. Thirdly, the Company will strengthen
business skills, and focus on training on production operation, cost auditing, production quality, paper printing
and other aspects. Fourthly, the Company will strengthen its safety and environmental friendly works, enhance
operation and management of environmental friendly equipment, and strictly conduct hazard inspection,
ratification and assessment, thus ensuring zero environment-related accident. Fifthly, the Company will focus
on effective management, optimise product portfolio, and produce high value-added products.
4. Further improve corporate management efficiency
Targeting on current management problems, we will adhere to the management philosophy of “strengthening
fundamentals, strictly focusing on appraisal, enhancing skills and coordinating services”, and fully enhance
the level of corporate management. Firstly, the Company will focus on basic management, and conduct
comprehensive optimisation on corporate systems, aiming to achieve simple, effective management. Secondly,
the Company will improve appraisal and incentive mechanism, and optimise the performance appraisal
measures for different business units. Thirdly, the Company will strengthen service coordination, enhance
employees’ awareness on management coordination, and conduct works actively and in a responsible manner.
Fourthly, the Company will introduce talents and enhance its staff trainings.
5. Further enhance supply chain management
Adhering to the supply chain management philosophy of “strengthening fundamentals, improving skills,
maintaining effective services, and reducing costs while enhancing efficiency”, the Company will focus on
supply chain construction, expand business scope and improve service quality, thus creating benefits. Firstly,
the Company will enhance basic management, and put greater efforts on facilitating procurement information
system construction, thereby effectively establish standardised procurement management system. Thirdly, the
Company will innovate procurement model. It will conduct supply chain financing business cooperation with
financial institutions, give play to core corporate scaling edges, and enhance competiveness of supply chain.
Fourthly, the Company will control key business, focus on procurement at source, optimise supplier team and
procurement channels, and reduce procurement cost. Fifthly, the Company will enhance logistic management,
and expand multi-model transportation business. Leveraging the edges on self-owned resources, the Company
will explore in-depth logistic cooperation.
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(IV) Future capital requirements, source of funds and plan for use
The Company has established itself as a large conglomerate principally engaged in pulp production and paper making
with synergistic development in finance, forestry, logistics and construction materials. With the further development of
the existing principal businesses of the Company, the future capital requirements of the Company will be: consistent
investment in the existing production facilities because of technological transformation or production expansion; and
business expansion and general working capital requirements.
In order to meet the business development requirements of the Company and further extend and expand the industry
chain, the Company will establish diversified financing channels, enhance credit management, deepen cooperation
with banks and increase the proportion of refinancing. The Company will also enrich its financing channels and
improve its debt structure through diversified financing channels such as corporate bonds, perpetual bonds,
short-term commercial paper, cross-border financing, GDR Fund and introduction of third-party strategic investors,
thus providing stable financial support for the operation and development of the Company.
(V) Risk factors likely to be faced and the measures to be taken
1. Policy risk
Paper making industry is a basic raw materials industry and its growth has been faster than the average
growth of the national economy in recent years. However, the paper making industry’s profitability is closely
correlated to the economic cycle, and the industry is therefore a cyclical industry fluctuating with the national
macroeconomic performance, which will further affect the profitability of the Company.
Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
will comprehensively improve its industrial structure and regional layout through incorporation of smart
technology into its industrial activities. The Company will emphasise on the development of leading businesses
including pulp production and paper making, so as to construct an efficient industrial system with synergies.
2. Market fluctuation risk
With the rapid growth of the national economy, economic globalisation and China’s accession to the WTO,
China’s paper making industry has been facing increasingly fierce competition. Leveraging on the strength and
capital accumulated over the years, domestic enterprises have further expanded their size and improved their
technological levels and product quality. Well-known paper making enterprises overseas have also directly set
up production bases in China through sole proprietorship or joint ventures so as to participate in the domestic
market competition by virtue of their advantages in size and technology. Besides, tariff reduction on China after
accession to the WTO has also further intensified the impact on the international market.
Hence, the Company will strive to enhance the quality of paper products and achieve the target of establishing
a layout for high-end paper industry so as to increase the proportion of high-end paper. In recent years,
the Company has been expanding its business size while optimising its product mix and has set up a few
production lines for high-end paper. A diversified and high-end product mix enables the Company to spread
market risk and strengthen the resistance towards market volatility. Besides, as high-end products have better
profit margins, the Company can increase the proportion of high-end products through consistent improvement
in product mix, thereby enhancing its profitability and comprehensive competitiveness.
2019 AnnuAl RepoRt 39
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
3. Risk of overcapacity and slowdown in demand
Overcapacity is a prominent problem in the paper making and paper product industry in China such that
there has been fierce competition among enterprises. Since 2013, affected by slowdown in macroeconomic
growth, the demand in paper making industry has been weak. At the same time, China has been encouraging
energy conservation and emission reduction. The outdated production capacity will be phased out, and thus
the new projects will be on a large scale. By virtue of the economies of scale in the paper making industry,
the production capacity of individual paper making projects which are under construction or planning for
construction in China is large, which affects the demand and supply relationship in the whole paper making
industry.
Hence, the Company will make advancements in equipment and technological level, expand its product mix,
improve the grading of products and focus on the research and development of high-end products so as to
improve competitiveness.
4. Risk of price fluctuation of raw materials
Wood pulp is a major raw material in the Company. The market price of wood pulp fluctuates significantly.
The market price fluctuation of raw material has significantly affected the production costs of the Company. In
addition to intensified market competition resulting from surging capacity in the industry in recent years, the
increases in prices of a number of paper products were not in line with the increases in prices of raw materials.
The market price fluctuation of raw materials will have an impact on the performance of the Company.
Hence, the Company will remain steadfast in the pulp and paper integration development path and focus
on the construction of the Zhanjiang Chenming pulp project, the Huanggang Chenming pulp project and the
Shouguang Meilun chemical pulp project, thereby eliminating the limitations of raw materials on the Company’s
development and enhancing the Company’s sustainable development.
5. Risk of change in environmental protection policies
China has been raising the standards for environmental protection in recent years. More stringent environmental
protection policies have been implemented in the paper making industry with successive implementation of
environmental inspections and licensing system for pollutant discharge. A multi-pronged approach has been
adopted to promote industrial restructuring, and the paper making industry has entered into an important
transitional period of development. A higher emission standard is bound to increase the environmental
protection costs in the industry and a high entry standard may result in the slowdown of scale expansion.
The Company always strives to achieve harmonious development with energy conservation and emission
reduction. The Company will endeavour to develop the recycling economy through waste exchange and
recycling and strive to maximise its resource utilisation. Meanwhile, the Company will make greater efforts
to construct environmentally friendly projects and strive to achieve its waste emission target. At present, the
Company adopts the world’s most advanced “ultrafiltration membrane+reverse osmosis membrane” technology
to complete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate
reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save fresh
water every day 170,000 cubic meters.
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
6. Risk on financial leasing business
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
payment 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 provision
as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be
exposed to risk of bad debts.
The stringent risk management measures of Chenming Leasing provide comprehensive risk prevention and
management for the Company’s projects. Besides, the Company has strong risk resistance and low risk of
default. Chenming Leasing will strengthen risk management so as to enhance risk resistance and maintain
high-quality services.
At present, Financial Leasing Company has changed its general operation strategies and continued to reduce its
business scale. Its business scale has reduced to approximately RMB13.6 billion, with net recovery of proceeds
of RMB5.9 billion realized in 2019, which effectively put risk exposures under control.
X. Reception of research investigations, communications and interviews
1. Reception of research investigations, communications and interviews during the reporting period
□ Applicable √ Not applicable
During the reporting period, the Company did not conduct any research investigation, communication or interview.
2019 AnnuAl RepoRt 41
VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2019.
I. Principal activities
Please refer to section IV “Business Overview”, and “I. Principal operations of the Company during the Reporting Period”
and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
activities of the Company.
II. Results and profit distribution
Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2019.
III. Dividends
After the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2019 (“final
dividend”) of RMB1.5 in cash for every 10 Shares (tax inclusive) (2018: dividend of RMB2.4 in cash for every 10 Shares (tax
inclusive)) to the ordinary shareholders of the Company, subject to approval of shareholders at the forthcoming Annual
General Meeting (“AGM”) of the Company held on 19 June 2020. Upon approval of shareholders of the Company at the
AGM, the Company is expected to pay the final dividend on or by 19 August 2020 to shareholders whose names appear on
the register of members of the Company on 24 June 2020.
In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008,
where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
enterprise shareholders, it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.
Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of final dividends as corporate income
tax, distribute the final dividends to non-resident enterprise shareholders, i.e. any shareholders who hold the Company’s
Shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, or other
nominees, trustees, or holders of H Shares registered in the name of other organisations and groups.
Due to changes in the PRC tax laws and regulations, according to the Announcement on the List of Fully and Partially
Invalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation 《關於公佈全文失效廢止 ﹑
部份條款失效廢止的稅收規範性文件目錄的公告》 on 4 January 2011, individual Shareholders who hold the Company’s H
Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer and
Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals
(Guo Shui Fa [1993] No. 045) 《關於外商投資企業 ﹑ 外國企業和外籍個人取得股票（股權) 轉讓收益和股息所得稅收問題的通
知》(國稅發[1993]045號)) issued by the State Administration of Taxation, whilst pursuant to the letter titled Tax Arrangements
on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to the issuers on 4
July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax after the Repeal of
Guo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) 《國家稅務總局關於國稅發
[1993]045號文件廢止後有關個人所得稅徵管問題的通知》(國稅函[2011]348號)), it is confirmed that the overseas resident
individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong Kong are entitled to
the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the countries where
they reside and the PRC or the tax arrangements between the PRC and Hong Kong (Macau). Therefore, the Company will
withhold 10% of the dividend as individual income tax, unless it is otherwise specified in the relevant tax regulations and tax
agreements, in which case the Company will withhold individual income tax of such dividends in accordance with the tax
rates and according to the relevant procedures as specified by the relevant regulations.
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
IV. Closure of register of members
The register of members of the Company will be closed from 12 June 2020 (Friday) to 19 June 2020 (Friday), (both days
inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
vote at the annual general meeting to be held on 19 June 2020 (Friday), all share transfer documents accompanied by
the 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 Road
East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 11 June 2020 (Thursday).
V. Five-year financial summary
Please 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 five
financial years.
VI. Donations
During the year, the Company donated RMB11,947,836.00 (2018: RMB8,740,500.00) to non-profit making organisations.
VII. Subsidiaries
Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
and “XX. Matters of significant of subsidiaries of the Company” under section VII “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 XIII “Financial Report” for the details
of changes in property, plant and equipment of the Group for the year ended 31 December 2019.
IX. Share capital
Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2019.
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.
2019 AnnuAl RepoRt 43
VI Directors’ Report
XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
December 2019, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB9,792,126,677.35 (2018: RMB9,530,159,552.96) as set out in “II. Financial
Statements 1. Consolidated Balance Sheet” under section XIII “Financial Report”.
XII. Directors
As at 31 December 2019, the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Hu Changqing
Mr. Li Xingchun
2. Non-executive Directors
Mr. Han Tingde
Mr. Li Chuanxuan
3. Independent Non-executive Directors
Ms. Yin Meiqun
Mr. Yang Biao
Mr. Sun Jianfei
According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been
elected at the general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for
another term upon expiry of tenure.
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XIII. Directors’ service contracts
All Directors have entered into service contracts with the Company for a term from 11 June 2019 to 11 June 2022.
None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
payment of compensation other than statutory compensation.
XIV. Directors and Senior Management’s remuneration and the five highest paid individuals
Details of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/and
its subsidiaries are set out in “V. Personnel of the Company” in section X “Directors, Supervisors and Senior Management
and Staff” and “XII Related parties and related party transactions” in section XIII “Financial Report”.
In 2019, the Company had 22 Senior Management members in total, which included directors, supervisors and the Senior
Management. The remuneration of the Senior Management falls within the following ranges:
Range of remuneration (RMB) Number
4.8 million to 5.2 million 2
3.6 million to 4.0 million 0
3.2 million to 3.6 million 0
2.8 million to 3.2 million 1
2.4 million to 2.8 million 1
2.0 million to 2.4 million 2
1.6 million to 2.0 million 3
1.2 million to 1.6 million 0
0.8 million to 1.2 million 2
Below 0.8 million 21
XV. Independent Non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for the
year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
be independent during the year.
2019 AnnuAl RepoRt 45
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives
As at 31 December 2019, 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 out
as follows:
Associated corporations
Number of shares
(A shares) held
as at the end of
the reporting period
Name Position (shares)
Directors
Chen Hongguo (Note 1) Chairman 11,080,044
Hu Changqing Executive Director and Vice Chairman 42,857
Li Xingchun Executive Director and Vice Chairman –
Han Tingde Non-executive Director –
Li Chuanxuan Non-executive Director –
Sun Jianfei Independent non-executive Director –
Yin Meiqun Independent non-executive Director –
Yang Biao Independent non-executive Director –
Supervisors
Li Dong Supervisor 75,000
Pan Ailing Supervisor –
Zhang Hong Supervisor –
Li Xinggui Supervisor –
Qiu Lanju Supervisor –
Associated corporations
Number of shares
held at the Number of shares
beginning of the held at the end
Name of associated reporting period Change during of the reporting
Name Position corporations (shares) the period +/- period (shares)
Chen Hongguo Chairman Shouguang Henglian 231,000,000 — 231,000,000
Enterprise Investment
Co. Ltd. (Note 2)
Note 1: Save for the 11,080,044 A shares held personally, Chen Hongguo is deemed to be interested in the 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.
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives (Cont’d)
Save as disclosed above, as at 31 December 2019, none of the Directors, Supervisors or chief executives of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
352 of the SFO or which were required to be notified to the Company and Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
the Listing of Securities on Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 31 December 2019, none of the Directors, Supervisors or chief executives or their respective spouses or children
under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
associated corporations.
XVII. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2019, the following shareholders (other than the Directors, Supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Number of Approximate shareholding
Name shares held (shares) as a percentage of
Total share Class of
capital (%) shares (%)
Chenming Holdings Co., Ltd. 445,396,128 A shares (L) 15.33 26.67
Chenming Holdings (Hong Kong) Limited 210,717,563 B shares (L) 7.25 29.83
Chenming Holdings (Hong Kong) Limited 153,414,000 H shares (L) 5.28 29.04
The National Social Security Fund Council 40,614,750 H shares (L) 1.40 7.69
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above, as at 31 December 2019, no other person had interests or short positions in the Company’s
shares 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 “V. Personnel of the Company” under section X “Directors, Supervisors and Senior Management and Staff”, 2.
(8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V “Discussion and
Analysis of Operations” for details of the relationship between the Company and its employees, customers and suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
period. The Company did not have any indemnity provision in favour of any Director.
2019 AnnuAl RepoRt 47
VI Directors’ Report
XX. Interests in competing business
None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
likely to compete with the businesses of the Company and any of its subsidiaries.
XXI. Directors’ rights to purchase shares or debentures
At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors
to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
XXII. Preference shares
Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.
XXIII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed in 2019.
XXIV. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
of the Company” under section V “Discussion and Analysis of Operations” for details of major risk factors of the Company.
XXV. Material matters
Please refer to section VII “Material Matters” for details of material matters of the Company.
XXVI. Future development
Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
plan for 2020” and “(IV) Future capital requirements, source of funds and plan for use” of “IX. Outlook on the future
development of the Company” under section V “Discussion and Analysis of Operations” for details of future development of
the Company.
XXVII. Environment, social and governance report and social responsibility
Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
responsibility. Please refer to the environment, social and governance report as required by the Hong Kong Listing Rules,
which will be issued separately by the Company before 29 June 2020.
XXVIII. Purchase, sale and redemption of shares
The Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting
period.
XXIX. Sufficiency of public float
During the reporting period, based on the information that is publicly available to the Company and within the knowledge of
the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
Listing Rules.
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Directors’ Report
XXX. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2019 has been reviewed by
the Audit Committee of the Company.
XXXI. Gearing ratio
As at 31 December 2019, the Company’s gearing ratio (including minority interest) was 62.16%, representing a decrease
of 0.45% from 62.61% for 2018, mainly due to the increase of long-term borrowings and short-term borrowings of the
Company.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXII. Going Concern Basis
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic
development in finance, forestry, logistics and construction materials. It is also the first company in the paper making
industry to own a financial company, as well as the only listed company in China with three types of shares in issue, namely
A shares, B shares and H shares. The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and
others, which deliver annual pulp and paper production capacity of over 11,000,000 tonnes.
The Company has good sustainable profitability. In 2019, the Company achieved revenue of RMB30,395 million, net profit
of RMB1,753 million and net cash inflows from operating activities of RMB41,634 million. Meanwhile, the Company always
places emphasis on the interests of and return to shareholders, and has paid generous cash dividends for several years.
With the commencement of operation of several major pulp production projects during and subsequent to the reporting
period, the future performance of the Company is worth looking forward to.
The auditor of the Company has prepared the 2019 annual financial report on a going concern 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.
XXXIII. Connected Transactions
During the year ended 31 December 2019, the Group did not conduct any connected transaction as defined in the Listing
Rules of the Stock Exchange.
2019 AnnuAl RepoRt 49
VI Directors’ Report
XXXIV. Major Investment, Acquisition and Disposal
During the year ended 31 December 2019, the Group entered into the following major transaction agreements.
1. Entering into of limited partnership agreement for the establishment of investment fund
On 6 March 2019, the Company (as a limited partner) has entered into the Limited Partnership Agreement with
Chenming (Qingdao) Asset Management Co., Ltd. (as the general partner), Weifang Hengxin Capital Management
Co., Ltd. (as a limited partner), Weifang Financial Holding Group Co., Ltd. (as a limited partner) and Shouguang Jintou
Asset Management Co., Ltd. (as a limited partner) for the establishment of the investment fund. For details, please
refer to the announcements of the Company dated 6 March 2019 and 10 March 2019.
2. Disposal of 60% equity interest in Haicheng Haiming Mining Company Limited
On 16 August 2019 (after trading hours), the Company and Jiangsu Fuda Enterprise Investment Company Limited
entered into the Equity and Loan Transfer Agreement, pursuant to which, the Company conditionally agreed to
sell, and Jiangsu Fuda Enterprise Investment Company Limited conditionally agreed to acquire the 60% equity
interest in aggregate in Haiming Mining held by the Company and the loan due from Haiming Mining amounting to
RMB1,527,670,000 in aggregate held by the Company at a total consideration of RMB1,948,670,000. For details,
please refer to the announcements of the Company dated 19 August 2019, 21 August 2019 and 3 September 2019.
3. Progress of major transaction: the subscription of shares in Guangdong Nanyue Bank Co., Ltd. and
the share transfer of Guangdong Nanyue Bank Co., Ltd.
The industrial and commercial registration of 356,000,000 shares in Guangdong Nanyue Bank Co., Ltd. subscribed by
Zhanjiang Chenming Pulp & Paper Co., Ltd. under private placement has completed. The Guangdong Bureau of China
Banking and Insurance Regulatory Commission issued the Reply on the Qualification of Shareholders of Zhanjiang
Chenming Pulp & Paper Co., Ltd. (Yue Yin Bao Fu [2019] No. 1002)《關于湛江晨鳴漿紙有限公司股東資格的批復》(粵銀
保監複[2019]1002 號)), approving the transfer by Zhanjiang Chenming of 953,405,634 shares of Nanyue Bank held by
certain shareholders including China Delixi Holding Group Co., Ltd. (中國德力西控股集團有限公司). For details, please
refer to the announcement of the Company dated 18 December 2019.
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital
Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
cash dividend during the reporting period
√ Applicable □ Not applicable
The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
of the small shareholders were fully protected as the related decision-making process and mechanism were in place,
the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
opportunities to sufficiently voice their opinion and make requests.
Implementation of the 2018 profit distribution plan for ordinary shareholders: Based on the number of the ordinary shares
as at the dividend distribution registration date of 2,904,608,200 shares, a cash dividend of RMB2.4 (tax inclusive) was paid
to ordinary shareholders for every 10 shares held and there was no increase of share capital from reserves. The total cash
dividend distributed amounted to RMB697,105,968. The dividend distribution was implemented and completed on 9 August
2019. For details, please refer to the Payment of Final Dividend and Withholding and Payment of Enterprise Income Tax for
Non-resident Enterprise Shareholders published on Hong Kong Stock Exchange on 4 August 2019, and the Announcement
on the Implementation of the 2019 Profit Distribution Plan for A Shares and B Shares published on CNINFO on 5 August
2019.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association and the resolutions of the
general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision-making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion and make
requests and were the legal interests of the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect of cash dividend policy with
adjustments and changes? Yes
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
reserves into share capital (proposed) over the past three years (the reporting period inclusive)
(1) The 2019 profit distribution plan for ordinary shares
On 27 March 2020, the Company convened the fourth meeting of the ninth session of the Board, at which the
proposed 2019 profit distribution plan was considered and approved. Based on the total number of ordinary shares
of the Company as at the end of 2019 of 2,904,608,200 shares, a cash dividend of RMB1.5 (tax inclusive) was to be
paid to ordinary shareholders for every 10 shares held. No bonus shares would be issued and there was no increase
of share capital from reserves. The cash dividend distributed to ordinary shareholders amounted to RMB435,691,230.
2019 AnnuAl RepoRt 51
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
reserves into share capital (proposed) over the past three years (the reporting period inclusive) (Cont’d)
(2) The 2018 profit distribution plan for ordinary shares
On 11 June 2019, the Company convened the 2018 annual general meeting, at which the 2018 profit distribution plan
was considered and approved: based on the number of the shares as at the end of 2018 of 2,904,608,200 shares, a
cash dividend of RMB2.4 (tax inclusive) was to be paid to all ordinary shareholders for every 10 shares held. The total
cash dividend distributed to ordinary shareholders amounted to RMB697,105,968 (tax inclusive) in 2018.
(3) The 2017 profit distribution plan for ordinary shares
On 13 June 2018, the Company convened the 2017 annual general meeting, at which the 2017 profit distribution plan
was considered and approved: based on the number of the shares as at the dividend distribution registration date
of 1,936,405,467 shares, a cash dividend of RMB6.00 (tax inclusive) was to be paid to all ordinary shareholders for
every 10 shares held, and a capitalisation issue made out of the capital reserves of 5 shares for every 10 shares held
will be distributed to ordinary shareholders. The total cash dividend distributed to ordinary shareholders amounted to
RMB1,161,843,280.20 (tax inclusive) in 2017.
Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
Unit: RMB
Total cash
Ratio of cash dividend
Dividends (including through
Net profit Amount of cash distribution other means)
attributable to dividend as a through other as a percentage
ordinary percentage of net means in net of net profit
shareholders of profit attributable Amount of profit attributable attributable
the Company in to ordinary cash dividends to ordinary to ordinary
the consolidated shareholders of distribution shareholders of Total cash shareholders of
financial the Company in through other the Company in dividend the Company in
Amount of statements the consolidated means such the consolidated (including the consolidated
cash dividends during the year financial as share financial through financial
Year of distribution (tax inclusive) of distribution statements repurchase statements other means) statements
2019 435,691,230.00 1,656,566,584.88 26.30% 0.00 0.00% 435,691,230.00 26.30%
2018 697,105,968.00 2,509,828,858.47 27.78% 0.00 0.00% 697,105,968.00 27.78%
2017 1,161,843,280.20 3,769,325,450.93 30.82% 0.00 0.00% 1,161,843,280.20 30.82%
The Company made a profit and had positive retained profit available for ordinary shareholders of parent company
during the reporting period without cash dividend for ordinary shares being proposed
□ Applicable √ Not applicable
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
II. Proposals on profit distribution and conversion of capital reserves into share capital during
this reporting period
√ Applicable □ Not applicable
Numbers of bonus share per 10 shares (share(s)) 0
Dividend distribution per 10 shares (RMB) (tax inclusive) Cash dividend of RMB1.5 (tax inclusive) per 10
shares to ordinary shareholders and cash dividend
of RMB1.5 (tax inclusive) per 10 simulated shares
converted from preference shares into ordinary shares
to holders of preference shares
Conversion per 10 shares (share(s)) No increase of share capital from reserves
Share base of the distribution proposal (shares) 2,904,608,200 ordinary shares and 1,162,790,698
simulated shares converted from preference shares
on a conversion ratio of 1 preference share valued at
RMB3.87; the share base of the distribution proposal
was 4,067,398,898 shares.
Cash dividend (RMB) (tax inclusive) 610,109,834.70
Amount of cash dividend distribution through other means such 0.00
as share repurchase (RMB)
Total cash dividend including other means (RMB) 610,109,834.70
Distributable profits (RMB) 9,306,269,617.38
Percentage of cash dividend (including other means) to total 100%
profits distribution
Cash dividend policy
For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the
percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
Particulars of profit distribution and conversion of capital reserves into share capital
The audited consolidated net profit attributable to shareholders of the Company for 2019 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB1,656,566,584.88. When deducting the
interest on perpetual bonds of RMB194,000,000.00 and fixed dividend on preference shares of RMB214,425,000.00 for
2019, the distributable profit realised for 2019 amounted to RMB1,248,141,584.88.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the total ordinary share capital of 2,904,608,200 shares and the 1,162,790,698 simulated ordinary shares
converted from the preference shares using a conversion ratio of 1 share valued at RMB3.87 as at the end of 2019, a cash
dividend of RMB1.5 (tax inclusive) per 10 shares will be distributed to ordinary shareholders; a cash dividend of RMB1.5
(tax inclusive) per 10 simulated ordinary shares converted from the preference shares will be distributed to holders of
preference shares. No bonus shares will be issued and there is no increase of share capital from reserves. A cash dividend
of RMB435,691,230 will be distributed to ordinary shareholders and a variable cash dividend of RMB174,418,604.70 will be
distributed to holders of preference shares. In other words, a cash dividend of RMB3.87 (tax inclusive) per preference share
with a nominal value of RMB100 each will be distributed to holders of preference shares.
2019 AnnuAl RepoRt 53
VII Material Matters
III. 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 periods but
subsisting to the end of the reporting period
√ Applicable □ Not applicable
Party involved Type of Undertaking Particulars on
Undertaking in undertaking undertaking Details of undertaking date Term the performance
Undertaking on
shareholding structure
reformation
Undertaking made in
offering documents or
shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on Chenming Non-competitive (1) Chenming Holdings Co., Ltd. (“Chenming Holdings”) shall not 22 May 2008 During the period Implementing
initial public offering Holdings undertaking engage, whether solely, jointly, or by representing itself or any when Chenming as normal
or refinancing Co., Ltd other persons or companies, and shall not procure its associates Holdings was the
(as defined in The Listing Rules of Hong Kong Stock Exchange) to major shareholder
engage, in any business which competes with the business of the of the Company
Company and its subsidiaries (“Chenming Group” or “we”) directly
or indirectly, in any country and region which our business exists (or
any part of the world if in any form of electronics business), or in any
business that directly or indirectly competes with Chenming Group’s
business which we operate from time to time (including but not limited
to any business in the form of sole proprietorship, joint ventures
or acquisitions, or holding interests directly 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 or companies, engage in
business which directly or indirectly competes against the business of
Chenming Group, or obtain any business opportunity which directly
or indirectly competes against the business of Chenming Group, it
shall endeavour to procure that Chenming Group shall have priority to
obtain the right to operate such business or to obtain such business
opportunity; (3) if Chenming Holdings is in breach of the above-
mentioned undertakings, it shall indemnify the Company for any
loss caused by such breach and the Company shall have the right
to acquire all businesses of Chenming Holdings, which directly or
indirectly compete with the businesses of our Group, at market price
or cost price (whichever price is lower); (4) Chenming Holdings shall
not make use of its position as the controlling shareholder (as defined
in The Listing Rules of Hong Kong Stock Exchange) of our Group to
jeopardise the legal interests of Chenming Group and its shareholders
with other persons or companies or on their behalf
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
III. Performance of undertakings (Cont’d)
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 periods but
subsisting to the end of the reporting period (Cont’d)
Party involved Type of Undertaking Particulars on
Undertaking in undertaking undertaking Details of undertaking date Term the performance
Chenming Defective (1) According to the plan on defective properties of the Company, 16 January During the period Implementing as
Holdings Co., properties Chenming Holdings Co., Ltd. (“Chenming Holdings”) has guaranteed 2008 when Chenming normal
Ltd. and undertaken that: according to the application of the Company, Holdings was the
for defective property(ies) owned by the Company and its holding major shareholder
subsidiary company which situated in the administrative area of of the Company
Shouguang city, Chenming Holdings will purchase it (them) and have
it(them) being transferred to itself pursuant to the law in accordance
with the result of the related asset valuation if the Company decides
to transfer and dispose of it(them) and there is no other transferee;
(2) before the Company transfers and disposes of the defective
properties pursuant to the law, if the Company suffers any economic
losses due to the defects of the title (including but not limited to
damages, penalties and relocation costs), Chenming Holdings will
bear such economic losses; (3) during the regulatory process taken
to the defective properties of buildings and land of subsidiaries of the
Company situated outside the local areas (outside the administrative
area of Shouguang city), the economic losses such as penalties or
relocation costs imposed by competent administrative authorities to
be borne by the subsidiaries arising from defects of insufficient title
documents shall be paid pursuant to the law by Chenming Holdings
after verification.
Shandong Specific In view of the impacts on dilution of current returns for ordinary 25 March 2016 9999-12-31 Implementing as
Chenming remedial shareholders under the preference shares issuance, and in order normal
Paper Holdings measures for to implement the Notice of the General Office of the State Council
Limited non-public on Further Strengthening Protection of the Lawful Rights of Small
issuance of Investors in Capital Markets, protect the interests of ordinary
preference shareholders and provide remedies for the possible dilution on current
shares returns as a result of preference shares issuance, the Company has
undertaken that it will implement various measures to ensure the
effective utilisation of proceeds raised, which can prevent dilution on
current returns effectively, thereby enhancing future returns.
Equity incentive
undertakings
Whether undertakings Yes
performed on time
2. Description on the Company’s assets and items in meeting original profit forecast and its explanation as
there is profit forecast for assets and items of the Company and the reporting period is still within the profit
forecast period
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 55
VII Material Matters
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
□ Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.
V. Opinions of the Board, the Supervisory Committee and independent Directors (if any)
regarding the “modified auditor’s report” for the reporting period issued by the accountants
□ Applicable √ Not applicable
VI. Reason for changes in accounting policies, accounting estimates and accounting methods
as compared to the financial report for the prior year
√ Applicable □ Not applicable
Change in accounting policies due to implementation of new standards
On 13 December 2018, the Ministry of Finance issued the Notice on Printing and Distributing the Amendments (Cai Kuai
[2018] No. 35), which amended the Accounting Standard for Business Enterprises No. 21 – Leases. Such amendments shall
be implemented from 1 January 2019 for the enterprises listed both domestically and overseas, as well as the enterprises
listed overseas and adopting the International Financial Reporting Standards or the Accounting Standards for Business
Enterprises to prepare their financial statements, and from 1 January 2021 for other enterprises adopting the Accounting
Standards for Business Enterprises. On 30 April 2019, the Ministry of Finance issued the Notice on Amending, Printing and
Distributing the General Format of the Financial Statements of Enterprises for 2019 (Cai Kuai [2019] No. 6), which amended
the general format of the financial statements of enterprises, required non-financial enterprises adopting the Accounting
Standards for Business Enterprises to prepare their interim financial statements and annual financial statements for 2019
and the financial statements for subsequent periods in accordance with the Accounting Standards for Business Enterprises
and Cai Kuai [2019] No. 6. On 9 May 2019, the Ministry of Finance issued the Notice on Printing and Distributing the
Amendments (Cai Kuai [2019] No. 8), which amended the Accounting Standard for Business Enterprises No. 7 – Exchange
of Non-monetary Assets. Such amendments shall be implemented from 10 June 2019 for the enterprises adopting the
Accounting Standards for Business Enterprises. On 16 May 2019, the Ministry of Finance issued the Notice on Printing
and Distributing (Cai Kuai [2019] No. 9), which amended the Accounting Standard for Business Enterprises No. 12 – Debt
Restructuring. Such amendments shall be implemented from 17 June 2019 for the enterprises adopting the Accounting
Standards for Business Enterprises. As approved at the eleventh meeting of the eighth session of the Board of the Company
on 25 October 2018, the Company began to adopt the above accounting standards within the timeframe as required by the
Ministry of Finance.
VII. Reason for retrospective restatement to correct major accounting errors during the reporting
period
□ Applicable √ Not applicable
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable □ Not applicable
During the reporting period, the scope of consolidation had 4 newly established subsidiaries, namely Shanghai Sales Co.,
Ltd., Meilun (BVI) Limited, Guangdong Chenming Panels Co., Ltd. and Weifang Chenming Growth Driver Replacement
Equity Investment Fund Partnership (Limited Partnership).
During the reporting period, 3 companies were reduced from the scope of consolidation: The Company disposed of 60%
equity interest in Haicheng Haiming Mining Co., Ltd., 100% equity interest in Beijing Chenming Meilun Technology Co.,
Ltd. and 100% equity interest in Wuxi Song Ling Paper Co., Ltd., and such companies, was excluded from the scope of
consolidation.
IX. Engagement or dismissal of accounting firms
Current accounting firm engaged
Grant Thornton
Name of the domestic accounting firm (Special General Partnership)
Remuneration of the domestic accounting firm (RMB’ 0,000) 330
Continued term of service of the domestic accounting firm 1
Name of certified public accountants of the domestic accounting firm Hu Naizhong and Liu Nana
Continued term of service of certified public accountants of the domestic 1
accounting firm
Whether to appoint another accounting firm during the period
√ Yes □ No
Whether to appoint another accounting firm during the audit period
□ Yes √ No
Whether the change of accounting firm was implemented according to the approval procedures
√ Yes □ No
Details on the reappointment and change of accounting firm
The Resolution on Change of the Auditor was approved at the fourth extraordinary meeting of the ninth session of the
Board and the second extraordinary meeting of the ninth session of the Supervisory Committee of the Company held on 16
September 2019. The Board proposed to reappoint Grant Thornton (Special General Partnership) (“Grant Thornton”) as the
auditor for the financial audit and internal control of the Company for 2019.
Ruihua Certified Public Accountants (“Ruihua”), the former auditor of the Company, had consecutively provided auditing
service for the Company for many years. In the course of practice, it adhered to the principle of independent auditing,
objectivity, fairness, and justness, reflecting the Company’s financial position, and earnestly performed its duties as the
auditor.
2019 AnnuAl RepoRt 57
VII Material Matters
IX. Engagement or dismissal of accounting firms (Cont’d)
Based on the business development and audit needs of the Company, and upon due and careful consideration, the Audit
Committee of the Board of the Company, proposed to appoint Grant Thornton licensed to engage in securities business as
the auditor for the financial audit and internal control of the Company for 2019 for a term of one year.
On 23 October 2019, the resolution in respect of the engagement of Grand Thornton was considered and approved at the
Company’s 2019 second extraordinary general meeting.
Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
√ Applicable □ Not applicable
The Company engaged Grand Thornton as the auditor for internal control of the Company for 2019. The Company paid
RMB800,000 as internal control audit fees during the period.
X. Suspension in trading or delisting upon publication of annual report
□ Applicable √ Not applicable
XI. Matters related to bankruptcy and reorganisation
□ Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
XII. Material litigation and arbitration
□ Applicable √ Not applicable
The Company was not involved in any material litigation and arbitration during the reporting period.
Other litigations
□ Applicable √ Not applicable
XIII. Punishment and rectification
√ Applicable □ Not applicable
Investigation and
Name Type Reason punishment type Conclusion, if any Disclosure date Disclosure index
Jiangxi Chenming Paper Subsidiary Excessive discharge of General In 2019, Nanchang Ecological Environment Not applicable Not applicable
Co., Ltd. water pollutants and air administrative Bureau conducted on-site sampling at
pollutants penalties the main water drain and unorganised
exhaust emission at Jiangxi Chenming.
The monitor report indicated that the
suspended solid concentration in the
discharge water and odor concentration of
Jiangxi Chenming exceeded the limit, and
fine a total of 1.304 million RMBJiangxi
Chenming had conducted rectification
based on the rectification notices and
had good results.
Rectification
√ Applicable □ Not applicable
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIII. Punishment and rectification (Cont’d)
1. Jiangxi Chenming conducted the following rectifications regarding the issue of excessive suspended solid
concentration in the discharge water:
(1) Since January 2019, Jiangxi Chenming adjusted its water treatment technique, refined dosing operation,
increased sludge press quality, and established, among others, monitoring response mechanism for water
quantity and water standard at the middle water section designed to respond to changes in BTMP ingredient
ratio and load. As a result, Jiangxi Chenming proved qualified on all indicators during two spontaneous
sampling inspections conducted by Nanchang Ecological Environment Bureau and the environmental monitor
station as well as a scheduled sampling inspection conducted by a third party. Based on such results,
Nanchang Ecological Environment Bureau determined in June 2019 that the rectification for out-of-limit waste
water (SS standard) of Jiangxi Chenming had been completed, and conducted post-inspection withdrawal for
the non-compliance.
(2) In July 2019, after installing 50 surface aerators at the south and north aeration tanks, Jiangxi Chenming further
installed 10 jet aeration devices for both tanks in order to increase dissolved oxygen, which was completed
in early August. Testing indicated that effluent COD of the two tanks dropped to approximately 60, and
fluctuations of suspended solid concentration of discharge water at the main water drain significantly improved.
(3) Since 26 August 2019, Jiangxi Chenming began to carry out in-depth technical modifications to the aeration
tanks to increase efficient jet aeration. The modifications were completed by 9 December 2019. All indicators
were above-standard after multiple sampling and monitoring, and the rectifications received good results.
2. Jiangxi Chenming conducted the following rectifications regarding the issue of excessive odor concentration:
(1) Each shift shall check the addition amount of caustic soda in the odor treatment system, ensuring that the PH
value remained between 11 and 12, in order to maximise the removal and absorption of odor components.
(2) The bacterial activity in the odor biological filter box was monitored each quarter to ensure maximum absorption
of odor components.
(3) The odor treatment facilities (fans, pipes, alkaline towers, biological filters, etc.) were inspected every two hours
to ensure that the odor treatment system operates normally and compile inspection records.
(4) Management and technical measures such as packing replacement for the anaerobic odor treatment system
were carried out. All indicators were above-standard after multiple sampling and monitoring by the municipal
environment monitoring station, and the rectifications received good results.
XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
□ Applicable √ Not applicable
XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measure of the Company
□ Applicable √ Not applicable
There was no implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure
of the Company during the reporting period.
2019 AnnuAl RepoRt 59
VII Material Matters
XVI. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable □ Not applicable
Percentage
Subject Pricing Related Amount of as the Amount of Whether Settlement Market price
Types of the matter of the basis of the party related party amount transactions exceeding of related of available
Related party related party related party related party transaction transactions of similar approved approved party similar Disclosure Disclosure
Related party relationship transactions transactions transaction price (RMB’0,000) transactions (RMB’0,000) cap transactions transaction date index
Jiangxi Jiuyu Director and senior Procurement Natural gas, Market price Market price 38,112.42 1.75% 60,000.00 No Bank acceptance and Not 20 July 2019 http://www.
Energy management of the Company heavy oi , etc. telegraphic transfer appl cable cninfo.com.cn
Co., Ltd. served as the director and
senior management
of the company during
the past twelve months
Particulars on refund of bulk sale Not appl cable
2. Related party transaction in connection with purchase or sale of assets or equity interest
□ Applicable √ Not applicable
3. Related party transaction connected to joint external investment
□ Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
4. Related creditors’ rights and debts transactions
√ Applicable □ Not applicable
Were there any non-operating related creditors’ rights and debts transaction?
√ Yes □ No
Debts payable to any related party:
Amount Amount
increased recovered
Opening during the during the Interest for the
Relationship balance current period current period current period Closing balance
Related party with the Company Reason (RMB’0,000) (RMB’0,000) (RMB’0,000) Interest rate (RMB’0,000) (RMB’0,000)
CHENMING HOLDINGS The controlling shareholder Financial support 37,600 140,190.51 106,946.62 market rate 2,790.51 70,844.09
COMPANY LIMITED of the Company
Effect of related debts on Financial support is provided by Chenming Holdings without requiring any pledge or guarantee, which is a testament to its support and confidence in the future
the operating results and development of the Company, and helps the Company promote project construction and satisfy its needs for working capital.
financial position
of the Company
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVI. Significant related party transactions (Cont’d)
5. Other significant related party transactions
□ Applicable √ Not applicable
There was no other significant related party transaction of the Company during the reporting period.
XVII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
□ Applicable √ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
□ Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
□ Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
2. Significant guarantees
√ Applicable □ Not applicable
(1) Guarantees
During the reporting period, the Company provided guarantee to subsidiaries and the guarantee amount
incurred was RMB8,587.4904 million. The subsidiaries provided guarantee to their subsidiaries and the
guarantee amount incurred was RMB1,286.9090 million.
As at 31 December 2019, the balance of the external guarantee provided by the Company (including the
guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)
amounted to RMB12,912.2032 million, representing 51.30% of the equity attributable to shareholders of the
Company as at the end of 2019.
The Company did not provide any guarantee to external parties (excluding the guarantee provided to its
subsidiaries and share participating companies and the guarantee provided to subsidiaries by subsidiaries) and
did not provide any guarantee against the rules and regulations.
2019 AnnuAl RepoRt 61
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Unit: RMB’ 0,000
External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Term or not or not
Weifang Sime Darby West Port Co., Ltd 24 July 2017 17,500 20 December 2017 13,500 General guarantee 10 years No No
Total external guarantees approved during the reporting period (A1) 0 Total actual external guarantees during the reporting period (A2) 0
Total external guarantees approved at the end of the reporting period (A3) 17,500 Balance of total actual guarantees at the end of the reporting period (A4) 13,500
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Term or not or not
Zhanjiang Chenming Pulp & Paper Co., Ltd. 14 June 2018 200,000 27 July 2018 429,063.93 General guarantee 3 years No No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30 March 2019 1,088,000 General guarantee 5 years No No
Shandong Chenming Group Finance Co., Ltd. 30 March 2019 500,000 General guarantee 5 years No No
Shandong Chenming Paper Sales Co., Ltd. 30 March 2019 600,000 29 May 2019 172,423.65 General guarantee 5 years No No
Shandong Chenming Financial Leasing Co., Ltd. 26 March 2015 500,000 21 September 2017 7,500 General guarantee 7 years No No
Shandong Chenming Financial Leasing Co., Ltd. 30 March 2016 300,000 General guarantee 7 years No No
Shandong Chenming Financial Leasing Co., Ltd. 14 February 2018 150,000 General guarantee 3 years No No
Shanghai Chenming Financial Leasing Co., Ltd. 14 February 2018 400,000 General guarantee 3 years No No
Qingdao Chenming Nonghai Financial Leasing Co., Ltd. 14 February 2018 250,000 General guarantee 3 years No No
Guangzhou Chenming Financial Leasing Co., Ltd. 14 February 2018 200,000 General guarantee 3 years No No
Shandong Chenming Commercial Factoring Co., Ltd. 14 February 2018 200,000 General guarantee 3 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 26 March 2015 400,000 24 June 2016 84,967.34 General guarantee 7 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 30 March 2016 550,000 General guarantee 7 years No No
Jiangxi Chenming Paper Co., Ltd. 14 June 2018 50,000 General guarantee 3 years No No
Jiangxi Chenming Paper Co., Ltd. 30 March 2019 350,000 7 January 2019 153,919.55 General guarantee 5 years No No
Shouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 6 August 2019 75,107.26 General guarantee 10 years No No
Shouguang Meilun Paper Co., Ltd. 30 March 2019 100,000 General guarantee 5 years No No
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 18 October 2019 100,000 General guarantee 3 years No No
Chenming (HK) Limited 14 June 2018 250,000 26 March 2019 101,625.22 General guarantee 3 years No No
Chenming (HK) Limited 30 March 2019 500,000 General guarantee 5 years No No
Shouguang Chenming Import and Export Trade Co., Ltd 30 March 2019 50,000 General guarantee 5 years No No
Jilin Chenming Paper Co., Ltd. 30 March 2019 150,000 3 September 2019 13,802.50 General guarantee 5 years No No
Zhanjiang Chenming Arboriculture Development Co., Ltd 30 March 2019 10,000 General guarantee 5 years No No
Nanchang Chenming Arboriculture Development Co., Ltd. 15 August 2017 10,000 General guarantee 3 years No No
Shandong Chenming Panels Co., Ltd. 14 June 2018 3,000 General guarantee 3 years No No
Shanghai Chenming Industrial Co., Ltd. 11 October 2018 400,000 General guarantee 3 years No No
Shanghai Chenming Pulp & Paper Sales Co., Ltd. 30 March 2019 300,000 27 December 2019 3,000 General guarantee 5 years No No
Total amount of guarantee provided for subsidiaries approved during the 3,748,000 Total amount of guarantee provided for subsidiaries approved as at the end of the 858,749.04
reporting period (B1) reporting period (B3)
Total amount of guarantee provided for subsidiaries during the reporting 8,211,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting 1,041,409.46
period (B2) period (B4)
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between subsidiaries
Date of the related Guarantee
Announcement to related
disclosing the Amount of Guarantee Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Term or not or not
Chenming (HK) Limited 30 March 2019 200,000 2 April 2019 199,789.51 General guarantee 5 years No No
Chenming (HK) Limited 30 March 2019 100,000 30 July 2019 24,521.34 General guarantee 5 years No No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 27 June 2019 12,000 27 June 2019 12,000 General guarantee 1 year No No
Total amount of guarantee provided for subsidiaries approved during the 312,000 Total amount of guarantee provided for subsidiaries during the reporting period (C2) 128,690.90
reporting period (C1)
Total amount of guarantee provided for subsidiaries approved as at the 312,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting 236,310.86
end of the reporting period (C3) period (C4)
Total 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) 4,060,000 Total amount of guarantee during the reporting period (A2+B2+C2) 987,439.94
Total amount of guarantee approved as at the end of the reporting period 8,540,500 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 1,291,220.32
(A3+B3+C3)
The percentage of total amount of guarantee provided (i.e. 4+B4+C4) to the net assets of the Company 51.30%
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D) 0
Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 586,327.08
Total amount of guarantee provided in excess of 50% of net assets (F) 32,733.13
Sum of the above three amount of guarantee (D+E+F) 619,060.21
(2) External guarantees against the rules and regulations
□ Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during
the reporting period.
3. Entrusted cash and asset management
(1) Entrusted wealth management
□ Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
□ Applicable √ Not applicable
The Company did not have any entrusted loans during the reporting period.
2019 AnnuAl RepoRt 63
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
4. Other material contracts
□ Applicable √ Not applicable
XVIII. Fulfilment of Social Responsibility
1. Fulfilment of social responsibility
The state is the strongest support for the development of Chenming, while society is the greatest origin for
Chenming’s development and growth. During its development for more than half a century, the Company has always
adhered to its philosophy of “building the country through industry development and paying back to society”. It has
voluntarily performed its social responsibility, and cultivated the “tree of responsibility”, which has already achieved
fruitful results.
The Company has established its corporate governance structure in accordance with the requirements of the
Companies Law, Securities Law, Articles of Association and other relevant laws and regulations and the actual
situation of the Company. There is a clear separation of powers and responsibilities between the general meeting,
the Board, the Supervisory Committee and the management which is accountable to the general manager. The
management system under the structure is characterised by a mechanism of checks and balances of a legal person
with separation of ownership and operation, separation of the decision-making, execution and supervisory powers,
as well as the co-existence of the general meeting, the Board and the Supervisory Committee. Strict provisions on
the rights, duties and responsibilities of the general meeting, the Board, the Supervisory Committee and general
managers have been stipulated. The Company has placed great emphasis on fulfilment of social responsibility and
goes beyond the concept of “profit as the only goal”. While creating value for shareholders during the process of
production, operation and business development, the Company, in line with the development of the State and the
society, has strived to reach a compromise between economic benefits and social benefits, short-term benefits and
long-term benefits, as well as corporate development and social development, with the aim to achieve a healthy and
harmonious development between the Company and its employees, the Company and the society, and the Company
and the environment.
Centering on the corporate spirit of “Learning, Surpass and Leading”, Chenming Group comprehensively elevates the
corporate management capacity and operation quality, with a view to becoming a globally competitive world-class
enterprise.
The Company strives to the development path of new type industrialisation with high technology content, low
energy consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In
addition, the Company endeavours to facilitate business development in line with ecological development, enhance
its competitiveness in economic development and environmental protection, and establish its economic and
ecological culture. It also seeks for development while protecting the environment and maintains higher environmental
protection while seeking for scientific development, thus achieving “win-win” situation in economic development
and environmental protection. The Company has strictly in compliance with relevant environmental protection
policies, laws and regulations in China. It has mitigated the impact on environment through industrial optimisation
and upgrade, reduced resources utilisation through innovative operation, and implemented strict management with
the concept of environmental protection and safety operation being penetrated into every procedure in production
and operation, thereby promoting the harmonious development between the people and the Company, as well as
that of the Company and the environment. The Company is the first in the industry in China which passes ISO14001
environmental management system certification. The Company has been named the environmental friendly enterprise,
the recycling economy exemplary enterprise, the outstanding water efficiency unit and the outstanding unit in
comprehensive utilisation of resources of Shandong province.
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
1. Fulfilment of social responsibility (Cont’d)
Leveraging its advanced production technology and manufacture equipment, extensive experience in waste treatment
and various comprehensive treatment systems, the Company strives to implement horizontal and vertical control
throughout its production processes, thus achieving low carbon emission through low energy consumption, as well
as reduction of use of resources through recycling. The Company has passed the clean production assessment
organised by United Nations Development Programme in May 1999. The Company focuses on its works in various
aspects, including the establishment of eco-friendly energy consumption system, implementation of on-site 6S
management, launch of environmental protection and hazard inspection works, wide application of new energy
conservation and emission reduction technology, promotion of key energy conservation and emission reduction
projects, enhancement of innovative technology, promotion of the industrialisation of comprehensive resources
utilisation, implementation of scientific proposal on “multi-usage of water” based on the quality, quantity and working
procedure, as well as strengthening of the awareness on energy saving and environmental protection of all staff and
habit building. Hence, the Company has achieved whole process control and management over clean and efficient
production.
The Company has strictly implemented in-depth corporate governance. It has put great efforts and huge investments
in promoting the management of “the three kinds of waste” so as to facilitate energy conservation and emission
reduction, aiming to become a low energy consumption and environment-friendly enterprise. In respect of wastewater
treatment, the Company has established world-class wastewater treatment system. It has over 10 wastewater
treatment facilities for various purposes, including the “ultrafiltration membrane+reverse osmosis membrane”
technology to complete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate
reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water
every day 170,000 cubic meters. In respect of solid waste treatment, the Company has discontinued the traditional
landfilling treatment. It has enhanced its technology innovation, strengthened comprehensive resources utilisation, as
well as expanded its industrial chain, thereby achieving recycling and harmless utilisation of solid waste. In respect
of waste gas treatment, the Company has introduced advanced international environmental protection equipment
and technology for desulphurisation, denitrification and de-dusting, smelly gas treatment and closure of coal plants.
It has adopted scientific waste gas treatment to ensure its waste gas emission is in compliance with all relevant
environmental protection standards and requirements in China.
The Company strives to create a wealthy society. It has offered more job vacancies, thereby contributing more taxes
to the government, and sharing the achievements of the Company with its staff and society. While caring for its
staff sincerely and building up a harmonious relationship with the staff, the Company also greatly supports different
charity programmes. Over the past few years, the Company has donated tens of millions to Shouguang Education
Fund, Shouguang Charity Federation, Weifang Venture Association, Shandong Red Cross and districts suffered from
earthquake, which reflects the outstanding contribution of the Company to building a harmonious society in China.
The Company has been honoured with the title of “Most Caring Donating Enterprise” by Weifang and Shouguang
Municipal Committee and Municipal Government for serval times, while the chairman Mr. Chen Hongguo has been
honoured with the title of “Most Caring Person”.
2. Fulfilment of social responsibility regarding targeted poverty relief
The Company did not commence any work regarding targeted poverty relief.
2019 AnnuAl RepoRt 65
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters
Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
protection authority?
Yes
Pollutant
Name of major Number of emission
Name of company pollutants and Way of emission Distribution of Emission standards Total Approved total Excessive
or subsidiary specific pollutants emission outlets emission outlets concentration implemented emissions emissions emissions
Huanggang Chenming Smoke Continuous 2 Within factory area Alkali furnace: 10.68 mg/m Alkali furnace: 30 mg/m Alkali furnace: 5.59t Alkali furnace: 124.357 t No
Pulp & Paper Co., Ltd. Lime kiln: 7.24 mg/m Lime kiln: 200 mg/m Lime kiln: 2.74t Lime kiln: 26.44 t
Sulphur dioxide Continuous 2 Within factory area Alkali furnace: 4.05 mg/m Alkali furnace: 200 mg/m Alkali furnace: 3.595t Alkali furnace: 321.193 t No
Lime kiln: 51.07 mg/m Lime kiln: 850 mg/m Lime kiln: 13.7 t Lime kiln: 158.304 t
Nitrogen oxide Continuous 1 Within factory area 164.55 mg/m 200 mg/m 117.75t 950.882 t No
COD Continuous 1 Within factory area 50.66 mg/m 150 mg/L 45.75t 563.72 t No
Ammonia nitrogen Continuous 1 Within factory area 0.809 mg/m 14 mg/L 1.92t 40.12 t No
Shandong Chenming COD Organised 2 Within Chenming 153mg/m 300mg/L 3254t 6510.74t No
Paper Holdings Limited emission Industrial Park
Ammonia nitrogen Organised 2 Within Chenming 5.59mg/m 30mg/L 130.7t 650.7t No
emission Industrial Park
Sulphur dioxide Organised 2 Within Chenming Power plant: 4.58mg/m Power plant: 35mg/m Power plant: 3.29t Power plant: 160.32t No
emission Industrial Park Alkali recovery: 3.99mg/m Alkali recovery: 200mg/m Alkali recovery: 0.94t
Nitrogen oxide Organised 2 Within Chenming Power plant: 39.05mg/m Power plant: 100 mg/m Power plant: 31.7t Alkali Power plant: 458.05t No
emission Industrial Park Alkali recovery: 101mg/m Alkali recovery: 300mg/m recovery: 24.2t Alkali recovery: 236t
Smoke Organised 2 Within Chenming Power plant: 0.82mg/m Power plant: 10mg/m Power plant: 0.63t Power plant: 45.81t No
emission Industrial Park Alkali recovery: 9.4mg/m Alkali recovery: 20mg/m Alkali recovery: 2.07t
Shouguang Meilun Paper Sulphur dioxide Organised 4 Within Chenming Power plant: 6.9mg/m Power plant: 35mg/m Power plant: 69.1t Power plant: 303.6t No
Co., Ltd. emission Industrial Park Alkali recovery: 1.44mg/m Alkali recovery: 50mg/m Alkali recovery: 4.58t Alkali recovery: 119.51t
Lime kiln: 7.79mg/m Lime kiln: 50mg/m Lime kiln: 2.61t
Nitrogen oxide Organised 4 Within Chenming Power plant: 36.55mg/m Power plant: 50mg/m Power plant: 382t Power plant: 618.64t No
emission Industrial Park Alkali recovery: 78.9mg/m Alkali recovery: 100mg/m Alkali recovery: 261t Alkali recovery: 747.57t
Lime kiln: 16.2mg/m Lime kiln: 100 mg/m Lime kiln: 5.23t
Smoke Organised 4 Within Chenming Power plant: 0.84mg/m Power plant: 5mg/m Power plant: 7.7t Power plant: 64.69t No
emission Industrial Park Alkali recovery: 1.56mg/m Alkali recovery: 10mg/m Alkali recovery: 5.17t Alkali recovery: 73.37t
Lime kiln: 2.2mg/m Lime kiln: 10mg/m Lime kiln: 0.554t
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters
Pollutant
Name of major Number of emission
Name of company pollutants and Way of emission Distribution of Emission standards Total Approved total Excessive
or subsidiary specific pollutants emission outlets emission outlets concentration implemented emissions emissions emissions
Wuhan Chenming COD Organised 1 East of the factory 42mg/l 80mg/L 33.96t 184.30t No
Hanyang Paper emission area
Holdings Co., Ltd. Ammonia nitrogen Organised 1 East of the factory 3.17mg/l 8 mg/L 1.37t 17.30t No
emission area
Sulphur dioxide Organised 2 Within Qianneng 130t/h furnace: 50mg/m 6.4t 102.58t No
emission thermal power plant 24.8mg/m75t/h
area Furnace: 29.7mg/m
Nitrogen oxide Organised 2 Within Qianneng 130t/h furnace: 27.8mg/m 100 mg/m 42.62t 205.16t No
emission thermal power p 75t/h furnace: 58.1mg/m
lant area
Smoke Organised 2 Within Qianneng 130t/h furnace: 12.2mg/m 20mg/m 5.6t 41.03t No
emission thermal power plant 75t/h furnace: 10.5mg/m
area
Jiangxi Chenming COD Organised 1 At the boundary of 42.75mg/L 90mg/L 184.904t 1260t No
Paper Co., Ltd. emission factory area
Ammonia nitrogen Organised 1 At the boundary of 2.25mg/L 8mg/L 8.772t 112t No
emission factory area
Sulphur dioxide Organised 2 Within factory area 0 200mg/m3 310.327t 806t No
emission
Nitrogen oxide Organised 2 Within factory area 102.41mg/m3 200 mg/m3 390.018t 806t No
emission
Smoke Organised 2 Within factory area 11.05mg/m3 30mg/m3 35.992t 135t No
emission
Jilin Chenming COD Organised 1 At the boundary of 53.4mg/L 90mg/L 313.83t 357t No
Paper Co., Ltd. emission factory area
Ammonia nitrogen Organised 1 At the boundary of 1.45mg/L 8mg/L 17.83t 34t No
emission factory area
Sulphur dioxide Organised 1 Within factory area 3.75mg/m3 100mg/m3 2.883t 97t No
emission
Nitrogen oxide Organised 1 Within factory area 36.9mg/m3 100mg/m3 21.813t 213t No
emission
Smoke Organised 1 Within factory area 13.02mg/m3 30mg/m3 8.895t 51.66t No
emission
Zhanjiang Chenming COD Organised 1 Within factory area 35.57mg/L 90mg/L 860.03t 1943t No
Pulp & Paper Co., Ltd. emission
2019 AnnuAl RepoRt 67
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Pollutant
Name of major Number of emission
Name of company pollutants and Way of emission Distribution of Emission standards Total Approved total Excessive
or subsidiary specific pollutants emission outlets emission outlets concentration implemented emissions emissions emissions
Ammonia nitrogen Organised 1 Within factory area 1.01mg/L 90mg/L 28.49t 43.90t No
emission
Sulphur dioxide Organised 6 Within factory area Lime kiln: 5.44mg/m3 Lime kiln: 400mg/m3 317.26t 620t No
emission Alkali recovery: Alkali recovery: 200mg/
124mg/m3 m3 1#, 2# & 3# circulating
Power plant 1#: fluidised bed boilers:
60.91mg/m3 100mg/m3 4# circulating
Power plant 2#: fluidised bed boilers:
50.55mg/m3 35mg/m3
Power plant 3#:
56.89mg/m3
Power plant 4#:
17.97mg/m3
Nitrogen oxide Organised 6 Within factory area Lime kiln: 154.75mg/m3 Lime kiln: 300mg/m3 1634.36t 2169.70t No
emission Alkali recovery: Alkali recovery: 200mg/
154.75mg/m3 m3 1#, 2# & 3# circulating
Power plant 1#: fluidised bed boilers:
14.26mg/m3 100mg/m3 4# circulating
Power plant 2#: fluidised bed boilers:
10.71mg/m3 50mg/m3
Power plant 3#:
10.22mg/m3
Power plant 4#:
12.57mg/m3
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Construction and operation of facilities for pollution prevention and control
(1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding environmental
protection of the central and local government. The construction of projects strictly adheres to the “three
simultaneities” on environmental protection. In order to ensure pollutants are discharged strictly in accordance with
the requirements under laws and regulations and disposed properly, production and operation strictly comply with the
national Law on the Prevention and Control of Environmental Pollution, Law on the Prevention and Control of Water
Pollution, Law on the Prevention and Control of Air Pollution, Action Plan for Prevention and Control of Water Pollution
and Law on the Prevention and Control of Environmental Pollution by Solid Waste and other laws.
(2) Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
facilities. The pre-treatment-aerobic-anaerobic-in-depth treatment technology is the major technology for water
treatment, which can achieve standardised discharge of wastewater. Moreover, subsidiaries are equipped with
recycling system for process effluent, and reuse treated wastewater to the greatest extent in order to minimise
pollution. The Company has constructed a total of 9 water treatment plants, with daily treatment capacity of 350,000
m3. In addition, governmental authority will regularly visit the Company to conduct comparison of online monitoring
data every quarter. All data meets the standards.
(3) Each subsidiary’s organised emission outlets are equipped with an online monitoring system for real-time monitoring.
All subsidiaries have their own power plants. Each self-owned plant has its own environmental protection facilities
for de-dusting, desulphurisation and denitrification. Denitrification is conducted through SCR or SNCR, while
desulphurisation is primarily conducted through gypsum desulphurisation (ammonia desulphurisation is adopted in the
self-owned plant of Jiangxi Chenming). Substantially all of the emissions indicators are below the national and local
execution standards. Other alkali recovery boilers and lime kilns are also in compliance with the emission standards.
Environmental impact assessment of construction projects and other environmental protection administrative
licensing
The Company has strictly complied with the environmental laws and regulations all along to carry out environmental
impact assessment of construction projects. The construction projects are all subject to environmental impact
assessment. During the construction process, a reasonable environmental protection project construction plan is
formulated and strictly implemented. The environmental protection facilities and the main project are designed,
constructed and put into operation at the same time. At present, all construction projects put into production have
obtained environmental impact assessment approvals and acceptance approvals.
In June 2017, the Company and its subsidiaries completed the formalities for new discharge permits in accordance
with the Measures for the Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection,
and the discharge permits of the new projects were renewed according to the environmental protection requirements
in a timely manner.
2019 AnnuAl RepoRt 69
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Emergency plan for emergency environmental incidents
The Company has strictly implemented emergency regulations for emergency environmental incidents, and formulated
various emergency plans for emergency environmental incidents according to the technical requirements in the
“Technical Guidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the
Environmental Protection Bureau, and regular emergency training and emergency drills are conducted. Emergency
measures in relation to 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.
Environmental self-monitoring programme
The Company has strictly complied with self-monitoring laws and regulations, and conducted self-monitoring in
accordance with the environmental protection requirements to establish and perfect the corporate environmental
management ledgers and materials. At present, self-monitoring is a combination of manual monitoring and automatic
monitoring. At the same time, qualified units are engaged to conduct regular monitoring. Automatically monitored
items include: total wastewater discharge (COD, ammonia nitrogen, flow rate, total phosphorus, total nitrogen and
PH); power plant, alkali recovery boilers and lime kiln exhaust emissions (sulphur dioxide, nitrogen oxide and smoke).
Manually monitored items include: daily monitoring of COD, ammonia nitrogen, SS, chroma, PH, total phosphorus
and total nitrogen indicators. Sewage and other monitoring items, unorganised exhaust emission, solid waste, and
noise at the plant boundary, are monitored on a monthly or quarterly basis by qualified units engaged in accordance
with the local environmental protection requirements in relation to each subsidiary.
The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries
are published on the national key pollution source information disclosure website and the provincial key pollution
source information disclosure websites.
Other environmental information to be disclosed
The relevant environmental protection information of the pollutant discharge permit information and the pollutant
discharge permit requirements is announced on the national sewage discharge permit management information
platform.
Other environmental protection related information
Other environmental protection related information is announced on the Company’s website.
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance
√ Applicable □ Not applicable
1. Issue of medium-term notes with a total amount of RMB1,200 million
The public issue of the 2019 first tranche of medium-term notes in the national inter-bank bond market was launched
by the Company on 15 July 2019. The amount of the issue was RMB700 million with a nominal value of RMB100 each
at the interest rate of 6.50%.
The public issue of the 2019 second tranche of medium-term notes in the national inter-bank bond market was
launched by the Company on 9 August 2019. The amount of the issue was RMB500 million with a nominal value of
RMB100 each at the interest rate of 6.50%.
For details, please refer to the relevant announcements (announcement no.: 2019-068 and 2019-087) of the Company
published on CNINFO on 19 July 2019 and 15 August 2019, respectively.
2. Re-elections of the Company
The 37th extraordinary meeting of the eighth session of the Board and the 13th extraordinary meeting of the eighth
session of the Supervisory Committee held on 20 May 2019 considered and passed the resolution in relation to the
re-election of the Board and the resolution in relation to the re-election of the Supervisory Committee. The above
resolutions in relation to the re-elections were considered and approved at the annual general meeting convened on
11 June 2019. The new session of the Board and the new session of the Supervisory Committee will serve for a term
of three years.
On 11 June 2019, the ninth session of the Board considered and passed the resolution in relation to the election of
the chairman, vice chairman, general manager, secretary to the Board and the senior management of the Company.
The ninth session of the Supervisory Committee considered and passed the resolution in relation to the election of the
chairman of the Supervisory Committee.
For details, please refer to the relevant announcements (announcement no.: 2019-039, 2019-040, 2019-055, 2019-056
and 2019-057) of the Company published on CNINFO on 21 May and 12 June 2019.
2019 AnnuAl RepoRt 71
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Information disclosure index for 2019
Announcement No. Subject matter Date of publication Publication website and index
2019-001 Announcement on Result of the Issue of 2018 Second Tranche of 3 January 2019 http://www.cninfo.com.cn
Medium-term Notes
2019-002 Announcement on the Receipt of the Decision on the 7 January 2019 http://www.cninfo.com.cn
Administrative Supervision Measures of the Shandong
Securities Regulatory Commission of the China Securities
Regulatory Commission
2019-003 Announcement on the Acquisition of Mining License by Haiming 7 January 2019 http://www.cninfo.com.cn
Mining, a Subsidiary of the Company
2019-004 Announcement on Signing Strategic Cooperation Agreement with 17 January 2019 http://www.cninfo.com.cn
Great Wall Glory Securities
2019-005 Announcement in respect of Resolutions of the Thirty-fifth 22 January 2019 http://www.cninfo.com.cn
Extraordinary Meeting of the Eighth Session of the
Board of Directors
2019-006 Announcement on External Investment (I) 22 January 2019 http://www.cninfo.com.cn
2019-007 Announcement on Huanggang Chenming’s Application for 22 January 2019 http://www.cninfo.com.cn
Bank Loan and Provision of Guarantee and Asset Pledge
2019-008 Announcement on External Investment (II) 22 January 2019 http://www.cninfo.com.cn
2019-009 Announcement on Result of the Issue of 2019 First Tranche of 22 January 2019 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2019-010 Announcement in respect of Resolutions of the Thirty-Sixth 7 March 2019 http://www.cninfo.com.cn
Extraordinary Meeting of the Eighth Session of the
Board of Directors
2019-011 Announcement on Cooperation on the Initiation of the 7 March 2019 http://www.cninfo.com.cn
Establishment of Weifang Chenming Growth Driver
Replacement Equity Investment Fund
2019-012 Announcement on the Progress of Initiation of the 11 March 2019 http://www.cninfo.com.cn
Establishment of Weifang Chenming Growth Driver
Replacement Equity Investment Fund
2019-013 Announcement on the Progress of Intended Increase in 11 March 2019 http://www.cninfo.com.cn
Shareholding by the Company’s Largest Shareholder
2019-014 Announcement on the Distribution of Dividend of 12 March 2019 http://www.cninfo.com.cn
Preference Share
2019-015 Announcement on Resignation of Senior Management 16 March 2019 http://www.cninfo.com.cn
2019-016 Announcement on Obtaining High-tech Enterprise Certificates 19 March 2019 http://www.cninfo.com.cn
by the Company and its wholly-owned subsidiaries
2019-017 Announcement on Pledge of Shares held by Shareholders 19 March 2019 http://www.cninfo.com.cn
and the Release of Pledge of Part of the Shares
2019-018 Announcement on payment of 2019 interest with respect 26 March 2019 http://www.cninfo.com.cn
to the first tranche of corporate bonds publicly issued
to qualified investors in 2018
2019-019 Announcement on Pledge of Shares held by Shareholders 26 March 2019 http://www.cninfo.com.cn
and the Release of Pledge of Part of the Shares
2019-020 Announcement in respect of Resolutions of the 30 March 2019 http://www.cninfo.com.cn
Twelfth Meeting of the Eighth Session of the Board of Directors
2019-021 2018 Annual Report Summary 30 March 2019 http://www.cninfo.com.cn
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Information disclosure index for 2019 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2019-022 Announcement in Respect of Resolutions of the 30 March 2019 http://www.cninfo.com.cn
Thirteenth Meeting of the Eighth Session of the
Supervisory Committee
2019-023 Announcement on Provision of Guarantees for General Facilities of 30 March 2019 http://www.cninfo.com.cn
Relevant Subsidiaries by the Company
2019-024 Announcement on Correction of Previous Accounting Errors and 30 March 2019 http://www.cninfo.com.cn
Retrospective Restatement
2019-025 Announcement on the Appointment of the Auditor for 2019 30 March 2019 http://www.cninfo.com.cn
2019-026 Announcement on the Commencement of Financial 30 March 2019 http://www.cninfo.com.cn
Leasing Business
2019-027 Notice of 2018 Annual General Meeting 30 March 2019 http://www.cninfo.com.cn
2019-028 Announcement on Result of the Issue of 2019 Third Tranche of 30 March 2019 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2019-029 Announcement on Receipt of Government Subsidy by 2 April 2019 http://www.cninfo.com.cn
Wholly-owned Subsidiaries of the Company
2019-030 Announcement on Pledge of Shares held by Shareholders 11 April 2019 http://www.cninfo.com.cn
2019-031 Announcement on Estimated Results for First Quarter of 2019 15 April 2019 http://www.cninfo.com.cn
2019-032 Announcement on Release of Pledge of Shares held by 19 April 2019 http://www.cninfo.com.cn
Shareholders
2019-033 Announcement in respect of Resolutions of the Thirteenth 30 April 2019 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2019-034 2019 First Quarterly Report 30 April 2019 http://www.cninfo.com.cn
2019-035 Announcement on the Commencement of Financial Leasing 30 April 2019 http://www.cninfo.com.cn
Business of Subsidiary
2019-036 Announcement on Receipt of Government Subsidy by 6 May 2019 http://www.cninfo.com.cn
Subsidiaries of the Company
2019-037 Announcement on Result of the Issue of 2019 Fourth 6 May 2019 http://www.cninfo.com.cn
Tranche of Super & Short-term Commercial Paper
2019-038 Announcement on Progress of external investment and Operation 13 May 2019 http://www.cninfo.com.cn
Commencement of Shouguang Meilun chemical pulp project
2019-039 Announcement in Respect of Resolutions of the Thirty-Seven 21 May 2019 http://www.cninfo.com.cn
Extraordinary Meeting of the Eighth Session of the
Board of Directors
2019-040 Announcement in respect of Resolutions of the Thirteenth 21 May 2019 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Supervisory Committee
2019-041 Declaration by Candidate for Independent Director (Sun Jianfei) 21 May 2019 http://www.cninfo.com.cn
2019-042 Declaration by Candidate for Independent Director (Yang Biao) 21 May 2019 http://www.cninfo.com.cn
2019-043 Declaration by Candidate for Independent Director (Yin Meiqun) 21 May 2019 http://www.cninfo.com.cn
2019-044 Declaration by Nominator of Independent Director 21 May 2019 http://www.cninfo.com.cn
2019-045 Announcement on the Issue of Commercial Mortgage Backed 21 May 2019 http://www.cninfo.com.cn
Securities Backed by an Office Property of a Subsidiary
2019-046 Announcement on the Commencement of Equipment Financing 21 May 2019 http://www.cninfo.com.cn
Business of Subsidiaries
2019-047 Announcement on Additional Resolutions Proposed at the 21 May 2019 http://www.cninfo.com.cn
2018 Annual General Meeting
2019 AnnuAl RepoRt 73
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Information disclosure index for 2019 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2019-048 Supplementary Notice of 2018 Annual General Meeting 21 May 2019 http://www.cninfo.com.cn
2019-049 Second Supplementary Notice of 2018 Annual General Meeting 24 May 2019 http://www.cninfo.com.cn
2019-050 Announcement on Supplemental Pledge of Shares held by 25 May 2019 http://www.cninfo.com.cn
Shareholders and Business Continuation
2019-051 Announcement on Result of the Issue of 2019 Fifth Tranche of 28 May 2019 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2019-052 Announcement on Intended Increase in Shareholding by the 29 May 2019 http://www.cninfo.com.cn
Directors, Supervisors and Senior Management
2019-053 Announcement on Release of Pledge of Shares and Supplemental 30 May 2019 http://www.cninfo.com.cn
Pledge of Shares held by Shareholders
2019-054 Announcement on Intended Increase in Shareholding by the 7 June 2019 http://www.cninfo.com.cn
Chairman of the Company
2019-055 Poll Results Announcement of the 2018 Annual General Meeting 12 June 2019 http://www.cninfo.com.cn
2019-056 Announcement on Resolutions of the First Meeting of the Ninth 12 June 2019 http://www.cninfo.com.cn
Session of the Board of Directors
2019-057 Announcement on Resolutions of the First Meeting of the Ninth 12 June 2019 http://www.cninfo.com.cn
Session of the Supervisory Committee
2019-058 Announcement on the Re-election of Employee Representative 12 June 2019 http://www.cninfo.com.cn
Supervisor
2019-059 Announcement on Pledge of Shares held by Shareholders 21 June 2019 http://www.cninfo.com.cn
2019-060 Announcement on Progress of the acquisition of 45% of 26 June 2019 http://www.cninfo.com.cn
equity interest in Goldtrust Futures
2019-061 Announcement in respect of Guarantee in Favour of Subsidiaries 27 June 2019 http://www.cninfo.com.cn
for their Bank Loans by the Wholly-owned Subsidiaries of the
Company
2019-062 Announcement on Estimated Interim Results for 2019 4 July 2019 http://www.cninfo.com.cn
2019-063 Announcement on Receipt of Government Subsidy 5 July 2019 http://www.cninfo.com.cn
2019-064 First Indicative Announcement on the Adjustment of Coupon 10 July 2019 http://www.cninfo.com.cn
Rate of “17 Chenming Bond 01” and Repurchase Measure for
Bondholders
2019-065 Second Indicative Announcement on the Adjustment of Coupon 11 July 2019 http://www.cninfo.com.cn
Rate of “17 Chenming Bond 01” and Repurchase Measure for
Bondholders
2019-066 Third Indicative Announcement on the Adjustment of Coupon 15 July 2019 http://www.cninfo.com.cn
Rate of “17 Chenming Bond 01” and Repurchase Measure for
Bondholders
2019-067 Announcement on Repurchase Report of Investor of “17 Chenming 18 July 2019 http://www.cninfo.com.cn
Bond 01”
2019-068 Announcement on Result of the Issue of 2019 First Tranche of 19 July 2019 http://www.cninfo.com.cn
Medium-term Notes
2019-069 Announcement in Respect of Resolutions of the First Extraordinary 20 July 2019 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Board of Directors
2019-070 Announcement on the Daily Business Transactions and 20 July 2019 http://www.cninfo.com.cn
Related Party Transaction of Subsidiary
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Information disclosure index for 2019 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2019-071 Announcement on Receipt of Financial Support and 20 July 2019 http://www.cninfo.com.cn
Related Party Transaction
2019-072 Notice of 2019 First Extraordinary General Meeting 20 July 2019 http://www.cninfo.com.cn
2019-073 Supplemental Announcement on the Daily Business 23 July 2019 http://www.cninfo.com.cn
Transactions and Related Party Transaction of Subsidiary
2019-074 Announcement on Pledge of Shares and Partial Release of 25 July 2019 http://www.cninfo.com.cn
Pledge of Shares by Shareholders
2019-075 Announcement on Result of the Issue of 2019 Sixth Tranche of 2 August 2019 http://www.cninfo.com.cn
Short-term Commercial Paper
2019-076 Indicative Announcement on the Issue of USD Bonds by an 2 August 2019 http://www.cninfo.com.cn
Overseas Subsidiary
2019-077 Announcement on the Implementation of Dividend Distribution to 5 August 2019 http://www.cninfo.com.cn
Holders of A Shares and B Shares for 2018
2019-078 Announcement on the Implementation of the Distribution of 5 August 2019 http://www.cninfo.com.cn
Residual Profits of 2018 to Preference Shareholders
2019-079 Announcement on Release of Pledge of Shares held by 7 August 2019 http://www.cninfo.com.cn
Shareholders
2019-080 Announcement on Provision of Pledge and Guarantee for the 7 August 2019 http://www.cninfo.com.cn
Financing of Subsidiary
2019-081 Announcement on the Progress of Issue of USD Bonds by 7 August 2019 http://www.cninfo.com.cn
Overseas Subsidiary
2019-082 Announcement in Respect of Resolutions of the Second 8 August 2019 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board of Directors
2019-083 Announcement on Public Tender of Equity of Subsidiary 8 August 2019 http://www.cninfo.com.cn
2019-084 Announcement on the Distribution of Dividend for Second 9 August 2019 http://www.cninfo.com.cn
Tranche of Preference Share
2019-085 Supplemental Announcement on Public Tender of 9 August 2019 http://www.cninfo.com.cn
Equity of Subsidiary
2019-086 Supplemental Announcement on Public Tender of 10 August 2019 http://www.cninfo.com.cn
Equity of Subsidiary
2019-087 Announcement on Result of the Issue of 2019 Second Tranche of 15 August 2019 http://www.cninfo.com.cn
Medium-term Notes
2019-088 2019 Interim Report Summary 16 August 2019 http://www.cninfo.com.cn
2019-089 Second Supplemental Announcement of the 2019 16 August 2019 http://www.cninfo.com.cn
First Extraordinary General Meeting
2019-090 Announcement on the Progress of Public Tender of 17 August 2019 http://www.cninfo.com.cn
Equity and Loan of Subsidiary
2019-091 Announcement on the 2019 Interest Payment of Corporate Bonds 19 August 2019 http://www.cninfo.com.cn
(Phase I)
2019-092 Announcement on Repurchase Report of Investor of 19 August 2019 http://www.cninfo.com.cn
“17 Chenming Bond 01”
2019-093 Announcement on the Progress of Public Tender of Equity of 22 August 2019 http://www.cninfo.com.cn
Subsidiary
2019-094 Poll Results Announcement of the 2019 First Extraordinary 4 September 2019 http://www.cninfo.com.cn
General Meeting
2019 AnnuAl RepoRt 75
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Information disclosure index for 2019 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2019-095 Announcement on the Progress of Public Tender of Equity of 4 September 2019 http://www.cninfo.com.cn
Subsidiary
2019-096 Announcement in respect of Resolutions of the Third Extraordinary 7 September 2019 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Board of Directors
2019-097 Announcement in respect of Resolutions of the First Extraordinary 7 September 2019 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Supervisory Committee
2019-098 Announcement on Delay in Increase of Shares of the Company 7 September 2019 http://www.cninfo.com.cn
by the Controlling Shareholder
2019-099 Notice of 2019 Second Extraordinary General Meeting 7 September 2019 http://www.cninfo.com.cn
2019-100 Announcement on Pledge of Shares held by Shareholders and the 7 September 2019 http://www.cninfo.com.cn
Release of Pledge of Part of the Shares
2019-101 Announcement on the Distribution of Dividend for 16 September 2019 http://www.cninfo.com.cn
Third Tranche of Preference Share
2019-102 Announcement on Pledge of Shares by Shareholders 16 September 2019 http://www.cninfo.com.cn
2019-103 Announcement in respect of Resolutions of the Fourth 17 September 2019 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Board of Directors
2019-104 Announcement in respect of Resolutions of the Second 17 September 2019 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
2019-105 Announcement on the Use of Accounts Receivable 17 September 2019 http://www.cninfo.com.cn
By Subsidiary for Financing Purpose
2019-106 Announcement on the Change of Auditor 17 September 2019 http://www.cninfo.com.cn
2019-107 Announcement on Additional Resolutions Proposed at the 2019 17 September 2019 http://www.cninfo.com.cn
Second Extraordinary General Meeting
2019-108 Supplementary Notice of 2019 Second Extraordinary 17 September 2019 http://www.cninfo.com.cn
General Meeting
2019-109 Announcement on Release of Pledge of Shares Held by 25 September 2019 http://www.cninfo.com.cn
Shareholders
2019-110 Announcement in respect of Provision of Guarantee in Favour of 30 September 2019 http://www.cninfo.com.cn
Wholly-owned Subsidiary for Financing
2019-111 Announcement on Pledge of Shares held by Shareholders 8 October 2019 http://www.cninfo.com.cn
2019-112 Second Supplementary Notice of the 2019 Second Extraordinary 8 October 2019 http://www.cninfo.com.cn
General Meeting
2019-113 Announcement on Estimated Results for the First Three 9 October 2019 http://www.cninfo.com.cn
Quarters of 2019
2019-114 Announcement in respect of Resolutions of the Fifth Extraordinary 18 October 2019 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Board of Directors
2019-115 Announcement in respect of Provision of Guarantee in Favour of 18 October 2019 http://www.cninfo.com.cn
Subsidiary
2019-116 Notice of 2019 Third Extraordinary General Meeting 18 October 2019 http://www.cninfo.com.cn
2019-117 Announcement in respect of Resolutions of the 2019 Second 24 October 2019 http://www.cninfo.com.cn
Extraordinary General Meeting
2019-118 Announcement in respect of Resolutions of the Third Meeting 26 October 2019 http://www.cninfo.com.cn
of the Ninth Session of the Board of Directors
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Information disclosure index for 2019 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2019-119 Announcement in respect of Resolutions of the Third Meeting 26 October 2019 http://www.cninfo.com.cn
of the Ninth Session of the Supervisory Committee
2019-120 2019 Third Quarterly Report 26 October 2019 http://www.cninfo.com.cn
2019-121 Announcement on Changes in Accounting Policies 26 October 2019 http://www.cninfo.com.cn
2019-122 Announcement on Receipt of Financial Support and 26 October 2019 http://www.cninfo.com.cn
Related Party Transaction
2019-123 Announcement on Additional Resolutions Proposed at the 2019 26 October 2019 http://www.cninfo.com.cn
Third Extraordinary General Meeting
2019-124 Supplemental Notice of 2019 Third Extraordinary General Meeting 26 October 2019 http://www.cninfo.com.cn
2019-125 Announcement in respect of Resolutions of the Sixth Extraordinary 7 November 2019 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Board of Directors
2019-126 Announcement on the Change and Rotation of the 7 November 2019 http://www.cninfo.com.cn
General Manager
2019-127 Announcement on Additional Resolutions Proposed at the 2019 7 November 2019 http://www.cninfo.com.cn
Third Extraordinary General Meeting
2019-128 Supplementary Notice of 2019 Third Extraordinary General Meeting 7 November 2019 http://www.cninfo.com.cn
2019-129 Second Supplementary Notice of 2019 Third Extraordinary 16 November 2019 http://www.cninfo.com.cn
General Meeting
2019-130 Announcement on Receipt of Government Subsidy 27 November 2019 http://www.cninfo.com.cn
2019-131 Announcement on the Commencement of Equipment Financing 28 November 2019 http://www.cninfo.com.cn
Business
2019-132 Announcement on the Resignation of Director 3 December 2019 http://www.cninfo.com.cn
2019-133 Announcement in respect of Resolutions of the 2019 Third 4 December 2019 http://www.cninfo.com.cn
Extraordinary General Meeting
2019-134 Announcement on Release of Pledge of Shares Held by 7 December 2019 http://www.cninfo.com.cn
Shareholders
2019-135 Announcement on the Receipt of Government Subsidy by a 14 December 2019 http://www.cninfo.com.cn
Subsidiary
2019-136 Announcement on the Progress of External Investment 19 December 2019 http://www.cninfo.com.cn
2019-137 Announcement on Release of Pledge of Shares Held by 20 December 2019 http://www.cninfo.com.cn
Shareholders
2019-138 Announcement in respect of Provision of Pledge and 25 December 2019 http://www.cninfo.com.cn
Guarantee in Favour of Huanggang Chenming by
Wuhan Chenming for Loan
2019-139 Announcement on Release of Pledge of Shares Held 31 December 2019 http://www.cninfo.com.cn
by Shareholders
2019-140 Announcement on Capital Increase and Introduction of Strategic 31 December 2019 http://www.cninfo.com.cn
Investor by a Wholly-owned Subsidiary
2019-141 Announcement on the Receipt of Government Subsidy 31 December 2019 http://www.cninfo.com.cn
by a Subsidiary
2019 AnnuAl RepoRt 77
VII Material Matters
XX. Matters of significant of subsidiaries of the Company
√ Applicable □ Not applicable
1. Establishment of Shanghai Chenming Pulp & Paper Sales Co., Ltd. through External Investment
In order to make full use of the advantages of Shanghai as a financial centre, expand and enhance the Shanghai
platform, put great efforts into market development, and enhance the Company’s overall strength and comprehensive
competitiveness, the company intended to set up Shanghai Chenming Pulp & Paper Sales Co., Ltd. in Hongkou
District, Shanghai.
For details, please refer to the relevant announcement (announcement no.: 2019-008) of the Company published on
CNINFO on 22 January 2019.
2. Operation Commencement of Shouguang Meilun Chemical Pulp Project
The proposal on the construction of a bleached sulphate chemical wood pulp in Shouguang of Shouguang Meilun,
a wholly-owned subsidiary of the Company, was considered and approved at the 2013 annual general meeting of
the Company. During the process of project construction, given the high dependence of China’s wood pulp imports
and the impact of waste paper import policies, waste paper prices in the domestic market rose sharply, which led to
the increase in wood pulp prices. In order to solve the problem of raw materials of the Company, make full use of the
cost advantage of self-made pulp and improve economic efficiency, the Company adjusted the annual production
of 400,000 tonnes of bleached sulphate chemical wood pulp to annual production of 1 million tonnes of bleached
sulphate chemical wood pulp and put it into production smoothly.
For details, please refer to the relevant announcement (announcement no.: 2019-038) of the Company published on
CNINFO on 13 May 2019.
3. Issue of USD Bonds by an Overseas Subsidiary
Meilun (BVI) Limited, an overseas subsidiary of the Company, issued a total of USD163 million USD bonds on Hong
Kong Stock Exchange with a term of less than 3 years.
For details, please refer to the relevant announcement (announcement no.: 2019-076) of the Company published on
CNINFO on 2 August 2019.
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: share
Opening balance Change during the reporting period (+/-) Closing balance
Converted
Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage
I. Restricted shares 11,982,642 0.41% 0 0 0 -1,402,118 -1,402,118 10,580,524 0.36%
Shares held by other
domestic investors 11,982,642 0.41% 0 0 0 -1,402,118 -1,402,118 10,580,524 0.36%
Shares held by
domestic natural
persons 11,982,642 0.41% 0 0 0 -1,402,118 -1,402,118 10,580,524 0.36%
II. Non-restricted shares 2,892,625,558 99.59% 0 0 0 1,402,118 1,402,118 2,894,027,676 99.64%
1. RMB ordinary shares 1,658,004,342 57.08% 0 0 0 1,332,818 1,332,818 1,659,337,160 57.13%
2. Domestic listed
foreign shares 706,315,966 24.32% 0 0 0 69,300 69,300 706,385,266 24.32%
3. Overseas listed
foreign shares 528,305,250 18.19% 0 0 0 0 0 528,305,250 18.19%
III. Total number of shares 2,904,608,200 100.00% 0 0 0 0 0 2,904,608,200 100.00%
The reasons for such changes
√ Applicable □ Not applicable
According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and Senior
Management of the Listed Companies of Shenzhen Stock Exchange, during the reporting period, 2,782,845 restricted
RMB ordinary shares (A shares) held by Directors and senior management who resigned became non-restricted
shares; 69,300 restricted domestic listed foreign shares (B shares) held by senior management who resigned
became unrestricted shares; and 1,450,027 unrestricted RMB ordinary shares (A shares) additionally acquired by the
Company’s Directors, Supervisors and senior management became restricted shares.
Approval of changes in shareholding
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 79
VIII Changes in Share Capital and Shareholders
I. Changes in shares (Cont’d)
1. Changes in shares (Cont’d)
Transfer of shares arising from changes in shareholding
□ Applicable √ Not applicable
Progress of share repurchase
□ Applicable √ Not applicable
Progress of decrease in the holding of repurchased shares by way of bidding
□ Applicable √ Not applicable
The 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 the Company for the latest year and the latest
period
□ Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be
disclosed
□ Applicable √ Not applicable
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Changes in Share Capital and Shareholders
I. Changes in shares (Cont’d)
2. Changes in restricted shares
√ Applicable □ Not applicable
Unit: share
Restricted shares Restricted shares Restricted shares Restricted shares
at the beginning released during increased during at the end
Name of shareholders of period the period the period of period Reason for restriction Date of release from restriction
Chen Hongguo 7,608,333 0 701,700 8,310,033 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Hu Changqing 1,392 0 30,751 32,143 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Geng Guanglin 492,113 0 45,599 537,712 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Li Feng 530,794 0 148,726 679,520 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Li Dong 11,250 0 45,000 56,250 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Li Weixian 3,599 0 57,301 60,900 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Li Xueqin 483,016 0 162,975 645,991 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Li Zhenzhong 0 0 84,750 84,750 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Yuan Xikun 0 0 33,525 33,525 Locked up by directors, Under relevant requirements
supervisors and senior for shares held by directors,
management supervisors and senior management
Yin Tongyuan 2,726,595 2,726,595 0 0 Resignation 18 November 2019
Xiao Peng 125,550 125,550 0 0 Resignation 18 November 2019
Chen Gang 0 0 139,700 139,700 Resignation 11 December 2022
Total 11,982,642 2,852,145 1,450,027 10,580,524 — —
2019 AnnuAl RepoRt 81
VIII Changes in Share Capital and Shareholders
II. Issuance and listing of securities
1. 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
2. Issuance of securities (excluding preference shares) during the reporting period
□ Applicable √ Not applicable
3. Existing staff shares
□ Applicable √ Not applicable
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of ordinary 120,766, of which Total number of ordinary 119,658, of which Total number of holders 0 Total number of holders 0
shareholders as at the end 100,644 were holders of shareholders as at the 99,635 were holders of of preference shares of preference shares
of the reporting period A shares, 19,752 were end of the month prior to A shares, 19,658 were with restored voting with restored voting
holders of B shares and the publication date of holders of B shares and right as at the end of the right as at the end of
370 were holders of H this annual report 365 were holders of H reporting period the month prior to the
shares shares disclosure date of the
annual report
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Changes
(increase or
Number of decrease)
shares held at during the Number of Number of
Percentage of the end of the Reporting restricted non-restrict
Name of shareholders Nature of shareholders shareholding reporting period period shares held shares held Share pledged or locked-up
Status of shares Number
CHENMING HOLDINGS COMPANY LIMITED State-owned legal person 15.33% 445,396,128 1,250,000 — 445,396,128 Pledge 261,670,000
HKSCC NOMINEES LIMITED Overseas legal person 12.85% 373,163,875 –124,000 — 373,163,875 — —
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 12.54% 364,131,563 — — 364,131,563 — —
CENTRAL HUIJIN ASSET MANAGEMENT LTD. State-owned legal person 2.07% 60,206,850 — — 60,206,850 — —
AGRICULTURAL BANK OF CHINA LIMITED – Others 0.46% 13,483,150 –683,300 — 13,483,150 — —
CHINA CSI 500 ETF
HONG KONG SECURITIES CLEARING COMPANY LIMITED Overseas legal person 0.46% 13,238,463 8,749,612 — 13,238,463 — —
VANGUARD EMERGING MARKETS STOCK INDEX FUND Overseas legal person 0.44% 12,912,357 — — 12,912,357 — —
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND Overseas legal person 0.43% 12,615,170 1,617,762 — 12,615,170 — —
Chen Hongguo Domestic nature person 0.38% 11,080,044 935,600 8,310,033 2,770,011 — —
Chen Suiqiang Domestic nature person 0.38% 11,010,200 1,109,050 — 11,010,200 — —
Related party relationship or acting in concert among A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming
the above shareholders 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.
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Number of non-
restricted shares
held as at the end of
Name of shareholders the reporting period Class of shares
Class of shares Number
CHENMING HOLDINGS COMPANY LIMITED 445,396,128 RMB ordinary shares 445,396,128
HKSCC NOMINEES LIMITED 373,163,875 Overseas listed 373,163,875
foreign shares
CHENMING HOLDINGS (HONG KONG) LIMITED 364,131,563 Domestic listed 210,717,563
foreign shares
Overseas listed 153,414,000
foreign shares
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 60,206,850 RMB ordinary shares 60,206,850
AGRICULTURAL BANK OF CHINA LIMITED – 13,483,150 RMB ordinary shares 13,483,150
CHINA CSI 500 ETF
HONG KONG SECURITIES CLEARING 13,238,463 RMB ordinary shares 13,238,463
COMPANY LIMITED
VANGUARD EMERGING MARKETS STOCK 12,912,357 Domestic listed 12,912,357
INDEX FUND foreign shares
VANGUARD TOTAL INTERNATIONAL STOCK 12,615,170 Domestic listed 12,615,170
INDEX FUND foreign shares
Chen Suiqiang 11,010,200 RMB ordinary shares 11,010,200
Jin Xing 10,856,000 Domestic listed 10,856,000
foreign shares
Related party relationship or acting in concert A shareholder, Chenming Holdings (Hong Kong) Limited, which
among the top ten shareholders of non- is an overseas legal person, is a wholly-owned subsidiary of a
restricted shares, and between the top ten shareholder, Shouguang Chenming Holdings Company Limited,
shareholders of non-restricted shares and which is a state-owned legal person. Save for the above, it is not
the top ten shareholders aware that any other shareholders of tradable shares are persons
acting in concert. It is also not aware that any other shareholders
of tradable shares are related to each other.
Securities margin trading of top 10 ordinary Chenming Holdings Company Limited held 445,396,128 RMB
shareholders, if any (see Note 4) ordinary shares, of which 402,196,128 shares were held through
ordinary account and 43,200,000 shares were held through credit
guarantee security account.
Chen Suiqiang held 11,010,200 RMB ordinary shares, of which 0
share was held through ordinary account and 11,010,200 shares
were held through credit guarantee security account.
2019 AnnuAl RepoRt 83
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
shareholders and top 10 shareholders of non-restricted shares of the Company
□ Yes √ No
The top 10 ordinary shareholders and top 10 shareholders of non-restricted shares
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Legal
representative/
Name of controlling Person in charge Date of
shareholders of the unit establishment Enterprise code Principal business
CHENMING HOLDINGS Chen Hongguo 30 December 91370783783485189Q Investment in paper
COMPANY LIMITED 2005 making, electricity,
heat and arboriculture
by its own capital
Shareholdings of controlling shareholders who Save for the Company, Chenming Holdings Company Limited
have control or hold shares in other domestic does not have control over or hold any equity interest of other
or overseas listed companies during the domestic or overseas listed companies.
reporting period
Change of controlling shareholders during the reporting period
□ Applicable √ Not applicable
There was no change in the controlling shareholders of the Company during the reporting period.
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial controller of the Company and persons acting in concert
Nature of the beneficial controller: Regional state-owned assets administration authority
Type of the beneficial controller: legal person
Legal
representative/
Person in charge Date of
Name of beneficial controller of the unit establishment Enterprise code Principal business
State-owned Assets Not applicable 1 August 1991 None Responsible for the
Supervision and management and
Administration Bureau capital operation of the
of Shouguang City state-owned assets of
enterprises and business
units in Shouguang city
Shareholdings of beneficial Save for the Company, State-owned Assets Supervision and Administration Office
controller who has control of Shouguang City does not have control over or hold any equity interest of other
or holds shares in other domestic or overseas listed companies.
domestic or overseas listed
companies during the
reporting period
2019 AnnuAl RepoRt 85
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial controller of the Company and persons acting in concert (Cont’d)
Change of beneficial controller during the reporting period
□ Applicable √ Not applicable
There 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
State-owned Assets Supervision and
Administration Commission of People’s Government of
Shouguang City and Weifang City in Shandong Province
100.00%
Shandong Shouguang Jinxin Investment
Development Holdings Group Co., Ltd.
45.21%
Chenming Holdings Limited
100.00%
15.33% Chenming Holdings
(Hong Kong) Limited
12.54%
Shandong Chenming Paper Holdings Limited
Beneficial controller controlling the Company through trust or other asset management method
□ Applicable √ Not applicable
4. Other legal person shareholders interested in over 10% of the shares of the Company
□ Applicable √ Not applicable
5. Restrictions on decrease in shareholding by controlling shareholders, beneficial controller,
reorganising party and other undertaking parties
□ Applicable √ Not applicable
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Preference Shares
√ Applicable □ Not Applicable
I. Issue and listing of preference shares during the past three years at the end of the reporting
period
√ Applicable □ Not Applicable
With listing Information
Issue price Coupon Issue size permission Information of of changes to
Method Issue date (RMB/share) rate (share) Listing date (share) Delisting date use of proceeds proceeds
Private 16 March 2016 100 4.36% 22,500,000 8 April 2016 22,500,000 Not applicable http://www.cninfo.com.cn Not applicable
Private 16 August 2016 100 5.17% 10,000,000 12 September 2016 10,000,000 Not applicable http://www.cninfo.com.cn Not applicable
Private 21 September 2016 100 5.17% 12,500,000 24 October 2016 12,500,000 Not applicable http://www.cninfo.com.cn Not applicable
II. Holders of preference shares and their shareholdings
Unit: share
Total number of holders of 8 Total number of holders of 8
preference shares as at the end of preference shares as at the end of
the reporting period the month prior to the publication date
of this annual report
Holders holdings more than 5% of the preference shares of the Company or top ten holders of preference shares
Changes
Number of (increase
shares held or decrease)
at the end of during the Number of Number of
Nature of Percentage of the reporting reporting restricted non-restricted
Name of shareholders shareholders shareholding period period shares held shares held Share pledged or locked-up
Status of shares Number
BEIJING YIBEN ZHONGXING INVESTMENT Domestic non-state- 27.78% 12,500,000 12,500,000 Pledged 12,500,000
MANAGEMENT CO., LTD. owned legal person
BANK OF COMMUNICATIONS Others 22.44% 10,100,000 10,100,000 – –
INTERNATIONAL TRUST CO., LTD. – HUILI
NO.167 SINGLE CAPITAL TRUST
BANK OF COMMUNICATIONS Others 14.22% 6,400,000 6,400,000 – –
INTERNATIONAL TRUST CO., LTD. – HUILI
NO.136 SINGLE CAPITAL TRUST
QILU BANK CO., LTD. – QILU BANK QUANXIN Others 13.33% 6,000,000 6,000,000 – –
WEALTH MANAGEMENT PRODUCT SERIES
HENGFENG BANK CO., LTD. Domestic non-state- 11.11% 5,000,000 5,000,000 – –
owned legal person
SHANGHAI STATE-OWNED State-owned legal 4.44% 2,000,000 -1,000,000 2,000,000 – –
ASSETS OPERATION CO., LTD. person
NCF – MINSHENG BANK – CHINA FORTUNE Others 4.44% 2,000,000 2,000,000 – –
INTERNATIONAL TRUST – CHINA
FORTUNE TRUSTMIN XIN NO. 11
SINGLE CAPITAL TRUST
SHANGHAI SHIJIE BUSINESS Domestic non-state- 2.22% 1,000,000 1,000,000 – 1,000,000 – –
CONSULTING CO., LTD. owned legal person
Related party relationship or acting in concert The aforesaid holders of preference shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.167 SINGLE CAPITAL
among the top ten holders of preference shares, TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.136 SINGLE CAPITAL TRUST”, are persons acting in
and between the top ten holders of preference concert. Save for the above, it is not aware that the remaining holders of preference shares are persons acting in concert. It is also not aware that the
shares and the top ten holders of ordinary shares top ten holders of preference shares and the top ten holders of ordinary shares are related to each other.
2019 AnnuAl RepoRt 87
IX Preference Shares
III. Profit distribution for preference shares
√ Applicable □ Not Applicable
Profit distribution for preference shares during the reporting period
√ Applicable □ Not Applicable
Whether it is in
compliance with
the conditions Whether Whether it
Distributed and the relevant Way of it was an participates in
Dividend amount (RMB) procedures of dividend accumulated distribution of
Date of Distribution Ratio (tax inclusive) distribution payment dividend remaining profit
18 March 2019 4.36% 98,100,000.00 Yes Cash No Yes
9 August 2019 6.20% 279,069,767.52 Yes Cash No Yes
16 August 2019 5.17% 51,700,000.00 Yes Cash No Yes
23 September 2019 5.17% 64,625,000.00 Yes Cash No Yes
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Preference Shares
III. Profit distribution for preference shares Cont’d
Distribution for preference shares of the Company for the past three years
Unit: RMB
Net profit
attributable to Percentage
shareholders of to the net profit
listed company attributable to Explanation on shortfall
under the shareholders of accumulated to the next
consolidated listed company accounting year due to
financial under the insufficient distributable
Distributed statements consolidated profits or portion can be
amount for the financial allocated to remaining profit
Year of distribution (tax inclusive) distribution year statements distribution
2019 388,843,604.70 1,656,566,584.88 23.47% Chenming You 01, Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB174,418,604.70 in 2019.
2018 493,494,767.52 2,509,828,858.47 19.66% Chenming You 01, Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB279,069,767.52 in 2018.
2017 679,141,006.88 3,769,325,450.93 18.02% Chenming You 01, Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB464,716,006.88 in 2017.
Any adjustment or change in profit distribution policy for preference shares
□ Yes √ No
Both earnings of the Company and retained profit of the parent company are positive during the reporting period but
without profit distribution for preference shares
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 89
IX Preference Shares
III. Profit distribution for preference shares Cont’d
Explanation on other matters regarding distribution for preference shares
√ Applicable □ Not applicable
Holders of preference shares participate in profit distribution in two portions, namely the fixed dividend distributed based on
a fixed dividend rate and the distribution of retained earnings realised for the year.
1. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the preference
shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
the preference shares in accordance with the issuance plan under the framework and principles considered and
approved in the general meeting in respect of the preference shares. The general meeting of the Company has the
right to cancel part of or all of the current dividends on the preference shares. However, when the general meeting
of the Company will consider the cancellation of part of or all of the current dividends on the preference shares, the
Company shall inform the holders of preference shares at least 10 working days before the date of dividend payment
in accordance with the requirements of the related authorities.
2. Participation in the distribution of retained earnings realised for the year
Holders of preference shares participate in the distribution of the retained earnings through receipt of cash which
is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of preference shares can
also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
basis upon distribution of relevant fixed income to holders of financial instruments such as the preference shares
which may be classified under equity. 50% of the retained earnings shall be distributed to holders of preference
shares and ordinary shareholders. Holders of preference shares shall participate in the distribution of the retained
earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained
earnings by receiving cash dividends or dividends on ordinary shares.
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Preference Shares
IV. Repurchase or conversion
□ Applicable √ Not applicable
There was no repurchase or conversion during the reporting period.
V. Resumption of voting rights of preference shares
1. Resumption and exercise of voting rights
□ Applicable √ Not applicable
2. Shareholders and beneficial owner involved in resumption of voting rights of preference shares
□ Applicable √ Not applicable
VI. Accounting policy and reasons thereof
√ Applicable □ Not applicable
Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of
Financial Instruments, Accounting Standard for Business Enterprises No. 37 – Presentation of Financial Instruments and
Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
2019 AnnuAl RepoRt 91
X Directors, Supervisors and Senior Management and Staff
I. Changes in shareholding of Directors, Supervisors and Senior Management
Shares held Increase in Decrease in Other Shares held
as at the the number of the number of changes as at the
beginning of shares held shares held (increase or end of the
Start date End date the period during the during the decrease) period
Name Position Status Gender Age of the term of the term (shares) period (shares) period (shares) (shares) (shares)
Chen Hongguo Chairman In office M 55 6 September 2001 11 June 2022 10,144,444 935,600 11,080,044
Hu Changqing Vice Chairman In office M 54 23 June 2018 11 June 2022 1,857 41,000 42,857
Li Xingchun Vice Chairman In office M 54 11 June 2019 11 June 2022 0 0
Han Tingde Director In office M 51 11 June 2019 11 June 2022 0 0
Li Chuanxuan Director In office M 42 11 June 2019 11 June 2022 0 0
Sun Jianfei Independent Director In office M 47 11 June 2019 11 June 2022 0 0
Yin Meiqun Independent Director In office F 49 11 June 2019 11 June 2022 0 0
Yang Biao Independent Director In office M 40 11 June 2019 11 June 2022 0 0
Li Dong Chairman of Supervisory In office M 37 13 December 2016 11 June 2022 15,000 60,000 75,000
Committee
Li Xinggui Supervisor In office M 55 11 June 2019 11 June 2022 0 0
Qiu Lanju Supervisor In office F 46 11 June 2019 11 June 2022 0 0
Pan Ailing Supervisor In office F 55 11 June 2019 11 June 2022 0 0
Zhang Hong Supervisor In office F 55 11 June 2019 11 June 2022 0 0
Li Feng General manager In office M 46 9 November 2019 9 November 2020 707,727 198,300 906,027
Li Xueqin Deputy general manager In office F 54 1 September 2004 11 June 2022 644,022 217,300 861,322
Geng Guanglin Deputy general manager In office M 46 11 June 2019 11 June 2022 656,150 60,800 716,950
Li Weixian Deputy general manager In office M 38 6 November 2019 11 June 2022 4,800 235,400 240,200
Li Zhenzhong Deputy general manager In office M 46 20 March 2011 11 June 2022 0 113,000 113,000
Zhao Xuegang Deputy general manager In office M 47 11 June 2019 11 June 2022 0 0
Dong Lianming Financial controller In office M 45 12 October 2018 11 June 2022 0 69,600 69,600
Yuan Xikun Secretary to the Board In office M 34 16 May 2018 11 June 2022 0 44,700 44,700
Chu Hon Leung Company secretary In office M 37 11 June 2019 11 June 2022 0 0
(Hong Kong)
Chen Gang Director and deputy Resigned M 47 14 June 2018 29 November 2019 0 139,700 139,700
general manager
Sun Yinghua Supervisor Resigned F 51 18 May 2016 11 June 2019 0 73,800 73,800
Zhang Qingzhi Deputy general manager Resigned M 54 18 May 2016 11 June 2019 0 0
Yang Weiming Deputy general manager Resigned M 45 18 May 2016 15 March 2019 0 0
Yang Guihua Director Resigned F 54 9 May 2014 11 June 2019 0 0
Wang Fengrong Independent Director Resigned F 51 18 May 2016 11 June 2019 0 0
Huang Lei Independent Director Resigned M 63 18 May 2016 11 June 2019 0 0
Liang Fu Independent Director Resigned F 52 18 May 2016 11 June 2019 0 0
Zhang Xiaofeng Supervisor Resigned M 42 18 May 2016 11 June 2019 0 0
Poon Shiu Cheong Company secretary and Resigned M 50 28 May 2008 11 June 2019 0 0
qualified accountant
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
II. Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable □ Not applicable
Name Position Type Date Reason
Chen Hongguo Chairman Elected 11 June 2019 Elected as a director and the chairman
of the ninth session of the Board at
the 2018 annual general meeting and
the first meeting of the ninth session
of the Board, respectively.
Hu Changqing Vice Chairman Elected 11 June 2019 Elected as a director and a vice chairman
of the ninth session of the Board at the
2018 annual general meeting and the
first meeting of the ninth session of
the Board, respectively.
Li Xingchun Vice Chairman Elected 11 June 2019 Elected as a director and a vice chairman
of the ninth session of the Board at the
2018 annual general meeting and the
first meeting of the ninth session of the
Board, respectively.
Han Tingde Director Elected 11 June 2019 Elected as a director of the ninth session
of the Board at the 2018 annual general
meeting.
Li Chuanxuan Director Elected 11 June 2019 Elected as a director of the ninth session
of the Board at the 2018 annual general
meeting.
Sun Jianfei Independent Elected 11 June 2019 Elected as an independent director of the
Director ninth session of the Board at the 2018
annual general meeting.
Yang Biao Independent Elected 11 June 2019 Elected as an independent director of the
Director ninth session of the Board at the 2018
annual general meeting.
Yin Meiqun Independent Elected 11 June 2019 Elected as an independent director of the
Director ninth session of the Board at the 2018
annual general meeting.
Li Dong Chairman of Elected 11 June 2019 Elected as a supervisor and the chairman
Supervisory of the ninth session of the Supervisory
Committee Committee at the 2018 annual general
meeting.
Pan Ailing Supervisor Elected 11 June 2019 Elected as a supervisor of the ninth
session of the Supervisory Committee
at the 2018 annual general meeting.
Zhang Hong Supervisor Elected 11 June 2019 Elected as a supervisor of the ninth
session of the Supervisory Committee
at the 2018 annual general meeting.
Li Xinggui Employee Elected 11 June 2019 Elected as an employee representative
representative supervisor at the tenth meeting of
supervisor the ninth session of the employee
representative meeting.
2019 AnnuAl RepoRt 93
X Directors, Supervisors and Senior Management and Staff
II. Changes of Directors, Supervisors and Senior Management of the Company (Cont’d)
Name Position Type Date Reason
Qiu Lanju Employee Elected 11 June 2019 Elected as an employee representative
representative supervisor at the tenth meeting of
supervisor the ninth session of the employee
representative meeting.
Li Feng General manager Appointed 6 November 2019 Appointed as the general manager by
the Company according to the
General Manager Rotation System.
Li Weixian Deputy general Appointed 6 November 2019 Elected as a deputy general manager at
manager the sixth extraordinary meeting of the
ninth session of the Board.
Li Xueqin Deputy general Appointed 11 June 2019 Elected as a deputy general manager at
manager the first meeting of the ninth session
of the Board.
Geng Guanglin Deputy general Appointed 11 June 2019 Elected as a deputy general manager at
manager the first meeting of the ninth session
of the Board.
Li Zhenzhong Deputy general Appointed 11 June 2019 Elected as a deputy general manager at
manager the first meeting of the ninth session
of the Board.
Zhao Xuegang Deputy general Appointed 11 June 2019 Elected as a deputy general manager at
manager the first meeting of the ninth session
of the Board.
Dong Lianming Financial controller Appointed 11 June 2019 Elected as the financial controller at the
first meeting of the ninth session of
the Board.
Yuan Xikun Secretary to the Appointed 11 June 2019 Elected as the secretary to the Board at
Board the first meeting of the ninth session
of the Board.
Chu Hon Leung Hong Kong Appointed 11 June 2019 Elected as the company secretary
company (Hong Kong) at the first meeting
secretary of the ninth session of the Board.
Geng Guanglin Director Expiry of term 11 June 2019 Vacation of office upon expiry of the term
of office of the eighth session of the Board
Li Feng Director Expiry of term 11 June 2019 Vacation of office upon expiry of the term
of office of the eighth session of the Board
Zhang Hong Director Expiry of term 11 June 2019 Elected as a supervisor subsequent to the
of office vacation of office upon expiry of the
term of the eighth session of the Board
Yang Guihua Director Expiry of term 11 June 2019 Vacation of office upon expiry of the term
of office of the eighth session of the Board
Wang Fengrong Independent Expiry of term 11 June 2019 Vacation of office upon expiry of the term
director of office of the eighth session of the Board
Huang Lei Independent Expiry of term 11 June 2019 Vacation of office upon expiry of the term
Director of office of the eighth session of the Board
Liang Fu Independent Expiry of term 11 June 2019 Vacation of office upon expiry of the term
Director of office of the eighth session of the Board
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
II. Changes of Directors, Supervisors and Senior Management of the Company (Cont’d)
Name Position Type Date Reason
Pan Ailing Independent Expiry of term 11 June 2019 Elected as a supervisor subsequent to the
Director of office vacation of office upon expiry of the
term of the eighth session of the Board
Sun Yinghua Employee Expiry of term 11 June 2019 Vacation of office upon expiry of the term
representative of office of the eighth session of the Supervisory
supervisor Committee
Zhang Xiaofeng Director Expiry of term 11 June 2019 Vacation of office upon expiry of the term
of office of the eighth session of the Supervisory
Committee
Zhang Qingzhi Deputy general Expiry of term 11 June 2019 Vacation of office upon expiry of the term
manager of office of the eighth session of the Board
Yang Weiming Deputy general Dismissed 15 March 2019 Resignation from the position due to
manager personal reasons
Chen Gang Director and deputy Resignation 29 November 2019 Resignation from the position due to
general manager personal reasons
Poon Shiu Cheong Company secretary Expiry of term 11 June 2019 Vacation of office upon expiry of the term
and qualified of office of the eighth session of the Board
accountant
III. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisors and 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 is a
senior economist and holds the titles including Nationwide Light Industry Top Ten Youth Experts (全國輕工
系統十佳傑出青年崗位能手), Labor Medal on Enriching Shandong Province (山東省富民興魯勞動獎章獲得者),
Excellent Entrepreneur of Shandong Province (山東省優秀企業家), Nationwide May 1st Labor Medal (全國五一勞
動獎章獲得者), Nationwide Excellent Entrepreneur (全國優秀創業企業家) and USA RISI CEO of the Year (美國銳
思 “年度最佳CEO獎”). 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 of Wuhan Chenming Hanyang Paper Co.,
Ltd. He is currently the chairman of the Company and a Party Committee Secretary. Mr. Chen Hongguo is the
spouse of 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. He joined
the Company in 1988. He had held various positions in the Company such as the chief of the technological
reform department, the chief officer of branch factory, the deputy general manager and the Director. He is
currently a director of Chenming Holdings Company Limited and a vice chairman of the Company.
2019 AnnuAl RepoRt 95
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(1) Brief biographies of executive Directors (Cont’d)
Mr. Li Xingchun holds a doctorate from School of Engineering Management and Engineering (Financial
Engineering) at Nanjing University and is a visiting professor of Shanghai Finance University and the founder of
Leadbank Financial Service Group. In 2015, he was selected as a financial innovative figure of Lujiazui by YICAI
(第一財經). In the same year, he was selected as an independent fortune leader in China by Fortune Today.
In 2016, he was selected as an outstanding entrepreneur of wealth management institution in China by China
Economy and Trade Promotion Association (中國經濟貿易促進會). In 2017, he was awarded the outstanding
wealth management leader award. He was the senior director of Ctrip.com, the vice president of Fuyou
Securities Co., Ltd. (富友證券有限責任公司), the executive vice president of Pan Asia Trust Co., Ltd. (泛亞信託有
限公司), and the director and president of Western Development Holdings Co., Ltd. (西部發展控股有限公司). He
is currently the chairman of Leadbank Technology (Investment Group) and a vice chairman of the Company.
(2) Brief biographies of non-executive Directors
Mr. Han Tingde graduated with a bachelor’s degree. He was the deputy general manager and the general
manager 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 Jinan offices of
Tiantong Securities Co., Ltd. in China, the general management of each of the customer service department,
the brokerage headquarters and the legal affairs department, as well as a deputy general manager of the retail
headquarters of Zhongtai Securities Co., Ltd., etc.
Mr. Li Chuanxuan holds a doctorate in law. He is a professor at Fudan University, Shanghai. From 2008 to 2012,
he was a lecturer in the Law School of Fudan University. From 2012 to 2013, he was a visiting scholar of the
Law School of Columbia University in the United States, focusing on the research on green finance laws and
policies. He is currently the secretary general of the Association of Shanghai Environmental Resources Law (上
海市環境資源法研究會), the director of the Association of China Environmental Resources Law (中國環境資
源法研究會), the director of the Association of Shanghai Economic Law (上海市經濟法研究會), as well as the
evaluation expert of the National Judicial Verification of Environmental Damages (國家環境損害司法鑒定). He
has been in charge of and undertook over 10 national and provincial scientific research projects. Moreover, he
has participated in the drafting of several laws and regulations of different legislatures including the Standing
Committee of the National People’s Congress, the Ministry of Ecology and Environment and Shanghai National
People’s Congress.
(3) Brief biographies of independent non-executive Directors
Mr. Sun Jianfei holds a doctorate in finance. He was a lecturer at University of Nevada, Reno, and concurrently
served as the consultant of hedge funds such as Eagle Peak Fund LP. From 2010 to 2017, he was a lecturer
at Antai College of Economics & Management, Shanghai Jiao Tong University. He was selected in the National
Academic Leadership Talent Programme in Accounting (Standby List) (全國學術類會計領軍（後備）人才項目)
organised by the Ministry of Finance, as well as the Shanghai Pujiang Talent Programme (上海市浦江人才計
劃). He is currently a professor at Institute for Social and Economic Research, Nanjing Audit University, and
concurrently serves as a professor at Antai College of Economics & Management and Advanced Institute of
Finance, Shanghai Jiao Tong University. He is currently the independent director of A share listed companies
including Zhejiang Yueling Co., Ltd. and Huasu Holdings Co., Ltd., as well as the independent director of
several companies whose shares is proposed to be listed, including Nanya New Material Technology Co., Ltd.
and Shanghai Saiyi Environmental Protection Equipment Co., Ltd. (上海賽一環保設備有限公司)
96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(3) Brief biographies of independent non-executive Directors (Cont’d)
Mr. Yang Biao holds a doctorate in law, and is currently a professor and doctoral tutor in 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 “Guangdong Special Support Program”, a selected member in the
“Double Thousand Plan” (雙千計劃) of the Ministry of Education and the Central Politics and Law Committee, a
training candidate in the “Thousand-Hundred-Ten” project (千百十工程) for universities in Guangdong Province,
a member of the Academy for East-Asian Tort Law (AETL), a member of the Expert Advisory Committee
to Guangdong People’s Procuratorate, a supervisory member and judicial advisory expert of the Standing
Committee of Guangzhou People’s Congress and an expert certified in Major Administrative Decision-Making
and Argumentation in Guangzhou. He has served in Guangdong High People’s Court and People’s Court of
Guangzhou Huangpu District. He has also served as independent director of Guangdong Guangzhou Daily
Media Co.,. Ltd.* (廣東廣州日報傳媒股份有限公司), Guangdong Yue Feed Group Co., Ltd. (廣東粵飼料集團股份
有限公司), Circle Logistics Co., Ltd. and Guangdong Tianhe Agricultural Means of Production Co., Ltd. (廣東天
禾農資股份有限公司).
Ms. Yin Meiqun is a university professor and a certified public accountant in China. She holds a doctorate in
accounting degree. She paid academic visits to Sweden, Finland, Denmark and the Iowa State University in the
United States. From 1993 to 2007, she was a professor in the department of accounting at Harbin University
of Science and Technology. She is a professor of Beijing International Studies University. She is currently
a representative of the 15th Beijing Municipal People’s Congress, a member of the Accounting Education
Committee of the Accounting Society of China, a council member of the Accounting Society of China, a council
director of the Association of Beijing Internal Audit, an expert of The Chinese Institute of Certified Public
Accountants and an expert of Social Examination Department of the National Education Examinations Authority,
etc. She concurrently serves as an independent director of Beijing Life Insurance Co., Ltd.
2. Brief biographies of Supervisors
Mr. Li Dong is a member of the Communist Party of the PRC. He graduated with a diploma. After joining the Company
in 2004, he had held different positions including the deputy chief of the cost auditing section and the chief of the
general section under the financial department of the Company, the financial controller of Zhanjiang Chenming and
the chief of the financial department of the Group. He is currently the chairman of the Supervisory Committee of the
Company.
Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She is currently a
professor of the School of Management, an advisor to doctoral students, the chief of the Department of Accounting
and the chief of the Investment and Financing Research Centre (投融資研究中心) in Shandong University and a
non-practising member of CICPA (Chinese Institute of Certified Public Accountants). She is also a director of the
Accounting Institute, Shandong Province (山東省會計學會), a council member of Shandong Comparative Management
Association, a visiting professor at Soochow University in Taiwan, a visiting scholar at University of Connecticut in
the United States and a state-level candidate for the New Century Ten Million Talents Project (新世紀 “百千萬人才
工程”). She is a specialist entitled to the State Council Special Allowance (國務院政府特貼專家), and a Young and
Middle-aged Expert with Outstanding Contributions in Shandong Province (山東省有突出貢獻的中青年專家). She is
the chief expert of the Major Tender Projects of National Social and Science Fund (國家社科基金重大招標課題首席專
家). She has finished various research projects at national and provincial level and published more than 80 academic
papers. She is also an independent director of Sinotruck Jinan Truck Co., Ltd. (中國重汽集團濟南卡車股份有限公司),
an independent director of Inspir Software Co., Ltd. and an independent director of Lu Thai Textile 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 doctoral students
at Shandong University, head of a multinational corporation research institute, a non-practising member of the
Chinese Institute of Certified Public Accountants, a director of China Association of International Trade, a director of
Shandong Province External Trade Association, and an independent director of Shandong Zhangqiu Blower Co., Ltd.,
Shandong Delisi Food Co., Ltd. and Cisen Pharmaceutical Co., Ltd. He is currently a supervisor of the Company.
2019 AnnuAl RepoRt 97
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
2. Brief biographies of Supervisors (Cont’d)
Mr. Li Xinggui is a member of the Communist Party of the PRC. He graduated with a diploma. After joining the
Company in 1994, he had held different positions including a deputy chief of the production department, a deputy
director and director of the general administration office, and a director of the trade union office of the Company. He
is currently the deputy chairman of the trade union of the Company and an employee representative supervisor.
Ms. Qiu Lanju graduated with a diploma. After joining the Company in 1995, she had held different position including
a deputy chief of the price auditing section of the audit department, a chief of the executive section of the purchase
department, a chief of the general administration section of the purchase department and a manager of the materials
company of the Company. She is currently the assistant to the general manager of the Company and an employee
representative supervisor.
3. Brief biographies of Senior Management
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the Company in
1992 and had held different positions including the chief officer of manufacturing section and assistant to the general
manager of the Company, chairman, executive director of a Group, marketing director and deputy general manager of
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. He is currently the general manager of the Company.
Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and had held different positions
including the deputy manager of a Shenzhen coated paper subsidiary of the Company, manager of Shandong
Chenming Paper Sales Company Limited, vice chairman of a household paper company, deputy marketing director
and marketing director of a sales company and vice president of a group. He is currently the deputy general manager
and chairman of the financial division of the Company.
Mr. Geng Guanglin is a member of the Communist Party of the PRC. He graduated with a diploma. He joined the
Company in 1992 and had held different positions including the chief officer of manufacturing section of the Company,
the deputy general manager of Chibi Chenming Paper Co., Ltd., the chairman of Wuhan Chenming Hanyang Paper
Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd., the chairman of Jiangxi Chenming Paper Co., Ltd.
and the director of the Company. He is currently the deputy general manager of the Company.
Ms. Li Xueqin is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She was successively
awarded titles including “Model Worker in Shandong Province (山東省勞動模範), Model Worker in the Country (全
國勞動模範) and Nationwide May 1st Labour Medal (全國五一勞動獎章)” and a deputy of the Tenth, Eleventh and
Twelfth National People‘s Congress. She joined the Company in 1987 and had held the positions of the chief of audit
department and deputy general manager of the Company. She has been a deputy general manager of the Company
since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo, chairman of the Company.
Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the
Company in 1995 and had served as principal representative of the Shanghai management region of a sales company,
sales manager of light weight coated cultural paper products, deputy marketing director of the Sales Company. He is
currently the deputy general manager of the Company.
Mr. Zhao Xuegang is a member of the Communist Party of China. He holds a postgraduate degree. He graduated
from the Economic Information Management School of Shandong Economics University, and obtained a Master’s
degree in Finance from Shandong University. After joining the Company in 2017, he served as the general manager of
the Financial Leasing Company and currently serves as the deputy general manager of the Company.
Mr. Dong Lianming is a member of the Communist Party of the PRC and an accountant. He holds a bachelor’s
degree. He joined the Company in 1997 and had held positions as the chief of accounting and auditing section under
the financial department of the Company, the deputy chief and chief of the financial department, chief accountant
of Jiangxi Chenming, chief accountant of Shandong Chenming Panels and financial controller and deputy general
manager of Zhanjiang Chenming. He is currently the financial controller of the Company.
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
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 statements in the
financial department of the Company, manager of disclosure department, security affairs specialist and chief 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 graduated from the City
University of Hong Kong and obtained a diploma in Hong Kong law. He had been a lawyer in local and international
law firms in Hong Kong and served and an internal consultant for leading Chinese asset management 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
Whether receiving
any remuneration
Position at the or allowance from
Name of shareholder shareholder of the shareholder of
Name of employee of the Company the Company Start date of the term End date of the term the Company
Chen Hongguo Chenming Holdings Chairman and 22 September 2016 29 December 2020 No
Company Limited general manger
Hu Changqing Chenming Holdings Director 22 September 2016 29 December 2020 No
Company Limited
Li Xueqin Chenming Holdings Director 22 September 2016 29 December 2020 No
Company Limited
Geng Guanglin Chenming Holdings Director 22 September 2016 29 December 2020 No
Company Limited
Li Dong Chenming Holdings Director 29 December 2017 29 December 2020 Yes
Company Limited
Explanation of the Nil
employment at the
shareholder of the
Company
2019 AnnuAl RepoRt 99
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Employment at other units
√ Applicable □ Not Applicable
Whether receiving
any remuneration
or allowance
Name of employee Name of other units Position at other units Start date of the term End date of the term from other units
Yang Biao Guangdong Guangzhou Daily Independent director 1 August 2019 1 August 2022 Yes
Media Co., Ltd.
Yin Meiqun Beijing Life Insurance Co., Ltd. Independent director 1 August 2018 1 August 2021 No
Sun Jianfei Nanya New Material Technology Independent director 1 August 2017 1 August 2020 Yes
Co., Ltd.
Zhejiang Yueling Co., Ltd. Independent director 1 November 2016 1 November 2019 Yes
Huasu Holdings Co., Ltd. Independent director 1 April 2017 1 April 2020 Yes
Explanation of the employment at the other unit Nil
Sanctions against current Directors, Supervisors and Senior Management of the Company and those who resigned
during the reporting period by securities regulatory authorities in the past three years
□ Applicable √ Not Applicable
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
IV. 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 of RMB0.20 million
to 5.00 million and the specific amount for each of them was determined by the remuneration committee based
on the main financial indicators and operation target completed by the Company, the scope of work and main
responsibilities of the Directors and Senior Management of the Company, the target completion of the Directors and
Senior Management as assessed by the duty and performance appraisal system, as well as business innovation
capability and profit generation ability of the Directors and the Senior Management. The annual remuneration of
Supervisors assuming specific managerial duties in the Company were determined by the general manager office
of the Company based on specific managerial duties assumed by them. Fixed annual remuneration policy was
adopted on external Supervisors who did not hold actual management positions in the Company. During the reporting
period, as approved by the first meetings of the ninth session of the Board and the Supervisory Board as well as
the 2019 first extraordinary general meeting, the Company paid each of the independent non-executive Directors
and non-executive Directors of the Company allowance of RMB200,000 (before tax). The remuneration of external
Supervisors amounted to RMB100,000 (before tax). The travel expenses for attending board meetings, supervisory
meetings and general meetings of the Company and fees reasonably incurred in the performance of their duties under
the Articles of Association by independent non-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 Assessment Committee
Under The Board, any remuneration plan for the Company’s executive Directors proposed by the remuneration and
assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management
officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
directors, non-executive directors and external supervisors of the Company shall be agreed on by the Board and then
submitted to the general meeting for consideration and approval 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 policy
and scheme of the non-independent Directors and Senior Management of the Company, and accountable to the
Board.
2019 AnnuAl RepoRt 101
X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
Unit: RMB’ 0,000
Total
remuneration Received
before tax remuneration
received from related
from the parties of the
Name Position Gender Age Status Company Company
Chen Hongguo Chairman M 55 In office 499.00 No
Hu Changqing Vice-chairman M 54 In office 303.90 No
Li Xingchun Vice-chairman M 54 In office 499.00 No
Li Chuanxuan Director M 42 In office 11.67 No
Han Tingde Director M 51 In office 11.67 No
Yin Meiqun Independent Director F 49 In office 11.67 No
Yang Biao Independent Director M 40 In office 11.67 No
Sun Jianfei Independent Director M 47 In office 11.67 No
Li Dong Chairman of Supervisory Committee M 37 In office 0 Yes
Pan Ailing Supervisor F 55 In office 11.20 No
Zhang Hong Supervisor F 55 In office 11.20 No
Qiu Lanju Employee representative supervisor F 46 In office 26.90 No
Li Xinggui Employee representative supervisor M 55 In office 24.40 No
Li Feng General manager M 46 In office 186.80 No
Li Xueqin Deputy general manager F 54 In office 219.10 No
Li Weixian Deputy general manager M 38 In office 277.50 No
Geng Guanglin Deputy general manager M 46 In office 162.40 No
Zhao Xuegang Deputy general manager M 47 In office 214.90 No
Li Zhenzhong Deputy general manager M 46 In office 164.20 No
Dong Lianming Financial controller M 45 In office 118.40 No
Yuan Xikun Secretary to the Board M 34 In office 42.00 No
Chu Hon Leung Company secretary (Hong Kong) M 37 In office 0 No
Chen Gang Director and deputy general manager M 47 Resigned 96.70 No
Yang Guihua Director F 54 Resigned 5.37 No
Wang Fengrong Independent Director F 51 Resigned 5.37 No
Huang Lei Independent Director M 63 Resigned 5.37 No
Liang Fu Independent Director F 52 Resigned 5.37 No
Sun Yinghua Employee representative supervisor F 51 Resigned 13.40 No
Zhang Xiaofeng Supervisor M 42 Resigned 1.12 No
Zhang Qingzhi Deputy general manager M 54 Resigned 20.60 No
Yang Weiming Deputy general manager M 45 Resigned 12.20 No
Poon Shiu Cheong Company secretary and qualified M 50 Resigned 10.08 (HKD) No
accountant
Note: The total remuneration of the resigned director, supervisor and senior management was the remuneration received during their respective
tenure of office.
Directors and Senior Management of the Company granted share options as incentives during the reporting
period
□ Applicable √ Not applicable
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
X Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) 4,055
Number of staff at major subsidiaries (person) 9,043
Total number of staff (person) 13,677
Total number of staff receiving remuneration during the period (person) 13,677
Number of retired/resigned staff the Company and its major
subsidiaries are required to compensate (person) 0
Specialty composition
Category of specialty composition Number of people (person)
Production staff 9,169
Sales staff 616
Technical staff 447
Financial staff 209
Administrative staff 1,861
Other staff 1,375
Total 13,677
Education level
Category of education level Number of people (person)
Postgraduate and above 60
Undergraduate 1,283
Post-secondary 3,130
Technical secondary and below 9,204
Total 13,677
2019 AnnuAl RepoRt 103
X Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company (Cont’d)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject
to 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 level
in 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 paid
leaves etc.
3. Training programmes
The Company attaches importance to personnel training, implements the corporate spirit of “learning, surpassing
and leading” and establishes a learning organisation. In 2020, the Company will further enhance cooperation with
professional training institutions to enhance training quality. Meanwhile, the Company innovated its way of learning
and built a practical online learning platform. We also developed quality training materials and improved existing ones
by levels, initiating targeted training programs. For the junior level staff, the training focuses on professional skills and
business knowledge. For the middle-level staff, the training focuses on team management and execution. For the
senior management, training focuses on leadership. A team of excellent quality is built through training.
4. Labour outsourcing
□ Applicable √ Not applicable
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
I. Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law（《公司法》） Securities Law（《證券法》）
Code of Corporate Governance for Listed Companies（《上市公司治理準則》） Rules Governing Listing of Stocks on
Shenzhen Stock Exchange（《深圳證券交易所股票上市規則》） the Listing Rules of Hong Kong Stock Exchange and the
related requirements as required by CSRC, and continued to improve and optimise its legal person governance structure
during the reporting period. The Company also continuously improved its internal control system and proactively carried
out management works in relation to investor relations during the reporting period, so as to further improve corporate
governance standards and promote the Company’s standardised operations. As of the end of the reporting period, the
actual practice of corporate governance complied with the requirements of the regulatory documents issued by the CSRC
regarding the governance of listed companies.
(I) Shareholders and general meeting
The Company had established a corporate governance structure that ensured shareholders’ ability to fully exercise
their rights and enjoy equal status. Shareholders enjoyed their rights and undertook corresponding obligations in
accordance with the shares held by them. The convening and holding of general meeting of the Company were legal
and compliant, and on the premise of guaranteeing the legality and effectiveness of the general meeting, both on-site
voting and online voting were provided as channels to participate in such meetings. Where significant matters which
had an impact on the interests of minority investors were being considered, the votes by minority investors were
counted separately for the convenience of shareholders and for the sake of making public and timely disclosures. At
the same time, investors present at the general meeting could communicate with the management of the Company in
person, which effectively safeguard the rights and demands of investors to participate in the Company’s management.
We ensured that all investors could participate in corporate governance on an equal basis, which effectively
safeguarded the legitimate interests of shareholders, especially those of minority shareholders.
(II) Controlling shareholder and the listed company
During the reporting period, the Company remained independent of its controlling shareholder, beneficial controllers
and related parties in terms of its business, assets, finance, personnel and organisations, and complied with the
relevant provisions of the China Securities Regulatory Commission on the independence of listed companies. The
controlling shareholders and beneficial controllers strictly regulated their behaviour, and exercised their rights and
performed their obligations in accordance with the laws. The Company had business independence and self-operation
capability. The Board, the Supervisory Committee and internal structure can operate independently.
(III) Directors and the Board
The composition of the Board of the Company complied with the laws and regulations and the requirements of
the Articles of Association. Directors of the Company possessed the knowledge, skills, and qualities necessary to
the performance of their duties. All of them were able to earnestly, faithfully, and diligently perform their duties and
powers as stipulated in the Articles of Association. The convening and holding of Board meetings were in strict
compliance with the Articles of Association and Rules of Procedure of Board Meetings and other relevant provisions.
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.
2019 AnnuAl RepoRt 105
XI Corporate Governance
I. Corporate governance in practice (Cont’d)
(IV) Supervisors and the Supervisory Committee
The Supervisory Committee strictly followed the requirement of relevant laws and regulations including the Companies
Law, the Articles of Associations and the Rules of Procedure of the Supervisory 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. By attending Board meetings and conducting regular
inspections on the legal compliance of the Company’s operations and finance, the Supervisory Committee supervised
the decision-making procedures of the Board, resolutions and the legal compliance of the Company’s operations, so
as to safeguard the legitimate interests of the Company and the shareholders.
(V) Information disclosure and management of investor relations
In accordance with the requirements of the relevant rules, the Company strictly enforced the relevant information
disclosure regulations and fully fulfilled its information disclosure obligations. The Company disclosed information in
a timely and fair manner and ensured that the information disclosed was true, accurate and complete, and did not
contain false information, misleading statements or major omissions. During the reporting period, the Company issued
a total of more than 190 periodic reports, interim announcements, and related documents through the designated
information disclosure media, and a total of 220 periodic reports, interim announcements, and related documents
through the website of Hong Kong Stock Exchange. The Company performed its information disclosure obligations in
a timely manner with respect to the Company’s operations, related party transactions, external investment, external
guarantees, and the implementation of annual profit distribution, so as to further safeguard the legitimate rights of
investors.
Under the premise of strictly fulfilling disclosure obligations, the Company attached importance to the management
of investor relations. The Company made public its address, contact number, facsimile, e-mail and other information
on its official website and CNINFO, in an attempt to facilitate investors’ communication with the Company through
the above channels. The Company also made full use of the investor hotline, Shenzhen Stock Exchange’s “EasyIR”
platform, field investigation and research and other channels and methods to actively interact with investors and
listen to what they had to say. We patiently answered questions from investors, and worked at enhancing investors’
understanding and recognition of the Company. We passed investors’ reasonable opinions and suggestions to the
management of the Company in a timely manner, building a bridge between investors and the Company.
(VI) Management on registration of personnel with insider information
The Company strictly complied with the provisions of the “Registration Management System of Personnel with Insider
Information” and other relevant systems to strengthen the confidentiality of insider information and improved the
registration and management of personnel with insider information. The Directors, Supervisors, Senior Management
and other related personnel of the Company were able to strictly observe their confidentiality obligations throughout
the preparation of periodic reports, temporary announcements and the planning of major events. With the
development of the Company, the Company will continue to strictly abide by the requirements of relevant laws and
regulations and continuously promote corporate governance to ensure that the Company operates in a standardised
manner.
Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
CSRC in respect of actual governance of the Company
□ Yes √ No
There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
the CSRC in respect of the actual governance of the Company.
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
II. Particulars about the independence in terms of businesses, personnel, assets, organisations,
and finance from the controlling shareholder
The 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 as
well 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 subsidiaries
were 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, finance
department, procurement department and sales department. The Company had also established a comprehensive
management system with respect to labour, personnel and salary. Personnel of the Company were independent of
the 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 all
worked at and received remuneration from the Company. They did not receive remuneration from related companies
of the controlling shareholder, nor did they serve at any position therein other than a director or supervisor. The
appointment of the Company’s Directors, supervisors and senior management was conducted through legal
procedures and in strict compliance with the relevant requirements of Companies Law and the Articles of Association.
None of the controlling shareholders interfered with the Company’s Board, or the appointment and dismissal
decisions 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 complete control 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 controlling
shareholder in terms of authority, personnel, etc. There was no subordinate relationship between the controlling
shareholder and its functional departments, and the Company and its functional departments. The Company’s
independence 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 accounting
system and financial management system for subsidiaries. None of the controlling shareholders interfered with the
Company’s finance and accounting activities. The Company had a separate account in a commercial bank and there
was no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled its
tax obligations independently in accordance with the law.
III. Competition in the industry
□ Applicable √ Not applicable
2019 AnnuAl RepoRt 107
XI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
Attendance
rate of
Meeting Type of meeting investors Convening date Disclosure date Disclosure index
2018 annual general meeting Annual general meeting 32.20% 11 June 2019 12 June 2019 http:/www.cninfo.com.cn
2019 first extraordinary Extraordinary general 31.16% 3 September 2019 4 September 2019 http:/www.cninfo.com.cn
general meeting meeting
2019 second extraordinary Extraordinary general 31.96% 23 October 2019 24 October 2019 http:/www.cninfo.com.cn
general meeting meeting
2019 third extraordinary Extraordinary general 31.72% 3 December 2019 4 December 2019 http:/www.cninfo.com.cn
general meeting meeting
2. Extraordinary general meeting requested by holders of the preference shares with voting rights
restored
□ Applicable √ Not applicable
V. Performance of Independent Directors during the reporting period
1. Attendance of Independent Directors at Board meetings and general meetings
Attendance of Independent Directors at Board meetings and general meetings
Number of
attendance
required for Board Attendance Attendance Absence Absent from
meetings during Attendance at at Board at Board from Board meetings Attendance
Name of the reporting Board meetings meetings by meetings Board twice in a row at general
Independent Directors period in person communication by proxy meetings (in person) meetings
Sun Jianfei 9 1 8 0 0 No 1
Yang Biao 9 1 8 0 0 No 1
Yin Meiqun 9 1 8 0 0 No 1
Pan Ailing 5 1 4 0 0 No 1
Huang Lei 5 1 4 0 0 No 0
Liang Fu 5 1 4 0 0 No 0
Wang Fengrong 5 1 4 0 0 No 0
None of the independent Directors was absent from the Board meeting twice in a row.
2. Objections from Independent Directors on related issues of the Company
Were there any objections on related issues of the Company from the Independent Directors?
□ Yes √ No
There was no objection on related issues of the Company from the Independent Directors during the reporting period.
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
V. Performance of Independent Directors during the reporting period (Cont’d)
3. Other details about the performance of duties by the independent Directors
Were there any suggestions from the independent Directors adopted by the Company?
√ Yes □ No
Explanation on the adoption or non-adoption with related suggestions from the independent Directors
During the reporting period, the independent Directors of the Company focused on the operation of the Company
and performed their duties strictly in accordance with relevant laws and regulations and the Articles of Association.
They provided a lot of valuable professional recommendations on optimising the Company’s system and decision on
daily operation. They also issued independent and fair opinion on matters arising during the reporting period which
requested opinions from Independent Directors. This helped optimise the supervisory system of the Company, as well
as protecting the legal rights of the Company and all shareholders.
Publication time Subject matter Opinion
21 January 2019 Independent opinions on Huanggang Chenming’s application for bank Agreed
loan and provision of guarantee and asset pledge
29 March 2019 Independent opinions on the Company’s internal control self-assessment Agreed
report, particulars and independent opinions on external guarantees of
the Company, independent opinions on determination of remuneration
of Directors, Supervisors and senior management for 2018, independent
opinions on the use of proceeds by related parties and related party
transactions, independent opinions on provision of guarantee for
comprehensive credit line of relevant subsidiaries, independent opinions
on appointment of the auditor for 2019, and independent opinions on
corrections of accounting errors and retrospective restatement
20 May 2019 Independent opinions on the election of the Board Agreed
11 June 2019 Independent opinions on the appointment of senior management Agreed
19 July 2019 Independent opinions on the remuneration of external directors and Agreed
shareholder representative supervisor
19 July 2019 Independent opinions on the acceptance of financial support and related Agreed
party transactions
19 July 2019 Independent opinions on daily business dealings with subsidiaries and Agreed
related party transactions
15 August 2019 Independent opinions on the use of proceeds by controlling shareholders Agreed
and other related parties and on external guarantees
6 September 2019 Independent opinions on the increase in shareholding by the controlling Agreed
shareholders
16 September 2019 Independent opinions on change of the auditor Agreed
17 October 2019 Independent opinions on the provision of guarantee to a subsidiary Agreed
25 October 2019 Independent opinions on the change of accounting policies Agreed
25 October 2019 Independent opinions on the acceptance of financial support and related Agreed
party transactions
6 November 2019 Independent opinions on change and rotation of the general manager, Agreed
and independent opinions on the appointment of senior management
2019 AnnuAl RepoRt 109
XI Corporate Governance
VI. Performance of duties by special committees under the Board during the reporting period
(I) Audit Committee
1. The following major tasks were completed in 2019:
(1) it conducted pre-audit communication with external auditing institution engaged by the Company in
respect of the 2018 financial report auditing, reviewed the 2018 auditor’s report and financial report, which
were submitted to the Board of the Company for consideration and approval;
(2) it reviewed the 2019 first quarter report of the Company as of 31 March 2019, which was submitted to the
Board for consideration and approval;
(3) it reviewed the 2019 interim financial statements as of 30 June 2019, which were submitted to the Board
for consideration and approval;
(4) it reviewed the 2019 third quarter report of the Company as of 30 September 2019, which was submitted
to the Board for consideration and approval.
2. Auditing work conducted on the 2019 financial report of the Company is as follows:
(1) it convened a meeting to review with due consideration the 2019 auditing plan and the related information
of the Company with the auditing certified public accountants and the finance department of the
Company prior to the on-site audit, and negotiated and determined the schedule of an audit of the 2019
financial statements of the Company with Ruihua Certified Public Accountants, which was responsible for
the Company’s auditing work during the year;
(2) with due consideration, it reviewed the draft of financial statements of the Company prior to an annual
onsite audit performed by the auditing certified public accountants and issued its approval to audit;
(3) it kept in close contact with the auditor upon the annual on-site audit performed by the auditing certified
public accountants and issued a letter to the auditor to urge that they submit the auditor’s report on
schedule;
(4) it reviewed the financial statements of the Company again upon the issue of preliminary opinion on the
annual audit by the auditing certified public accountants appointed for the annual audit, and considered
the financial statements of the Company to be true, accurate and complete to reflect the overall position
of the Company;
(5) it reviewed the 2019 report on internal audit and self-assessment report on internal controls of the
Company as of 31 December 2019.
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
VI. Performance of duties by special committees under the Board during the reporting period
(Cont’d)
(II) Remuneration and Assessment Committee
The Remuneration and Assessment Committee under the Board of the Company were primarily responsible for
formulating the remuneration and assessment for the Directors and the Senior Management of the Company and
formulating and examining the remuneration package of the Directors and the Senior Management of the Company,
and accountable to the Board. During the reporting period, the Remuneration and Assessment Committee formulated
the 2018 remuneration package of the Directors and the Senior Management of the Company, which was arrived
at based on the operation conditions of 2018 and assessment of the Directors and the Senior Management of the
Company. The remuneration package was then submitted to the Board for consideration.
(III) Strategy Committee
The Strategy Committee conducted research on major investment decisions of the Company and made
recommendations, and inspected and evaluated the implementation of related matters. At the same time, the Strategy
Committee actively discussed the Company’s future long-term strategic development plan based on the Company’s
industry characteristics and development stage in combination with the Company’s production and operation
conditions, providing valuable and constructive opinions for the company’s steady development.
During the reporting period, the Strategy Committee held two meetings. On 21 January 2019, the first meeting of
the Strategy Committee considered the Resolution in Relation to the External Investment. On 7 March 2019, the
second meeting of the Strategy Committee considered the resolution in relation to the Cooperation on the Initiation
of the Establishment of Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited
Partnership).
(IV) Nomination Committee
During the reporting period, the Nomination Committee held three meetings. The first meeting in 2019 considered
the Resolution in Relation to the Election of the Board, which was submitted to the 37th extraordinary meeting of the
eighth session of the Board of the Company for consideration and approval. The second meeting in 2019 considered
the Resolution in Relation to the Election of the Senior Management Personnel of the Company, which was submitted
to the first meeting of the ninth session of the Board of the Company for consideration and approval. The third
meeting in 2019 considered the Resolution in Relation to the Appointment of New General Manager on Duty on
Rotation, which was submitted to the 6th extraordinary meeting of the ninth session of the Board of the Company for
consideration and approval.
2019 AnnuAl RepoRt 111
XI Corporate Governance
VII. Performance of duties by the Supervisory Committee
Were there any risks of the Company identified by the Supervisory Committee when performing its duties during the
reporting period?
□ Yes √ No
None of those issues under the supervision was objected by the Supervisory Committee during the reporting period.
VIII. Assessment and incentive mechanism for the Senior Management
The senior management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted
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 carried out monthly by
way of cross assessment and supervision among the related departments. The annual assessments were carried out by the
Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances
during the year, including the integrated quality of Senior Management and internal training of talents.
IX. Internal control
1. Particulars of material deficiencies in internal control detected during the reporting period
□ Yes √ No
2. Self-assessment Report on Internal Controls
Date of Disclosure of Assessment Report on Internal Controls 28 March 2020
Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cn
Percentage of Total Assets Included in Assessment to Total Assets in
Consolidated Financial Statements of the Company 99.30%
Percentage of Revenue Included in Assessment to Revenue in
Consolidated Financial Statements of the Company 99.50%
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
IX. Internal control (Cont’d)
2. Self-assessment Report on Internal Controls (Cont’d)
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Qualitative criteria ① Indicators of material deficiencies in the Indicators of material deficiencies in the
internal control of financial reporting include: internal control of non-financial reporting
ineffective control environment, material loss include: major failure as a result of the decision
to and adverse impact on the Company as a making process; lack of control system or
result of misconduct by Directors, Supervisors occurrence of systematic failure in principal
and senior management; material misstatement activities and lack of effective compensation
of non-exceptional incidents; ineffectiveness in control, high turnover rate of mid to senior level
supervision of internal control of the Company management and senior technical staff; failure
by the Board, or its delegated authorities, and to address the findings of internal control
the internal audit department. assessment, in particular material deficiencies;
② Indicators of major deficiencies in internal and other factors which impose material
control of financial reporting include: failure adverse impact on the Company. Indicators
in selecting and applying accounting of major deficiencies in internal control of
policies in accordance with generally nonfinancial reporting include: general failure
accepted accounting principles; failure to as a result of the decision-making process;
establish procedures and control measures deficiencies in major business procedure or
to prevent corrupt practices; failure to system; high turnover rate of key staff; failure
establish corresponding control mechanism to address the findings of internal control
for the accounting of unusual or special assessment, in particular major deficiencies;
transactions or failure to implement or set and other factors which impose great adverse
up the corresponding compensation control; impact to the Company. Indicators of general
failure to reasonably ensure the truthfulness deficiencies in internal control of non-financial
and accuracy in the preparation of financial reporting include: low efficiency of decision
statement, as a result of one or more making process; deficiencies in general
deficiencies in the control of financial reporting business procedure or system; high turnover
as of the end of the period. rate of employees; and failure to rectify general
③ General deficiencies: other deficiencies in deficiencies.
internal control that do not constitute material
or major deficiencies.
Quantitative criteria General deficiencies: deviation of less than or General deficiencies: quantitative criterion
equal to 0.1% from the target of accounting (financial loss) less than RMB5,000,000;
error/the total revenue; Major deficiencies: major deficiencies: quantitative criterion
deviation of 0.1% – 0.5% from the target of (financial loss) between RMB5,000,000
accounting error/the total revenue; material and RMB20,000,000; material deficiencies:
deficiencies: deviation greater than 0.5% quantitative criterion (financial loss) over
from the target of accounting error/the total RMB20,000,000.
revenue.
Number of material deficiencies in financial reporting: (number) 0
Number of material deficiencies in non-financial reporting: (number) 0
Number of major deficiencies in financial reporting: (number) 0
Number of major deficiencies in non-financial reporting: (number) 0
2019 AnnuAl RepoRt 113
XI Corporate Governance
X. Auditor’s report on internal control
√ Applicable □ Not applicable
Auditor’s opinion contained in the Auditor’s report on internal control
We are of the opinion that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effective
internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31
December 2019.
Disclosure of Auditor’s Report on Internal Control Disclosed
Date of Disclosure of Auditor’s report on internal control 28 March 2020
Index of Auditor’s Report on Internal Control Disclosure http://www.cninfo.com.cn
Type of Opinion in Auditor’s Report on Internal Control Standard and unqualified opinion
Material deficiencies in non-financial reporting No
Any opinions of non-standardisation set out in the Auditor’s Report on Internal Control issued by accountants
□ Yes √ No
Auditor’s Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment
Report
√ Yes □ No
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited
(I) Compliance with the Code on Corporate Governance
The Company maintained high standards of corporate governance through various internal controls. The Board
reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance
standards of the Company.
Save for the details set out in III Board, IV Chairman and General Manager and XVII Communications with
shareholders in this section, the Company had fully complied with all the principles and code provisions of the Code
on Corporate Governance as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.
(II) Securities transactions by Directors
The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions
by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate
enquiries with all Directors and Supervisors of the Company, the Company was not aware of any information that
reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this
code during the reporting period.
114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board
The members of the Board of the Company are elected at the general meeting and held accountable to the general
meeting, and shall exercise the following functions and powers: (1) to be responsible for convening the general
meeting 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 annual
financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan
making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the
Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for material
acquisition and repurchase of the Company’s own shares; (8) to draft plans for the merger, division or dissolution or
the change of formation of the Company; (9) to decide on external investment, acquisition and disposal of assets,
pledge of assets, matter in relation to external guarantee, entrusted wealth management, connected transactions,
etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of the Company’s
internal management organisation; (11) to employ or dismiss the manager or secretary to the Board of the Company;
to employ or dismiss the Senior Management, such as the deputy general manager(s) and personnel in charge
of financial affairs, as proposed by the general manager; and to decide on their remuneration and rewards and
punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for
amending 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 exercise
the functions and powers as conferred upon by the Articles of Association or the general meeting.
The Board comprised three executive Directors: Chen Hongguo (Chairman), Hu Changqing and Li Xingchun; two
non-executive Directors: Han Tingde and Li Chuanxuan; and three independent non-executive Directors: Sun Jianfei,
Yin Meiqun and Yang Biao. Please refer to section X of this annual report for their brief biographies.
The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration and
supervision of the Company’s businesses to facilitate its success. The Executive Director or the senior management is
authorised to be responsible for the various divisions and functions and management of the processing. Directors of
the Company shall act objectively and make decisions in the interests of the Company. The management and senior
management of the Company held regular meetings with the Board to discuss the ordinary business operations
and performance of the Company, and carried out the relevant decisions of the Board. The Company will arrange
independent legal advice upon the request from the Directors or any committees of the Board, if the Board or any
committees of the Board consider it necessary to seek for independent professional advice.
Pursuant to Code A.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respect
of legal action against its Directors. As at the date of this report, the Company has not reached an agreement with
the original insurance company, and therefore has not arranged relevant insurance cover for directors. However, the
Company is currently under negotiation with another insurance Company with respect to director liability insurance in
2020.
2019 AnnuAl RepoRt 115
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
During the reporting period, the Board held 14 meetings, 4 of which were regular meetings and 10 were extraordinary
meetings. None of the directors were absent from any Board meetings.
Name Position Attendance at the relevant meetings (attention required/attended)
Remuneration
Audit Nomination and assessment Strategic
Board committee committee committee committee General
meetings meetings meetings meetings meetings meetings
I. Executive Directors
Chen Hongguo Chairman 14/14 N/A 3/3 N/A 2/2 4/0
Hu Changqing Vice Chairman 14/14 N/A N/A N/A 2/2 4/4
Li Xingchun Vice Chairman 9/9 N/A N/A 1/1 N/A 4/1
II. Non-executive Directors
Li Chuanxuan Director 9/9 3/3 N/A N/A N/A 4/1
Han Tingde Director 9/9 N/A N/A N/A N/A 4/1
III. Independent non-executive Directors
Sun Jianfei Independent Director 9/9 3/3 2/2 1/1 N/A 4/1
Yin Meiqun Independent Director 9/9 3/3 2/2 N/A N/A 4/1
Yang Biao Independent Director 9/9 N/A N/A 1/1 0/0 4/1
Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of the
Board had any financial, business, family relations or material connections with each other.
The Board held 4 regular meetings during the year, each by giving a 10-day notice in advance to ensure that all
Directors could participate in discussions of matters in the agenda. Reasonable prior notification was given for the
other 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 governing
the Board and all applicable regulations and rules were complied with.
116 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
Directors’ training and professional development
All newly appointed Directors are provided with necessary orientation information, with an aim to ensure that they will
have a better understanding of operations and business of the Company as well as relevant laws and regulations and
obligations under the Listing Rules.
Directors and Supervisors of the Company were arranged by the Company to attend the 1st and the 2nd session
of training courses 2019 for directors and supervisors held by China Securities Regulatory Commission, Shandong;
and, briefing paper in respect of amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of
the Company was distributed to all Directors and Supervisors, the above of which were to ensure all Directors and
Supervisors to comply with relevant laws and sound corporate governance practice, and enhance their awareness of
sound corporate governance practice.
(IV) Chairman and General Manage
The chairman of the Company is Mr. Chen Hongguo, and the general manager of the Company is Mr. Li Feng. Please
refer to section X of this annual report for his brief biographies.
According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1)
presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and inspecting
the implementation of the resolutions of the Board; (3) signing the shares, the securities and bonds issued by the
Company; (4) signing important documents of the Board and other documents which are required to be signed by
legal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidates
for general manager for the Board; (7) exercising the special right to operate the Company in accordance with the
laws and acting for the benefits of the Company in the event of emergency situation as a result of act of God or
natural disaster, and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powers
authorised by the Board.
The general manager shall exercise the following powers: (1) in charge of the operation and management of the
Company, and organising the implementation of the resolutions of the Board; (2) organising the implementation of
the Company’s annual business plans and investment plans; (3) drafting plans for the establishment of the internal
organisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulating
specific rules and regulations for the 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 dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting of
the Board; and (10) exercising other powers conferred by the Articles of Association of the Company and the Board.
2019 AnnuAl RepoRt 117
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(V) Independent Non-executive Directors
There are three independent non-executive Directors in the Board, which is in compliance with the minimum
requirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Wang
Fengrong and Pan Ailing, the independent non-executive Directors of the Company, have appropriate accounting
or related financial management expertise, which is compliance with the requirement of Rule 3.10 of the Hong Kong
Listing Rules. Please refer to section X of this annual report for their brief biographies. The Company has received
from each of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule
3.13 of the Hong Kong 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, are elected
at general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for another term
upon expiry of tenure.
(VII) Directors’ Responsibility for the Financial Statements
The Directors acknowledged their responsibility to prepare financial statements for each financial year which give
a true and fair view of the state of affairs of the Company. The Directors believed that the Company had adopted
and applied consistently appropriate accounting policies in preparing the financial statements in compliance with all
related accounting standards.
(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 particular
aspects of the Company’s affairs. Each Board Committee has its own defined written terms of reference. The written
terms 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, for
overseeing and studying long-term strategic development plan of the Company and making recommendations.
118 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(IX) Audit Committee
The Audit Committee of the Company comprises three members, including Yin Meiqun (as the chairman), Li
Chuanxuan and Sun Jianfei. Two of them, including the chairman, are independent non-executive Directors. The
primary duties of the Audit Committee are serving as a communication media between internal and external audit
and the related review and supervision. Yin Meiqun and Sun Jianfei have appropriate professional qualifications or
appropriate accounting or related 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) proposing the appointment or dismissal of the
external auditor; (2) supervising the internal control system of the Company and its implementation; (3) serving as
a communication media between internal and external audit; (4) auditing the financial information of the Company
and its disclosures; (5) reviewing the financial control, risk control and internal control system of the Company and
audit the significant connected transactions; (6) discussing the risk management and internal control system with
the management to ensure the management has performed its duties to establish effective systems. The discussion
should include the adequacy of resources, staff qualifications and experience, training programs and budget of the
accounting and financial reporting functions of the Company; (7) studying the major investigation findings on risk
management and internal control matters on its own initiative or as delegated by the Board and the management’s
response to these findings; (8) where the annual report includes statements in relation to the risk management and
internal control system of the Company, reviewing such statements prior to submission to the Board for approval; and
(9) dealing with other matters as delegated by the Board.
The Audit Committee discussed with the management of the Company the accounting standards and practices
adopted by the Group and discussed and reviewed this report, including the review of the financial statements of the
Group for the year ended 31 December 2019 prepared in accordance with China Accounting Standards for Business
Enterprises.
Particulars of the meetings held by the Audit Committee during the reporting period were detailed in part VI of this
section.
Risk Management and Internal Control
The 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 can
only 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
of the risk management and internal control systems, and the management has provided confirmation to the Audit
Committee (and the Board) on the effectiveness of these systems for the year ended 31 December 2019.
In respect of internal control system, procedures have been designed for safeguarding assets against unauthorised
use or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financial
information for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations.
2019 AnnuAl RepoRt 119
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(X) Remuneration and Assessment Committee
The Remuneration and Assessment Committee of the Company comprises three members, including Yang Biao,
the Chairman, and other members, namely Li Xingchun and Sun Jianfei. Two members, including the Chairman,
are independent non-executive Directors, which is in compliance with Code on Corporate Governance Practices.
The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal of
the Directors and managers and conducting the appraisal, and studying and formulating the remuneration policy
and package of the Directors and the Senior 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 the
remuneration plan or package based on the major scope of work, duties and importance of the Directors and the
management and the remuneration level of other counterparts; (2) formulating the remuneration plan or package
which mainly includes but not limited to standards, procedures and a system for performance appraisals as well
as major plans and a system for rewards and sanctions; (3) examining the performance of the Directors, excluding
the independent non-executive Directors, and the Senior Management and conduct annual performance appraisals
for them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with other
matters as delegated by the Board.
Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period are
detailed in part VI of this section.
(XI) Nomination Committee
The Nomination Committee of the Company comprises three members, including Sun Jianfei (as the chairman), Chen
Hongguo and Yin Meiqun. Two of them, including the chairman, are independent non-executive Directors, which is
in compliance with Code on Corporate Governance Practices. The Nomination Committee is primarily responsible
for selecting candidates for directors and the management of the Company, determining the selection criteria and
procedure and making recommendations.
The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Board
in light of the Company’s operating activities, asset scale and shareholding structure; (2) studying the selection criteria
and procedure for Directors and the management and advising the Board on the same; (3) extensively identifying
qualified candidates for Directors and the management; (4) examining candidates for Director and the management
and advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision on
their employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directors
and on skills, knowledge, experience, background, gender and other characteristics required in serving as a director
taking into consideration diversity, balance and efficiency of the Board and benefits thereto; (7) reviewing the Board
diversity policy, revising thereon in a timely manner and making relevant disclosure in the corporate governance report
in 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 Directors
and managerial personnel and taking into consideration the Board diversity policy, identified suitable candidates for
Director and managerial positions through various channels (including from the Group internally and from the human
resources market). Upon acceptance of nomination by the nominated person, the Nomination Committee performed
qualification 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 new
Directors, the Nomination Committee submitted recommendations and relevant materials of the directorial candidates
to the Board; prior to engaging new Senior Management, the Nomination Committee submitted recommendations
and 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 VI of
this section.
120 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XII) Strategic Committee
The Company set up a Strategic Committee which comprised three members, including Chen Hongguo, the
Chairman, and other members, namely, Hu Changqing and Yang Biao. The Strategic Committee is primarily
responsible for studying the long term strategic 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 the
long term development strategic plan; (2) conducting research and submitting proposals regarding the financing
plans for major investments which require approval from the Board as stipulated in the Articles of Association of the
Company; (3) conducting research and submitting proposals regarding major capital operations and assets operation
projects 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 of
the Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other matters
as delegated by the Board.
(XIII) Auditor
On 23 October 2019, the 2019 second extraordinary general meeting of the Company approved a resolution to
engage Grant Thornton (Special General Partnership) as the domestic auditor of the Company for 2019 and be
responsible for domestic auditing of the Company for 2019.
(XIV) Remuneration for the Auditor
The financial statements for 2019 prepared in accordance with Accounting Standards for Business Enterprises by
the Group were audited by Grant Thornton (Special General Partnership). The Company paid the auditor in aggregate
RMB2,500,000 and RMB800,000 in respect of financial statements audit and non-audit services in relation to internal
control for 2019 respectively. Save the above, no other non-audit fee was incurred during the year.
Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements of
the Group in XII. Financial Report.
(XV) Supervisors and Supervisory Committee
The Supervisory Committee is accountable to the shareholders. It monitors the financial position of the Company
and the performance of the Directors, managers and Senior Management of the Company as to whether they are in
accordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company and the
shareholders. The Supervisory Committee comprises three shareholder representatives and two staff representatives.
The shareholder representatives shall be elected and removed at a general meeting and the staff representatives shall
be elected and removed democratically by the staff of the Company.
Details of the work of the Supervisory Committee during the reporting period are set forth in part VII of this section.
(XVI) Company Secretary
During the year, the company secretary confirmed that he has received relevant professional training for not less than
15 hours in accordance with Rule 3.29 of the Listing Rules.
2019 AnnuAl RepoRt 121
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders
The Company considers effective communication with Shareholders is essential to enable them to have a clear
assessment of the Group’s performance as well as accountability of the Board. Principal means of communication
with Shareholders of the Company are as follows:
Information disclosure on the Company’s website
The Company endeavours to disclose all material information about the Group to all interested parties as widely and
timely as possible. The Company maintains its website at www.chenmingpaper.com where important information
about 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 are
available for review by Shareholders and other stakeholders.
When announcements are made through the Stock Exchange, the same information will be made available on the
Company’s website.
General meetings
The Company’s annual general meeting provides a useful platform for direct communication between the Board and
Shareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Save
for the annual general meeting held on 11 June 2019 by the Company, three extraordinary general meetings were
convened in 2019. The attendance record of Directors at each general meeting is set out below:
Name Directors attending general meetings in person
2018 annual general meeting Hu Changqing, Chen Gang, Yang Biao, Yin Meiqun, Sun Jianfei,
Li Chuanxuan, Han Tingde, Li Xingchun, Zhang Hong and Pan Ailing
2019 first extraordinary general meeting Hu Changqing
2019 second extraordinary general meeting Hu Changqing
2019 third extraordinary general meeting Hu Changqing
The Company’s external auditor also attended the Annual General Meeting.
Code E.1.2 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 its strategy committee, was absent from the annual general
meeting due to business commitments.
122 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders (Cont’d)
General meetings (Cont’d)
Code A.6.7 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 and any committees on which they serve
the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and active
participation. They should also attend general meetings and develop a balanced understanding of the views of
shareholders.
Yang Guihua, Wang Fengrong, Liang Fu and Huang Lei were absent from the 2018 annual general meeting due to
business commitments.
Han Tingde, Li Chuanxuan, Yang Biao, Yin Meiqun and Sun Jian were absent from the 2019 first extraordinary general
meeting due to business commitments.
Han Tingde, Li Chuanxuan, Yang Biao, Yin Meiqun and Sun Jian were absent from the 2019 second extraordinary
general meeting due to business commitments.
Han Tingde, Li Chuanxuan, Yang Biao, Yin Meiqun and Sun Jian were absent from the 2019 third extraordinary
general meeting due to business commitments.
Voting by poll
Resolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conduct
of the poll are explained to the shareholders at the commencement of each general meeting, and questions from
shareholders regarding the voting procedures are answered. The poll results are posted on the websites of the Stock
Exchange and the Company respectively on the same day.
Shareholders’ right
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 90 of the Articles of Association of the Company, Shareholder(s) alone or in aggregate
holding 10% or more of the Company’s shares shall be entitled to request the Board to convene extraordinary
general meetings, provided that such request shall be made in writing. The Board shall, in accordance with
provisions of the laws, administrative regulations and the Articles of Association, furnish a written reply stating
its agreement or disagreement to the convening of an extraordinary general meeting within ten 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 meeting
shall be issued within five days after the passing of the relevant resolution of the Board. Any changes in the
original request made in the notice shall require prior approval of Shareholders concerned.
2019 AnnuAl RepoRt 123
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders (Cont’d)
Shareholders’ right (Cont’d)
1. Procedures for convening an extraordinary general meeting by Shareholder (Cont’d)
In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish any
reply within ten days after receiving such proposal, Shareholder(s) alone or in aggregate holding 10% or more of
the Company’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary
general 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 of
general meeting shall be issued within five days after receiving such request. Any changes in the original request
made 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 period shall
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 shares for ninety consecutive days
or more shall be entitled to convene and preside over the meeting on a unilateral basis.
Pursuant to Article 91 of the Articles of Association of the Company, if Shareholders determine to convene a
general meeting on their own, they shall give a written notice to the Board and file the same with the local office
of CSRC at the place where the Company is located and the stock exchange 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 local office of CSRC at the place where
the Company is located and the stock exchange upon the issuance of the notice of general meeting and the
announcement of resolutions of the general meeting.
The Board and its secretary shall cooperate with respect to matters relating to general meetings convened
by Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholding
register. If a general meeting is convened by shareholders on their own, all necessary expenses incurred shall
be borne by the Company.
124 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders (Cont’d)
Shareholders’ right (Cont’d)
2. Procedures for sending shareholders’ enquiries to the Board
Shareholders may at any time send their enquiries and concerns to the Board of the Company in writing through
the Company Secretary/Secretary to the Board whose contact details are as follows:
Secretary to the Board Hong Kong Company Secretary
Name Yuan Xikun Chu Hon Leung
Address No. 2199 East Nongsheng Road, 22/F, Universal Building, Central, Hong Kong
Shouguang City, Shandong Province
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email chenmmingpaper@163.com liamchu@li-partners.com
The Company Secretary and the secretary to the Board shall forward shareholders’ enquiries and concerns
to 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 102 of the Articles of Association of the Company, shareholders individually or jointly holding
over 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 submit extraordinary
motions to the Board or the secretary to the Board ten working days before the convening of the General
Meeting. The Board or the secretary to the Board shall issue supplementary notice of the General Meeting to
announce the extraordinary motions within two working days after receiving the proposed motions.
Save for provided above, the Board or Secretary to the Board shall not amend proposals stated in the notice of
general meeting or add new 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 been
stated 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 investors
The Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond to
their 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 care
is taken to ensure that no price-sensitive information is disclosed selectively.
2019 AnnuAl RepoRt 125
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVIII) Internal Control
For details of internal control of the Company, please refer to IX. Internal Control hereunder.
(XIX) Articles of Association
On 3 December 2019, the Company amended the Articles of Association. The amendments were primarily relating to
the time for convening general meetings. Memorandum of Association and the amended version of the new Articles of
Association of the Company are available on websites of the Company and Stock Exchange.
(XX) Board Diversity
On 21 August 2013, the Company formulated policies to diversify Board members and amended the implementing
rules of the nomination committee. Pursuant to the new policies, the nomination committee shall regularly review the
Board 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 as
an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use
of differences in the talents, skills, regional and industry experience, backgrounds, genders and other qualities of the
members of the Board. These differences will be considered in determining the optimum composition of the Board
and when possible should be balanced appropriately. All appointments of the members of the Board are made on
merit, 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 makes
recommendations to the Board on appointment of new directors of the Company. The Nomination Committee
also oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing the
composition of the Board, the Nomination Committee will consider the benefits of all aspects of diversity, including
without 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, the
Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits
of diversity on the Board.
The composition of the Board of the Company is basically diversified. For details, please refer to (III) Composition of
the Board under section XI.
(XXI) Dividend policy
Based on the total ordinary share capital of 2,904,608,200 shares and the 1,162,790,698 simulated ordinary shares
converted from the preference shares using a conversion ratio of 1 share valued at RMB3.87 as at the end of 2019, a
cash dividend of RMB1.5 (tax inclusive) per 10 shares will be distributed to ordinary shareholders; a cash dividend of
RMB1.5 (tax inclusive) per 10 simulated ordinary shares converted from the preference shares will be distributed to
holders of preference shares. No bonus shares will be issued and there is no increase of share capital from reserves.
A cash dividend of RMB435,691,230 will be distributed to holders of ordinary shares and a variable cash dividend of
RMB174,418,604.70 will be distributed to holders of preference shares. In other words, a cash dividend of RMB3.87
(tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference
shares.
126 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XII Corporate bonds
Are there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date of
approval of annual report or overdue but not fully settled?
Yes
I. Basic information on corporate bonds
Outstanding
amount of
the bonds
Name of bond Bond abbreviation Bond code Issue date Maturity date (RMB’0,000) Interest rate Payment method
The public issuance of the 17 Chenming 112570 17 August 21 August 2022 9,000 7.28% Interest is paid annually. The principal
corporate bonds of Shandong Bond 01 2017 amount and the last interest payment
Chenming Paper Holdings will be paid on the maturity date.
Limited to qualified investors
in 2017 (phase I)
The public issuance of the 18 Chenming 112641 29 March 2 April 2023 90,000 7.28% Interest is paid annually. The principal
corporate bonds of Shandong Bond 01 2018 amount and the last interest payment
Chenming Paper Holdings will be paid on the maturity date.
Limited to qualified investors
in 2018 (phase I)
Stock exchange on which Shenzhen Stock Exchange
corporate bonds are listed or
transferred
Investor eligibility arrangement 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.
Interest payment of corporate The payment of principal and interest on the remaining bonds for the bond resale portion of 17 Chenming Bond 01 was completed on 21
bonds during the reporting per August 2019. For details, please refer to the relevant announcements as disclosed on 10 July, 11 July, 15 July and 18 July 2019.
The payment of interest on 18 Chenming Bond 01 was completed on 2 April 2019. For details, please refer to the Announcement on
Payment of 2019 Interest with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2018, which was
published by the Company on 26 March 2019.
Performance of relevant terms Both 17 Chenming Bond 01 and 18 Chenming Bond 01 attach with options for the issuer to adjust the coupon rate and for investors to
during the reporting period, for resell. The issuer has the right to determine the adjustment to the coupon rate for the following 3 years at the end of the second year
special terms such as issuer or and the adjustment to the coupon rate for the following year as the end of the fourth year. After issuing the announcement on whether
investor option and the coupon rate of the relevant tranche of bonds will be adjusted and the range of adjustment, the investors have the right to register for
interchangeable for corporate reselling during the period as announced to resell all or part of the relevant tranche of bonds held to the issuer at par value.
bonds (if any).
2019 AnnuAl RepoRt 127
XII Corporate bonds
II. Information on bond custodian and credit rating agency
Bond custodian:
Name GF Securities Co., Ltd. Office address 38th Floor, Metro Plaza, Contact person Xu Duwei Telephone of 020-87555888
No.183 Tianhe North contact person
Road, Guangzhou
Credit rating agency(ies) which conducted rating on corporate bonds during the reporting period:
Name China Chengxin Securities Rating Co., Ltd. Office address 21/F, Anji Building, 760 Xizang South Road,
Huangpu District, Shanghai
Reason of change, procedures to be performed and impacts on interests of investors, etc. in case No change during the reporting period.
the bond trustee and credit rating agency engaged by the Company during the reporting period
have changed (if applicable)
III. Use of proceeds from corporate bonds
Use of proceeds from corporate bonds and its The use of proceeds from issuance of corporate bonds has strictly
implementation completed relevant application and approval procedures. As at the
end of the reporting period, the proceeds from 17 Chenming Bond
01 and 18 Chenming Bond 01 were fully used.
Balance as at the end of the year (RMB’ 0,000) 0
Operation of special account for proceeds Special account for proceeds is used for the deposit of special
capital from bonds.
Is the use of proceeds consistent with the use of Consistent
proceeds guaranteed under the prospectus,
proposed use of proceeds and other agreement?
IV. Credit rating of corporate bonds
The credit rating of 18 Chenming Bond 01 as granted by China Chengxin Securities Rating Co., Ltd. was AA+, and the
credit rating for the Company remained at AA+ (stable outlook). The 2018 public issuance of the corporate bonds (tranche I)
updated rating report (2019) was published on CNINFO on 28 May 2019.
The credit rating of 17 Chenming Bond 01 as granted by China Chengxin Securities Rating Co., Ltd. remained at AA+, and
the credit rating for the Company was AA+ (stable outlook). The 2017 public issuance of the corporate bonds (tranche I)
updated rating report (2019) was published on CNINFO on 28 May 2019.
V. Credit enhancement mechanism, repayment plan and other repayment guarantee measures
for corporate bonds
There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures, which
were consistent with relevant commitments as set out in the prospectuses, during the reporting period.
128 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XII Corporate bonds
VI. Convening of meeting for bondholders during the reporting period
Not applicable
VII. Performance of bond custodian during the reporting period
The bond custodian performed its duties in accordance with the agreement during the reporting period.
VIII. Major accounting data and financial indicators of the Company over the past two years as at
the end of the reporting period
Unit: RMB’ 0,000
Year-on-year
increase/decrease
Item 2019 2018 in percentage
EBITDA 689,484.08 655,492.30 5.19%
Current ratio 85.30% 78.10% 7.20%
Gearing ratio 73.11% 75.43% -2.32%
Quick ratio 76.24% 67.27% 8.97%
Proportion of EBITDA to total debts 11.32% 8.25% 3.07%
Interest coverage ratio 1.70 1.87 -9.09%
Cash interest coverage ratio 4.56 3.84 18.75%
EBITDA interest coverage ratio 2.34 2.47 -5.26%
Loans payment ratio 100.00% 100.00% –
Interest payment ratio 100.00% 100.00% –
Major reason for more than 30% in year-on-year change for the above accounting data and financial indicators
□ Applicable √ Not applicable
IX. Interest payment on other bonds, debt and financing instruments during the reporting period
Unit: RMB
Amount of
Item interest payment
Corporate bonds 1,253,520000.00
Medium-term notes 197,000,000.00
Super & short-term commercial papers 5,065,928,807.55
Total 6,516,418,807.55
2019 AnnuAl RepoRt 129
XII Corporate bonds
X. Bank credit obtained, its use and repayment of bank loans during the reporting period
During the reporting period, the Company obtained bank credit of RMB82,720 million, of which RMB48,648 million was
utilised with RMB34,072 million outstanding. The Company repaid bank loans of RMB30,486 million.
XI. Performance of relevant agreements or commitments under the prospectus of corporate
bonds during the reporting period
Nil
XII. Matters of significance during the reporting period
Nil
XIII. Is there any guarantor for corporate bonds?
□ Yes √ No
130 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
I. Auditor’s Report
Type of auditor’s opinion Standard and unqualified opinions
The date of the audit report signed 27 March 2020
Name of the auditor Grant Thornton (Special General Partnership)
Reference number of the auditor’s report Audit Report No. 371ZA4264 (2020)
Name of certified public accountants Hu Naizhong and Liu Nana
Text of the auditor’s report
I. Auditor’s opinion
We have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter “Chenming
Paper Company”), which comprise the consolidated and company balance sheets as at 31 December 2019, the
consolidated and company income statements, the consolidated and company cash flow statements and the
consolidated and company statements of changes in shareholders’ equity for 2019 and notes to the relevant financial
statements.
In our opinion, the accompanying financial statements were prepared in accordance with the Accounting Standards
for Business Enterprises in all material aspects and give a true and fair view of the consolidated and company financial
position of Chenming Paper Company as at 31 December 2019 and of its consolidated and company operating
results and cash flows for 2019.
II. Basis of opinions
We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute of
Certified Public Accountants. Our responsibilities under those standards are further described in the responsibilities
of certified public accountants for the audit of the financial statements section of the auditor’s report. We are
independent of Chenming Paper Company in accordance with the ethical codes of Chinese certified public
accountants, and we have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
III. Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements for the current period. These matters were addressed in the context of our audit of the financial
statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.
(I) Recognition of revenue from machine-made paper
For detailed disclosures of relevant information, please see note V. 26 and VII. 46.
1. Details
In 2019, Chenming Paper Company recorded revenue of RMB30,395,434,100, of which
RMB25,911,568,900 was attributed to revenue of machine-made paper, accounting for 85.25% of the
revenue. For domestic machine-made paper sales business, Chenming Paper Company will recognize
the revenue after the goods have been delivered and signed by the customer for confirmation; for foreign
machine-made paper sales business, Chenming Paper Company will recognize the revenue after the
goods are loaded on board and declared.
Revenue is one of the key performance indicators of Chenming Paper Company, and the revenue from
machine-made paper accounted for a relatively huge proportion of the total revenue due to enormous
sales, there may be potential misstatement in relation to whether revenue recognition is accounted
for in the appropriate period of the financial statements and have a significant impact on the financial
statements, therefore, we identified recognition of revenue from machine-made paper as a key audit
matter.
2019 AnnuAl RepoRt 131
XIII Financial Report
2. Application for auditing
We have carried out the following audit procedures for the recognition of revenue from machine-made
paper:
(1) we identified and evaluated and tested the effectiveness of the design and operation of key internal
controls conducted by the management related to revenue recognition;
(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 sales
revenue from Chenming Paper Company meets the requirements of the Accounting Standards for
Business Enterprises;
(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) 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 revenue
recognition 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 is
recorded in the appropriate accounting period;
(6) we conducted sampling inspections on transactions recorded during the year and verified with
sales invoices, sales contracts, letters of credit, letters of guarantee, declaration forms, customers’
confirmation of receipt and delivery orders, etc.; evaluated whether the relevant revenue recognition
meets the accounting policy on revenue recognition of Chenming Paper Company;
(7) we sought external confirmations and conducted interviews for clients with larger sales during the
period.
132 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
(II) The existence and integrity of monetary funds
For detailed disclosures of relevant information, please see note VII.1.
1. Details
As at 31 December 2019, the balance of the Chenming Paper Company’s monetary funds was
RMB19,306,529,500, accounting for 19.71% of the total assets, of which the balance of other monetary
funds was RMB16,338,984,100, accounting for 84.63% of the monetary funds. As the available restricted
amount was significant, investors and regulatory authorities were very concerned about the risk of
misappropriation, and, the security of the depository, and the accuracy and integrity of the balance had
material impact on the financial statements. Therefore, we have regarded the existence and integrity of
the monetary funds as a key audit matter.
2. Application for auditing
We have carried out the following audit procedures for the existence and integrity of monetary funds:
(1) we identified, evaluated and tested the effectiveness of the design and operation of internal control
related to monetary fund revenue and expenditure and management;
(2) obtained the list of opened bank accounts, verify with Chenming Paper Company’s account
information, and verify the integrity of bank accounts;
(3) supervised the cash on hand, examined the bank statement, and sought external confirmations for
bank account;
(4) obtained the enterprise credit report, examined whether the monetary fund is mortgaged, pledged
or frozen, and review whether the disclosure of the restricted monetary fund in the notes to the
financial statements is sufficient and appropriate;
(5) interviewed Chenming Paper Company’s management to confirm whether there is fund pooling and
appropriation formed by “fund pool” business and others.
2019 AnnuAl RepoRt 133
XIII Financial Report
(III) Accounting of new major long-term equity investment
For detailed disclosures of relevant information, please see note V. 13 and note VII. 11 and 58.
1. Details
The closing balance of the long-term equity investment of Chenming Paper Company was
RMB3,606,339,000, and the opening balance was RMB484,674,300, an increase of RMB3,121,664,700.
The main reason for the change was to purchase the equity of Guangdong Nanyue Bank Co., Ltd.
Due to the significant amount of investment, and the transaction recognized non-operating income of
RMB364,597,000. The accuracy of accounting has material impact on the financial statements, therefore,
we have regarded the new major long-term equity investment as a key audit matter.
2. Application for auditing
We have carried out the following audit procedures for the accounting of new major long-term equity
investment:
(1) identified and assessed the internal control possess in relation to external investment decision
making and approval, interviewed the responsible officer of the investment management
department, and conducted a walk-through test on its business process;
(2) obtained the investment contract and regulatory approval of the transaction, analysed the holding
intentions and capabilities of Chenming Paper Company’s management of long-term equity
investment;
(3) examined the resolutions of the board of directors and general meeting of Guangdong Nanyue
Bank Co., Ltd., assessed the actual influence of Chenming Paper Company’s major decisions on
the investee and related operations, and reviewed whether the classification of the new significant
long-term equity investments during the current period was correct and whether the subsequent
measurement was appropriate;
(4) obtained and reviewed the financial information of the investee, and recalculated for the recognition
of long-term equity investments and non-operating income.
IV. Other information
Chenming Paper Company’s management is responsible for other information. Other information includes the
information covered in the 2019 annual report of Chenming Paper Company, but does not include the financial
statements and our audit report.
Our audit opinions published in the financial statements do not cover other information and we do not publish any
form of assurance conclusion on other information.
In conjunction with our audit of the financial statements, our responsibility is to read other information, during which
we consider whether there is significant inconsistency or other material misstatement of other information with the
financial 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, we
should report that fact. In this regard, we have nothing to report.
134 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Management and management responsibility for financial statements
The management of Chenming Paper Company is responsible for the preparation of financial statements in
accordance with the requirements of the Accounting Standards for Business Enterprises to enable them to achieve
fair reflection, and to achieve the design, implementation and maintenance of necessary internal controls so that the
financial statements are free of material misstatements due to fraud or errors.
In the preparation of the financial statements, the management is responsible for assessing the continuing operations
capabilities of Chenming Paper Company, disclosing issues related to going concern (if applicable), and applying the
going concern assumption unless management plans to liquidate Chenming Paper Company, terminate operations or
have no other realistic options.
The management is responsible for supervising the financial reporting process of Chenming Paper Company.
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 material
misstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance is
a high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standards
can always discover a major misstatement when it exists. Misstatements are generally considered to be material if it
is reasonably expected that misstatements, individually or in aggregate, may affect 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 and
maintain 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, intentional
omission, misrepresentation or override of internal controls, the risk of failing to detect a material misstatement
due 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.
2019 AnnuAl RepoRt 135
XIII 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
same time, according to the audit evidence obtained, it may lead to conclusions as to whether there are
significant uncertainties in matters or circumstances that have significant doubts about the ability of Chenming
Paper Company to continue its operations. If we conclude that there are significant uncertainties, the auditing
standards require us to request the users of the report to pay attention to the relevant disclosures in the financial
statements in the audit report; if the disclosure is not sufficient, we should publish modified audit report. Our
conclusions are based on the information available as of the date of the audit report. However, future events or
circumstances may cause Chenming Paper Company to not continue its operations.
(5) Evaluate the overall presentation, structure, and content (including disclosures) 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 Company to express opinions on the financial statements. We are responsible for guiding,
supervising and 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 to
affect 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 the
audit of the financial statements for the current period and thus constitute the key audit matters. We describe these
matters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare
cases, if it is reasonably expected that the negative consequences of disclosing something in the audit report will
outweigh the benefits to the public interest, we determine that the matter should not be reported in the audit report.
Grant Thorn ton Chinese Certified Public Accountant (Project Partner): Hu
(Special General Partnership) Naizhong
Beijing, China Chinese Certified Public Accountant: Liu Nana
27 March 2020
136 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
II. Financial Statements
The unit in the notes to the financial statements is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
31 December 2019
Unit: RMB
Item 31 December 2019 31 December 2018
CURRENT ASSETS:
Monetary funds 19,306,529,473.33 19,292,774,747.79
Bills receivable 1,213,116,491.46
Accounts receivable 2,525,083,311.03 3,404,487,004.59
Accounts receivable financing 442,915,861.70
Prepayments 603,573,549.08 863,739,020.74
Other receivables 2,216,654,598.66 2,133,089,983.39
Including: Interest receivable 198,577,632.43
Dividend receivable 13,000,000.00
Inventories 4,774,430,110.81 6,771,488,433.74
Non-current assets due within one year 6,974,539,613.30 4,007,503,281.86
Other current assets 8,108,707,394.70 10,281,312,825.13
Total current assets 44,952,433,912.61 47,967,511,788.70
2019 AnnuAl RepoRt 137
XIII Financial Report
Item 31 December 2019 31 December 2018
NON-CURRENT ASSETS:
Long-term receivables 1,200,575,810.95 7,926,610,770.86
Long-term equity investments 3,606,339,023.74 484,674,282.77
Other non-current financial assets 147,445,653.55 103,000,000.00
Investment property 5,082,362,293.11 4,844,993,039.62
Fixed assets 34,439,935,032.69 27,913,986,152.68
Construction in progress 5,476,122,928.95 11,871,350,821.55
Right-of-use assets 152,141,882.05
Intangible assets 1,781,061,904.51 1,939,355,274.98
Goodwill 5,969,626.57 5,969,626.57
Long-term prepaid expenses 48,203,408.71 134,916,241.81
Deferred income tax assets 892,442,631.04 603,873,698.62
Other non-current assets 173,875,826.67 1,522,493,129.66
Total non-current assets 53,006,476,022.54 57,351,223,039.12
Total assets 97,958,909,935.15 105,318,734,827.82
138 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
Item 31 December 2019 31 December 2018
CURRENT LIABILITIES:
Short-term borrowings 36,883,156,014.19 40,227,945,361.89
Bills payable 1,515,048,206.00 4,218,969,554.93
Accounts payable 4,351,087,581.98 4,150,228,644.66
Contract liabilities 968,082,063.13 419,540,133.74
Staff remuneration payables 190,229,883.52 135,373,407.70
Tax payables 311,554,116.73 451,651,198.64
Other payables 2,594,249,626.54 1,777,718,017.48
Including: Interest payable 208,189,699.15 226,788,777.59
Non-current liabilities due within one year 5,662,958,920.03 7,216,305,771.01
Other current liabilities 222,402,500.00 2,816,956,481.68
Total current liabilities 52,698,768,912.12 61,414,688,571.73
NON-CURRENT LIABILITIES:
Long-term borrowings 9,140,339,693.56 7,798,934,484.94
Bonds payable 1,258,270,909.49 2,097,562,500.00
Lease liabilities 59,697,128.65
Long-term payables 3,321,535,538.94 3,900,255,693.44
Provisions 325,259,082.28 325,259,082.28
Deferred income 1,771,013,335.11 1,862,395,197.61
Deferred income tax liabilities 1,411,125.59
Other non-current liabilities 3,042,841,328.86 2,047,948,069.73
Total non-current liabilities 18,920,368,142.48 18,032,355,028.00
Total liabilities 71,619,137,054.60 79,447,043,599.73
2019 AnnuAl RepoRt 139
XIII Financial Report
Item 31 December 2019 31 December 2018
OWNERS’ EQUITY:
Share capital 2,904,608,200.00 2,904,608,200.00
Other equity instruments 7,465,500,000.00 7,465,500,000.00
Including: Preference shares 4,477,500,000.00 4,477,500,000.00
Perpetual bonds 2,988,000,000.00 2,988,000,000.00
Capital reserves 5,086,686,427.30 5,091,449,915.14
Other comprehensive income -879,452,135.10 -736,520,181.01
Special reserves 3,257,998.47
Surplus reserves 1,212,009,109.97 1,148,888,912.11
General risk provisions 74,122,644.20 64,123,919.23
Retained profit 9,306,269,617.38 9,107,422,690.85
Total equity attributable to owners of the Company 25,169,743,863.75 25,048,731,454.79
Minority interest 1,170,029,016.80 822,959,773.30
Total owners’ equity 26,339,772,880.55 25,871,691,228.09
Total liabilities and owners’ equity 97,958,909,935.15 105,318,734,827.82
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
2. Balance sheet of the Company
Unit: RMB
Item 31 December 2019 31 December 2018
CURRENT ASSETS:
Monetary funds 9,001,257,324.52 8,160,234,434.15
Bills receivable 3,254,460,000.00 436,662,187.80
Accounts receivable 39,204,670.00 1,349,276,965.04
Financing receivables 189,873,567.14
Prepayments 722,472,479.01 1,584,388,551.00
Other receivables 13,975,590,537.58 19,405,314,961.24
Including: Interest receivable 77,257,506.25
Inventories 696,487,727.53 1,133,888,230.37
Non-current assets due within one year 129,546,826.00
Other current assets 80,815,659.84 140,126,157.18
Total current assets 28,089,708,791.62 32,209,891,486.78
140 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
Item 31 December 2019 31 December 2018
NON-CURRENT ASSETS:
Long-term receivables 418,750,862.51 516,925,607.06
Long-term equity investments 23,629,780,317.87 22,487,417,443.24
Investment in other equity instruments 3,000,000.00 3,000,000.00
Other non-current financial assets 147,445,653.55 103,000,000.00
Fixed assets 3,901,007,932.88 2,103,164,588.93
Construction in progress 350,623,821.42 2,014,493,138.68
Intangible assets 446,430,156.00 458,365,862.52
Deferred income tax assets 426,711,909.98 303,861,021.95
Other non-current assets 110,930,000.00 9,800,000.00
Total non-current assets 29,434,680,654.21 28,000,027,662.38
Total assets 57,524,389,445.83 60,209,919,149.16
CURRENT ASSETS:
Short-term borrowings 11,601,509,632.09 7,668,689,104.31
Bills payable 9,890,041,170.20 10,595,836,030.46
Accounts payable 833,526,295.40 722,999,244.33
Contract liabilities 2,096,436,345.90 3,299,778,982.47
Staff remuneration payables 71,040,017.13 53,899,651.15
Taxes payable 76,872,851.56 59,595,083.56
Other payables 6,426,648,847.95 5,465,488,890.52
Including: Interest payable 127,278,083.35 139,444,333.34
Non-current liabilities due within one year 3,695,934,663.30 3,256,715,148.39
Other current liabilities 932,402,500.00 3,527,956,481.68
Total current liabilities 35,624,412,323.53 34,650,958,616.87
2019 AnnuAl RepoRt 141
XIII Financial Report
Item 31 December 2019 31 December 2018
NON-CURRENT LIABILITIES:
Long-term borrowings 150,692,035.94 1,335,482,969.43
Bonds payable 89,070,000.00 2,097,562,500.00
Long-term payables 1,167,426,124.98 2,072,502,840.48
Provisions 325,259,082.28 325,259,082.28
Deferred income 42,070,840.27 46,412,014.99
Other non-current liabilities 2,789,283,340.67 1,592,166,670.00
Total non-current liabilities 4,563,801,424.14 7,469,386,077.18
Total liabilities 40,188,213,747.67 42,120,344,694.05
OWNERS’ EQUITY:
Share capital 2,904,608,200.00 2,904,608,200.00
Other equity instruments 7,465,500,000.00 7,465,500,000.00
Including: Preference shares 4,477,500,000.00 4,477,500,000.00
Perpetual bonds 2,988,000,000.00 2,988,000,000.00
Capital reserves 4,953,557,435.19 4,953,557,435.19
Surplus reserves 1,199,819,528.06 1,136,699,330.20
Retained profit 812,690,534.91 1,629,209,489.72
Total owners’ equity 17,336,175,698.16 18,089,574,455.11
TOTAL LIABILITIES AND OWNERS’ EQUITY 57,524,389,445.83 60,209,919,149.16
142 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
3. Consolidated Income Statement
Unit: RMB
Item Amount for 2019 Amount for 2018
I. Total revenue 30,395,434,073.35 28,875,756,163.56
Including: Revenue 30,395,434,073.35 28,875,756,163.56
II. Total operating costs 28,390,081,416.99 25,925,815,303.43
Including: Operating costs 21,773,884,285.39 19,845,756,818.51
Taxes and surcharges 275,933,439.81 250,358,478.10
Sales and distribution expenses 1,297,196,188.84 1,190,499,238.49
General and administrative expenses 1,134,725,391.84 967,840,641.90
Research and development expense 992,312,956.74 929,873,688.40
Finance expenses 2,916,029,154.37 2,741,486,438.03
Including: Interest expenses 3,573,865,213.86 3,348,606,907.65
Interest income 836,491,207.55 692,370,142.41
Plus: Other income 561,556,630.51 97,814,340.42
Investment income (“-” denotes loss) 174,000,822.89 248,962,910.68
Including: Investment income from associates and joint ventures -2,995,932.01 -20,475,760.38
Gain on change in fair value (“-” denotes loss) 26,692,741.61 -115,464,400.65
Credit impairment loss (“-” denotes loss) -1,033,867,928.73 -127,644,916.73
Loss on impairment of assets (“-” denotes loss) -120,991,683.19 -164,654,098.54
Gain on disposal of assets (“-” denotes loss) -29,073,731.05 17,149,722.72
III. Operating profit (“-” denotes loss) 1,583,669,508.40 2,906,104,418.03
Plus: Non-operating income 493,393,914.87 319,396,237.27
Less: Non-operating expenses 28,584,594.00 19,184,539.11
IV. Total profit (“-” denotes total loss) 2,048,478,829.27 3,206,316,116.19
Less: Income tax expenses 295,180,636.46 641,577,494.92
V. Net profit (“-” denotes net loss) 1,753,298,192.81 2,564,738,621.27
(I) Classification according to the continuity of operation
1. Net profit from continuing operations (“-” denotes net loss) 1,689,474,069.20 2,515,935,340.22
2. Net profit from discontinued operations (“-” denotes net loss) 63,824,123.61 48,803,281.05
(II) Classification according to ownership
1. Net profit attributable to shareholders of the Company 1,656,566,584.88 2,509,828,858.47
2. Profit or loss of minority interest 96,731,607.93 54,909,762.80
2019 AnnuAl RepoRt 143
XIII Financial Report
Item Amount for 2019 Amount for 2018
VI. Net other comprehensive income after tax -142,931,954.09 -382,355,053.21
Net other comprehensive income after tax attributable to shareholders of the
Company -142,931,954.09 -382,355,053.21
Other comprehensive income that will be reclassified to profit and loss in
subsequent periods -142,931,954.09 -382,355,053.21
Including Exchange differences on translation -142,931,954.09 -382,355,053.21
VII. Total comprehensive income 1,610,366,238.72 2,182,383,568.06
Total comprehensive income attributable to shareholders of the Company 1,513,634,630.79 2,127,473,805.26
Total comprehensive income attributable to minority interest 96,731,607.93 54,909,762.80
VIII. Earnings per share:
(I) Basic earnings per share 0.33 0.51
(Ii) Diluted earnings per share 0.33 0.51
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
144 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
4. Income statement of the Company
Unit: RMB
Item Amount for 2019 Amount for 2018
I. Revenue 6,914,154,801.19 5,674,841,840.67
Less: Operating costs 5,276,084,637.80 4,280,788,382.36
Taxes and surcharges 47,507,009.10 70,504,281.15
Sales and distribution expenses 217,963,783.79 170,956,908.96
General and administrative expenses 367,847,081.04 313,006,816.72
Research and development expense 292,447,426.29 217,377,973.03
Finance expenses 1,437,070,384.94 1,370,330,815.22
Including: Interest expenses 2,275,231,993.88 2,392,019,845.76
Interest income 980,330,079.03 1,196,235,406.95
Plus: Other income 78,722,787.60 4,341,174.61
Investment income (“-” denotes loss) 1,352,470,766.36 728,792,644.01
Including: Investment income from associates and joint
ventures -11,142,579.41 -16,957,355.99
Gain on change in fair value (“-” denotes loss) -94,000,000.00
Credit impairment loss (“-” denotes loss) -128,688,655.59 -2,970,370.50
Loss on impairment of assets (“-” denotes loss) -77,447,218.54 -5,617,450.00
Gain on disposal of assets (“-” denotes loss) -30,388,143.09 17,006,032.16
II. Operating profit (“-” denotes loss) 469,904,014.97 -100,571,306.49
Plus: Non-operating income 11,140,162.55 158,610,672.64
Less: Non-operating expenses 19,138,740.53 7,236,443.34
III. Total profit (“-” denotes total loss) 461,905,436.99 50,802,922.81
Less: Income tax expenses -122,850,888.03 -116,925,134.27
IV. Net profit (“-” denotes net loss) 584,756,325.02 167,728,057.08
Net profit from continuing operations (“-” denotes net loss) 584,756,325.02 167,728,057.08
V. Total comprehensive income 584,756,325.02 167,728,057.08
VI. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share
2019 AnnuAl RepoRt 145
XIII Financial Report
5. Consolidated cash flow statement
Unit: RMB
Item Amount for 2019 Amount for 2018
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 34,573,214,070.98 32,087,951,780.92
Tax rebates received 111,119,105.01 60,796,324.64
Cash received relating to other operating activities 6,949,229,810.96 6,920,381,377.58
Subtotal of cash inflows from operating activities 41,633,562,986.95 39,069,129,483.14
Cash paid for goods and services 23,866,695,680.80 19,899,777,030.88
Cash paid to and for employees 1,457,717,966.62 1,263,770,142.64
Payments of taxes and surcharges 2,273,360,732.52 2,104,645,214.45
Cash paid relating to other operating activities 1,803,081,384.07 1,701,235,208.13
Subtotal of cash outflows from operating activities 29,400,855,764.01 24,969,427,596.10
Net cash flows from operating activities 12,232,707,222.94 14,099,701,887.04
II. Cash flows from investing activities:
Cash received from investments 2,784,345.77 2,390,000,000.00
Cash received from investment income 12,000,000.00 375,641,400.00
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 137,211,301.99 698,360.18
Net cash received from disposal of subsidiaries and other business
units 215,421,083.24 19,610,260.70
Cash received relating to other investing activities 767,670,000.00
Subtotal of cash inflows from investing activities 1,135,086,731.00 2,785,950,020.88
Cash paid for purchase of fixed assets, intangible assets and other
long-term assets 1,112,186,863.71 3,608,698,828.73
Cash paid on investments 1,947,322,879.24 118,200,000.00
Cash paid relating to other investing activities 101,130,000.00 838,042,210.54
Subtotal of cash outflows from investing activities 3,160,639,742.95 4,564,941,039.27
Net cash flows from investing activities -2,025,553,011.95 -1,778,991,018.39
146 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
Item Amount for 2019 Amount for 2018
III. Cash flows from financing activities:
Cash received from investments 423,000,000.00 500,000,000.00
Including: Cash received from by subsidiaries from minority
investment 423,000,000.00 500,000,000.00
Cash received from borrowings 28,631,245,817.48 43,668,959,703.07
Cash received from issuance of bonds 898,650,000.00
Cash received relating to other financing activities 5,866,106,002.62 16,718,183,724.57
Subtotal of cash inflows from financing activities 34,920,351,820.10 61,785,793,427.64
Cash repayments of amounts borrowed 30,767,815,349.31 38,860,270,293.67
Cash paid for dividend and profit distribution or interest payment 3,530,178,266.59 3,749,772,244.77
Including: Dividend and profit paid by subsidiaries to minority
shareholders 19,262,500.00
Cash paid relating to other financing activities 10,109,785,861.74 32,028,908,989.58
Subtotal of cash outflows from financing activities 44,407,779,477.64 74,638,951,528.02
Net cash flows from financing activities -9,487,427,657.54 -12,853,158,100.38
IV. Effect of foreign exchange rate changes on cash and cash
equivalents -210,956,768.56 109,597,099.79
V. Net increase in cash and cash equivalents 508,769,784.89 -422,850,131.94
Plus: Balance of cash and cash equivalents as at the beginning
of the period 2,381,558,242.52 2,804,408,374.46
VI. Balance of cash and cash equivalents as at the end of the period 2,890,328,027.41 2,381,558,242.52
2019 AnnuAl RepoRt 147
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6. Cash flow statement of the Company
Unit: RMB
Item Amount for 2019 Amount for 2018
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 7,719,183,653.24 6,040,539,799.02
Cash received relating to other operating activities 1,561,317,548.23 1,899,284,149.44
Subtotal of cash inflows from operating activities 9,280,501,201.47 7,939,823,948.46
Cash paid for goods and services 3,634,400,369.89 3,280,788,382.36
Cash paid to and for employees 496,342,845.44 388,826,518.74
Payments of taxes and surcharges 206,120,796.96 296,043,362.00
Cash paid relating to other operating activities 1,113,784,472.34 1,861,866,604.79
Subtotal of cash outflows from operating activities 5,450,648,484.63 5,827,524,867.89
Net cash flows from operating activities 3,829,852,716.84 2,112,299,080.57
II. Cash flows from investing activities:
Cash received from investments 228,794,345.77 2,288,400,000.00
Cash received from investment income 1,087,829,000.00 965,641,400.00
Net cash received from disposal of fixed assets, intangible assets and other
long-term assets 81,086,086.00 290,680.96
Cash received relating to other investing activities
Subtotal of cash inflows from investing activities 1,397,709,431.77 3,254,332,080.96
Cash paid for purchase of fixed assets, intangible assets and other
long-term assets 154,820,434.45 338,672,140.85
Cash paid on investments 1,278,000,000.00 3,794,390,597.05
Cash paid relating to other investing activities 101,130,000.00
Subtotal of cash outflows from investing activities 1,533,950,434.45 4,133,062,737.90
Net cash flows from investing activities -136,241,002.68 -878,730,656.94
III. Cash flows from financing activities:
Cash received from borrowings 13,980,360,915.86 10,473,500,000.00
Cash received from issuance of bonds 898,650,000.00
Cash received relating to other financing activities 5,007,324,754.27 25,438,933,017.20
Subtotal of cash inflows from financing activities 18,987,685,670.13 36,811,083,017.20
Cash repayments of amounts borrowed 10,970,294,184.80 12,527,601,933.33
Cash paid for dividend and profit distribution or interest payment 1,762,132,250.15 1,602,928,591.75
Cash paid relating to other financing activities 10,415,992,353.54 24,309,884,284.53
Subtotal of cash outflows from financing activities 23,148,418,788.49 38,440,414,809.61
Net cash flows from financing activities -4,160,733,118.36 -1,629,331,792.41
IV. Effect of foreign exchange rate changes on cash and cash equivalents -4,354,937.11 -16,693,638.05
V. Net increase in cash and cash equivalents -471,476,341.31 -412,457,006.83
Plus: Balance of cash and cash equivalents as at the beginning of the period 607,805,063.02 1,020,262,069.85
VI. Balance of cash and cash equivalents as at the end of the period 136,328,721.71 607,805,063.02
148 SHANDONG CHENMING PAPER HOLDINGS LIMITED
7. Consolidated statement of changes in owners’ equity
Amount for the reporting period
Unit: RMB
2019
Equity attributabl e to owners of the Company
Other equity instruments
Other comprehensive
Item Share capital Preference shares Perpetual bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves General risk provisions Retained profit Others Subtotal Minority interest Total owners’ equity
I. Balance as at the end of the prior
XIII Financial Report
year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 5,091,449,915.14 -736,520,181.01 3,257,998.47 1,148,888,912.11 64,123,919.23 9,107,422,690.85 25,048,731,454.79 822,959,773.30 25,871,691,228.09
II. Balance as at the beginning of the
year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 5,091,449,915.14 -736,520,181.01 3,257,998.47 1,148,888,912.11 64,123,919.23 9,107,422,690.85 25,048,731,454.79 822,959,773.30 25,871,691,228.09
III. Changes in the period
( –” denotes decrease) -4,763,487.84 -142,931,954.09 -3,257,998.47 63,120,197.86 9,998,724.97 198,846,926.53 121,012,408.96 347,069,243.50 468,081,652.46
(I) Total comprehensive income -142,931,954.09 1,656,566,584.88 1,513,634,630.79 71,201,958.49 1,584,836,589.28
(II) Capital paid in and reduced
by owners -4,763,487.84 -4,763,487.84 295,129,785.01 290,366,297.17
1. Ordinary shares paid by
owners — 439,447,225.77 439,447,225.77
2. Capital paid by holders of
other equity instruments — —
3. Others -4,763,487.84 -4,763,487.84 -144,317,440.76 -149,080,928.60
(III) Profit distribution 63,120,197.86 9,998,724.97 -1,457,719,658.35 -1,384,600,735.52 -19,262,500.00 -1,403,863,235.52
1. Transfer to surplus
reserves 63,120,197.86 -63,120,197.86 — —
2. Transfer to general risk
provisions 9,998,724.97 -9,998,724.97 — —
3. Distribution to owners (or
shareholders) -1,384,600,735.52 -1,384,600,735.52 -19,262,500.00 -1,403,863,235.52
IV. Transfer within owners’ equity -4,881,991.84 -4,881,991.84 -4,881,991.84
1. Capital (or share capital)
created on capital reserve — —
2. Others -4,881,991.84 -4,881,991.84 -4,881,991.84
V. Special reserves 1,623,993.37 1,623,993.37 1,623,993.37
1. Withdrawal 1,623,993.37 1,623,993.37 1,623,993.37
IV. Balance as at the end of the
period 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 5,086,686,427.30 -879,452,135.10 — 1,212,009,109.97 74,122,644.20 9,306,269,617.38 25,169,743,863.75 1,170,029,016.80 26,339,772,880.55
2019 AnnuAl RepoRt
149
150
Amount for the prior period
Unit: RMB
2018
Equity attributable to owners of the Company
Other equity instruments
Other comprehensive General risk
Item Share capital Preference shares Perpetual bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves provisions Retained profit Others Subtotal Minority interest Total owners’ equity
I. Balance as at the end of the prior
year 1,936,405,467.00 4,477,500,000.00 5,570,800,000.00 6,149,257,784.90 -354,165,127.80 1,132,116,106.40 8,866,614,844.40 27,778,529,074.90 2,495,649,464.04 30,274,178,538.94
XIII Financial Report
II. Balance as at the beginning of the
year 1,936,405,467.00 4,477,500,000.00 5,570,800,000.00 6,149,257,784.90 -354,165,127.80 1,132,116,106.40 8,866,614,844.40 27,778,529,074.90 2,495,649,464.04 30,274,178,538.94
III. Changes in the period
( –” denotes decrease) 968,202,733.00 -2,582,800,000.00 -1,057,807,869.76 -382,355,053.21 3,257,998.47 16,772,805.71 64,123,919.23 240,807,846.45 -2,729,797,620.11 -1,672,689,690.74 -4,402,487,310.85
(I) Total comprehensive income -382,355,053.21 2,509,828,858.47 2,127,473,805.26 54,909,762.80 2,182,383,568.06
(II) Capital paid in and reduced
by owners -2,582,800,000.00 -17,200,000.00 -2,600,000,000.00 500,000,000.00 -2,100,000,000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Ordinary shares paid by
owners 500,000,000.00 500,000,000.00
2. Capital paid by holders of
other equity instruments -2,582,800,000.00 -17,200,000.00 -2,600,000,000.00 -2,600,000,000.00
3. Others
(III) Profit distribution 16,772,805.71 64,123,919.23 -2,269,021,012.02 -2,188,124,287.08 -2,188,124,287.08
1. Transfer to surplus
reserves 16,772,805.71 -16,772,805.71
2. Transfer to general risk
provisions 64,123,919.23 -64,123,919.23
3. Distribution to owners (or
shareholders) -2,188,124,287.08 -2,188,124,287.08 -2,188,124,287.08
IV. Transfer within owners’ equity 968,202,733.00 -1,040,607,869.76 -72,405,136.76 -2,227,599,453.54 -2,300,004,590.30
1. Capital (or share capital)
created on capital reserve 968,202,733.00 -968,202,733.00
2. Others -72,405,136.76 -72,405,136.76 -2,227,599,453.54 -2,300,004,590.30
V. Special reserves 3,257,998.47 3,257,998.47 3,257,998.47
1. Withdrawal 3,257,998.47 3,257,998.47 3,257,998.47
IV. Balance as at the end of the
period 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 5,091,449,915.14 -736,520,181.01 3,257,998.47 1,148,888,912.11 64,123,919.23 9,107,422,690.85 25,048,731,454.79 822,959,773.30 25,871,691,228.09
8. Statement of changes in equity of owners of the Company
Amount for the reporting period
Unit: RMB
2019
Other equity instruments
Other comprehensive
Item Share capital Preference shares Perpetual bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves Retained profit Others Total owners’ equity
I. Balance as at the end of the prior year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,136,699,330.20 1,629,209,489.72 18,089,574,455.11
Plus: Others
XIII Financial Report
II. Balance as at the beginning of the year 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,136,699,330.20 1,629,209,489.72 18,089,574,455.11
III. Changes in the period (“-” denotes decrease) 63,120,197.86 -816,518,954.81 -753,398,756.95
(I) Total comprehensive income 631,201,978.57 631,201,978.57
(II) Capital paid in and reduced by owners
1. Capital paid by holders of other equity
instruments
2. Others
(III) Profit distribution 63,120,197.86 -1,447,720,933.38 -1,384,600,735.52
1. Transfer to surplus reserves 63,120,197.86 -63,120,197.86
2. Distribution to owners (or shareholders) -1,384,600,735.52 -1,384,600,735.52
(IV) Transfer within owners’ equity
1. Capital (or share capital) created on
capital reserve
IV. Balance as at the end of the period 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,199,819,528.06 812,690,534.91 17,336,175,698.16
2019 AnnuAl RepoRt
151
152
Amount for the prior period
Unit: RMB
2018
Other equity instruments
Other comprehensive
Item Share capital Preference shares Perpetual bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves Retained profit Others Total owners’ equity
I. Balance as at the end of the prior year 1,936,405,467.00 4,477,500,000.00 5,570,800,000.00 5,938,960,168.19 1,119,926,524.49 3,674,882,253.11 22,718,474,412.79
Plus: Others -8,503,727.68 -8,503,727.68
XIII Financial Report
II. Balance as at the beginning of the year 1,936,405,467.00 4,477,500,000.00 5,570,800,000.00 5,938,960,168.19 1,119,926,524.49 3,666,378,525.43 22,709,970,685.11
III. Changes in the period (“-” denotes decrease 968,202,733.00 -2,582,800,000.00 -985,402,733.00 16,772,805.71 -2,037,169,035.71 -4,620,396,230.00
(I) Total comprehensive income 167,728,057.08 167,728,057.08
(II) Capital paid in and reduced by owners -2,582,800,000.00 -17,200,000.00 -2,600,000,000.00
1. Capital paid by holders of other equity
instruments -2,582,800,000.00 -17,200,000.00 -2,600,000,000.00
2. Others
(III) Profit distribution 16,772,805.71 -2,204,897,092.79 -2,188,124,287.08
1. Transfer to surplus reserves 16,772,805.71 -16,772,805.71
SHANDONG CHENMING PAPER HOLDINGS LIMITED
2. Distribution to owners (or shareholders) -2,188,124,287.08 -2,188,124,287.08
(IV) Transfer within owners’ equity 968,202,733.00 -968,202,733.00
1. Capital (or share capital) created on
capital reserve 968,202,733.00 -968,202,733.00
IV. Balance as at the end of the period 2,904,608,200.00 4,477,500,000.00 2,988,000,000.00 4,953,557,435.19 1,136,699,330.20 1,629,209,489.72 18,089,574,455.11
XIII 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”) was
Shandong Shouguang Paper Mill Corporation, which was changed as a joint stock company with limited liability
through offering to specific investors in May 1993. In December 1996, with approval by Lu Gai Zi [1996] No. 270)
issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committee
of the State Council, the Company was changed as a joint stock company with limited liability established by share
offer.
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 listed
and 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 Regulatory
Commission, the Company issued an additional 70,000,000 RMB ordinary shares (A shares), which were listed and
traded 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 H
shares. The Company publicly offered 355,700,000 H shares all over the world and listed for trading on the main
board of Stock Exchange of Hong Kong on 18 June 2008. At the same time, 35,570,000 H shares were allocated to
the National Council for Social Security Fund by our relevant state-owned shareholder and converted into overseas
listed foreign shares (H shares) for the purpose of reducing the number of state-owned shares. The additional H
shares issued were listed and traded on Hong Kong Stock Exchange on 18 June 2008.
As at 31 December 2019, the total share capital of the Company was changed to 2,904,608,200 shares. For details,
please refer to Note VII. 38.
The Company established a corporate governance structure comprising the general meeting, the board of directors
and the supervisory committee, and has human resources department, information technology department,
corporate management department, legal affairs department, financial management department, capital management
department, securities investment department, procurement department, audit department, and other departments.
The Company and its subsidiaries (hereinafter referred to as the “Group”) are principally engaged in, among other
things, processing and sale 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 manufacturing and sale
of laminated boards and fortified wooden floorboards, hotel service, equipment financial and operating leasing,
magnesite mining, processing and sales of talc.
The financial statements and notes thereto were approved by the board of directors of the Company (the “Board”) on
27 March 2020.
2. Scope of consolidation
Subsidiaries of the Company included in the scope of consolidation in 2019 totalled 68. For details, please refer to
Note IX “Equity in other entities”. The scope of consolidation of the Company during the year had 4 more companies
included and three companies less compared to the prior year. For details, please refer to Note VIII “Changes in the
scope of consolidation”.
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IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
The Company’s financial statements are prepared on a going concern and based on actual transactions and events,
in accordance with the Accounting Standards for Business Enterprises-Basic Standards promulgated by the Ministry
of Finance (Order of Ministry of Finance No. 33, as amended by Order of Ministry of Finance No. 76) and 42 specific
accounting standards as promulgated and amended on and after 15 February 2006, the application guidelines of the
Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards
for Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on
the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for
Financial Reports” (revised in 2014) of China Securities Regulatory Commission.
The Company’s financial statements have been prepared on an accrual basis in accordance with the ASBEs.
Except for certain financial instruments, the financial statements are prepared under the historical cost convention.
Held-for-sale non-current assets are measured at the lower of the difference of fair value less expected expenses or
the original carrying amount when meeting the conditions of holding for sale. In the event that depreciation of assets
occurs, 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 12
months since the end of the reporting period.
V. Significant Accounting Policies and Accounting Estimates
Specific accounting policies and accounting estimates are indicated as follows:
The Company and its subsidiaries are principally engaged in machine-made paper, electricity and heat, construction
materials, paper making chemical products, financial leasing, hotel management and other operations. The Company and its
subsidiaries formulated certain specific accounting policies and accounting estimates for the transactions and matters such
as revenue recognition, determination of performance progress and R&D expenses based on their actual production and
operation characteristics pursuant to the requirements under the relevant accounting standards for business enterprises.
For details, please refer to this Note V. 29 “Revenue”. For the critical accounting judgments and estimates made by the
management, please refer to Note V. 33 “Change of 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 financial
position of the consolidated entity and the Company as at 31 December 2019 and relevant information such as the
operating results and cash flows of the consolidated entity and the Company for 2019.
2. Accounting period
The accounting period of the Group is from 1 January to 31 December of each calendar year.
154 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
3. Operating cycle
Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Company until
their realisation in cash or cash equivalents. The operating cycle of the Company lasts for 12 months, and acts as an
indicator for classification of liquidity of assets and liabilities.
4. Functional currency
The Company and its domestic subsidiaries recognise RMB as their functional currency according to the primary
economic environment in which they operate. The functional currency of the Company and its domestic subsidiaries
is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or “US$”), Japanese yen
(“JPY”), Euro (“EUR”) and South Korean Won (“KRW”) as their respective functional currency according to the general
economic environment in which these subsidiaries operate. The Company prepares its financial statements in RMB.
5. 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. The
term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns
from its involvement with the investee and the ability to use its power over the investee to affect the amount of
those returns. A subsidiary is an entity controlled by the Company (including an enterprise, a separable part of
an 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 the
Company 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, and
intra-company significant transactions and balances are eliminated.
A subsidiary and its business acquired through a business combination involving entities under common control
during the reporting period shall be included in the scope of the consolidation of the Company from the date
of being controlled by the ultimate controlling party, and its operating results and cash flows from the date of
being controlled by the ultimate controlling party are included in the consolidated income statement and the
consolidated cash flow statement, respectively.
For a subsidiary and its business acquired through a business combination involving entities not under common
control during the reporting period, its income, expenses and profits are included in the consolidated income
statement, and cash flows are included in the consolidated cash flow statement from the acquisition date to the
end of the reporting period.
The shareholders’ equity of the subsidiaries that is not attributable to the Company is presented under
shareholders’ equity in the consolidated balance sheet as minority interest. The portion of net profit or loss of
subsidiaries for the period attributable to minority interest is presented in the consolidated income statement
under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders
of a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the
subsidiary, the excess amount shall be allocated against minority interest.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
5. Preparation of consolidated financial statements (Cont’d)
(3) 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 from
the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest
over the sun of the share of the carrying amount of net assets of the former subsidiary calculated continuously
from the purchase date based on the shareholding percentage before disposal and the goodwill is recognised
as 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 current
profit or loss at the time when the control is lost, except for other comprehensive income arising from changes
in net assets or net liabilities due to remeasurement of defined benefit plan by the investee.
6. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of the
Group comprise joint operations and joint ventures.
(1) Joint operations
Joint operations refer to a joint arrangement during which the Group is entitled to relevant assets and
obligations of this arrangement.
The Group recognises the following items in relation to its interest in a joint operation and accounts for them in
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 this
arrangement.
The Group accounts for its investments in joint ventures in accordance with the requirements relating to
accounting treatment using equity method for long-term equity investments.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
7. 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 Group which are readily convertible into known amount of cash and which
are subject to insignificant risk of value change.
8. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
The foreign currency operations of the Group are translated into the functional currency at the prevailing spot
exchange rate on the date of exchange, i.e. usually the middle price of RMB exchange rate published by the
People’s Bank of China on that date in general and the same hereinafter.
On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on
the balance sheet date. The exchange difference arising from the difference between the spot exchange rate
on the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date will
be recognised in profit or loss for the period. The foreign currency non-monetary items measured at historical
cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the
transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange
rate on the date of determination of the fair value. The difference between the amounts of the functional
currency before and after the translation will be recognised in profit or loss for the period.
(2) Translation of financial statements denominated in foreign currency
When translating the financial statements denominated in foreign currency of overseas subsidiaries, assets and
liabilities 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 which
such items arose.
Income and expenses items in the income statement are translated at the average exchange rate for the period
in which the transaction occurred.
All items in the cash flow statements shall be translated at the average exchange rate for the period in which
the cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presented
separately as the “effect of foreign exchange rate changes on cash and cash equivalents” item in the cash flow
statements.
The differences arising from translation of financial statements shall be included in the “other comprehensive
income” item in owners’ equity in the balance sheet.
On disposal of foreign operations and loss of control, exchange differences arising from the translation of
financial statements denominated in foreign currencies related to the disposed foreign operations which
has been included in owners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in
proportionate share in the period in which the disposal took place.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equity
instrument of another party.
(1) Recognition and derecognition of financial instruments
Financial asset or financial liability will be recognised when the Group became one of the parties under a
financial instrument contract.
Financial asset that satisfied any of the following criteria shall be derecognised:
① the contract right to receive the cash flows of the financial asset has terminated;
② the financial asset has been transferred and meets the derecognition criteria for the transfer of financial
asset as described below.
A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or
in part. If an agreement is entered between the Group (debtor) and a creditor to replace the existing financial
liabilities with new financial liabilities, and the contractual terms of the new financial liabilities are substantially
different from those of the existing financial liabilities, the existing financial liabilities shall be derecognised and
the 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 Group classifies the financial assets according to the business model for managing the financial assets and
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 at fair value
through profit or loss.
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated
as measured at fair value through other comprehensive income:
The Group’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 solely
payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, such financial assets are measured at amortised cost using the effective
interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a
hedging relationship shall be recognised in profit or loss for the current period when the financial asset is
derecognised, amortised using the effective interest method or with impairment recognised.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(2) Classification and measurement of financial assets (Cont’d)
Financial assets measured at fair value through other comprehensive income
A financial asset is classified as measured at fair value through other comprehensive income if it meets both of
the following conditions and is not designated as measured at fair value through profit or loss:
The Group’s business model for managing such financial assets is achieved both by collecting collect
contractual cash flows and selling such financial assets;
The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, such financial assets are subsequently measured at fair value. Interest
calculated using the effective interest method, impairment losses or gains and foreign exchange gains and
losses are recognised in profit or loss for the current period, and other gains or losses are recognised in
other comprehensive income. On derecognition, the cumulative gain or loss previously recognised in other
comprehensive income is reclassified from other comprehensive income to profit or loss.
Financial assets measured at fair value through profit or loss
The Group classifies the financial assets other than those measured at amortised cost and measured at fair
value through other comprehensive income as financial assets measured at fair value through profit or loss.
Upon initial recognition, the Group irrevocably designates certain financial assets that are required to be
measured at amortised cost or at fair value through other comprehensive income as financial assets measured
at 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 hedging
purposes, gains or losses (including interests and dividend income) arising from such financial assets are
recognised in the profit or loss for the current period.
The business model for managing financial assets refers to how the Group manages its financial assets in order
to generate cash flows. That is, the Group’s business model determines whether cash flows will result from
collecting contractual cash flows, selling financial assets or both. The Group determines the business model for
managing financial assets on the basis of objective facts and specific business objectives for managing financial
assets determined by key management personnel.
The Group assesses the characteristics of the contractual cash flows of financial assets to determine whether
the contractual cash flows generated by the relevant financial assets on a specific date are solely payments of
principal and interest on the principal amount outstanding. The principal refers to the fair value of the financial
assets at the initial recognition. Interest includes consideration for the time value of money, for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic lending
risks, costs and profits. In addition, the Group evaluates the contractual terms that may result in a change in the
time distribution or amount of contractual cash flows from a financial asset to determine whether it meets the
requirements of the above contractual cash flow characteristics.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(2) Classification and measurement of financial assets (Cont’d)
Financial assets measured at fair value through profit or loss (Cont’d)
All affected financial assets are reclassified on the first day of the first reporting period following the change
in the business model where the Group changes its business model for managing financial assets; otherwise,
financial assets shall not be reclassified after initial recognition.
Financial assets other than accounts receivable without a significant financing component are measured at
fair value upon initial recognition. For financial assets measured at fair value through profit or loss, relevant
transaction costs are directly recognised in profit or loss for the current period. For other categories of financial
assets, relevant transaction costs are included in the amount initially recognised. Accounts receivable without
significant financing component are initially recognised based on the transaction price expected to be entitled
by the Group.
(3) Classification and measurement of financial liabilities
At initial recognition, financial liabilities of the Group are classified as financial liabilities measured at fair value
through profit or loss and financial liabilities measured at amortised cost. For financial liabilities not classified
as measured at fair value through profit or loss, relevant transaction costs are included in the amount initially
recognised.
Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss comprise held-for-trading financial liabilities
and financial liabilities designated as measured at fair value through profit or loss upon initial recognition. Such
financial liabilities are subsequently measured at fair value, and the gains or losses from the change in fair value
and the dividend or interest expenses related to the financial liabilities are included in the profit or loss of the
current period.
Financial liabilities measured at amortised cost
Other 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 current
period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(3) Classification and measurement of financial liabilities
Classification between financial liabilities and equity instruments
A financial liability is a liability if:
① it has a contractual obligation to pay in cash or other financial assets to other parties.
② it has a contractual obligation to exchange financial assets or financial liabilities under potential adverse
condition with other parties.
③ it is a non-derivative instrument contract which will or may be settled with the entity’s own equity
instruments, and the entity will deliver a variable number of its own equity instruments according to such
contract.
④ 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 asset
with 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 deducting
all of its liabilities.
If the Group cannot unconditionally avoid the performance of a contractual obligation by paying cash or
delivering other financial assets, the contractual obligation meets the definition of financial liabilities.
Where a financial instrument must or may be settled with the Group’s own equity instruments, the Group’s own
equity instruments used to settle such instrument should be considered as to whether it is as a substitute for
cash or other financial assets or for the purpose of enabling the holder of the instrument to be entitled to the
remaining interest in the assets of the issuer after deducting all of its liabilities. For the former, it is a financial
liability of the Group; for the latter, it is the Group’s own equity instruments.
(4) Derivative financial instruments
The Group’s derivative financial instruments are mainly forward foreign exchange contracts, which are initially
recognised at fair value on the date a derivative contract is entered into and are subsequently measured at
their fair value. A derivative financial instrument is recognised as an asset when the fair value is positive and as
a liability when the fair value is negative. Any gain or loss arising from changes in fair value and not complying
with the accounting requirements on hedging shall be recognised in profit or loss for current period.
(5) 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. 10.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets
The Group makes provision for impairment based on expected credit losses (ECLs) on the following items:
Financial assets measured at amortised cost;
Debt investments measured at fair value through other comprehensive income;
Measurement of ECLs
ECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Credit
losses refer to the difference between all contractual cash flows receivable according to the contract and
discounted according to the original effective interest rate and all cash flows expected to be received, i.e. the
present value of all cash shortages.
The Group takes into account reasonable and well-founded information such as past events, current conditions
and forecasts of future economic conditions, and calculates the probability-weighted amount of the present
value of the difference between the cash flows receivable from the contract and the cash flows expected to be
received weighted by the risk of default.
The Group measures ECLs of financial instruments at different stages. If the credit risk of the financial instrument
did not increase significantly upon initial recognition, it is at the first stage, and the Group makes provision for
impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrument increased
significantly upon initial recognition but has not yet incurred credit impairment, it is at the second stage, and the
Group makes provision for impairment based on the lifetime ECLs of the instrument; if the financial instrument
incurred credit impairment upon initial recognition, it is at the third stage, and the Group makes provision for
impairment based on the lifetime ECLs of the instrument.
For financial instruments with low credit risk on the balance sheet date, the Group assumes that the credit risk
did not increase significantly upon initial recognition, and makes provision for impairment based on the ECLs
within the next 12 months.
Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financial
instrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrument
within 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) after
the balance sheet date, and is a portion of lifetime ECLs.
The maximum period to be considered when estimating ECLs is the maximum contractual period over which
the Group is exposed to credit risk, including renewal options.
For the financial instruments at the first and second stages and with low credit risks, the Group calculates the
interest income based on the book balance and the effective interest rate before deducting the impairment
provisions. For financial instruments at the third stage, interest income is calculated based on the amortised
cost after deducting impairment provisions made from the book balance and the effective interest rate.
For bills receivable, accounts receivable and contract assets, regardless of whether there is a significant
financing component, the Group always makes provision for impairment at an amount equal to lifetime ECLs.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Measurement of ECLs (Cont’d)
When the Group is unable to assess the information of ECLs for an individual financial asset at a reasonable
cost, 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 bills
Bills receivable portfolio 2: Commercial acceptance bills
B. Accounts receivable
Accounts receivable portfolio 1: Factoring receivables
Accounts receivable portfolio 2: Receivables from non-related party customers
Accounts receivable portfolio 3: Due from related party customers
For bills receivable classified as a portfolio, the Group refers to the historical credit loss experience, combined
with the current situation and the forecast of future economic conditions, to calculate the ECLs based on default
risk exposure and lifetime ECL rate.
For accounts receivable classified as a portfolio, the Group refers to the historical credit loss experience,
combined with the current situation and the forecast of future economic conditions, to prepare a comparison
table of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs.
Other receivables
The Group classifies other receivables into portfolios based on credit risk characteristics, and calculates the
ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
Other receivables portfolio 1: Amount due from government authorities
Other receivables portfolio 2: Amount due from related parties
Other receivables portfolio 3: Other receivables
For other receivables classified as a portfolio, the Group calculates the ECLs based on default risk exposure
and the ECL rate over the next 12 months or the entire lifetime.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Long-term receivables
The Group’s long-term receivables include finance lease receivables and deposits receivable.
The Group classifies the finance lease receivables, deposits receivable and other receivables 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. Finance lease receivables
Finance lease receivables portfolio 1: Receivables not past due
Finance lease receivables portfolio 2: Overdue receivables
B. Other long-term receivables
Other long-term receivables portfolio 1: Deposits receivable
Other long-term receivables portfolio 2: Other receivables
For deposits receivable and other receivables, the Group refers to the historical credit loss experience,
combined with the current situation and the forecast of future economic conditions, and calculates 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
the next 12 months or the entire lifetime.
Debt investments and other debt investments
For debt investments and other debt investments, the Group measures the ECLs based on the nature of the
investment, the types of counterparty and risk exposure, and default risk exposure and ECL rate within the next
12 months or the entire lifetime.
Assessment of significant increase in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition,
the Group compares the risk of default of the financial instrument at the balance sheet date with that at the date
of initial recognition to determine the relative change in risk of default within the expected lifetime of the financial
instrument.
In determining whether the credit risk has increased significantly upon initial recognition, the Group considers
reasonable and well-founded information, including forward-looking information, which can be obtained without
unnecessary extra costs or efforts. Information considered by the Group includes:
The debtor’s failure to make payments of principal and interest on their contractually due dates;
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Assessment of significant increase in credit risk (Cont’d)
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 significant
adverse effect on the debtor’s ability to meet its obligation to the Group.
Depending on the nature of the financial instruments, the Group assesses whether there has been a significant
increase in credit risk on either an individual basis or a collective basis. When the assessment is performed on a
collective basis, the financial instruments are grouped based on their common credit risk characteristics, such
as past due information and credit risk ratings.
The Group determines that the credit risk on a financial asset has increased significantly if it is more than 30
days past due.
Credit-impaired financial assets
At balance sheet date, the Group assesses whether financial assets measured at amortised cost and debt
investments measured at fair value through other comprehensive income are credit-impaired. A financial asset
is credit-impaired when one or more events that have an adverse effect on the estimated future cash flows
of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following
observable 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;
For economic or contractual reasons relating to the debtor’s financial difficulty, the Group having granted to the
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 or
debtor.
Presentation of provisions for ECLs
ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk upon
initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss for
the current period. For financial assets measured at amortised cost, the provisions of impairment is deducted
from the carrying amount of the financial assets presented in the balance sheet; for debt investments at fair
value through other comprehensive income, the Group makes provisions of impairment in other comprehensive
income without reducing the carrying amount of the financial asset.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Write-offs
The book balance of a financial asset is directly written off to the extent that there is no realistic prospect of
recovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutes
derecognition of such financial asset. This is generally the case when the Group determines that the debtor
does not have assets or sources of income that could generate sufficient cash flows to repay the amounts
subject to the write-off. However, financial assets that are written off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.
If a write-off of financial assets is later recovered, the recovery is credited to profit or loss in the period in which
the recovery occurs.
(7) Transfer of financial assets
Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than the
issuer of such financial assets (the transferee).
If the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee,
the financial asset shall be derecognised. If the Group retains substantially all the risks and rewards of
ownership of a financial asset, the financial asset shall not be derecognised.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset, it accounts for the transaction as follows: if the Group does not retain control, it derecognises the
financial asset and recognises any resulting assets or liabilities; if the control over the financial asset is not
waived, the relevant financial asset is recognised according to the extent of its continuing involvement in the
transferred financial asset and the relevant liability is recognised accordingly.
(8) Offset of financial assets and financial liabilities
If the Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which
are enforceable currently, and the Group plans to realise the financial assets or to clear off the financial liabilities
on a net amount basis or simultaneously, the net amount of financial assets and financial liabilities shall be
presented in the balance sheet upon offsetting. Otherwise, financial assets and financial liabilities are presented
separately in the balance sheet without offsetting.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Fair value measurement
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a liability
in an orderly transaction between market participants on the date of measurement.
The Group measures the relevant assets or liabilities at fair value, assuming that the orderly transaction of selling the
assets or transferring the liabilities is conducted in the main market of the relevant assets or liabilities; in the absence
of the main market, the Group assumes that the transaction is conducted in the most advantageous market for
the relevant asset or liability. The main (or the most advantageous) market must be accessible to by the Group on
the measurement date. The Group uses assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
For financial assets or financial liabilities exist in an active market, fair value is determined based on the quoted
price in such market. While financial instruments do not exist in an active market, the fair value is determined using
valuation techniques
Fair value measurement for a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its best use or by selling it to another market participant that would use the
asset in its best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, and gives priority to relevant observable inputs. Unobservable inputs are used only
when relevant observable inputs are not accessible or the access to which is impracticable.
All assets and liabilities measured at fair value or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole: Level 1 inputs are available quoted prices (unadjusted) in active markets for identical assets or liabilities
at the measurement date; Level 2 inputs are inputs, other than Level 1 inputs, that are observable for the asset or
liability, either directly or indirectly; Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group
re-assess them at each balance sheet date to determine whether transfers have occurred between levels in the
hierarchy.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
11. Inventories
(1) Classification of inventories
Inventories of the Group mainly include raw materials, work in progress, goods in stock, development products
and consumable biological assets, etc.
(2) Pricing of inventories dispatched
Inventories of the Group are measured at their actual cost when obtained. Cost of raw materials, goods in stock
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. Consumable
biological assets without a stock are stated at historical cost at initial recognition, and subsequently measured
at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current
period. The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses
directly 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 loss
for the current period.
(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 estimated
cost incurred upon completion, estimated sales expenses and taxes and levies. The realisable value of
inventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effect
of after-balance-sheet-date events.
At the balance sheet date, provision for inventory impairment is made when the cost is higher than the net
realisable value. The Group usually make provision for inventory impairment based on categories of inventories.
At the balance sheet date, in case the factors causing inventory impairment no longer exists, the original
provision for inventory impairment shall be reversed.
(4) Inventory stock taking system
The Group 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 Group are amortised when issued for use.
Packaging materials for turnover are amortised when issued for use.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Held for sale and discontinued operations
(1) Classification and measurement of non-current assets or disposal groups held for sale
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered
principally through a sale transaction (including a non-monetary asset exchange with commercial substance)
rather than through continuing use.
The aforesaid non-current asset does not include the investment property subsequently measured at fair value,
the biological assets measured at the net amount of the fair value deducting the sales expense, the assets
generated from remuneration, financial assets, deferred income tax assets and rights from insurance contract.
A disposal group is a group of assets to be disposed of together as a whole by sale or other means in a
transaction, and liabilities directly associated with those assets that will be transferred in the transaction. In
certain circumstances, the disposal group includes the goodwill acquired in the business combination.
A non-current asset or a disposal group is classified as held for sale if it meets all of the following conditions:
the non-current asset or disposal group is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such asset or disposal group; the sale is highly probable, i.e. a
sale plan has been resolved and a firm purchase commitment has been obtained, and the sale is expected to
be completed within one year. When the Group loses control of a subsidiary due to reasons such as disposal
of investment in a subsidiary, regardless of whether the Group retains part of the equity investment after the
disposal, when the investment in a subsidiary intended to be disposed of meets the conditions for classification
as held for sale, the investment in a subsidiary is classified as held for sale as a whole in the separate financial
statements, and all assets and liabilities of the subsidiary are classified as held for sale in the consolidated
financial statements.
When the non-current assets or disposal groups held for sale are initially measured or remeasured at the
balance sheet date, the excess of the carrying amount over the net amount of the fair value less selling
expenses is recognised as asset impairment loss. For the amount of impairment loss recognised on disposal
groups held for sale, the carrying amount of the goodwill of the disposal group shall be offset against first, and
then be offset against the carrying amount of non-current assets according to the proportion of the carrying
amount of non-current assets.
If the net amount of the fair value of the non-current assets or disposal groups held for sale less the selling
expenses increases on the subsequent balance sheet date, the amount previously written down shall be
recovered and reversed in the amount of asset impairment loss recognised after be classified as held for sale,
and the reversed amount shall be included in the current profit and loss. The carrying amount of goodwill written
off shall not be reversed.
Non-current assets held for sale and assets in disposal group held for sale are not depreciated or amortised.
Interest and other expenses of a disposal group classified as held for sale continue to be recognised. For all
or part of an investment in an associate or a joint venture that is classified as held for sale, the part of being
classified as held for sale shall cease to be accounted for using the equity method, while any retained portion
(not classified as held for sale) shall continue to be accounted for using the equity method; The Group ceases to
use the equity method from the date when the Group ceases to have significant influence over an associate or a
joint venture.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Held for sale and discontinued operations (Cont’d)
(1) Classification and measurement of non-current assets or disposal groups held for sale (Cont’d)
If a non-current asset or disposal group is classified as held for sale but subsequently no longer meets the
criteria for being classified as held for sale, the Group shall cease to classify it as held for sale and measure it at
the lower of:
① he carrying amount of the asset or disposal group before being classified as held for sale is adjusted by
the depreciation, amortisation or impairment that would have been recognised if the asset or disposal
group had not been classified as held for sale;
② recoverable amount.
(2) Discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as held
for sale, and can be distinguished separately, and meets one of the following conditions:
① The component represents a separate major line of business or geographical area of operations.
② The component is part of a related plan to dispose of a separate major line of business or geographical
area of operations.
③ The component is a subsidiary acquired exclusively with a view to resale.
(3) Presentation
The Group presents the non-current assets held for sale or the assets in the disposal group held for sale as
“assets held-for-sale” and the liabilities in the disposal group held for sale as “liabilities held-for-sale” in the
balance sheet.
The Group presents profit or loss from continuing operations and profit or loss from discontinued operations in
the income statement. For non-current assets and disposal groups held for sale that do not meet the definition
of discontinued operation, their impairment losses and reversal amounts and gains or losses are presented as
profit or loss from continuing operations. Operating profit or loss such as impairment loss and reversal amount
of discontinued operation and disposal gain or loss are presented as profit or loss from discontinued operation.
Disposal groups that are intended to be closed for use rather than for sale and meet the conditions for the
components in the definition of discontinued operations are presented as discontinued operations from the date
of cessation of use.
For the discontinued operations presented in the current period, the information originally presented as
profit or loss from continuing operations in the current financial statements is re-presented as profit or loss
from discontinued operations in the comparable accounting period. If the discontinued operations no longer
meet the conditions for being classified of held-for-sale, the information originally presented as profit or loss
from discontinued operations in the current financial statements shall be re-presented as profit or loss from
continuing operations in the comparable accounting period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments
Long-term equity investments include the equity investments in subsidiaries, joint ventures and associates. Associates
of the Group are those investees that the Group imposes significant influence over.
(1) Determination of initial investment cost
Long-term equity investments acquired through business combinations: for a long-term equity investment
acquired through a business combination involving enterprises under common control, the investment cost shall
be the absorbing party’s share of the carrying amount of the owners’ equity under the consolidated financial
statements of the ultimate controlling party on the date of combination. For a long-term equity investment
acquired through a business combination involving enterprises not under common control, the investment cost
of 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 acquired
by cash payment, the initial investment cost shall be the purchase cost actually paid; for a long-term equity
investment acquired by issuing equity securities, the initial investment cost shall be the fair value of equity
securities issued.
(2) Subsequent measurement and method for profit or loss recognition
Investments in subsidiaries shall be accounted for using the cost method. Except for the investments which
meet the conditions of holding for sale, investments in associates and joint ventures shall be accounted for
using the equity method.
For a long-term equity investment accounted for using the cost method, the cash dividends or profits declared
by the investees for distribution shall be recognised as investment gains and included in profit or loss for the
current period, except the case of receiving the actual consideration paid for the investment or the declared but
not 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 cost
exceeds 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 initial
investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the
acquisition date, adjustment shall be made to the carrying amount of the long-term equity investment, and the
difference 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 on
the 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 carrying
amount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividend
distributed by the investee. In respect of the other movement of net profit or loss, other comprehensive income
and profit distribution of investee, the carrying amount of long-term equity investment shall be adjusted and
included in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s net
profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of
acquisition, after making appropriate adjustments thereto according to the accounting policies and accounting
periods of the Group.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and method for profit or loss recognition (Cont’d)
For additional equity investment made in order to obtain significant influence or common control over investee
without resulted in control, the initial investment cost under the equity method shall be the aggregate of fair
value of previously held equity investment and additional investment cost on the date of transfer. The difference
between the fair value and carrying amount of previously held equity investment on the date of transfer and the
accumulated change in fair value originally included in other comprehensive income shall be recognised in the
profit or loss for the current period under the equity method.
In the event of loss of common control or significant influence over investee due to partial disposal of equity
investment, the remaining equity interest after disposal shall be accounted for according to the Accounting
Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The
difference between its fair value and carrying amount shall be included in profit or loss for the current period. In
respect of other comprehensive income recognised under previous equity investment using equity method, it
shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or
liability by investee at the time when equity method was ceased to be used. Movement of other owners’ equity
related to the previous equity investment shall be transferred to profit or loss for the current period.
In the event of loss of control over investee due to partial disposal of equity investment, the remaining equity
interest which can apply common control or impose significant influence over the investee after disposal shall
be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using
equity method since it is obtained and adjustment was made accordingly. For the remaining equity interest
which cannot apply common control or impose significant influence over the investee after disposal, it shall be
accounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement
of Financial Instruments. The difference between its fair value and carrying amount as at the date of losing
control 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 a
result, the Company loses the control of but still can apply common control or impose significant influence over
the investee, the net asset increase due to the capital increase of the investee attributable to the Company shall
be recognised according to the new shareholding ratio, and the difference with the original carrying amount of
the long-term equity investment corresponding to the shareholding ratio reduction part that should be carried
forward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according to
the new shareholding ratio as if equity method is used for accounting when acquiring the investment.
In respect of the transactions between the Group and its associates and joint ventures, the share of unrealised
gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Group.
Investment gain shall be recognised accordingly. However, any unrealised loss arising from internal transactions
between the Group and an investee is not eliminated to the extent that the loss is impairment loss of the
transferred assets.
(In case of using accounting policy options, the following disclosure should be added:
The Group’s long-term equity investments in associates and joint ventures, which are held indirectly by venture
capital institutions, mutual funds, trust companies or similar entities including investment-linked insurance
funds, are measured at fair value and their changes are included in the profit or loss.)
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(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 activities
of such arrangement must be decided by unanimously agreement from parties who share control. When
determining if there is any common control, it should first be identified if the arrangement is controlled by
all the participants or the group consisting of the participants, and then determined if the decision on the
arranged activity can be made only with the unanimous consent of the participants sharing the control. If all the
participants or a group of participants can only decide the relevant activities of certain arrangement through
concerted action, it can be considered that all the participants or a group of participants share common
control on the arrangement. If there are two or more participant groups that can collectively control certain
arrangement, it does not constitute common control. When determining if there is any common control, the
relevant protection rights will not be taken into account.
Significant influence is the power of the investor to participate in the financial and operating policy decisions
of 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 the
investee held by the investor directly and indirectly and the potential voting rights held by the investor and
other parties which are exercisable in the current period and converted to the equity of the investee, including
the warrants, stock options and convertible bonds that are issued by the investee and can be converted in the
current period, shall be taken into account.
When the Company holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the voting
shares of the investee, it is generally considered to have significant influence on the investee, unless there
is concrete evidence to prove that it cannot participate in the production and operation decision-making of
the investee and cannot pose significant influence in this situation. When the Group owns less than 20%
of the voting 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 cannot pose significant influence in this situation.
(4) Method for impairment test and measurement of impairment provision
For the method for making impairment provision for the investment in subsidiaries, associates and joint
ventures, please refer to Note V. 21.
14. Investment property
Investment property refers to real estate held to earn rentals or for capital appreciation, or both. The investment
property of the Group includes leased land use rights, land use rights held for sale after appreciation, and leased
buildings.
The investment property of the Group is measured initially at cost upon acquisition, and subject to depreciation or
amortisation 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 subsequent
measurement, please refer to Note V. 21.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the
property net of the carrying amount and related tax and surcharges is recognised in profit or loss for the current
period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
15. Fixed assets
(1) Conditions for recognition of fixed assets
Fixed assets of the Group are tangible assets that are held for use in the production or supply of goods or
services, for rental to others, or for administrative purposes; and have a useful life of more than one accounting
year.
Fixed assets are recognised only if the Company is very likely to receive economic benefits from the asset and
its cost can be measured reliably.
A fixed asset of the Group shall be initially measured at actual cost when acquired.
(2) Depreciation method of various types of fixed assets
The Group adopts the straight-line method for depreciation. Provision for depreciation will be started when the
fixed asset reaches its expected usable state, and stopped when the fixed asset is derecognised or classified as
a non-current asset held for sale. Without regard to the depreciation provision, the Group determines the annual
depreciation rate of various types of fixed assets by category, estimated useful lives and estimated residual
value of the fixed assets, as shown below:
Useful lives Estimated residual Annual depreciation
Category (Year) value (%) rate (%)
Housing and building structure 20-40 5-10 2.25-4.75
Machinery and equipment 8-20 5-10 4.50-11.88
Transportation equipment 5-8 5-10 11.25-19.00
Electronic equipment and others 5 5-10 18.00-19.00
Where, for the fixed assets for which depreciation provision is made, to determine the depreciation rate, the
accumulated amount of the fixed asset depreciation 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. 21.
(4) The Group will recheck 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 useful
lives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual value
estimate and the originally estimated value, the estimated net residual value of the fixed asset shall be adjusted.
(5) Overhaul expense
For the overhaul expense incurred by the Group during the regular inspection on the fixed assets, if there is
concrete evidence to prove that it meets the fixed asset recognition condition, it shall be included in the cost of
fixed asset; if it does not meet the fixed asset recognition condition, it shall be included in the profit or loss for
the current period. The depreciation of fixed assets shall be continued in the intervals of the regular overhaul of
the fixed asset.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
16. Construction in progress
Construction in progress of the Group is recognised based on the actual construction cost, including all necessary
expenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before it
has 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 intended
use.
The method for impairment provision of construction in progress is set out in Note V. 21.
17. Materials for project
The materials for project of the Group refer to various materials prepared for construction in progress, including
construction 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 to
construction in progress. After the completion of the project, the remaining materials for project are transferred to
inventory.
The method for impairment provision of materials for project is set out in Note V. 21.
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 Group directly attributable to the acquisition, construction or production
of a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will be
recognised as expenses when incurred according to the incurred amount, and included in the profit or loss for
the current period. When the borrowing costs meet all the following conditions, capitalisation shall be started:
① 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 or
producing the qualifying assets;
② The borrowing costs have been incurred;
③ The acquisition, construction or production activity necessary for the asset to be ready for its intended
use or sale has been started.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
18. Borrowing costs (Cont’d)
(2) Capitalisation period of borrowing costs
When a qualifying asset acquired, constructed or produced by the Group is ready for its intended use or sale,
the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifying asset
is ready for its intended use or sale shall be recognised as expenses when incurred according to the incurred
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 or
production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of
more than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruption
period.
(3) Calculation methods for capitalisation rate and capitalisation amount of the borrowing costs
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual
interest expense incurred on that borrowing for the period less any bank interest earned from depositing the
borrowed funds before being used into banks or any investment income on the temporary investment of those
funds. Where funds are borrowed for general purpose, the Company shall determine the amount of interest
to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess
amounts 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-purpose
borrowings.
During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign
currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in
foreign currency shall be included in profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
19. Intangible assets
The intangible assets of the Group include land use rights, software 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 life
is finite, the intangible asset will be amortised over the estimated useful life using the amortisation method that
can reflect the estimated realisation of the economic benefits related to the asset, starting from the time when it is
available for use. If it is unable to reliably determine the estimated realisation, straight-line method shall be adopted
for amortisation. The intangible assets with uncertain useful life will not be amortised.
The amortisation methods for the intangible assets with finite useful life are as follows:
Type Useful life Method of amortisation
Land use rights 50-70 Straight-line method
Software 5-10 Straight-line method
Certificates of third party right 3 Straight-line method
The Group reviews the useful life and amortisation method of the intangible assets with finite useful life at the end of
each year. If it is different from the previous estimates, the original estimates will be adjusted, and will be treated as a
change in accounting estimate.
If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic benefit
to the company, the carrying amount of the intangible asset will be entirely transferred into the profit or loss for the
current period.
The impairment method for the intangible assets is set out in Note V. 21.
20. Research and development expenditure
Research and development expenditure of the Group is divided into expenses incurred during the research phase and
expenses incurred during the development phase.
Expenses incurred during the research phase and the development phase are recognised in profit or loss in the
current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
21. Asset impairment
Impairment of long-term equity investments in subsidiaries, associates and joint ventures, investment property, fixed
assets, construction in progress, intangible assets, goodwill and others (excluding inventories, deferred tax assets
and financial assets) subsequently measured at cost is determined as follows:
The Group determines if there is any indication of asset impairment as at the balance sheet date. If there is any
evidence 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 not
ready 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 the
future cash flows expected to be derived from the asset. The Group estimates the recoverable amount of an individual
asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall determine the
recoverable amount of the asset group to which the asset belongs. The determination of an asset group is based on
whether major cash inflows generated by the asset group are independent of the cash inflows from other assets or
asset groups.
When the recoverable amount of an asset or an asset group is less than its carrying amount, the carrying amount is
reduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision is
made accordingly.
For the purpose of impairment test of goodwill, the carrying amount of goodwill acquired in a business combination is
allocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocate
to the related asset groups, it is allocated to the combination of related asset groups. The related asset groups or
combination of asset groups are those which can benefit from the synergies of the business combination and are not
larger than the reportable segments identified by the Group.
In the impairment test, if there is any indication that an asset group or a combination of asset groups related to
goodwill may be impaired, the Group first tests the asset group or set of asset groups excluding goodwill for
impairment, calculates the recoverable amount and recognises the corresponding impairment loss. An impairment test
is then carried out on the asset group or combination of asset groups containing goodwill by comparing its carrying
amount with its recoverable amount. If the recoverable amount is lower than the carrying amount, an impairment loss
is recognised for goodwill.
An impairment loss recognised shall not be reversed in a subsequent period.
22. Long-term prepaid expenses
The long-term prepaid expenses incurred by the Group shall be recognised based on the actual cost, and evenly
amortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequent
accounting periods, its value after amortisation shall be entirely included in the profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
23. Employee benefits
(1) Scope of employee benefits
Employee benefits are all forms of considerations or compensation given by an entity in exchange for
services rendered by employees or for the termination of employment. Employee benefits include short-term
staff remuneration, post-employment benefits, termination benefits and other long-term employee benefits.
Employee benefits include benefits provided to employees’ spouses, children, other dependants, survivors of
the deceased employees or to other beneficiaries.
Employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable” in
the balance sheet, respectively, according to liquidity.
(2) Short-term staff remuneration
Employee wages or salaries actually incurred, bonuses, and social insurance contributions such as medical
insurance, work injury insurance, maternity insurance, and housing fund, contributed at the applicable
benchmarks and rates, are recognised as a liability as the employees provide services, with a corresponding
charge to profit or loss or included in the cost of assets where appropriate. Where the payment of liability is
expected not to be fully settled within 12 months after the end of the annual reporting period in which the
employees render the related services, and the financial impact would be material, these liabilities are measured
at their discounted values.
(3) Post-employment benefits
Post-employment benefit plans include defined contribution plans and defined benefit plans. A defined
contribution plan is a post-employment benefit plan under which the Group pays fixed contributions
into a separate fund and the Group has no further obligations for payment. A defined benefit plan is a
post-employment benefit plan other than a defined contribution plan.
Defined contribution plans
Defined contribution plans include basic pension insurance and unemployment insurance.
During the accounting period in which an employee provides service, the amount payable calculated according
to the defined contribution plan is recognised as a liability and included in the profit or loss for the current period
or the cost of relevant assets.
(4) Termination benefits
When the Group provides termination benefits to employees, employee benefits liabilities arising from
termination benefits are recognised in profit or loss for the current period at the earlier of the following dates:
when the Group cannot revoke unilaterally compensation for dismissal due to the cancellation of labour
relationship plans and employee redundant proposals; the Group recognises cost and expenses related to
payment of compensation for dismissal and restructuring.
For the early retirement plans, economic compensations before the actual retirement date were classified as
termination benefits. During the period from the date of cease of render of services to the actual retirement
date, relevant wages and contribution to social insurance for the employees proposed to be paid are recognised
in profit or loss on a one-off basis. Economic compensation after the official retirement date, such as normal
pension, is accounted for as post-employment benefits.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
23. Employee benefits (Cont’d)
(5) Other long-term benefits
Other long-term employee benefits provided by the Group to employees that meet the conditions for defined
contribution plans are accounted for in accordance with the relevant provisions relating to defined contribution
plans as stated above. If the conditions for defined benefit plans are met, the benefits shall accounted for in
accordance with the relevant provisions relating to defined benefit plans, but the “changes arising from the
remeasurement of the net liabilities or net assets of the defined benefit plans” in the relevant employee benefits
shall be included in the current profit or loss or the relevant asset cost.
24. Provisions
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as provisions:
(1) the obligation is a current obligation borne by the Group;
(2) it is likely that an outflow of economic benefits from the Group will be resulted from the performance of the
obligation; and
(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 performance
of the current obligation, after taking into account relevant risks, uncertainties, time value of money and other
factors pertinent to the contingencies. If the time value of money has significant influence, the best estimates shall
be determined after discounting the relevant future cash outflow. The Group reviews the carrying amount of the
provisions 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 compensation
amount recognised shall not be more than the carrying amount of provisions.
25. Preference shares, perpetual bonds and other financial instruments
(1) Classification of financial liabilities and equity instruments
Financial instruments issued by the Group are classified into financial assets, financial liabilities or equity
instruments on the basis of the substance of the contractual arrangements and the economic nature not only
its legal form, together with the definition of financial asset, financial liability and equity instruments on initial
recognition.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
25. Preference shares, perpetual bonds and other financial instruments (Cont’d)
(2) Accounting treatment of preference shares, perpetual bonds and other financial instruments
Financial instruments issued by the Group are initially recognised and measured in accordance with the
financial instrument standards; thereafter, interest or dividends are accrued on each balance sheet date
and accounted for in accordance with relevant specific ASBEs, i.e. to determine the accounting treatment
for interest expenditure or dividend distribution of the instrument based on the classification of the financial
instrument issued. For financial instruments classified as equity instruments, their interest expenses or dividend
distributions are treated as profit distribution of the Group, and their repurchases and cancellations are treated
as changes in equity; for financial instruments classified as financial liabilities, their interest expenses or dividend
distribution are in principle accounted for with reference to borrowing costs, and the gains or losses arising 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 Group for issuing financial instruments,
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 are classified as
equity instruments, they are deducted from equity.
26. Revenue
(1) General principles
The Group recognises revenue when it satisfies a performance obligation in the contract, i.e. when the customer
obtains control of the relevant goods or services.
Where a contract has two or more performance obligations, the Group allocates the transaction price to each
performance obligation based on the percentage of respective unit price of goods or services guaranteed by
each performance obligation, and recognises as revenue based on the transaction price that is allocated to
each performance obligation.
If one of the following conditions is fulfilled, the Group performs its performance obligation within a certain
period; otherwise, it performs its performance obligation at a point of time:
① when the customer simultaneously receives and consumes the benefits provided by the Group when the
Group performs its obligations under the contract;
② when the customer is able to control the goods in progress in the course of performance by the Group
under the contract;
③ when the goods produced by the Group under the contract are irreplaceable and the Group has the right
to payment for performance completed to date during the whole contract term.
For performance obligations performed within a certain period, the Group recognises revenue by measuring
the progress towards complete of that performance obligation within that certain period. When the progress
of performance cannot be reasonably determined, if the costs incurred by the Group are expected to
be compensated, the revenue shall be recognised at the amount of costs incurred until the progress of
performance can be reasonably determined.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
26. Revenue (Cont’d)
(1) General principles (Cont’d)
For performance obligation performed at a point of time, the Group recognises revenue at the point of time
at which the customer obtains control of relevant goods or services. To determine whether a customer has
obtained control of goods or services, the Group considers the following indications:
① the Group has the current right to receive payment for the goods, which is when the customers has the
current payment obligations for the goods;
② the Group has transferred the legal title of the goods to the customer, which is when the client possesses
the legal title of the goods;
③ the Group has transferred the physical possession of goods to the customer, which is when the customer
obtain physical possession of the goods;
④ the Group has transferred all of the substantial risks and rewards of ownership of the goods to the
customer, which is when the customer obtain all of the substantial risks and rewards of ownership of the
goods to the customer;
⑤ the customer has accepted the goods;
⑥ other information indicates that the customer has obtained control of the goods.
The Group’s right to consideration in exchange for goods or services that the Group has transferred to
customers (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 (see Note V. 9 (6)). The Group’s unconditional
right to receive consideration from customers (only depends on passage of time) is accounted for as accounts
receivable. The Group’s obligation to transfer goods or services to customers for which the Group has received
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 net
amount has a debit balance, it is presented in “contract assets” or “other non-current assets” according to its
liquidity. Where the net amount has a credit balance, it is presented in “contract liabilities” or “other non-current
liabilities” according to its liquidity.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
26. Revenue (Cont’d)
(2) Specific methods
Specific method for revenue recognition of machine-made paper business of the Group: in terms of domestic
sales of machine-made paper, revenue is recognised when goods are delivered to the customers and such
deliveries are confirmed; while in terms of overseas sales of machine-made paper, revenue is recognised on the
day when goods are loaded on board and declared.
Specific method for recognition of finance lease income of the Group: 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 Group: revenue is recognised by amortising
the rental income on a straight-line basis over the lease term.
27. Government grants
A government grant is recognised when there is reasonable assurance that the grant will be received and that the
Group will comply with the conditions attaching to the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or
receivable. If a government grant is in the form of a transfer of non-monetary asset, it is measured at fair value; if the
fair value cannot be obtained in 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 asset
formation are classified as government grants related to assets, while the remaining government grants are classified
as government grants related to revenue.
Regarding the government grant not clearly defined in the official documents and can form long-term assets, the
part of government grant which can be referred to the value of the assets is classified as government grant related
to assets and the remaining part is government grant related to revenue. For the government grant that is difficult to
distinguish, the entire government grant is classified as government grant related to revenue.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or loss
over the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue,
if the grant is a compensation for related costs, expenses or losses incurred, the grant shall be recognised in profit
or loss for the current period; if the grant is a compensation for related costs, expenses or losses to be incurred
in subsequent periods, the grant shall be recognised as deferred income, and recognised in profit or loss over the
periods in which the related costs, expenses or losses are recognised. A government grant measured at nominal
amount is directly included in profit or loss for the current period. The Group adopts a consistent approach to the
same or similar government grants.
A government grant related to daily activities is recognised in other gains relying on the essence of economic
business; otherwise, recognised in non-operating income or non-operating expenses.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
27. Government grants (Cont’d)
For the repayment of a government grant already recognised, if there is any related deferred income, the repayment
shall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit or
loss for the current period; otherwise, the repayment shall be recognised immediately in profit or loss for the current
period.
For the policy preferential interest subsidy, if it is provided by the financial authority through banks, it is recognised
at the amount of borrowings actually received, and the borrowings costs are calculated based on the principal
of the borrowings and the policy preferential interest rate; if it is provided by the financial authority directly, the
corresponding interest will be used to offset the relevant borrowing expenses.
28. Deferred income tax assets and deferred income tax liabilities
Income tax comprises current income tax expense and deferred income tax expense, which are included in profit or
loss for the current period as income tax expenses, except for deferred tax related to transactions or events that are
directly recognised in owners’ equity which are recognised in owners’ equity, and deferred tax arising from a business
combination, 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 base
at the balance sheet date of the Group shall be recognised as deferred income tax using the balance sheet liability
method.
All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in the
following 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 the
transaction occurs;
(2) The taxable temporary differences associated with investments in subsidiaries, associates and joint ventures,
and the Group is able to control the timing of the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The Group 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 profits
will 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 taxable
profits will be available in the future, against which the temporary difference can be utilised.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
28. Deferred income tax assets and deferred income tax liabilities (Cont’d)
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax
rates that are expected to apply to the period when the asset is realised or the liability is settled, and their tax effect is
reflected accordingly.
At the balance sheet date, the Group reviews the carrying amount of a deferred income tax asset. If it is probable
that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be
utilised, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it
becomes probable that sufficient taxable profits will be available.
29. Lease
(1) Identification of leases
On the beginning date of the contract, the Group (as a lessee or lessor) assesses whether the customer in
the contract has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use and has the right to direct the use of the identified asset throughout the period of
use. If a contract conveys the right to control the use of an identified asset and multiple identified assets for a
period of time in exchange for consideration, the Group identifies such contract is, or contains, a lease.
(2) The Group as lessee
On the beginning date of the lease, the Company recognises right-of-use assets and lease liabilities for all
leases, 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. 30.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
beginning date of the lease using the interest rate implicit in the lease or the incremental borrowing rate. Lease
payments include fixed payments and in-substance fixed payments, less any lease incentives receivable;
variable lease payments that are based on an index or a rate; the exercise price of a purchase option if the
lessee is reasonably certain to exercise that option; payments for terminating the lease, if the lease term reflects
the lessee exercising that option of terminating; and amounts expected to be payable by the lessee under
residual value guarantees. Subsequently, the interest expense on the lease liability for each period during the
lease term is 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 charged to
profit or loss in the period in which they actually arise. The Group calculates the interest expense of the lease
liability for each period of the lease term based on the fixed periodic interest rate and is included in the current
profit and loss. The variable lease payments that are not included in the measurement of the lease liability are
recognised in profit or loss when incurred.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
29. Lease (Cont’d)
(2) The Group as lessee (Cont’d)
Short-term lease
Short-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 a
straight-line basis over the lease term.
For short-term leases, the Group chooses to adopt the above simplified approach for the following types of
assets that meet the conditions of short-term lease according to the classification of leased assets.
Low-valve machinery and equipment
Transportation vehicles
Low-value asset lease
A low-value asset lease is a lease that the value of a single leased asset is below RMB2,000,000 when it is a
new asset.
For a low-value asset lease, the Group chooses the above simplified approach based on the specific
circumstances of each lease.
Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term, and
either included in the cost of the related asset or charged to profit or loss for the current period.
(3) The Group as lessor
When the Group is a lessor, a lease is classified as a finance lease whenever the terms of the lease transfer
substantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases are
classified as operating leases.
Operating lease
Lease payments under operating leases are recognised in profit or loss on a straight-line basis over the lease
term. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease term
on the same basis as rental income and recognised in profit or loss for the current period. The variable lease
payments obtained in relation to operating leases that are not included in the lease payments are recognised in
profit or loss in the period in which they actually incurred.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
29. Lease (Cont’d)
(4) Sale and leaseback
The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and leaseback
transaction is a sale in accordance with the requirements of the Accounting Standard for Business Enterprises
No. 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 original
assets related to right of use obtained upon leaseback, and only recognise relevant profit or loss for the right
transferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicable
ASBEs 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 to
recognise the transferred assets while recognising a financial liability equal to the transfer income and account
for such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition and
Measurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial asset
equal to the transfer income and account for such asset according to the Accounting Standard for Business
Enterprises No. 22 – Recognition and Measurement of Financial Instruments.
30. Right-of-use assets
(1) Conditions for recognition of right-of-use assets
Right-of-use assets of the Group are defined as the right of underlying assets in the lease term for the Group as
a lessee.
Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes
the amount of the initial measurement of lease liability; lease payments made at or before the inception of the
lease less any lease incentives enjoyed; initial direct costs incurred by the Group as lessee; costs to be incurred
in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the
underlying asset to the condition required by the terms and conditions of the lease incurred by the Group as
lessee. As a lessee, the Group recognises and measures the costs of dismantling and restoration in accordance
with the Accounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently, the lease liability
is adjusted for any remeasurement of the lease liability.
(2) Depreciation method of right-of-use assets
The Group uses the straight-line method for depreciation. Where the Group, as a lessee, is reasonably certain to
obtain ownership of the leased asset at the end of the lease term, such asset is depreciated over the remaining
useful life of the leased asset. Where ownership of the lease assets during the lease term cannot be reasonably
determined, right-of-use assets are depreciated over the lease term or the remainder of useful lives of 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. 21.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
31. General risk reserves
General risk reserve is a reserve provided from net profit for the partial offset unidentified possible losses.
Adopting the principle of dynamic provisioning, the Finance Company employs the standard method to quantitatively
analyze the risk situation faced by risk assets, to determine the estimated potential risk value. After calculating
the potential risk value, if the potential risk value is higher than the provision for impairment of assets, the accrued
provision for impairment of assets will be deducted and provision for general risk will be made. If the potential risk
value is lower than the provision for impairment of assets, provision for general risk will not be made.
Dynamic provisioning is a counter-cyclical provisioning method adopted by financial companies based on changes
in the macroeconomic situation, as in, in the upward cycle of macroeconomy and when the risk asset default
rate is relatively low, more provisions are made to enhance financial buffer capacity; and in the downturn cycle of
macroeconomy and when the risk asset default rate is relatively high, the accumulated provisions are used to absorb
asset losses.
The Finance Company makes general risk provisions for assets bearing risks and losses at the end of each year, the
balance of which, in principle, shall not be lower than 1.5% of the closing balance of risk assets. The risk provision
made by factoring companies shall not be lower than 1% of the closing balance of the financial factoring business.
Based on changes in the macroeconomic situation, and with reference to non-performing corporate loans,
non-performing loan ratio, provision coverage ratio for non-performing loans, loan provision ratio, standard risk
factor and the requirement of general risk provision as a percentage of risk assets, the Ministry of Finance makes
adjustments to the scope of risk assets for general risk provisions, standard risk factor and the requirement of
general risk provision as a percentage of risk assets as appropriate. The Finance Company shall make adjustments
accordingly according to the requirements of the Ministry of Finance.
Provisions for general risk is insufficient, in principle, the company shall not engage in after-tax profit distribution. As
considered and approved by the board of directors and general meeting of the Finance Company, such provisions
may be used to offset losses but not for dividends. For special reasons, as approved by the Board and the general
meeting, general risk reserves may be reclassified into undistributed profits.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
32. Critical accounting judgments and estimates
The Group gives continuous assessment on, among other things, the reasonable expectations of future events and
the critical accounting estimates and key assumptions adopted according to its historical experience and other
factors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks of
the carrying amount of assets and liabilities for the next financial year are listed as follows:
Classification of financial assets
Significant judgements involved in determining the classification of financial assets include the analysis of business
models and contractual cash flow characteristics.
Factors considered by the Group in determining the business model for a group of financial assets include how the
asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed
and how the relevant management personnel are compensated.
When the Group assesses whether the contractual cash flows of the financial assets are consistent with basic lending
arrangements, the main judgements are described as below: whether the principal amount may change over the life of
the financial asset (for example, if there are repayments of principal); whether the interest includes only consideration
for the time value of money, credit risk, other basic lending risks and a profit margin and cost. For example, whether
the amount repaid in advance reflects only the outstanding principal and interest thereon, as well as reasonable
compensation paid for early termination of the contract.
Measurement of the ECLs of accounts receivable
The Group calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accounts
receivable, and determines the ECL rate based on default probability and default loss rate. When determining the ECL
rate, the Group adjusts its historical data by referring to information such as historical credit loss experience as well
as current situation and forward-looking information. When considering the forward-looking information, indicators
used by the Group include the risk of economic downturn, external market environment, technology environment and
changes in customers. The assumptions relating to the ECL calculation are monitored and reviewed by the Group on
a regularly basis.
Deferred income tax assets
Deferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilised. Significant management judgement is required to determine
the amount of deferred income tax assets that can be recognised, based upon the likely timing and level of future
taxable profits together with future tax planning strategies.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Changes in significant accounting policies and estimates
(1) Changes in significant accounting policies
① New Debt Restructuring Standard
On 16 May 2019, the Ministry of Finance published the Accounting Standard for Business Enterprises No.
12 – Debt Restructuring (hereinafter referred to as the “New Debt Restructuring Standard”), which revised
the definition of debt restructuring, clarified the applicable standards such as the Accounting Standard
for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments in relation to
financial instruments in debt restructuring, clarified that assets other than the financial assets transferred
to creditors shall be initially measured at cost, and clarified that the distinction between the profit or loss
from asset disposal and the profit or loss from debt restructuring is no longer required when the debt is
settled with assets by the debtor.
According to the requirements under Cai Kuai [2019] No. 6 Document, the “non-operating income” and
“non-operating expenses” items no longer include gains or losses from disposal of non-current assets in
debt restructuring.
The Group adopted the prospective application method for the new debt restructuring occurred on 1
January 2019, and did not make retrospective adjustments for the debt restructuring occurred before 1
January 2019.
The effects of the adoption of the New Debt Restructuring Standard on the Group’s financial position and
results of operations are as follows:
Contents and reasons for the changes in
accounting policies Approval procedures Item affected in the statements Amount affected
The New Debt Restructuring Standards The third meeting of the ninth Credit impairment loss 55,792,548.82
published by the Ministry of Finance session of the Board of Directors
The New Debt Restructuring Standards The third meeting of the ninth Other current assets -61,437,051.19
published by the Ministry of Finance session of the Board of Directors
The New Debt Restructuring Standards The third meeting of the ninth Accounts receivable 5,644,502.37
published by the Ministry of Finance session of the Board of Directors
190 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Changes in significant accounting policies and estimates (Cont’d)
(1) Changes in significant accounting policies (Cont’d)
New Lease Standard
In 2018, the Ministry of Finance published the Accounting Standard for Business Enterprises No. 21 –
Leases (Revised), which imposed requirements on the enterprises listed in both domestic and overseas
markets and the enterprises listed in overseas markets and adopting the International Financial Reporting
Standards or Accounting Standards for Business Enterprises for financial report preparation from 1
January 2019. At the third meeting of the ninth session of the Board of Directors of the Company held on
25 October 2019, the Company approved the implementation of the New Lease Standard from 1 January
2019, and adjusted the relevant accounting policies. The revised accounting policies are set out in Note V.
29.
As lessee
The New Lease Standard requires a lessee to recognise right-of-use assets and lease liabilities for all
leases, except for short-term lease and low-value asset lease with simplified approach, in which case
depreciation and interest expense are recognised respectively.
For contracts that existed before the date of initial application, the Group chose not to reassess whether it
is, or contains, a lease at the date of initial application.
The New Lease Standard allows a lessee to choose one of the following methods for the transitional
accounting of leases:
According to the Accounting Standard for Business Enterprises No. 28 – Changes in Accounting Policies
and Accounting Estimates and Correction of Errors, retrospective adjustment method is adopted.
According to the cumulative effect of the initial application of this standard, the retained earnings at the
beginning of the year of the initial application of this standard and the amount of other relevant items in
the financial statements shall be adjusted, and the information for the comparable period shall not be
adjusted.
In accordance with the requirements of the New Lease Standard, the Group retrospectively adjusted
the difference between the New Lease Standard and the existing lease standard at the date of initial
application to the retained earnings at the beginning of 2019. Meanwhile, the Group did not adjust the
data in the comparative financial statements.
As for the finance leases before the date of initial application, the Group measured the right-of-use
assets and lease liabilities according to the carrying amount of the finance lease assets and finance lease
payments payable respectively;
2019 AnnuAl RepoRt 191
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Changes in significant accounting policies and estimates (Cont’d)
(1) Changes in significant accounting policies (Cont’d)
New Lease Standard (Cont’d)
As lessee (Cont’d)
For operating leases before the date of initial application, the Group measured the lease liabilities based
on the present value of the remaining lease payments discounted using the incremental borrowing rate at
the date of initial application, and measured the right-of-use assets for all leases at an amount equal to
the lease liabilities, adjusted by the prepaid lease payments where necessary.
At the date of initial application, the Group performed impairment test on the right-of-use assets and
carried out corresponding accounting treatment in accordance with Note V. 30.
For operating leases of low-value assets and short-term leases within 12 months before the date of initial
application, the Group adopted a simplified approach and did not recognised right-of-use assets and
lease liabilities.
The Group adopted the following simplified approach for operating leases before the date of initial
application:
When measuring lease liabilities, leases with similar characteristics may adopt the same discount rate.
The measurement of right-of-use assets may exclude initial direct costs;
When there is an option to renew or terminate the lease, the Group determined the lease term based on
the actual exercise of the option and other latest conditions before the date of initial application;
As an alternative to the impairment test for right-of-use assets, the Group assessed whether a contract
containing a lease is a loss-making contract before the date of initial application and adjusts the
right-of-use asset based on the amount of loss allowance included in the balance sheet before the date of
initial application;
As for the lease changes before the date of initial date, the Group carried out accounting treatment based
on the final arrangement of lease changes.
192 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Changes in significant accounting policies and estimates (Cont’d)
(1) Changes in significant accounting policies (Cont’d)
New Lease Standard (Cont’d)
As lessee (Cont’d)
The impacts of the adoption of the New Lease Standard on items in the balance sheet as at 1 January
2019 are as follows:
Carrying amount Carrying amount
before adjustment after adjustment
Item (31 December 2018) Reclassification Remeasurement (1 January 2019)
Assets:
Intangible assets 13,341,727.06 -13,341,727.06 — —
Right-of-use assets — 92,855,179.16 70,479,785.74 163,334,964.90
Long-term prepaid expenses 79,513,452.10 -79,513,452.10
Total assets 92,855,179.16 70,479,785.74 163,334,964.90
Liabilities:
Lease liabilities
Provisions 70,479,785.74 70,479,785.74
Total liabilities 70,479,785.74 70,479,785.74
For the minimum lease payments under significant operating leases disclosed in the 2018 financial
statements, the Group adjusted the outstanding minimum lease payments disclosed under the original
lease standard to the lease liabilities recognised under the New Lease Standard based on the incremental
borrowing rate as the lessee on 1 January 2019 as follows:
Minimum lease payments under significant operating leases as at 31 December 2018 101,323,476.94
Minimum lease payments under the New Standards for Leases as at 1 January 2019 101,323,476.94
Weighted average incremental borrowing rate as at 1 January 2019 4.30%
Lease liabilities as at 1 January 2019 70,479,785.74
2019 AnnuAl RepoRt 193
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Changes in significant accounting policies and estimates (Cont’d)
(1) Changes in significant accounting policies (Cont’d)
New Lease Standard (Cont’d)
As lessee (Cont’d)
The impacts of the adoption of the New Lease Standard on items in the financial statements for 2019 are
as follows:
Based on the
original lease Increase/
Item in consolidated balance sheet 2019.12.31 standard decrease (-)
Assets:
Right-of-use assets 152,141,882.05 152,141,882.05
Long-term prepaid expenses 48,203,408.71 124,528,223.40 -76,324,814.69
Intangible assets 1,781,061,904.51 1,801,508,745.54 -20,446,841.03
Total assets 1,981,407,195.27 1,926,036,968.94 55,370,226.33
Liabilities:
Non-current liabilities due within one year 5,662,958,920.03 5,658,352,202.45 4,606,717.58
Lease liabilities 59,697,128.65 59,697,128.65
Total liabilities 5,722,656,048.68 5,658,352,202.45 64,303,846.23
Based on the
original lease Increase/
Item in consolidated income statement Amount for 2019 standard decrease (-)
Operating costs 21,773,884,285.39 21,769,479,298.78 4,404,986.61
Finance expenses 2,916,029,154.37 2,913,002,047.58 3,027,106.79
194 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VI. Taxation
1. Main tax types and tax rates
Tax type Tax base and tax rate
Value added tax (VAT) 16%/13% for general, 10%/9% for sales of water and gas and 6% for
the service industry. VAT is computed on the difference after deduction
of input value-added tax.
Urban maintenance and construction tax 7%, 3%, 2% and 0.5% of actual payment of turnover tax.
Enterprise income tax (EIT) 25% of taxable income; for the companies which are subject to
preferential policies, please refer to the table below; the overseas
companies shall pay taxes at the tax rate pursuant to the requirements of
the countries or regions where the companies are located.
Disclosure of taxable entities subject to different EIT tax rates
Name of taxable entity EIT tax rate
Shandong Chenming Paper Holdings Limited 15%
Shouguang Meilun Paper Co., Ltd. 15%
Jilin Chenming Paper Co., Ltd. 15%
Jiangxi Chenming Paper Co., Ltd. 15%
Zhanjiang Chenming Pulp & Paper Co., Ltd. 15%
Shouguang Shun Da Customs Declaration Co, Ltd. 10%
Qingdao Chenming Pulp & Paper Electronic Commodity Spot Trading Co., Ltd. 10%
Zhanjiang Chenming Arboriculture Development Co., Ltd. Exempt from EIT
Nanchang Chenming Arboriculture Development Co., Ltd. Exempt from EIT
Chenming Arboriculture Co., Ltd. Exempt from EIT
Yangjiang Chenming Arboriculture Development Co., Ltd. Exempt from EIT
2. Tax incentives
(1) Enterprise income tax
On 16 August 2018, the Company received a high and new technology enterprise certificate with a certification
number of GR201837000311. Pursuant to the requirements under the Law of the People’s Republic of China on
Enterprise Income Tax and the relevant policies, the Company is subject to a corporate income tax rate of 15%
of taxable income, and is entitled to the preferential treatment from 2018 to 2020.
Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise
certificate with a certification number of GR201837000455 on 16 August 2018. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Shouguang
Meilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the preferential
treatment from 2018 to 2020.
2019 AnnuAl RepoRt 195
XIII Financial Report
VI. Taxation (Cont’d)
2. Tax incentives (Cont’d)
(1) Enterprise income tax (Cont’d)
Jilin Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise
certificate with a certification number of GR201922000658 on 2 September 2019. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Jilin
Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the
preferential treatment from 2019 to 2021.
Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise
certificate with a certification number of GR201936002184 on 3 December 2019. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Jiangxi
Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the
preferential treatment from 2019 to 2021.
Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and new technology
enterprise certificate with a certification number of GR20184400547 on 28 November 2018. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Zhanjiang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is
entitled to the preferential treatment from 2018 to 2020.
Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Tax
and Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on Enterprise
Income Tax, Zhanjiang Chenming Arboriculture Development Co., Ltd. and Yangjiang Chenming Arboriculture
Development Co., Ltd., which are the subsidiaries of the Company, have completed the filings for EIT reduction
for exemption from EIT.
196 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VI. Taxation (Cont’d)
2. Tax incentives (Cont’d)
(2) Value-added Tax (“VAT”)
Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax, Zhanjiang
Chenming Arboriculture Development Co., Ltd. and Yangjiang Chenming Arboriculture Development Co., Ltd.,
which are the subsidiaries of the Company, are exempt from VAT, and have completed the filings for VAT
reduction for exemption from VAT.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Zhanjiang Chenming New-style Wall Materials
Co., Ltd., a subsidiary of the Company, produced products applying raw materials containing more than 30%
of fly ash. It belongs to a company that uses pollutants for production, and is therefore subject to the immediate
VAT refund policy in 2019.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use
of Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying
integrated use of resources may enjoy the immediate VAT refund policy. Shandong Chenming Panels Co., Ltd.,
a subsidiary of the Company, produced products applying integrated use of resources, and is therefore subject
to the immediate VAT refund policy in 2019.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Shouguang Chenming Cement Co., Limited, a
subsidiary of the Company, produced products applying integrated use of resources, and is therefore subject to
the immediate VAT refund policy in 2019.
2019 AnnuAl RepoRt 197
XIII Financial Report
VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMB
Item Closing balance Opening balance
Treasury cash 2,418,131.86 2,078,321.66
Bank deposit 2,965,127,198.70 2,379,479,920.86
Other monetary funds 16,338,984,142.77 16,911,216,505.27
Total 19,306,529,473.33 19,292,774,747.79
Of which: Total deposits in overseas banks 405,881,189.78 614,601,451.77
Other explanation
Notes: ① Other monetary funds of RMB11,796,498,642.44 (31 December 2018: RMB9,329,325,370.71) were the guarantee deposit for
the application for bank acceptance with the banks by the Group.
② Other monetary funds of RMB2,091,467,385.94 (31 December 2018: RMB3,703,195,695.22) were the guarantee deposit for
the application for letter of credit with the banks by the Group.
③ Other monetary funds of RMB1,846,470,647.42 (31 December 2018: RMB2,357,084,376.63) were the guarantee deposit for
the application for guarantees with the banks by the Group.
④ Other monetary funds of RMB0.00 (31 December 2018: RMB987,520,000.00) were the guarantee deposit for the application
for loans with the banks by the Group.
⑤ Other monetary funds of RMB440,810,000.00 (31 December 2018: RMB533,060,000.00) were the Group’s statutory reserve
deposit at the banks.
⑥ Other monetary funds of RMB995,129.48 (31 December 2018: 1,031,062.71) were locked-up due to litigations, resulting in
restriction on the use of that account’s balance.
⑦ Bank deposit includes interest receivable of RMB77,217,303.16, and the other monetary funds include interest receivable of
RMB162,742,336.99.
2. Bills receivable
2019.12.31 2018.12.31
Bad debts Carrying Bad debts Carrying
Type of bill Book balance provision amount Book balance provision amount
Bank acceptance bills 1,214,616,491.46 1,500,000.00 1,213,116,491.46
Total 1,214,616,491.46 1,500,000.00 1,213,116,491.46
198 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
Provision Carrying Provision Carrying
Category Amount Percentage Amount percentage amount Amount Percentage Amount percentage amount
Accounts receivable
assessed i div dual y
for i pairment 117,277,135.48 3.81% 117,277,135.48 100.00% 0 71,960,343.90 1.90% 55,240,343.90 76.76% 16,720,000.00
Of which:
Accounts receivable
assessed col ectively
for i pairment 2,960,085,058.36 96.19% 435,001,747.30 14.70% 2,525,083,311.03 3,711,403,752.23 98.10% 323,636,747.64 8.72% 3,387,767,004.59
Of which:
Accounts receivable
from related parties 2,008,185.60 0.07% 61,132.76 3.04% 1,947,052.84 5,838,812.92 0.15% 947,246.64 16.22% 4,891,566.28
Accounts receivable
from distributor cl ents 2,202,548,603.03 71.57% 307,333,600.84 13.95% 1,895,215,002.16 3,043,388,184.37 80.45% 320,207,886.86 10.52% 2,723,180,297.51
Factoring receivables 755,528,269.73 24.55% 127,607,013.70 16.89% 627,921,256.03 662,176,754.94 17.50% 2,481,614.14 0.37% 659,695,140.80
Total 3,077,362,193.84 100.00% 552,278,882.78 17.95% 2,525,083,311.03 3,783,364,096.13 100.00% 378,877,091.54 10.01% 3,404,487,004.59
2019 AnnuAl RepoRt 199
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
3. Accounts receivable (Cont’d )
(1) Disclosure of accounts receivable by category (Cont’d)
Items assessed collectively for impairment:
In the groups, accounts receivable with collective provision for bad debts based on receivables from related
parties:
Unit: RMB
Closing balance
Expected
credit loss
Ageing Accounts receivable Bad debt provision rate (%)
Within 1 year 2,008,185.60 61,132.76 3.04
Total 2,008,185.60 61,132.76 3.04
Collectively assessed item: receivables from unrelated party customers
Unit: RMB
Closing balance
Expected
credit loss
Name Book balance Bad debt provision rate (%)
Within 1 year 1,831,410,082.59 34,598,907.77 1.89
1 – 2 years 90,212,063.19 34,205,889.74 37.92
2 – 3 years 61,174,883.12 36,261,660.88 59.28
Over 3 years 219,751,574.13 202,267,142.45 92.04
Total 2,202,548,603.03 307,333,600.84 13.95
200 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
3. Accounts receivable (Cont’d )
(1) Disclosure of accounts receivable by category (Cont’d)
Collectively assessed item: factoring receivables
Unit: RMB
Closing balance
Provision
Name Book balance Bad debt provision percentage
Within 1 year 604,114,038.87 97,324,167.53 16.11%
1 to 2 years 151,414,230.86 30,282,846.17 20.00%
Total 755,528,269.73 127,607,013.70 16.89%
If the provision for bad debts of accounts receivable is made in accordance with the general model of expected
credit losses, please disclose the information about provision for bad debts with reference to the way of
disclosure of other receivables:
□ Applicable √ Not applicable
Disclosed by ageing
Ageing Closing balance Opening balance
Within 1 year 2,440,760,038.21 3,431,563,448.16
1 to 2 years 397,312,284.08 71,098,999.39
2 to 3 years 70,484,233.21 71,505,067.24
Over 3 years 168,805,638.34 209,196,581.34
Subtotal 3,077,362,193.84 3,783,364,096.13
(2) Provision, recovery or reversal of bad debt provision for the period
Unit: RMB
Changes in the period
Recovery or
Category Opening balance Provision reversal Written off Closing balance
Provision for bad debt 378,877,091.54 189,884,304.16 16,482,512.89 552,278,882.81
Total 378,877,091.54 189,884,304.16 16,482,512.89 552,278,882.81
(3) Top five accounts receivable based on closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for the
period was RMB894,051,793.67, which accounted for 29.05% of the closing balance of the total accounts
receivable. The closing balance of corresponding bad debt provision amounted to RMB95,343,756.76.
2019 AnnuAl RepoRt 201
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
4. Accounts receivable financing
Unit: RMB
Item Closing balance Opening balance
Bills receivable 442,915,861.70
Total 442,915,861.70
5. Prepayments
(1) Presentation of prepayments stated according to ageing analysis
Unit: RMB
Closing balance Opening balance
Ageing Amount Percentage Amount Percentage
Within 1 year 528,554,005.66 85.57% 793,395,209.02 91.86%
1-2 years 75,019,543.42 12.43% 70,343,811.72 8.14%
Total 603,573,549.08 100% 863,739,020.74 100%
(2) Top five prepayments according to closing balance of prepaid parties
Top five prepayments according to closing balance of prepaid parties was RMB272,218,038.77, which
accounted for 45.10% of the closing balance of the total accounts payable.
202 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
6. Other receivables
Unit: RMB
Item Closing balance Opening balance
Interest receivables 0 198,577,632.43
Dividend receivables 13,000,000.00
Other receivables 2,203,654,598.66 1,934,512,350.96
Total 2,216,654,598.66 2,133,089,983.39
(1) Interest receivable
Unit: RMB
Item Closing balance Opening balance
Fixed term deposit 0 26,021,373.31
Interest on guarantee deposit 0 172,556,259.12
Total 0 198,577,632.43
(2) Dividends receivable
Unit: RMB
Item (or investee) Closing balance Opening balance
Weifang Xingxing United Chemical Co., Ltd. 13,000,000.00
Total 13,000,000.00
(3) Other receivables
1) Other payables by nature
Unit: RMB
Nature Closing book balance Opening book balance
Open credit 2,502,722,227.16 1,960,044,821.28
Reserve and borrowings 20,877,056.54 1,957,000.00
Guarantee deposit 29,529,247.78 18,064,797.46
Insurance premium 21,618.27 2,034,980.18
Advances 19,351,237.29 4,099,146.51
Others 126,503,088.52 162,793,258.20
Total 2,699,004,475.56 2,148,994,003.63
2019 AnnuAl RepoRt 203
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
6. Other receivables (Cont’d )
(3) Other receivables (Cont’d)
2) Particulars of bad debt provision
Unit: RMB
Closing bad debt provision at phase 1:
Expected credit
loss rate (%) for
the next 12 Bad debt Carrying
Category Book balance months provision amount
Bad debt provision assessed
individually 13,000,000.00 13,000,000.00
Dividends receivable 13,000,000.00 13,000,000.00
Bad debt provision assessed
collectively 1,253,790,238.95 13.50 169,202,744.32 1,084,587,494.63
Amount due from government
agencies 5,525,444.91 52.33 2,891,297.49 2,634,147.42
Amount due from related parties 76,081,288.34 9.33 7,101,277.63 68,980,010.71
Other receivables 1,287,769,398.85 18.6 239,557,967.11 1,048,211,431.74
Total 1,382,376,132.10 18.05 249,550,542.23 1,132,825,589.87
As at the end of the period, the Company did not have interest receivables, dividends receivables and
other receivables in phase 2.
As at the end of the period, closing bad debt provision at phase 3:
Expected credit
loss rate (%) over Bad debt Carrying
Category Book balance the entire life provision amount
Bad debt provision assessed
individually 1,445,214,236.61 22.57 326,147,132.58 1,119,067,104.03
Total 1,445,214,236.61 22.57 326,147,132.58 1,119,067,104.03
204 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
6. Other receivables (Cont’d )
(3) Other receivables (Cont’d)
2) Particulars of bad debt provision (Cont’d)
By ageing
Unit: RMB
Ageing Closing Balance Opening balance
Within 1 year 1,601,285,972.69 1,893,654,554.59
1-2 years 920,980,164.23 83,130,878.32
2-3 years 82,752,788.66 43,609,618.98
Over 3 years 93,985,549.98 128,598,951.74
Total 2,699,004,475.56 2,148,994,003.63
3) Provision, recovery or reversal of bad debt provision for the year
Unit: RMB
Changes for the year
Opening Recovery Closing
Category balance Provision or reversal Writing-off balance
Bad debt provision 214,481,652.67 283,002,941.38 2,134,717.15 495,349,876.90
Total 214,481,652.67 283,002,941.38 2,134,717.15 495,349,876.90
4) Top five other 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 the year was RMB2,350,552,046.65, which accounted for 87.9% of the closing balance of the
total accounts receivable. The closing balance of corresponding bad debt provision amounted to
RMB310,186,154.68.
2019 AnnuAl RepoRt 205
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
7. Inventories
Whether the New Revenue Standard has been implemented
√ Yes □ No
(1) Categories of inventories
Unit: RMB
Closing balance Opening balance
Impairment Impairment
provision for provision for
inventories or inventories or
performance performance
Item Book balance costs Carrying amount Book balance costs Carrying amount
Raw materials 1,972,197,240.93 21,269,429.01 1,950,927,811.92 3,275,454,669.27 9,525,360.59 3,265,929,308.68
Work-in-process products 81,382,693.49 81,382,693.49 102,153,808.77 102,153,808.77
Goods in stock 886,102,819.24 886,102,819.24 1,690,248,067.43 34,943,475.27 1,655,304,592.16
Consumable biological assets 1,541,004,633.42 1,541,004,633.42 1,511,542,610.36 1,511,542,610.36
Developing products 315,012,152.74 315,012,152.74 309,823,656.64 73,265,542.87 236,558,113.77
Total 4,795,699,539.82 21,269,429.01 4,774,430,110.81 6,889,222,812.47 117,734,378.73 6,771,488,433.74
(2) Impairment provision for inventories or performance costs
Unit: RMB
Increase for the period Decrease for the period
Item Closing balance Provision Others Reversal or transfer Others Closing balance
Raw materials 9,525,360.59 21,269,429.01 9,525,360.59 21,269,429.01
Goods in stock 34,943,475.27 34,943,475.27
Developing products 73,265,542.87 73,265,542.87
Total 117,734,378.73 21,269,429.01 117,734,378.73 21,269,429.01
Recognize net realisable value/residual
Item consideration with future cost Reversal or transfer for the year
Raw materials Full amount impairment of idle spare Processed as machine-made paper and
parts with long-term storage ageing sold
Goods in stock The goods in stock have been sold
Development cost Government supporting documents have
been obtained, and the compensation
amount is greater than the development
cost
206 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
7. Inventories (Cont’d )
(3) Changes in consumable biological assets
Unit: RMB
Increase for the period Decrease for the period
Opening Increase in Increase in Decrease in Other Decrease in Closing
Item balance breeding purchase fair value decreases sales balance
Consumable biological assets
measured at fair value 1,511,542,610.36 79,652,771.18 19,752,911.94 30,437,836.18 1,541,004,633.42
Total 1,511,542,610.36 79,652,771.18 19,752,911.94 30,437,836.18 1,541,004,633.42
8. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 6,974,539,613.30 4,007,503,281.86
Total 6,974,539,613.30 4,007,503,281.86
9. Other current assets
Whether the New Revenue Standard has been implemented
√ Yes □ No
Unit: RMB
Item Closing balance Opening balance
VAT recoverable 1,431,298,632.04 1,365,819,497.97
Prepaid tax 56,778,563.04 13,217,451.88
Receivables under financial lease due within one year 5,229,125,471.51 7,192,752,596.30
Factoring receivables due within one year 1,008,707,988.47 1,041,254,552.40
Prepaid expenses 366,080,343.71 662,919,414.09
Others 16,716,395.93 5,349,312.49
Total 8,108,707,394.70 10,281,312,825.13
2019 AnnuAl RepoRt 207
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
10. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMB
Closing balance Opening balance
Bad debt Carrying Bad debt Carrying Discount
Item Book balance provision amount Book balance provision amount rate range
Finance lease payments 8,144,589,680.94 182,532,601.30 7,962,057,079.64 12,992,711,023.11 145,746,721.12 12,846,964,301.99 4.00-20.00
Less: Unrealised financing income 462,276,887.85 462,276,887.85 1,491,762,037.16 1,491,762,037.16
Less: non-current assets due within
one year 7,004,375,494.88 159,382,707.55 6,844,992,787.33 4,028,313,053.68 20,809,771.82 4,007,503,281.86
Subtotal 677,937,298.21 23,149,893.75 654,787,404.46 7,472,635,932.27 124,936,949.30 7,347,698,982.97
Deposit for finance lease 734,530,650.26 734,530,650.26 588,925,607.06 588,925,607.06
Less: Unrealised financing income 59,195,417.77 59,195,417.77 10,013,819.17 10,013,819.17
Less: non-current assets due within
one year 129,546,826.00 129,546,826.00
Subtotal 545,788,406.49 545,788,406.49 578,911,787.89 578,911,787.89
Total 1,223,725,704.70 23,149,893.75 1,200,575,810.95 8,051,547,720.16 124,936,949.30 7,926,610,770.86 —
(2) Particulars of bad debt provision
Unit: RMB
Closing balance
Book balance Bad debt provision
Expected credit
Category Amount Percentage (%) Amount loss rate (%) Carrying amount
Bad debt provision assessed individually 174,135,402.70 14.23 20,025,571.31 11.50 154,109,831.39
Bad debt provision assessed collectively 1,049,590,302.00 85.77 3,124,322.44 0.30 1,046,465,979.56
Including:
Lease receivables 503,801,895.51 41.17 3,124,322.44 0.62 500,677,573.07
Guarantee receivables 545,788,406.49 44.60 545,788,406.49
Total 1,223,725,704.70 100.00 23,149,893.75 1.89 1,200,575,810.95
208 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
10. Long-term receivables (Cont’d )
(2) Particulars of bad debt provision (Cont’d)
Closing balance
Book balance Bad debt provision
Expected credit
Category Amount Percentage (%) Amount loss rate (%) Carrying amount
Bad debt provision assessed individually
Bad debt provision assessed collectively 8,051,547,720.16 100.00 124,936,949.30 1.55 7,926,610,770.86
Including:
Lease receivables 7,472,635,932.27 92.81 124,936,949.30 1.67 7,347,698,982.97
Guarantee receivables 578,911,787.89 7.19 578,911,787.89
Total 8,051,547,720.16 100.00 124,936,949.30 1.55 7,926,610,770.86
Bad debt provision assessed collectively:
Collectively assessed item: lease receivables
Closing balance
Expected credit
Book balance Bad debt provision loss rate (%)
Within 1 year
1 to 2 years 52,356,592.95 324,688.89 0.62
2 to 3 years 451,445,302.56 2,799,633.55 0.62
Total 503,801,895.51 3,124,322.44 0.62
Collectively assessed item: guarantee receivables
Closing balance
Expected credit
Book balance Bad debt provision loss rate (%)
Within 1 year
1 to 2 years 182,525,444.52
2 to 3 years
Over 3 years 363,262,961.97
Total 545,788,406.49
(3) Provision, recovery or reversal of bad debt provision for the period
The bad debt provision for the period amounted to RMB9,079,405.33 and reversal of bad debt provision
amounted to RMB110,866,460.88.
2019 AnnuAl RepoRt 209
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
11. Long-term equity investments
Unit: RMB
Change for the period
Investment
Opening gain or loss Adjustment Distribution of Closing Closing
balance recognised of other Other change cash dividend balance balance
(carrying Additional Withdrawn under equity comprehensive in equity or profit Impairment (carrying of impairment
Investee amount) contribution contribution method income interest declared provision Others amount) provision
I. Joint venture
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd. 3,572,834.79 2,216,832.82 2,000,000.00 3,789,667.61
Weifang Sime Darby West
Port Co., Ltd 103,159,857.71 -13,433,185.95 89,726,671.76
Shouguang Meite Environmental
Technology Co., Ltd. 5,880,000.00 5,880,000.00
Weifang Xingxing United Chemical
Co., Ltd. 109,253,237.12 7,563,320.27 23,000,000.00 93,816,557.39
Weifang Chenrong New and
Old Kinetic Energy Conversion
Equity Investment Fund Partnership
(Limited Partnership) 158,000,000.00 158,000,000.00
Subtotal 215,985,929.62 163,880,000.00 -3,653,032.86 25,000,000.00 351,212,896.76
II. Associates
Jiangxi Jiangbao Media Colour
Printing Co. Ltd. 811,998.75 -811,998.75 0
Zhuhai Dechen New Third Board
Equity Investment Fund
Company (Limited Partnership) 52,253,817.72 159,172.19 52,412,989.91
Ningbo Kaichen Huamei Equity
Investment Fund Partnership
(Limited Partnership) 199,585,216.94 -56,369.42 199,528,847.52
Jiangxi Chenming Port Co., Ltd. 2,156,252.31 -465,892.65 1,690,359.66
Xuchang Chenming Paper
Co., Ltd. 5,994,545.96 5,994,545.96 5,994,545.96
Xuchang Chenming Paper Co., Ltd. 180,000,000.00 1,049,219.78 11,683,737.93 192,732,957.71
Chenming (Qingdao) Asset
ManagementCo., Ltd. 7,886,521.47 782,969.70 8,669,491.17
Guangdong Nanyue Bank Co., Ltd. 2,435,494,479.24 364,597,001.77 2,800,091,481.01
Subtotal 268,688,353.15 2,615,494,479.24 0 657,100.85 11,683,737.93 — 5,994,545.96 364,597,001.77 3,255,126,126.98 5,994,545.96
Total 484,674,282.77 2,779,374,479.24 0 -2,995,932.01 11,683,737.93 25,000,000.00 5,994,545.96 364,597,001.77 3,606,339,023.74 5,994,545.96
210 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
12. Other non-current financial assets
Unit: RMB
Item Closing balance Opening balance
Equity instrument investment 147,445,653.55 103,000,000.00
Total 147,445,653.55 103,000,000.00
13. Investment property
(1) Investment property under the cost method
√ Applicable □ Not applicable
Unit: RMB
Housing and
Item building structure Total
I. Original carrying amount
1. Opening balance 5,021,057,511.20 5,021,057,511.20
2. Increase for the period 419,903,365.19 419,903,365.19
(1) Purchase 419,903,365.19 419,903,365.19
3. Decrease for the period 7,250,842.00 7,250,842.00
(1) Disposal 7,250,842.00 7,250,842.00
4. Closing balance 5,433,710,034.39 5,433,710,034.39
II. Accumulated depreciation and accumulated amortisation
1. Opening balance 176,064,471.58 176,064,471.58
2. Increase for the period 176,124,231.77 176,124,231.77
(1) Provision or amortisation 176,124,231.77 176,124,231.77
3. Decrease for the period 840,962.07 840,962.07
(1) Disposal 840,962.07 840,962.07
4. Closing balance 351,347,741.28 351,347,741.28
III. Provision for impairment
IV. Carrying amount
1. Closing carrying amount 5,082,362,293.11 5,082,362,293.11
2. Opening carrying amount 4,844,993,039.62 4,844,993,039.62
2019 AnnuAl RepoRt 211
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
14. Fixed assets
Unit: RMB
Item Closing balance Opening balance
Fixed assets 34,439,935,032.69 27,913,986,152.68
Total 34,439,935,032.69 27,913,986,152.68
(1) Particulars of fixed assets
Unit: RMB
Housing and Electronic
building Machinery and equipment
Item structure equipment Vehicles and others Total
I. Original carrying amount:
1. Opening balance 9,669,605,532.54 32,091,581,325.72 345,066,029.50 440,199,456.27 42,546,452,344.03
2. Increase for the period 1,101,144,203.55 7,998,189,981.53 33,305,487.67 26,726,134.79 9,309,950,501.03
(1) Acquisition 178,039,614.34 393,317,184.19 13,790,229.85 14,186,430.78 749,918,152.65
(2) Transferred from construction
in progress 923,104,589.21 7,604,872,797.34 19,515,257.82 12,539,704.01 8,560,032,348.38
3. Decrease for the period 829,168,855.31 607,690,846.73 27,341,909.96 68,557,533.88 1,683,343,839.37
(1) Disposal or retirement 246,662,919.20 605,652,693.33 12,693,006.16 67,234,646.44 1,082,827,958.62
(2) Others 582,505,936.11 2,038,153.40 14,648,903.80 1,322,887.44 600,515,880.75
4. Closing balance 9,941,580,880.78 39,482,080,460.52 351,029,607.21 398,368,057.18 50,173,059,005.69
II. Accumulated depreciation
1. Opening balance 1,678,906,121.65 12,326,017,656.16 173,353,238.78 257,772,524.59 14,436,049,541.18
2. Increase for the period 238,241,029.23 1,382,386,217.87 31,350,459.05 13,844,069.75 1,665,821,775.90
(1) Provision 238,241,029.23 1,382,386,217.87 31,350,459.05 13,844,069.75 1,665,821,775.90
3. Decrease for the period 120,817,150.11 411,312,338.50 15,806,863.60 13,845,694.20 561,782,046.41
(1) Disposal or retirement 116,657,524.35 395,263,144.41 6,430,300.72 12,700,957.97 531,051,927.45
(2) Others 4,159,625.76 16,049,194.09 9,376,562.88 1,144,736.23 30,730,118.96
4. Closing balance 1,796,330,000.77 13,297,091,535.53 188,896,834.23 257,770,900.14 15,540,089,270.67
III. Provision for impairment
1. Opening balance 50,958,113.15 145,083,130.77 13,092.92 362,313.33 196,416,650.17
2. Increase for the period 27,808,852.79 135,295,622.68 13,889.13 7,434,552.87 170,552,917.47
(1) Provision 27,808,852.79 135,295,622.68 13,889.13 7,434,552.87 170,552,917.47
3. Decrease for the period 50,958,113.15 122,601,345.91 13,092.92 362,313.33 173,934,865.31
(1) Disposal or retirement 50,958,113.15 122,601,345.91 13,092.92 362,313.33 173,934,865.31
4. Closing balance 27,808,852.79 157,777,407.54 13,889.13 7,434,552.87 193,034,702.33
IV. Carrying amount
1. Closing carrying amount 8,117,442,027.22 26,027,211,517.45 162,118,883.85 133,162,604.17 34,439,935,032.69
2. Opening carrying amount 7,939,741,297.74 19,620,480,538.79 171,699,697.80 182,064,618.35 27,913,986,152.68
212 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
14. Fixed assets (Cont’d )
Notes: (1) As at 31 December 2019, housing, building structure and equipment with the carrying amount of RMB10,573,696,190.50 (31
December 2018: carrying amount of RMB8,079,811,565.53) were pledged as collateral for intangible assets with the carrying
amount of RMB880,676,428.58 (31 December 2018: carrying amount of RMB873,985,362.13), and investment properties with
the carrying amount of RMB4,519,487,976.25 (31 December 2018: carrying amount of RMB4,691,453,227.24) was pledged as
collateral for long-term borrowings with the carrying amount of RMB5,110,291,847.19 (31 December 2018: carrying amount
of RMB4,733,171,900.00) and short-term borrowings with the carrying amount of RMB180,000,000.00 (31 December 2018:
carrying amount of RMB180,000,000.00).
(2) Other decreases in the original carrying amount and accumulated depreciation was due to the disposal of subsidiary, Haicheng
Haiming Mining Co., Ltd., during the period.
(2) Particulars of temporarily idle fixed assets
Unit: RMB
Original
carrying Accumulated Provision Carrying
Item amount depreciation for impairment amount
Housing and building structure 95,712,983.12 14,236,532.95 1,430,613.21 80,045,836.96
Machinery and equipment 1,036,068,969.74 484,306,592.65 127,431,431.68 424,330,945.41
Transportation equipment 12,200.00 10,980.00 119.59 1,100.41
Electronic equipment and others 766,226.60 651,788.26 8,478.26 105,960.08
Total 1,132,560,379.46 499,205,893.86 128,870,642.74 504,483,842.86
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMB
Reason for not yet
obtaining property
Item Carrying amount right certificates
Housing and building structure (Zhanjiang Chenming
Pulp & Paper Co., Ltd.) 1,182,521,604.07 Handling
Housing and building structure (Jilin Chenming Paper
Co., Ltd.) 476,756,148.62 Handling
Housing and building structure (Shouguang Meilun Paper
Co., Ltd.) 422,122,695.70 Handling
Housing and building structure (Jiangxi Chenming Paper
Co., Ltd.) 246,454,191.11 Handling
Housing and building structure (Shandong Chenming
Paper Holdings Limited) 132,010,908.01 Handling
Housing and building structure (Shandong Chenming
Investment Limited) 93,311,859.03 Handling
Housing and building structure (Wuhan Chenming
Hanyang Paper Holdings Co., Ltd.) 81,493,301.27 Handling
Housing and building structure (Chengdu Chenming
Culture Communication Co., Ltd.) 13,289,619.14 Handling
Total 2,647,960,326.95
2019 AnnuAl RepoRt 213
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
15. Construction in progress
Unit: RMB
Item Closing balance Opening balance
Construction in progress 5,467,321,406.80 11,861,494,351.33
Materials for project 8,801,522.15 9,856,470.22
Total 5,476,122,928.95 11,871,350,821.55
(1) Particulars of construction in progress
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Carrying amount Book balance provision Carrying amount
400T/d Mechanical pulp project (Headquarters) 190,246,507.11 190,246,507.11
Newsprint machine to cultural paper
machine and related pulp line
transformation (Headquarters) 1,426,602,125.57 1,426,602,125.57
Chemical pulp project (Meilun) 3,016,785,495.66 3,016,785,495.66
High-end cultural paper (Meilun) 179,056,842.38 179,056,842.38 1,701,781,479.30 1,701,781,479.30
Haiming mining magnesite deep processing
project (Haiming) 486,501,551.60 486,501,551.60
200,000-ton magnesia-alumina spinel project
(Haiming) 558,876,283.14 558,876,283.14
Huanggang Chenming integrated forestry,
pulp and paper project 4,601,844,646.274 4,601,844,646.274 3,605,150,078.66 3,605,150,078.66
Biomass power generation project 193,548,348.79 193,548,348.79 157,540,365.92 157,540,365.92
Membrane treatment project (Zhanjiang
Chenming) 25,833,751.07 25,833,751.07 74,505,129.72 74,505,129.72
Back pressure unit project (Zhanjiang Chenming) 26,452,503.41 26,452,503.41
Technological modification project 67,088,127.35 67,088,127.35 60,368,232.95 60,368,232.95
Upgrading and renovation of back pressure
unit of captive power plant 263,626,439.57 263,626,439.57 177,001,786.08 177,001,786.08
Fly ash cement ceramsite production project 51,767,628.00 51,767,628.00 30,122,443.49 30,122,443.49
Others 114,080,363.78 29,524,740.41 84,555,623.37 376,989,304.54 27,428,935.82 349,560,368.72
Total 5,496,846,147.21 29,524,740.41 5,467,321,406.80 11,888,923,287.15 27,428,935.82 11,861,494,351.33
214 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
15. Construction in progress (Cont’d )
(2) Changes in material construction in progress projects for the period
Unit: RMB
Of which: Capital sation
Transfer capital sed rate of the
Budget to fixed Other Accumulated Accumulated i terest i terest
( MB’00 Opening I crease for asset for deductions Closing I vestment to Construction capital sed amount for amount for Source
Project name mi l on) balance the period the period for the period balance budget i progress i terest the period the period of fund
Upgrading and renovation of back self-raised and
pressure unit of captive power plant borrowings
( eadquarter) 2.74 177,001,786.08 86,624,653.49 263,626,439.57 96% 92% 822,004.98 822,004.98 5.36%
400T/d Mechanical pulp project self-raised and
( eadquarters) 2.09 190,246,507.11 29,905,920.80 220,152,427.91 105% 100% 6,659,293.48 2,800,225.15 5.57% borrowings
Membrane treatment for recla med self-raised and
water recycl ng ( eadquarters) 3.00 145,410,753.42 147,752,923.23 293,163,676.65 98% 100% 5,427,899.12 5,427,899.12 5.52% borrowings
New annual 200,000 ton of fly ash self-raised
cement ceramsite production project 0.76 30,122,443.49 21,645,184.51 51,767,628.00 68% 70%
Newsprint machine to cultural paper self-raised and
machine and related pulp l ne borrowings
transformation ( eadquarters) 15.02 1,426,602,125.57 185,117,357.76 1,611,719,483.33 107% 100% 16,038,785.31 1,482,337.16 6.22%
Chemical pulp project ( ei un) self-raised and
43.77 3,016,785,495.66 1,298,086,862.96 4,314,872,358.62 99% 100% 235,662,801.02 98,372,335.67 5.42% borrowings
High-end cultural paper ( ei un) self-raised and
37.61 1,701,781,479.30 345,927,249.60 1,868,651,886.52 179,056,842.38 54% 99% 64,161,971.31 22,003,288.79 5.71% borrowings
Haim ng min ng magnesite deep
processing project ( aim ng) 486,501,551.60 486,501,551.60 0% 0% 97,619,920.72
200,000-ton magnesia-alumina spinel self-raised and
project 558,876,283.14 558,876,283.14 0% 0% 8,915,496.55 borrowings
Huanggang Chenming Forest and Paper self-raised and
I tegration Project ( ulp ng Project) borrowings
( uanggang Chenming) 44.85 3,605,150,078.66 1,027,583,763.38 30,889,195.77 4,601,844,646.27 103% 98% 223,845,072.85 75,599,965.83 5.35%
Differentiated viscose and spinning self-raised
and chemical project ( uanggang
Chenming) 109.35 10,199,525.60 2,283,840.02 12,483,365.62 0% 0%
Biomass power generation project self-raised
( outhern district) ( uanggang
Chenming) 2.05 157,540,365.92 36,007,982.87 193,548,348.79 94% 100%
Membrane treatment project ( hanj ang self-raised
Chenming) 1.2 74,505,129.72 25,833,751.07 74,505,129.72 25,833,751.07 84% 90%
Back pressure unit project ( hanj ang self-raised
Chenming) 0.6 26,452,503.41 26,452,503.41 100% 100%
Total 263.04 11,607,176,028.68 3,206,769,489.69 8,440,406,661.93 1,045,377,834.74 5,328,161,021.70 659,153,245.34 206,508,056.70 —
Explanation: The disposal of the subsidiary Haicheng Haiming Mining Co., Ltd. during the period resulted in the decrease in magnesite
deep processing projects.
2019 AnnuAl RepoRt 215
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
15. Construction in progress (Cont’d )
(3) Particulars of provision for construction in progress impairment
Unit: RMB
Amount for Reason for
Item the year the provision
Huang Pulp & Paper project 5,838,644.59 Project suspension
Total 5,838,644.59 —
(4) Materials for project
Unit: RMB
Closing balance Opening balance
Book Impairment Carrying Book Impairment Carrying
Item balance provision amount balance provision amount
Special materials 8,801,522.15 8,801,522.15 9,856,470.22 9,856,470.22
Total 8,801,522.15 8,801,522.15 9,856,470.22 9,856,470.22
216 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
16. Right-of-use assets
Unit: RMB
Item Land use rights Total
I. Original carrying amount
1. Opening balance
2. Increase for the period 163,334,964.90 163,334,964.90
3. Decrease for the period
4. Closing balance 163,334,964.90 163,334,964.90
II. Accumulated depreciation
1. Increase for the period 11,193,082.85 11,193,082.85
(1) Provision 11,193,082.85 11,193,082.85
2. Decrease for the period
(1) Disposal
3. Closing balance 11,193,082.85 11,193,082.85
III. Provision for impairment
1. Opening balance
2. Increase for the period
(1) Provision
3. Decrease for the period
(1) Disposal
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 152,141,882.05 152,141,882.05
2. Opening carrying amount
2019 AnnuAl RepoRt 217
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
17. Intangible assets
(1) Particulars of intangible assets
Unit: RMB
Land use Unpatented
Item rights technology Software Total
I. Original carrying amount
1. Opening balance 2,303,026,559.35 15,908,674.87 20,666,526.26 2,339,601,760.48
2. Increase for the period 5,900,102.31 36,109.30 5,936,211.61
(1) Acquisition 5,900,102.31 36,109.30 5,936,211.61
3. Decrease for the period 127,063,110.15 20,452.12 127,083,562.27
(1) Disposal 1,130,379.12 20,452.12 1,150,831.24
(2) Transferred to right-of-use assets 20,446,841.03 20,446,841.03
(3) Others 105,485,890.00 105,485,890.00
4. Closing balance 2,181,863,551.51 15,908,674.87 20,682,183.44 2,218,454,409.82
II. Accumulated amortisation
1. Opening balance 379,780,407.96 1,705,328.66 18,760,748.88 400,246,485.50
2. Increase for the period 47,468,676.99 5,301,096.84 331,072.18 53,100,846.01
(1) Provision 47,468,676.99 5,301,096.84 331,072.18 53,100,846.01
(2) Transferred to right-of-use assets 15,954,826.20 15,954,826.20
(3) Others 1,606,907.78 1,606,907.78
3. Decrease for the period 6,788,096.24 6,788,096.24
(1) Disposal 7,559,822.18 7,559,822.18
4. Closing balance 411,294,258.75 7,006,425.50 19,091,821.06 437,392,505.31
III. Impairment provision
IV. Carrying amount
1. Closing carrying amount 1,770,569,292.76 8,902,249.37 1,590,362.38 1,781,061,904.51
2. Opening carrying amount 1,923,246,151.39 14,203,346.21 1,905,777.38 1,939,355,274.98
Explanation:
① As at 31 December 2019, housing, building structure and equipment with the carrying amount of RMB10,573,696,190.50 (31
December 2018: carrying amount of RMB8,079,811,565.53) were pledged as collateral for intangible assets with the carrying
amount of RMB880,676,428.58 (31 December 2018: carrying amount of RMB873,985,362.13), and investment properties with
the carrying amount of RMB4,519,487,976.25 (31 December 2018: carrying amount of RMB4,691,453,227.24) was pledged as
collateral for long-term borrowings with the carrying amount of RMB5,110,291,847.19 (31 December 2018: carrying amount
of RMB4,733,171,900.00) and short-term borrowings with the carrying amount of RMB180,000,000.00 (31 December 2018:
carrying amount of RMB180,000,000.00).
② The emission right of Huanggang Pulp and Paper is categorised as others (Other Rights Certificate), with the number of pollutant
discharge permit being 91421100679765869N001P, the issuing authority being Huanggang Ministry of Environmental Protection
and the expiry date ranging between 14 September 2018 and 13 September 2021.
218 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
18. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Opening Increase for Decrease Closing
Name of investee balance the period for the period balance
Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Total 20,283,787.17 20,283,787.17
(2) Provision for impairment of goodwill
Unit: RMB
Opening Increase for Decrease for Closing
Name of investee balance the period the period balance
Machine-made paper sector –
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Total 14,314,160.60 14,314,160.60
Explanation: The Company evaluated the recoverable amount of the goodwill and determined that the goodwill related to the
Company’s panel business had not been impaired. With the category of the main business as the basis for determining
the reporting segments, the Company regarded Shandong Chenming Panels Co., Ltd. as a single asset group. The
recoverable amount of the asset group Shandong Chenming Panels Co., Ltd. is determined based on the present value
of the estimated future cash flows. Future cash flows are based on the financial budget from 2020 to 2024 approved
by the management, and adopt 7.28% as the discount rate which is the interest rate of the 5-year bonds issued by the
Company in 2018. The cash flows of the asset group Shandong Chenming Panels Co., Ltd. for more than 5 years are
calculated based on the growth rate of 5%. Other key assumptions used in estimating future cash flows include the
estimated sales and gross profit based on the performance of such asset group in the past and the expectation to market
development by the management. The management believes that any reasonable change in the above assumptions
will not result in the total book value of the asset group Shandong Chenming Panels Co., Ltd. exceeding its recoverable
amount.
19. Long-term prepaid expenses
Unit: RMB
Opening Increase for Amortisation Other Closing
Item balance the period for the period deductions balance
Woodland expenses 51,978,428.52 3,213,756.77 39,122,447.15 9,642,224.6
Others 82,937,813.29 166,458.72 4,219,273.64 40,323,814.26 38,561,184.1
Total 134,916,241.81 166,458.72 7,433,030.41 79,446,261.41 48,203,408.7
2019 AnnuAl RepoRt 219
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
20. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB
Closing balance Opening balance
Deductible Deferred Deductible Deferred
temporary income temporary income
Item difference tax assets difference tax assets
Provision for impairment of assets 1,791,356,735.71 417,688,820.31 1,009,229,761.95 201,814,843.08
Unrealised profit arising from
intra-group transactions 164,089,227.26 41,022,306.82 53,691,645.13 13,422,911.28
Deductible loss 2,243,481,924.83 344,125,106.67 1,832,638,038.33 291,277,348.30
Outstanding payables 446,580,396.87 68,163,018.91 464,741,048.85 72,646,157.78
Deferred income 116,165,951.14 21,443,378.33 136,079,842.63 24,712,438.18
Total 4,761,674,235.81 892,442,631.04 3,496,380,336.89 603,873,698.62
(2) Deferred income tax assets before offsetting
Unit: RMB
Closing balance Opening balance
Taxable temporary Deferred income Taxable temporary Deferred income
Item differences tax liabilities differences tax liabilities
Debt reconstructing 5,644,502.36 1,411,125.59
Total 5,644,502.36 1,411,125.59
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary difference 352,057,221.14 293,812,600.65
Deductible loss 521,737,724.53 618,945,325.05
Total 873,794,945.67 912,757,925.70
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMB
Year Closing amount Opening amount
2019 — 58,075,279.70
2020 674,989.71 68,154,676.89
2021 185,647.61 79,493,561.61
2022 11,628,813.14 91,517,702.92
2023 164,859,774.53 321,704,103.93
2024 344,388,499.54 —
Total 521,737,724.53 618,945,325.05
220 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
21. Other non-current assets
Whether the New Revenue Standard has been implemented
√ Yes □ No
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Carrying amount Book balance provision Carrying amount
Prepayments for properties 9,800,000.00 9,800,000.00 458,224,099.89 458,224,099.89
Prepayments for land 101,130,000.00 101,130,000.00 45,230,000.00 45,230,000.00
Prepayments for engineering 47,430,952.09 47,430,952.09 22,445,137.18 22,445,137.18
Prepayments for equipment 15,514,874.58 15,514,874.58 223,822,509.86 223,822,509.86
Deposits 36,000,000.00 36,000,000.00
Equity transfer 694,000,000.00 694,000,000.00
Pre-paid expenses 42,771,382.73 42,771,382.73
Total 173,875,826.67 173,875,826.67 1,522,493,129.66 1,522,493,129.66
22. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Discounted borrowings 21,587,694,481.53 21,626,534,000.00
Credit borrowings 7,174,060,275.17 7,531,565,147.43
Guaranteed borrowings 7,082,088,423.98 9,918,242,061.05
Pledged borrowings 859,312,833.51 971,604,153.41
Mortgage borrowings 180,000,000.00 180,000,000.00
Total 36,883,156,014.19 40,227,945,361.89
Explanation:
① For classification and amount of mortgage borrowing and mortgage borrowing, please see notes in
relation to monetary funds and assets with restricted ownerships or right to use.
For classification and amount of pledged borrowing and mortgage borrowing, please see notes in relation
to monetary funds and assets with restricted ownerships or right to use.
② Overdue short-term borrowings
Total outstanding accounts payable as at the end of the year amounted to RMB0.00.
2019 AnnuAl RepoRt 221
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
23. Bills payable
Unit: RMB
Classification Closing balance Opening balance
Commercial acceptance bills 625,325,798.18 49,670,407.62
Bank acceptance bills 889,722,407.82 4,169,299,147.31
Total 1,515,048,206.00 4,218,969,554.93
Explanation: Total outstanding bills payable as at the end of the period amounted to RMB0.
24. Accounts payable
(1) Particulars of accounts payable
Unit: RMB
Item Closing balance Opening balance
Loans 3,393,786,063.51 3,137,376,535.33
Payment for engineering 408,694,349.00 327,682,450.74
Payment for equipment 312,292,221.48 474,915,744.05
Service expense 199,838,288.95 131,889,382.02
Others 36,476,659.04 78,364,532.52
Total 4,351,087,581.98 4,150,228,644.66
(2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
XD Baoji Electric Co., Ltd. 22,343,730.83 Quality guarantee deposit
for engineering
Omya Haiming (Nanchang) Chemical Co. Ltd. 16,000,000.00 Quality guarantee deposit
for engineering
China Light Industry Nanning Design Engineering Co., Ltd. 15,217,955.12 Quality guarantee deposit
for engineering
Hangzhou Water Treatment Technology Development 13,068,000.00 Quality guarantee deposit
Center Co., Ltd. for engineering
Shandong Shenhua Shanda Energy & Environment 11,736,736.36 Quality guarantee deposit
Co., Ltd. for engineering
Total 78,366,422.31 –
222 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
25. Contract liabilities
Unit: RMB
Item Closing balance Opening balance
Advance loans 968,082,063.13 419,540,133.74
Total 968,082,063.13 419,540,133.74
26. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMB
Increase for Decrease for Closing
Item Opening balance the period the period balance
I. Short-term remuneration 135,108,374.13 1,348,451,077.12 1,294,553,070.53 189,006,380.72
II. Retirement benefit plan–
defined contribution scheme 265,033.57 193,837,915.85 192,879,446.62 1,223,502.80
Total 135,373,407.70 1,542,288,992.97 1,487,432,517.15 190,229,883.52
(2) Particulars of short-term remuneration
Unit: RMB
Opening Increase for Decrease for Closing
Item balance the period the period balance
1. Salaries, bonuses, allowance and subsidies 54,864,072.32 1,106,708,111.64 1,040,937,184.08 120,634,999.88
2. Staff welfare 38,374,252.23 38,374,252.23
3. Social insurance premium 1,453,195.45 84,973,131.23 84,554,394.38 1,871,932.30
Of which: Medical insurance premium 484,700.11 73,988,756.01 73,633,207.30 840,248.82
Work-related injury insurance premium 2,559.91 4,263,030.53 4,242,520.56 23,069.88
Maternity insurance premium 965,935.43 6,721,344.69 6,678,666.52 1,008,613.60
4. Housing provident funds 8,814,407.42 89,852,004.69 89,809,868.49 8,856,543.62
5. Union funds and workers’ education 26,540,500.67 22,076,711.09 12,786,187.83 35,831,023.93
6. Other short-term remuneration 43,436,198.27 6,466,866.24 28,091,183.52 21,811,880.99
Total 135,108,374.13 1,348,451,077.12 1,294,553,070.53 189,006,380.72
2019 AnnuAl RepoRt 223
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
26. Staff remuneration payables (Cont’d )
(3) Defined contribution plan
Unit: RMB
Opening Increase for Decrease for Closing
Item balance the period the period balance
1. Basic pension insurance 13,533.34 186,731,483.19 185,711,254.11 1,033,762.42
2. Unemployment insurance 251,500.23 7,106,432.66 7,168,192.51 189,740.38
Total 265,033.57 193,837,915.85 192,879,446.62 1,223,502.80
27. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 81,745,671.90 101,147,703.11
Enterprise income tax 166,389,232.03 279,044,478.52
Individual income tax 29,565,363.87 21,204,181.79
Urban maintenance and construction tax 5,844,684.79 1,675,884.94
Land use tax 8,206,677.02 16,727,507.78
Property tax 8,239,300.78 26,049,416.88
Educational surcharges and others 6,850,900.34 2,685,191.81
Stamp duty 4,712,286.00 3,116,833.81
Total 311,554,116.73 451,651,198.64
28. Other payables
Unit: RMB
Item Closing balance Opening balance
Interest payable 208,189,699.15 226,788,777.59
Other payables 2,386,059,927.39 1,550,929,239.89
Total 2,594,249,626.54 1,777,718,017.48
224 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
28. Other payables (Cont’d )
(1) Interest payable
Unit: RMB
Item Closing balance Opening balance
Interest on corporate bonds 103,432,934.98 132,103,351.62
Interest payable on short-term borrowings 27,960,930.86 34,393,759.32
Interest on medium-term notes 76,795,833.31 60,291,666.65
Total 208,189,699.15 226,788,777.59
(2) Other payables
1) Other payables by nature
Unit: RMB
Item Closing balance Opening balance
Open credit 1,287,822,732.06 164,919,560.22
Deposit 451,756,402.26 969,423,011.35
Accrued expenses 506,095,837.14 281,151,124.64
Others 140,384,955.93 135,435,543.68
Total 2,386,059,927.39 1,550,929,239.89
2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
Nine Dragons Dawei Holdings Co., Ltd. 30,000,000.00 Deposit
Shenzhen Dongchan Capital Group Co., Ltd. 9,093,918.30 Deposit
State-owned Shouguang Qingshuipo Farm 8,800,000.00 Open credit
Lu Haobin 6,830,800.00 Deposit
Shandong Yingli Industrial Co., Ltd. 6,286,020.00 Deposit
Total 61,010,738.30
2019 AnnuAl RepoRt 225
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
29. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 2,520,582,051.43 4,234,248,448.36
Bonds payable due within one year 899,122,500.00
Long-term payables due within one year 2,238,647,651.02 2,732,057,322.65
Lease liabilities due within one year 4,606,717.58
Other non-current liabilities due within one year 250,000,000.00
Total 5,662,958,920.03 7,216,305,771.01
30. Other current liabilities
Whether the New Revenue Standard has been implemented
√ Yes □ No
Unit: RMB
Item Closing balance Opening balance
Short-term bonds payable 222,402,500.00 2,816,956,481.68
Total 222,402,500.00 2,816,956,481.68
226 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
30. Other current liabilities (Cont’d )
Increase/decrease in short-term bonds payable:
Unit: RMB
Amortisation Redemption
Date Opening Issue during Interest at of premium/ during Closing
Name of commercial paper Par value of issue Term Amount balance the period par value discount the period balance
2018 Fifth Tranche of Super & Short-term
Commercial Paper 1,000,000,000.00 2018-4-24 270 days 998,500,000.00 683,129,134.97 683,129,134.97
2018 Sixth Tranche of Super & Short-term
Commercial Paper 600,000,000.00 2018-5-9 270 days 599,100,000.00 630,791,666.71 3,616,666.67 100,000.00 634,508,333.38
2018 Tenth Tranche of Super & Short-term
Commercial Paper 600,000,000.00 2018-8-9 270 days 599,066,750.00 425,794,527.78 14,000,000.00 400,000.00 440,194,527.78
2018 Eleventh Tranche of Super & Short-
term Commercial Paper 600,000,000.00 2018-10-29 270 days 599,004,115.00 455,887,448.33 21,116,666.67 600,000.00 477,604,115.00
2018 Twelfth Tranche of Super & Short-
term Commercial Paper 620,000,000.00 2018-12-19 176 days 619,393,778.00 621,353,703.89 18,203,888.89 505,185.00 640,062,777.78
2019 First Tranche of Super & Short-term
Commercial Paper 500,000,000.00 2019-1-18 175 days 499,513,889.00 499,513,889.00 15,944,444.44 486,111.00 515,944,444.44
2019 Second Tranche of Super & Short-
term Commercial Paper 600,000,000.00 2019-2-27 270 days 599,100,000.00 599,100,000.00 26,758,333.33 900,000.00 626,758,333.33
2019 Third Tranche of Super & Short-term
Commercial Paper 300,000,000.00 2019-3-28 270 days 299,550,000.00 299,575,471.70 13,533,333.33 324,528.30 313,433,333.33
2019 Fourth Tranche of Super & Short-term
Commercial Paper 300,000,000.00 2019-4-30 270 days 299,550,000.00 299,550,000.00 12,915,000.00 450,000.00 260,000,000.00 52,915,000.00
2019 Fifth Tranche of Super & Short-term
Commercial Paper 300,000,000.00 2019-5-24 270 days 299,550,000.00 299,550,000.00 11,655,000.00 400,000.00 300,000,000.00 11,605,000.00
2019 Sixth Tranche of Super & Short-term
Commercial Paper 300,000,000.00 2019-7-31 270 days 299,550,000.00 299,550,000.00 8,032,500.00 300,000.00 150,000,000.00 157,882,500.00
Subtotal 5,720,000,000.00 5,711,878,532.00 2,816,956,481.68 2,296,839,360.70 145,775,833.33 4,465,824.30 5,041,635,000.01 222,402,500.00
2019 AnnuAl RepoRt 227
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
31. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledge borrowings 74,823,068.83 362,064,033.51
Secured borrowings 5,110,291,847.19 4,733,171,900.00
Guarantee borrowings 5,695,114,793.03 6,097,254,963.85
Credit borrowings 780,692,035.94 840,692,035.94
Less: long-term borrowings due within 1 year 2,520,582,051.43 4,234,248,448.36
Total 9,140,339,693.56 7,798,934,484.94
Explanation: For classifications and amounts of secured borrowings and pledged assets, please see notes in respect of monetary
funds and assets with restricted ownerships or right to use.
For classifications and amounts of pledge borrowings and pledged assets, please see notes in respect of monetary funds
and assets with restricted ownerships or right to use.
32. Bonds payable
(1) Bonds payable
Unit: RMB
Item Closing balance Opening balance
17 Chenming Bond 01- Chenming Group 89,070,000.00 1,198,710,000.00
18 Chenming Bond 01- Chenming Group 898,852,500.00
Chenming USD Bonds 1,169,200,909.49
Total 1,258,270,909.49 2,097,562,500.00
228 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
32. Bonds payable Cont’d
(2) Increase/decrease in bonds payable (excluding other financial instruments such as preference shares and
perpetual bonds classified as financial liabilities)
Unit: RMB
Amortisation Redemption Amortisation
Date of Issue during Interest at of premium/ during the of issuance Closing
Bond name Par value issue Term Amount Opening balance the period par value discount period fees balance
17 Chenming Bond
01- Chenming
Group 1,200,000,000.00 2017-8-22 5 years 1,198,200,000.00 1,198,710,000.00 78,000,000.00 360,000.00 1,188,000,000.00 89,070,000.00
18 Chenming Bond
01- Chenming
Group 900,000,000.00 2018-4-2 5 years 898,650,000.00 898,852,500.00 65,520,000.00 270,000.00 65,520,000.00 899,122,500.00
Chenming USD
Bonds 1,137,120,600.00 2019-8-6 2.6 years 1,125,276,863.46 1,125,276,863.46 42,073,462.20 1,850,583.83 1,169,200,909.49
Total 3,237,120,600.00 – – 3,222,126,863.46 2,097,562,500.00 1,125,276,863.46 185,593,462.20 2,480,583.83 1,253,520,000.00 2,157,393,409.49
Less: Bonds
payable due
within one year 899,122,500.00
Total 3,237,120,600.00 3,222,126,863.46 2,097,562,500.00 1,125,276,863.46 185,593,462.20 2,480,583.83 1,253,520,000.00 1,258,270,909.49
33. Lease liabilities
Unit:
Item Closing balance Opening balance
Lease payments payable 90,539,867.03
Less: Unrecognised financing expenses 26,236,020.80
Subtotal 64,303,846.23
Less: Lease liabilities due within one year 4,606,717.58
Total 59,697,128.65
2019 AnnuAl RepoRt 229
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
34. Long-term payables
Unit: RMB
Item Closing balance Opening balance
Long-term payables 3,321,535,538.94 3,900,255,693.44
Total 3,321,535,538.94 3,900,255,693.44
(1) By nature
Unit: RMB
Item Closing balance Opening balance
Retention for the financial leasing operations 160,190,103.51 167,083,436.84
China Development Bank Special funds 595,000,000.00 622,500,000.00
Financial leasing 4,804,993,086.45 5,842,729,579.25
Less: due within 1 year 2,238,647,651.02 2,732,057,322.65
Total 3,321,535,538.94 3,900,255,693.44
35. Provision
Whether the New Revenue Standard has been implemented
√ Yes □ No
Unit: RMB
Item Closing balance Opening balance Reason
Pending litigation 325,259,082.28 325,259,082.28 Losses from Arjo’s lawsuit
Total 325,259,082.28 325,259,082.28 —
Other explanations, including the explanations on significant assumptions and estimation related to significant
provision:
Note: In February 2017, ArjowigginsHKK2Limited (“HKK2 Company”) submitted a H share winding-up petition to Hong
Kong High Court due to a joint venture dispute, which required a compensation for economic loss of RMB167
million and interest thereon, and legal costs of USD3.54 million and arbitration fee of HK$3.3 million and interest
thereon to HKK2. The Company made provision of RMB325 million for such pending litigation in 2017. As at the
balance sheet date, Hong Kong High Court had not given a verdict for such litigation.
230 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
36. Deferred income
Unit: RMB
Increase for Decrease for
Item Opening balance the period the period Closing balance Reason
Government grants 1,862,395,197.61 91,381,862.50 1,771,013,335.11 Financial provision
Total 1,862,395,197.61 91,381,862.50 1,771,013,335.11 —
Items in respect of government grants:
Unit: RMB
Include in Amount
non-operating Include in charged
Opening New grants income for other income against cost Other Closing Asset-related/
Liabilities item balance for the period the period for the period expenses changes balance income-related
Project fund for National
technological support scheme 1,617,224.68 164,699.68 1,452,525.00 Asset-related
Sewage treatment and water
conservation configuration project 64,466,819.64 1,192,682.93 63,274,136.71 Asset-related
Financial grants for technological
modification project 180,966,256.91 12,783,808.11 168,182,448.80 Asset-related
Subsidy Funds, for environmental
protection 749,420,276.75 49,191,971.56 700,228,305.19 Asset-related
Logistics park project 51,960,000.00 Asset-related
Zhanjiang integrated forestry,
pulp and paper project 71,141,834.42 4,094,632.92 67,047,201.50
Huanggang pulp-forestry-paper
project 681,564,072.66 681,564,072.66 Asset-related
Others 61,258,712.55 1,589,455.08 22,364,612.22 37,304,645.25 Asset-related
Total 1,862,395,197.61 69,017,250.28 22,364,612.22 1,771,013,335.11 Asset-related
2019 AnnuAl RepoRt 231
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
37. Other non-current liabilities
Whether the New Revenue Standard has been implemented
√ Yes □ No
Unit: RMB
Item Closing balance Opening balance
Wealth management direct financing 250,000,000.00
Less: other non-current liabilities due within one yea 250,000,000.00
Medium-term notes 3,042,841,328.86 2,047,948,069.73
Total 3,042,841,328.86 2,047,948,069.73
38. Share capital
Unit: RMB
Increase/decrease during the year(+/-)
Shares
converted
Opening balance New issue Bonus issue from reserves Others Subtotal Closing balance
Total number of shares 2,904,608,200.00 2,904,608,200.00
39. Other equity instruments
(1) Preference shares, perpetual bonds and other financial instruments outstanding at the end of the period
Increase during Decrease during
Item Opening balance the year the year Closing balance
Perpetual bonds 2,988,000,000.00 2,988,000,000.00
Preference shares 4,477,500,000.00 4,477,500,000.00
Total 7,465,500,000.00 7,465,500,000.00
232 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
39. Other equity instruments Cont’d
(2) Changes in preference shares, perpetual bonds and other financial instruments outstanding at the end of
the period
Unit: RMB
Beginning of the period Increase for the period Decrease for the period End of the period
Outstanding financial Carrying Carrying Carrying Carrying
instruments Number amount Number amount Number amount Number amount
17 Lu Chenming MTN001 10,000,000.00 996,000,000.00 10,000,000.00 996,000,000.00
17 Lu Chenming MTN002 20,000,000.00 1,992,000,000.00 20,000,000.00 1,992,000,000.00
Chenming You 01 22,500,000.00 2,238,750,000.00 22,500,000.00 2,238,750,000.00
Chenming You 02 10,000,000.00 999,000,000.00 10,000,000.00 999,000,000.00
Chenming You 03 12,500,000.00 1,239,750,000.00 12,500,000.00 1,239,750,000.00
75,000,000 7,465,500,000.00 75,000,000 7,465,500,000.00
Changes (increase or decrease) in other equity instruments during the period, the reasons for such changes,
and the basis for relevant accounting treatment:
1. Note: ① Particulars of issue:
The Company issued medium-term notes amounting to RMB3,000 million on 12 July and 28
September 2017 at a coupon rate of 6.80% and 6.30% respectively. The proceeds net of
issue costs amounted to RMB2,988.00 million.
② Particulars of the notes as perpetual bonds
The notes are debts without a defined maturity date and will continue indefinitely until the
exercise of the right of redemption by the Company. The interest rate of the bills is determined
by the basic interest rate + the initial interest rate + 300BP. It has the feature of capped
interest rates and the capped interest rate does not exceed the average interest rate level
of the same type of instruments in the same industry in the same period; The Company has
the right to defer any payment of interest. The right of redemption of the notes is vested
in the Company so that it is up to the Company to decide whether to redeem or not; the
priority of repayment of the principal and interest of medium-term notes for the period is the
same as other outstanding debt financing instruments of the issuers in the event of winding
up, because there is low probability of bankruptcy that the Company will 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 financial assets to any other entity, or to exchange any
financial asset or financial liability with any other entity under potential adverse circumstances.
Consequently, they are eligible to be recognised and accounted for as equity instruments and
included under other equity instruments.
2019 AnnuAl RepoRt 233
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
39. Other equity instruments Cont’d
(2) Changes in preference shares, perpetual bonds and other financial instruments outstanding at the end of
the period Cont’d
2. Note: ① Particulars of issue:
The Company non-publicly issued preference shares amounting to RMB4,500 million on 17
March, 17 August and 22 September 2016 respectively. The proceeds net of issue costs
amounted to RMB4,477.50 million.
② Particulars of the preference shares as equity Instruments
Holders of preference shares participate in profit distribution in two portions, namely the fixed
dividend distributed based on a fixed dividend rate and the distribution of retained earnings
realised for the year.
Other explanations:
A. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders
of the preference shares at fixed dividend rate if there are distributable profits after making good
losses and the contribution to reserve fund according to law. The Board is authorised by the general
meeting to declare and pay all dividends on the preference shares in accordance with the issuance
plan under the framework and principles considered and approved in the general meeting in respect
of the preference shares. The general meeting of the Company has the right to cancel part of or
all of the current dividends on the preference shares. However, when the general meeting of the
Company considers the cancellation of part of or all of the current dividends on the preference
shares, the Company shall inform the shareholders of preference shares at least 10 working days
before the date of dividend payment in accordance with the requirements of the related authorities.
234 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
39. Other equity instruments Cont’d
(2) Changes in preference shares, perpetual bonds and other financial instruments outstanding at the end of
the period Cont’d
B. Participation in the distribution of retained earnings realised for the year
Holders of preference shares participate in the distribution of the retained earnings through receipt
of cash which is non-cumulative and non-deferrable. In the event of making good losses and the
contribution to reserve fund according to law, after receiving fixed dividends at fixed dividend
rate as agreed, holders of preference shares can also participate in the distribution of the retained
earnings for the year in proportion. Specific terms are as follows: the retained earnings for the year
arises from net profit attributable to owners of the parent company on a consolidated basis upon
distribution of relevant fixed income to holders of financial instruments such as the preference
shares which may be classified under equity. 50% of the retained earnings shall be distributed
to holders of preference shares and ordinary shareholders. Holders of preference shares shall
participate in the distribution of the retained earnings by receiving cash dividends, and the ordinary
shareholders shall participate in the distribution of the retained earnings by receiving cash dividends
or dividends on ordinary shares.
Based on the above, the preference shares do not contain any term giving rise to any contractual
obligation to deliver cash or other financial assets to any other entity, or to exchange any financial
asset or financial liability with any other entity under potential adverse circumstances. Consequently,
they were accounted for as other equity instruments – preference shares.
40. Capital reserves
Unit: RMB
Opening Increase for Decrease for Closing
Item balance the period the period balance
Share premium 4,421,127,407.93 11,683,737.93 16,447,225.77 4,416,363,920.09
Other capital reserves 670,322,507.21 670,322,507.21
Total 5,091,449,915.14 11,683,737.93 16,447,225.77 5,086,686,427.30
Other explanations, including changes (increase or decrease) during the period and reasons for such changes:
① The Company previously held 100% of equity interest in Shouguang Meilun Paper Co., Ltd. In December
2019, the Company entered the capital increase and share expansion agreement among Weifang Chenrong
Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) and Shouguang Meilun
Paper Co., Ltd.. Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership (Limited
Partnership) made a unilateral capital injection into Shouguang Meilun Paper Co., Ltd. Upon completion of the
capital increase, its equity interest in Shouguang Meilun Paper Co., Ltd.. was 8% by Weifang Chenrong Growth
Driver Replacement Equity Investment Fund Partnership (Limited Partnership), and the transaction did not result
in the loss of our control of Shouguang Meilun Paper Co., Ltd. As of 31 December 2019, the implementation
of this agreement was completed, and the capital increase was RMB415 million. The transaction resulted in an
increase in minority interest of RMB431.42 million and a decrease in capital reserves of RMB16.44 million.
② The capital increase and share expansion and the introduction from external shareholders from Goldtrust
Futures Co., Ltd., joint venture of the Company resulted in the dilution of the equity interest of the Company, but
the Company still had a significant impact on it. Upon the capital increase, the balance of the net asset share
calculated according to the new shareholding ratio prior to the capital increase was RMB116.8 million based on
the original shareholding ratio, and the capital reserve increase was adjusted to RMB11.68 million.
2019 AnnuAl RepoRt 235
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
41. Other comprehensive income
Unit: RMB
During the period
Less: Transferred Less: Transferred
from Other from Other
Comprehensive Comprehensive
Incurred Income in prior Income in prior Attributable Attributable
before income periods to profit periods to retained to parent to minority
Opening tax for or loss during earnings during Less: income company shareholders Closing
Item balance the period the period the period tax expenses after tax after tax balance
Other comprehensive income
to be reclassified to profit or
loss in subsequent periods -736,520,181.01 -142,931,954.09 -142,931,954.09 -879,452,135.10
Including: Exchange differences on
translation of foreign
operations -736,520,181.01 -142,931,954.09 -142,931,954.09 -879,452,135.10
Total other comprehensive income -736,520,181.01 -142,931,954.09 -142,931,954.09 -879,452,135.10
42. Special reserves
Unit: RMB
Increase for Decrease for
Item Opening balance the period the period Closing balance
Safety production 3,257,998.47 3,257,998.47 0
Total 3,257,998.47 3,257,998.47 0
Explanation: The decrease in special reserves for the period represents the disposal of Haicheng Haiming Mining Co., Ltd.
43. General risk reserves
Increase for Decrease for
Item Opening balance the period the period Closing balance
General risk reserves 64,123,919.23 9,998,724.97 74,122,644.20
Total 64,123,919.23 9,998,724.97 74,122,644.20
Note: Pursuant to the requirements under the Notice of the Ministry of Finance on Issuing the Administrative Measures
for the Provision of Reserves of Financial Enterprises (Cai Jin [2012] No. 20), the assets of a financial enterprise
that are subject to risks and losses shall make provisions, including loans and advances, available-for-sale
financial assets, held-to-maturity investments, long-term equity investments, deposits with banks, borrowings,
debt assets, other receivables and others. The general reserve balance shall not be lower than 1.5% of the
closing balance of the risk assets in principle. The general provisions may be used to make up the losses, but
not for dividend distribution or capital transfers.
The Company makes provision for general risk in accordance with 1.5% of the closing balance of deposits with banks,
loans, discounted assets, borrowings, held-for-trading financial assets, debt investments and other receivables.
236 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
44. Surplus reserves
Unit: RMB
Increase for Amortisation for
Item Opening balance the period the period Closing balance
Statutory surplus reserves 1,148,888,912.11 63,120,197.86 1,212,009,109.97
Total 1,148,888,912.11 63,120,197.86 1,212,009,109.97
45. Retained profit
Unit: RMB
Item The period The prior period
Retained profit as at the end of the prior year before adjustment 9,107,422,690.85 8,866,614,844.40
Accumulated adjustments to retained profit as at the beginning of the
year (increase “+”, decrease “-”)
Retained profit as at the beginning of the year after adjustment 9,107,422,690.85 8,866,614,844.40
Plus: Net profit for year attributable to shareholders of the parent
company 1,656,566,584.88 2,509,828,858.47
Less: Transfer of statutory surplus reserves 63,120,197.86 16,772,805.71
Transfer of general risk reserves 9,998,724.97 64,123,919.23
Ordinary dividend payable 697,105,968.00 1,161,843,280.20
Dividends payable to minority shareholders
Perpetual bonds interest payable 194,000,000.00 347,140,000.00
Preferred shares interest payable 493,494,767.52 679,141,006.88
Retained profit as at the end of the period 9,306,269,617.38 9,107,422,690.85
Including: Surplus reserve attributable to the Parent Company
extracted by subsidiaries 175,282,280.06 161,466,873.84
46. Revenue and operating cost
Unit: RMB
Amount for the year Amount for the prior year
Item Revenue Operating costs Revenue Operating costs
Principal activities 29,731,389,708.33 21,311,249,692.71 28,215,233,444.13 19,278,736,866.85
Other activities 664,044,365.02 462,634,592.68 660,522,719.43 567,019,951.66
Total 30,395,434,073.35 21,773,884,285.39 28,875,756,163.56 19,845,756,818.51
Whether the New Revenue Standard has been implemented
√ Yes □ No
2019 AnnuAl RepoRt 237
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VII. Notes to items of the consolidated financial statements (Cont’d )
46. Revenue and operating cost (Cont’d )
Information in relation to revenue:
Unit: RMB
Machine – Financial Magnesium
Category of contract made paper services mining Real estate Others Total
Type of goods
Machine-made paper 25,911,568,864.48 25,911,568,864.48
Financial leasing 1,815,459,714.28 1,815,459,714.28
Magnesium mining 278,633,403.31 278,633,403.31
Electricity and steam 143,725,243.14 143,725,243.14
Construction materials 311,264,909.38 311,264,909.38
Paper chemicals 126,550,115.28 126,550,115.28
Others 1,557,952,590.89 51,132,956.66 105,094,250.42 94,052,025.51 1,808,231,823.48
Total 27,739,796,813.79 1,866,592,670.94 278,633,403.31 105,094,250.42 405,316,934.89 30,395,434,073.35
By geographical area
Domestic 24,132,497,135.20 1,866,592,670.94 278,633,403.31 105,094,250.42 405,316,934.89 26,788,134,394.76
Overseas 3,607,299,678.59 3,607,299,678.59
Total 27,739,796,813.79 1,866,592,670.94 278,633,403.31 105,094,250.42 405,316,934.89 30,395,434,073.35
Breakdown of revenue from principal activities
① By industry
Amount for the year Amount for the prior year
Industry Revenue Operating costs Revenue Operating costs
Machine-made paper 25,911,568,864.47 19,455,165,308.40 24,303,557,365.13 17,849,873,914.56
Financial leasing 1,815,459,714.28 119,934,602.87 2,202,061,690.16 167,892,149.50
Paper chemicals 311,264,909.38 252,296,926.73 288,669,257.79 228,873,017.91
Magnesium mining 278,633,403.31 125,112,807.37 416,152,447.97 198,076,427.48
Electricity and steam 143,725,243.14 114,507,240.78 154,541,407.23 115,739,913.92
Construction materials 126,550,115.28 112,807,283.45 110,998,714.22 104,827,034.51
Others 1,144,187,458.47 1,131,425,523.11 739,252,561.63 613,454,408.97
Total 29,731,389,708.33 21,311,249,692.71 28,215,233,444.13 19,278,736,866.85
238 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
46. Revenue and operating cost (Cont’d )
② Machine-made paper by category of major products
Amount for the year Amount for the prior year
Item Revenue Operating costs Revenue Operating costs
Duplex press paper 7,728,877,039.07 5,734,589,199.80 6,155,644,742.23 4,518,550,774.15
White paper board 6,908,899,578.15 5,755,130,694.57 6,440,247,745.66 5,395,302,715.50
Coated paper 3,779,487,348.44 2,722,530,177.96 4,697,177,229.03 3,407,051,401.87
Electrostatic paper 3,270,064,358.54 2,295,436,749.00 2,404,374,935.48 1,440,077,827.51
Anti-sticking raw paper 1,238,578,315.18 846,933,499.50 1,208,193,494.70 728,105,243.01
Household paper 620,993,038.46 515,992,003.79 749,151,937.19 703,211,713.08
Others 2,364,669,186.64 1,584,552,983.78 2,647,586,420.34 1,656,767,066.92
Total 25,911,568,864.47 19,455,165,308.40 24,302,376,504.62 17,849,066,742.04
③ Machine-made paper by geographical areas
Amount for the year Amount for the prior year
Item Revenue Operating costs Revenue Operating costs
Mainland China 22,304,269,185.88 16,179,838,701.97 20,008,292,214.92 13,741,799,550.40
Other countries and regions 3,607,299,678.59 3,275,326,606.43 4,295,265,150.21 4,108,074,364.17
Total 25,911,568,864.47 19,455,165,308.40 24,303,557,365.13 17,849,873,914.56
④ Revenue from top 5 customers
Percentage of the
Total revenue from total revenue in
Period top 5 customers the same period (%)
2019 3,193,575,635.94 10.51%
2018 2,031,261,823.95 7.03%
2019 AnnuAl RepoRt 239
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VII. Notes to items of the consolidated financial statements (Cont’d )
47. Taxes and surcharges
Unit: RMB
Amount Amount for
Item for the year the prior year
Urban maintenance and construction tax 68,851,026.86 54,001,398.48
Educational surcharges 30,207,914.38 26,130,730.37
Resource tax 11,038,459.80 14,792,493.31
Property tax 70,397,206.93 54,081,329.55
Land use tax 34,686,247.44 51,224,066.03
Vehicle and vessel tax 112,050.62 216,968.91
Stamp duty 26,151,364.68 26,256,847.64
Local education surcharges 18,602,695.08 12,085,006.25
Water engineering funds 2,576,414.28 2,718,637.28
Land appreciation tax 701,320.66 368,549.40
Others 12,608,739.08 8,482,450.88
Total 275,933,439.81 250,358,478.10
48. Selling and distribution expenses
Unit: RMB
Amount for Amount for
Item the year the prior year
Wages 143,945,947.37 132,591,972.27
Depreciation expenses 12,421,773.86 13,122,208.66
Office expenses 4,737,474.20 4,403,154.36
Travel expenses 31,547,133.82 29,777,817.13
Selling commissions 8,642,790.19 26,874,918.19
Transportation expenses 961,299,229.05 869,865,309.41
Cargo handling charges 15,086,234.94 13,435,084.73
Rental expenses 10,481,463.36 9,362,720.62
Hospitality expenses 66,310,236.64 57,922,888.46
Warehouse expenses 7,548,664.33 3,137,071.93
Others 35,175,241.08 30,006,092.73
Total 1,297,196,188.84 1,190,499,238.49
240 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
49. General and administrative expenses
Unit: RMB
Amount Amount for
Item for the year the prior year
Wages and surcharges 336,234,528.59 286,951,672.01
Welfare expenses 51,837,962.58 47,180,086.08
Depreciation expenses 146,845,808.97 192,962,832.24
Amortisation of intangible assets and long-term expenses 48,927,936.41 39,967,397.65
Production interruption loss 146,340,924.01 55,876,227.19
Repair cost and consumption of materials 49,131,088.84 35,079,467.58
Audit fees 6,131,215.01 5,755,228.95
Travel expenses 23,656,024.87 24,336,676.68
Business hospitality expenses 101,735,867.20 74,890,255.06
Waste disposal expenses 8,621,732.91 12,445,936.32
Insurance premium 27,737,182.97 25,343,799.30
Office expenses 13,277,878.29 10,861,986.20
Others 174,247,241.19 156,189,076.64
Total 1,134,725,391.84 967,840,641.90
50. R&D expenses
Unit: RMB
Amount Amount
Item for the year for the prior year
Installation expenses 880,370.71 1,489,393.97
Depreciation expenses 47,736,244.65 36,497,685.73
Consumption of materials 656,418,640.23 656,847,566.98
Travel expenses 163,071.13 521,322.61
Wages and surcharges 136,792,729.52 106,705,510.89
Welfare expenses 3,484,889.21 3,019,837.65
Housing provident funds 4,647,016.68 4,232,757.63
Insurance premium 12,437,428.25 19,103,988.33
Union funds 104,485.65 415,339.74
Utilities 126,993,184.82 99,972,218.72
Other expenses 2,654,895.89 1,068,066.15
Total 992,312,956.74 929,873,688.40
2019 AnnuAl RepoRt 241
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VII. Notes to items of the consolidated financial statements (Cont’d )
51. Finance expenses
Unit: RMB
Amount Amount
Item for the year for the prior year
Interest expenses 3,780,373,270.56 3,667,168,014.56
Less: capitalised interest amount 206,508,056.70 318,561,106.91
Less: interest income 836,491,207.55 692,370,142.41
Foreign exchange gains and losses -78,262,003.10 -156,373,853.85
Bank charges 256,917,151.16 241,623,526.64
Total 2,916,029,154.37 2,741,486,438.03
52. Other income
Unit: RMB
Amount Amount
Source of other income for the year for the prior year
Government grants – amortised deferred income included in profit or loss 91,381,862.50 70,998,592.61
Government grants – directly included in profit or loss 470,171,768.01 26,815,747.81
Total 561,556,630.51 97,814,340.42
53. Investment income
Unit: RMB
Amount Amount
Item for the year for the prior year
Income from long-term equity investments accounted for using the
equity method -2,995,932.01 -20,475,760.38
Investment gain on disposal of long-term equity investments 176,212,409.13 113,688,671.06
Disposal of other non-current financial assets 784,345.77 155,750,000.00
174,000,822.89 248,962,910.68
242 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VII. Notes to items of the consolidated financial statements (Cont’d )
54. Gain on change in fair value
Unit: RMB
Amount Amount
Source of gain on change in fair value for the year for the prior year
Gain on change in fair value of consumable biological assets
measured at fair value -19,752,911.94 -21,464,400.65
Gain on change in fair value of other non-current financial assets 46,445,653.55 -94,000,000.00
Total 26,692,741.61 -115,464,400.65
55. Credit impairment loss
Unit: RMB
Amount Amount
Item for the year for the prior year
Bad debt loss of bills receivable -1,494,362.23
Bad debt loss of accounts receivable -173,401,791.27 -25,891,565.05
Bad debt loss of other receivables -280,868,224.23 -112,957,716.39
Loss on debt restructuring impairment -55,792,548.82
Bad debt loss of financial lease payments -523,805,364.41 12,698,726.94
Total -1,033,867,928.73 -127,644,916.73
56. Loss on impairment of assets
Whether the New Revenue Standard has been implemented
√ Yes □ No
Unit: RMB
Amount Amount
Item for the year for the prior year
Loss on inventory impairment 61,394,424.83 -117,733,282.00
Loss on long-term equity investments impairment -5,994,545.96
Loss on fixed asset impairment -170,552,917.47 -5,177,720.12
Loss on construction in progress impairment -5,838,644.59 -27,428,935.82
Loss on goodwill impairment -14,314,160.60
Total -120,991,683.19 -164,654,098.54
2019 AnnuAl RepoRt 243
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VII. Notes to items of the consolidated financial statements (Cont’d )
57. Asset disposal income
Unit: RMB
Amount Amount
Source of asset disposal income for the year for the prior year
Disposal of fixed assets -29,073,731.05 17,149,722.72
Total -29,073,731.05 17,149,722.72
58. Non-operating income
Unit: RMB
Amount included
in the current
Amount for Amount for non-recurring
Item the period the prior period profit and loss
Non-current assets damage and scrap profits 1,360,844.76 146,138.79 1,360,844.76
Unpaid debt 9,170,357.94 9,170,357.94
government subsidy 86,353,174.56 277,480,950.83 86,353,174.56
Fine income 3,244,945.04 6,061,107.57 3,244,945.04
Adjustment in equity book value 364,597,001.77 364,597,001.77
Others 28,667,590.80 35,708,040.08 28,667,590.80
Total 493,393,914.87 319,396,237.27 493,393,914.87
Government grants included in profit or loss for the year:
Unit: RMB
Amount Amount Asset-related/
Grants item for the year for the prior year income-related
Amortised deferred income 17,480,975.56 Asset-related
Grant income 86,353,174.56 259,999,975.27 Income-related
Total 86,353,174.56 277,480,950.83
244 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
59. Non-operating expenses
Unit: RMB
Amounts included
in extraordinary
Amount Amount gains or losses
Item for the year for the prior year for the year
Charitable donation expenditures 11,947,836.00 8,740,500.00 11,947,836.00
Litigation 3,590,000.00
Loss on destroyed and scrapped non-current assets 12,610,269.22 3,324,345.71 12,610,269.22
Others 4,026,488.78 3,529,693.40 4,026,488.78
Total 28,584,594.00 19,184,539.11 28,584,594.00
60. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMB
Amount Amount
Item for the year for the prior year
Income tax expenses for the period 564,800,047.60 723,140,689.50
Deferred income tax expenses -269,619,411.14 -81,563,194.58
Total 295,180,636.46 641,577,494.92
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMB
Item Amount for the period
Total profit 2,048,478,829.27
Income tax expenses calculated at statutory (or applicable) tax rates 307,271,824.39
Impact of applying different tax rates to certain subsidiaries 66,184,045.82
Adjustments to current income tax in previous periods -11,281,025.57
Profit and loss of joint ventures and associates accounted for using the equity method -462,773.83
Non-taxable income (listed with “-”) -97,258,402.51
Non-deductible costs, expenses and losses 29,485,040.12
Utilization of the tax effect of unrecognized deductible losses and deductible
temporary differences in previous years (listed with “-”) -7,736,927.40
Tax effects of unrecognized deductible losses and deductible temporary differences 116,346,380.50
Tax effect of R & D fee deduction (listed with “-”) -107,367,525.06
Income tax expense 295,180,636.46
2019 AnnuAl RepoRt 245
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VII. Notes to items of the consolidated financial statements (Cont’d )
61. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB
Amount Amount
Item for the year for the prior year
Default penalty and fine 31,483,669.33 52,469,446.81
Finance expenses – Interest income 301,405,794.11 278,115,215.56
Income-related government grants 502,905,296.95 362,143,279.08
Open credit and other income 228,147,969.26 35,794,381.99
Net proceedings from the financial leasing business 5,885,287,081.31 6,191,859,054.14
Total 6,949,229,810.96 6,920,381,377.58
Explanation on cash received relating to other operating activities:
Explanation on cash received relating to other operating activities: Pursuant to the new standards, the
government grants related to assets and income were all included in operating activities.
(2) Cash paid relating to other operating activities
Unit: RMB
Amount Amount
Item for the year for the prior year
Financial institutions charge 249,130,994.84 241,636,705.91
Business hospitality expenses 134,787,611.84 128,872,141.01
Travel expenses 55,277,692.76 55,398,230.16
Office expenses 21,976,874.36 19,426,972.84
Transportation expenses 1,035,450,908.40 937,436,432.35
Leasing expenses 14,283,881.89 14,452,327.88
Waste disposal expenses 18,686,112.18 31,586,754.90
Insurance premium 19,412,563.18 19,073,069.46
Repair expenses 54,630,753.25 51,165,035.29
Cargo handling charges 37,988,391.76 19,073,069.46
Intermediary service expenses 43,965,039.03 62,252,620.51
Donation 11,947,836.00 8,530,000.00
Others 105,542,724.58 112,331,848.36
Total 1,803,081,384.07 1,701,235,208.13
246 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
61. Items on statements of cash flow (Cont’d )
(3) Cash received relating to other investing activities
Unit: RMB
Amount Amount
Item for the year for the prior year
Recovery of consideration for equity transfer 767,670,000.00
Total 767,670,000.00
(4) Cash paid relating to other investing activities
Unit: RMB
Amount Amount
Item for the year for the prior year
Security deposit for Goldtrust Futures 36,000,000.00
Security deposit for Western Trust 5,000,000.00
Security deposit for acquisition of equity interest in Nanyue Bank 694,000,000.00
Compensation liability 103,042,210.54
Prepayments for land 101,130,000.00
Total 101,130,000.00 838,042,210.54
(5) Cash received relating to other financing activities
Unit: RMB
Amount Amount
Item for the year for the prior year
Short-term commercial paper 3,081,090,437.86 12,915,683,724.57
Loans to the Finance Company 100,000,000.00
Equipment leaseback 1,717,600,000.00 3,702,500,000.00
Loans to Chenming Holdings Co., Ltd. 332,440,865.27
Net recovery of guarantee deposit 734,974,699.49
Total 5,866,106,002.62 16,718,183,724.57
2019 AnnuAl RepoRt 247
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
61. Items on statements of cash flow (Cont’d )
(6) Cash paid relating to other financing activities
Unit: RMB
Amount Amount
Item for the year for the prior year
Repayment of short-term commercial paper and MTN 5,070,000,000.00 18,036,968,519.46
Repayment of bonds 1,182,150,000.00 2,600,000,000.00
Repayment of equipment leaseback 3,155,141,094.22 2,790,756,044.94
Repayment of interest on preference shares 493,494,767.52 679,141,006.88
Repayment of interest on perpetual bonds 194,000,000.00 347,140,000.00
Increase in restricted bank deposits for the year 5,272,132,418.30
Security deposit for financial leasing 15,000,000.00 32,200,000.00
Acquisition of non-controlling interests in Shanghai Hongtai 2,089,074,400.00
Acquisition of non-controlling interests in Guangdong Huirui 120,600,000.00
Acquisition of non-controlling interests in Wuhan Chenming 60,896,600.00
Total 10,109,785,861.74 32,028,908,989.58
248 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
62. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB
Amount Amount
Supplementary information for the year for the prior year
1. Reconciliation of net profit as cash flows from operating
activities: — —
Net profit 1,753,298,192.81 2,564,738,621.27
Plus: loss on impairment of assets 120,991,683.19 164,654,098.54
Credit impairment loss 1,033,867,928.73 127,644,916.73
Depreciation of fixed assets, consumption of oil and
gas assets, depreciation of bearer biological assets 1,853,139,090.52 1,686,464,360.70
Amortisation of intangible assets 53,100,846.01 49,169,532.63
Amortisation of long-term prepaid expenses 7,433,030.41 8,377,363.10
Loss on disposal of fixed assets, intangible assets and other
long-term assets (“-” denotes gain) 30,173,140.18 -16,986,475.18
Loss on scrapped fixed assets (“-” denotes gain) 1,361,320.41
Loss on changes in fair value (“-” denotes gain) -26,692,741.61 115,279,025.65
Finance expenses (“-” denotes gain) 3,073,865,213.86 3,348,593,728.38
Investment loss (“-” denotes gain) -538,508,597.83 -248,962,910.68
Decrease in deferred income tax assets (“-” denotes increase) -288,568,932.42 -81,584,848.22
Increase in deferred income tax liabilities (“-” denotes decrease) 1,411,125.59
Decrease in inventories (“-” denotes increase) 2,093,523,272.65 -748,682,942.57
Decrease in operating receivables (“-” denotes increase) 7,690,318,930.21 12,866,522,125.36
Increase in operating payables (“-” denotes decrease) -4,625,917,052.94 -5,735,524,708.67
Others
Net cash flows from operating activities 12,232,707,222.94 14,099,701,887.04
2. Major investing and financing activities not involving
cash settlements:
Capital converted from debts
Convertible bonds of the Company due within one year
Finance leases of fixed assets
3. Net change in cash and cash equivalents:
Closing balance of cash 2,890,328,027.40 2,381,558,242.52
Less: Opening balance of cash 2,381,558,242.52 2,804,408,374.46
Plus: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 508,769,784.88 -422,850,131.94
2019 AnnuAl RepoRt 249
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
62. Supplementary information on cash flow statement (Cont’d )
(2) Net cash received from disposal of subsidiaries during the current period
Unit: RMB
Amount
Disposal of cash or cash equivalents received by subsidiaries during the period 238,326,500.00
Of which: –
Haicheng Haiming Mining Co., Ltd. 221,000,000.00
Beijing Chenming Meilun Technology Co., Ltd. 12,316,500.00
Wuxi Songling Paper Co., Ltd. 5,010,000.00
Less: Cash and cash equivalents held by the company on the day in the event that the
control is lost 22,905,416.76
Of which: –
Haicheng Haiming Mining Co., Ltd. 22,843,749.03
Beijing Chenming Meilun Technology Co., Ltd. 60,797.95
Wuxi Songling Paper Co., Ltd. 869.78
Net cash received from disposal of subsidiaries 215,421,083.24
(3) Cash and cash equivalents composition
Unit: RMB
Item Closing balance Opening balance
I. Cash 2,890,328,027.40 2,381,558,242.52
Of which: Treasury cash 2,418,131.86 2,078,321.66
Bank deposit that can be used for payment at any time 2,887,909,895.54 2,379,479,920.86
Other monetary funds that can be used for payment at any time
Deposit at central bank deposit that can be used for payment
Amount due from banks
Amount due to banks
II. Cash equivalents
Of which: Bond investment with maturity within 3 months
III. Balance of cash and cash equivalent at end of period 2,890,328,027.41 2,381,558,242.52
Of which: Restricted cash and cash equivalents used by the
Company or subsidiaries within the Group
Other explanation: Cash and cash equivalents did not include the restricted cash and cash equivalents used by
the Company or subsidiaries within the Group.
250 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
63. Assets with restricted ownerships or right to use
Unit: RMB
Closing
Item carrying amount Reason for such restrictions
Monetary funds 16,176,241,805.78 As guarantee deposits for bank acceptance bills and letter of
credit and deposit reserves (Note VII.1)
Bills receivable/accounts 152,714,290.24 As collateral for short-term borrowings, letters of guarantee and
receivable financing letters of credit (Note VII.4)
Fixed assets 10,573,696,190.50 As collateral for bank borrowings (Note VII.14)
Intangible assets 880,676,428.58 As collateral for bank borrowings and long-term payables
(Note VII.17)
Investment property 4,519,487,976.25 As collateral for bank borrowings (Note VII.13)
Total 32,302,816,691.35
2019 AnnuAl RepoRt 251
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
64. Foreign currency items
(1) Foreign currency items
Unit: RMB
Closing foreign Closing balance
Item currency balance Exchange rate in RMB
Monetary funds
Of which: USD 110,500,218.68 6.9762 770,871,625.55
EUR 405,730.03 7.8155 3,170,983.04
HKD 710,980.25 0.8958 636,881.89
JPY 4,980.96 0.0641 319.21
GBP 2,034.18 9.1501 18,612.93
Accounts receivables
Of which: USD 100,358,916.38 6.9762 700,123,872.43
EUR 5,844,790.93 7.8155 45,679,963.48
JPY 146,734,998.00 0.0641 9,403,659.08
Accounts payable
Of which: USD 120,461,073.62 6.9762 840,360,541.80
EUR 12,302,034.94 7.8155 96,146,554.03
Long-term borrowings
Of which: USD 211,200,000.00 6.9762 1,473,373,440.00
Bonds payable
Of which: USD 167,598,536.38 6.9762 1,169,200,909.49
Short-term borrowings
Of which: USD 127,401,000.63 6.9762 888,774,860.61
HKD 34,999,986.66 0.8958 31,352,288.05
Prepayments
Of which: USD 218,766.49 6.9762 1,526,158.79
JPY 121,696.00 0.0641 7,799.01
Other receivables
Of which: USD 685,767.62 6.9762 4,784,052.09
EUR 315,311.82 7.8155 2,464,319.53
Contract liabilities
Of which: USD 10,517,400.64 6.9762 73,371,490.31
Other payables
Of which: USD 13,252,216.09 6.9762 92,450,109.89
EUR 352,861.30 7.8155 2,757,787.49
HKD 173,783.57 0.8958 155,671.85
252 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d )
64. Foreign currency items (Cont’d )
(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 if
there is any change in the functional currency.
√ Applicable □ Not applicable
Principal place Place of Functional
No. Name of subsidiary of business incorporation currency
1 Chenming GmbH Hamburg, Germany Hamburg, Germany EUR
2 Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea KRW
3 Chenming International Co., Ltd. Los Angeles, USA Los Angeles, USA USD
4 Chenming Paper Japan Co., Ltd. Tokyo, Japan Tokyo, Japan JPY
5 Chenming Paper United States Co., Ltd. Los Angeles, USA Los Angeles, USA USD
65. Government grants
(1) General information of government grants
Unit: RMB
Amount included
in the current
Type Amount Reporting item profit and loss
National Science and Technology Support Program
Project Funding 164,700.00 Other revenue 164,700.00
Sewage treatment and water saving reconstruction 1,192,682.88 Other revenue 1,192,682.88
Financial subsidies for technical transformation items 110,054,807.72 Other revenue 110,054,807.72
Zhanjiang Forest Pulp & Paper Integration Item 4,094,632.92 Other revenue 4,094,632.92
Industrial logistics park reconstruction compensation 4,705,900.00 Other revenue 4,705,900.00
Financial discount 22,364,612.22 Financial cost 22,364,612.22
Research and development grants 74,923,512.88 Other revenue 74,923,512.88
Funding for environmental protection 49,361,843.85 Other revenue 49,361,843.85
Government awards 228,000,000.00 Other revenue 228,000,000.00
VAT is levied and reimbursed immediately 1,217,058.15 Other revenue 1,217,058.15
Afforestation subsidy 3,891,820.00 Other revenue 3,891,820.00
Tax return 80,382,428.92 Other revenue 80,382,428.92
Enterprise reform and development subsidies 31,070,010.00 Non-operating 31,070,010.00
income
Investment promotion subsidy 41,542,500.00 Non-operating 41,542,500.00
income
Others 17,307,907.75 Non-operating 17,307,907.75
income, other
revenue
Total 670,274,417.29 670,274,417.29
2019 AnnuAl RepoRt 253
XIII Financial Report
VIII. Change in scope of consolidation
1. Disposal of subsidiaries
Whether there is loss of control over subsidiaries on a single disposal
√ Yes □ No
Difference
between
consideration
and share of
net assets of Carrying Determination and
relevant amount of Fair value key assumption Relevant other
subsidiary Remaining remaining of remaining of fair value comprehensive
Consideration Shareholding as per shareholding shareholding shareholding Gain or loss of remaining income of
of disposal of disposal Nature of consolidated as of the as of the as of the date in fair value of shareholding former subsidiary
Name of of equity of equity disposal of Time of financial date of loss date of loss of loss remaining as of the date transferred to
subsidiary interest interest equity interest loss of control Basis for time statements of control of control of control shareholding of loss of control profit or loss
Ha cheng Haim ng
Min ng Company
Lim ted 421,000,000.00 60.00 Transfer 2019.8.31 Without control 163,300,169.59 0.00 0.00 0.00 0.00
Be j ng Chenming Mei un
Technology Co., Ltd. 12,316,500.00 100.00 Transfer 2019.9.30 Without control 6,656,201.20 0.00 0.00 0.00 0.00
Wuxi Song Ling Paper
Co., Ltd. 5,010,000.00 100.00 Transfer 2019.12.31 Without control 6,256,038.34 0.00 0.00 0.00 0.00
2. Others
During the year, the scope of consolidation had 4 newly established subsidiaries, namely Shanghai Chenming Pulp
& Paper Sales Co., Ltd., Meilun (BVI) Limited, Shandong Chenming Panels Co., Ltd., and Weifang Chenrong Growth
Driver Replacement Equity Investment Fund Partnership (Limited Partnership). Please refer to Note IX. 1. Interest in
subsidiaries for details.
254 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Principle place Place of Nature of Type of Issued debt Issued share
Name of subsidiary of business incorporation business legal entity Shareholding Acquisition securities capital
Direct Indirect
Zhanjiang Chenming Pulp & Paper Co., Ltd. Zhanjiang, China Zhanjiang, China Paper making For-profit legal entity 100.00% Establishment 0 0
Shouguang Meilun Paper Co., Ltd. Shouguang, China Shouguang, China Paper making For-profit legal entity 92.00% Establishment 0 0
Jilin Chenming Paper Co., Ltd. Jilin, China Jilin, China Paper making For-profit legal entity 100.00% Merger and 0 0
acquisition
Huanggang Chenming Pulp & Huanggang, China Huanggang, China Pulp production For-profit legal entity 100.00% Establishment 0 0
Paper Co., Ltd.
Shandong Chenming Paper Sales Co., Ltd. Shouguang, China Shouguang, China Sales of paper products For-profit legal entity 100.00% Establishment 0 0
Shouguang Chenming Shouguang, China Shouguang, China Import and export trade For-profit legal entity 100.00% Establishment 0 0
Import and Export Trade Co., Ltd.
Jiangxi Chenming Supply Jiangxi, China Jiangxi, China Trading For-profit legal entity 70.00% Establishment 0 0
Chain Management Co., Ltd.
Chenming GmbH Hamburg, Germany Hamburg, Germany Paper product trading For-profit legal entity 100.00% Establishment 0 0
Shouguang Chenming Shouguang, China Shouguang, China Machinery manufacturing For-profit legal entity 100.00% Establishment 0 0
Papermaking Machine Co., Ltd.
Shouguang Hongxiang Shouguang, China Shouguang, China Printing and packaging For-profit legal entity 100.00% Merger and 0 0
Printing and Packaging Co., Ltd. acquisition
Shouguang Chenming Shouguang, China Shouguang, China Transportation For-profit legal entity 100.00% Establishment 0 0
Modern Logistic Co., Ltd.
Shouguang Chenming Shouguang, China Shouguang, China Logistics For-profit legal entity 100.00% Establishment 0 0
Industrial Logistics Co., Ltd.
Jinan Chenming Jinan, China Jinan, China Investment Management For-profit legal entity 100.00% Establishment 0 0
Investment Management Co., Ltd.
Huanggang Chenming Huanggang, China Huanggang, China Arboriculture For-profit legal entity 100.00% Establishment 0 0
Arboriculture Development Co., Ltd.
Chenming Arboriculture Co., Ltd. Wuhan, China Wuhan, China Arboriculture For-profit legal entity 100.00% Establishment 0 0
Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea Sales of paper products For-profit legal entity 100.00% Establishment 0 0
Shandong Chenming Power Supply Shouguang, China Shouguang, China Power For-profit legal entity 100.00% Establishment 0 0
Holdings Co., Ltd.
Shouguang Shun Da Shouguang, China Shouguang, China Customs declaration For-profit legal entity 100.00% Establishment 0 0
Customs Declaration Co, Ltd.
Shanghai Chenming Industrial Co., Ltd. Shanghai, China Shanghai, China Property investment and For-profit legal entity 100.00% Establishment 0 0
management
Shandong Chenming Paper Fuyu, China Fuyu, China Sales of paper products For-profit legal entity 100.00% Establishment 0 0
Group (Fuyu) Sales Co., Ltd.
Shandong Chenming Group Jinan, China Jinan, China Finance For-profit legal entity 80.00% 20.00% Establishment 0 0
Finance Co., Ltd.
Jiangxi Chenming Paper Co., Ltd. Nanchang, China Nanchang, China Paper making For-profit legal entity 42.46% 40.79% Establishment 0 0
Qingdao Chenming Qingdao, China Qingdao, China Logistics For-profit legal entity 30.00% 70.00% Establishment 0 0
International Logistics Co., Ltd.
Shouguang Chenming Art Paper Co., Ltd. Shouguang, China Shouguang, China Paper making For-profit legal entity 75.00% Establishment 0 0
Hailaer Chenming Paper Co., Ltd. Hailaer, China Hailaer, China Paper making For-profit legal entity 75.00% Establishment 0 0
2019 AnnuAl RepoRt 255
XIII Financial Report
IX. Interest in other entities (Cont’d )
1. Interest in subsidiaries (Cont’d )
(1) Constitution of the Group (Cont’d)
Principle place Place of Nature of Type of Issued debt Issued share
Name of subsidiary of business incorporation business legal entity Shareholding Acquisition securities capital
Direct Indirect
Shandong Grand View Hotel Co., Ltd. Shouguang, China Shouguang, China Catering For-profit legal entity 70.00% Establishment 0 0
Wuhan Chenming Hanyang Wuhan, China Wuhan, China Paper making For-profit legal entity 65.21% Establishment 0 0
Paper Holdings Co., Ltd
Chengdu Chenming Chengdu, China Chengdu, China Marketing For-profit legal entity 100.00% Establishment 0 0
Culture Communication Co., Ltd.
Shandong Chenming Jinan, China Jinan, China Financial leasing For-profit legal entity 100.00% Establishment 0 0
Financial Leasing Co., Ltd.
Qingdao Chenming Qingdao, China Qingdao, China Financial leasing For-profit legal entity 100.00% Establishment 0 0
Nonghai Financial Leasing Co., Ltd.
Chenming (HK) Limited Hong Kong, China Hong Kong, China Paper product trading For-profit legal entity 100.00% Establishment 0 0
Shouguang Hongyi Shouguang, China Shouguang, China Packaging For-profit legal entity 100.00% Merger and 0 0
Decorative Packaging Co., Ltd. acquisition
Shouguang Xinyuan Coal Co., Ltd. Shouguang, China Shouguang, China Coal For-profit legal entity 100.00% Merger and 0 0
acquisition
Shouguang City Run Sheng Shouguang, China Shouguang, China Purchase and sale of waste For-profit legal entity 100.00% Merger and 0 0
Wasted Paper Recycle Co., Ltd. acquisition
Shouguang Wei Yuan Logistics Shouguang, China Shouguang, China Logistics For-profit legal entity 100.00% Merger and 0 0
Company Limited acquisition
Shandong Chenming Panels Co., Ltd. Shouguang, China Shouguang, China Panels For-profit legal entity 100.00% Merger and 0 0
acquisition
Shandong Chenming Floor Board Co., Ltd. Shouguang, China Shouguang, China Floor Board For-profit legal entity 100.00% Merger and 0 0
acquisition
Shouguang Chenming Cement Co., Limited Shouguang, China Shouguang, China Cement For-profit legal entity 100.00% Establishment 0 0
Wuhan Chenming Wuhan, China Wuhan, China Thermal power For-profit legal entity 51.00% Establishment 0 0
Qianneng Electric Power Co., Ltd.
Shandong Chenming Investment Limited Jinan, China Jinan, China Investment For-profit legal entity 100.00% Establishment 0 0
Japan Chenming Paper Co., Ltd. Tokyo, Japan Tokyo, Japan Paper product trading For-profit legal entity 100.00% Establishment 0 0
Chenming International Co., Ltd. Los Angeles, Los Angeles, Paper product trading For-profit legal entity 100.00% Establishment 0 0
the United States the United States
Zhanjiang Chenming Zhanjiang, China Zhanjiang, China Arboriculture For-profit legal entity 100.00% Establishment 0 0
Arboriculture Development Co., Ltd.
Yangjiang Chenming Yangjiang, China Yangjiang, China Arboriculture For-profit legal entity 100.00% Establishment 0 0
Arboriculture Development Co., Ltd.
Nanchang Chenming Nanchang, China Nanchang, China Arboriculture For-profit legal entity 100.00% Establishment 0 0
Arboriculture Development Co., Ltd.
Guangdong Huirui Investment Co., Ltd. Zhanjiang, China Zhanjiang, China Investment For-profit legal entity 100.00% Merger and 0 0
acquisition
Zhanjiang Chenming Zhanjiang, China Zhanjiang, China Wall materials For-profit legal entity 100.00% Establishment 0 0
New-style Wall Materials Co., Ltd
Jilin Chenming Jilin, China Jilin, China Wall materials For-profit legal entity 100.00% Establishment 0 0
New-style Wall Materials Co., Ltd.
256 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d )
1. Interest in subsidiaries (Cont’d )
(1) Constitution of the Group (Cont’d)
Principle place Place of Nature of Type of Issued debt Issued share
Name of subsidiary of business incorporation business legal entity Shareholding Acquisition securities capital
Direct Indirect
Jilin Chenming Logistics Co., Ltd. Jilin, China Jilin, China Logistics For-profit legal entity 100.00% Establishment 0 0
Jiangxi Chenming Logistics Co., Ltd. Nanchang, China Nanchang, China Logistics For-profit legal entity 100.00% Establishment 0 0
Fuyu Chenming Paper Co., Ltd. Fuyu, China Fuyu, China Paper making For-profit legal entity 100.00% Establishment 0 0
Zhanjiang Meilun Pulp & Paper Co., Ltd. Zhanjiang, China Zhanjiang, China Paper making For-profit legal entity 100.00% Establishment 0 0
Shanghai Chenming Shanghai, China Shanghai, China Financial leasing For-profit legal entity 100.00% Establishment 0 0
Financial Leasing Co., Ltd.
Guangzhou Chenming Guangzhou, China Guangzhou, China Financial leasing For-profit legal entity 100.00% Establishment 0 0
Financial Leasing Co., Ltd.
Shanghai Hongtai Real Estate Co., Ltd. Shanghai, China Shanghai, China Real estate For-profit legal entity 100.00% Merger and 0 0
acquisition
Shanghai Hongtai Shanghai, China Shanghai, China Property Management For-profit legal entity 100.00% Merger and 0 0
Property Management Co., Ltd. acquisition
Shandong Chenming Jinan, China Jinan, China Business factoring For-profit legal entity 100.00% Establishment 0 0
Commercial Factoring Co., Ltd.
Guangzhou Chenming Guangzhou, China Guangzhou, China Business factoring For-profit legal entity 51.00% Establishment 0 0
Commercial Factoring Co., Ltd.
Qingdao Chenming Pulp & Paper Electronic Qingdao, China Qingdao, China Trading For-profit legal entity 30.00% 70.00% Establishment 0 0
Commodity Spot Trading Co., Ltd.
Shandong Chenming Shouguang, China Shouguang, China Sales For-profit legal entity 100.00% Establishment 0 0
Coated Paper Sales Co. Ltd.
Zhanjiang Chenming Port Co., Ltd. Zhanjiang, China Zhanjiang, China Cargo loading For-profit legal entity 100.00% Establishment 0 0
Beijing Chenming Financial Leasing Co., Ltd. Beijing, China Beijing, China Finance For-profit legal entity 100.00% Establishment 0 0
Chenming Paper United States Co., Ltd. The United States 3200 EL CAMINO Paper trading For-profit legal entity 100.00% Establishment 0 0
REAL,SUITE
130,IRVINE,CA
Guangdong Chenming Panels Co., Ltd. Guangdong Guangdong Panels For-profit legal entity 100.00% Establishment 0 0
Shanghai Chenming Pulp & Paper Sales Shanghai Shanghai Paper product trading For-profit legal entity 100.00% Establishment 0 0
Co., Ltd.
Meilun (BVI) Limited Cayman Shouguang For-profit legal entity 100.00% Establishment 0 0
Weifang Chenming Growth Driver Weifang Weifang Fund For-profit legal entity 79% Establishment 0 0
Replacement Equity Investment Fund
Partnership (Limited Partnership)
Nanjing Chenming Culture Communication Nanjing Nanjing Marketing For-profit legal entity 100.00% Establishment 0 0
Co., Ltd.
2019 AnnuAl RepoRt 257
XIII Financial Report
IX. Interest in other entities (Cont’d )
1. Interest in subsidiaries (Cont’d )
(2) Major non-wholly owned subsidiaries
Unit: RMB
Gain or Dividend to
loss attributable minority
to minority interest Closing
interest during declared balance of
Name of subsidiary Minority interest the period during the period minority interest
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 34.79% 27,220,765.44 111,697,321.19
Shouguang Chenming Art Paper Co., Ltd. 25% 17,088,924.63 98,366,240.06
Shouguang Meilun Paper Co., Ltd. 8% 431,429,276.54
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Closing balance Opening balance
Name of Current Non-current Total Current Non-current Total Current Non-current Total Current Non-current Total
subsidiary assets assets assets liabilities liabilities liabilities assets assets assets liabilities liabilities liabilities
Wuhan Chenming
Hanyang Paper
Hold ngs Co., Ltd. 242,300,843.28 1,042,530,549.73 1,284,831,393.01 854,628,918.22 84,521,086.72 939,150,004.94 304,800,513.20 1,128,834,779.70 1,433,635,292.90 1,116,394,677.03 43,004,618.52 1,159,399,295.55
Shouguang Chenming
Art Paper Co., Ltd. 651,004,033.69 573,204,378.67 1,224,208,412.36 830,743,452.16 830,743,452.16 874,366,187.24 618,223,904.52 1,492,590,091.76 1,167,480,830.07 1,167,480,830.07
Shouguang Mei un
Paper Co., Ltd. 5,071,137,194.65 11,453,793,662.17 16,524,930,856.82 10,013,297,488.59 1,186,061,831.08 11,199,359,319.67 1,731,551,339.38 10,007,456,117.42 11,739,007,456.80 5,339,163,271.76 1,700,271,079.40 7,039,434,351.16
Unit: RMB
Amount for the year Amount for the prior year
Total Cash flows Total Cash flows
comprehensive from operating comprehensive from operating
Name of subsidiary Revenue Net profit income activities Revenue Net profit income activities
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 1,282,969,981.66 71,445,390.72 71,445,390.72 104,514,705.53 1,364,181,429.19 35,042,380.33 35,042,380.33 316,577,834.65
Shouguang Chenming Art Paper Co., Ltd. 765,841,628.21 68,355,698.51 68,355,698.51 -66,098,414.48 909,260,241.77 118,652,095.44 118,652,095.44 -99,931,648.76
Shouguang Meilun Paper Co., Ltd. 5,199,154,922.05 199,314,693.58 199,314,693.58 1,510,148,358.58 5,048,212,524.75 103,361,172.68 103,361,172.68 1,184,997,775.73
258 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d )
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(1) Changing in shareholding in subsidiaries
The Company previously held 100% of equity interest in Shouguang Meilun Paper Co., Ltd. In December
2019, the Company entered the capital increase and share expansion agreement among Weifang Chenrong
Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) and Shouguang Meilun
Paper Co., Ltd.. Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership (Limited
Partnership) made a unilateral capital injection into Shouguang Meilun Paper Co., Ltd. Upon completion of the
capital increase, its equity interest in Shouguang Meilun Paper Co., Ltd.. was 8% by Weifang Chenrong Growth
Driver Replacement Equity Investment Fund Partnership (Limited Partnership), and the transaction did not result
in the loss of our control of Shouguang Meilun Paper Co., Ltd. As of 31 December 2019, the implementation
of this agreement was completed, and the capital increase was RMB415 million. The transaction resulted in an
increase in minority interest of RMB431.44 million and a decrease in capital reserves of RMB16.44 million.
(2) Effect on minority interest and equity attributable to the owners of the parent company
Unit: RMB
Shouguang Meilun
Paper Co., Ltd.
– Cash 4,978,090,322.16
Total acquisition cost/disposal consideration 415,000,000.00
Less: share of net assets in subsidiaries based on shares acquired/disposed 4,961,643,096.39
Difference 16,447,225.77
Of which: capital reserve adjustment -16,447,225.77
3. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Principle place Principle place Nature of Accounting
Name of joint venture and associate of business of incorporation business Shareholding method
Direct Indirect
Weifang Senda Meixi Port Co., Ltd. Weifang, China Weifang, China Port construction 50.00% Equity method
Ningbo Kaichen Huamei Equity Investment Ningbo, China Ningbo, China Investment 40.00% Equity method
Fund Partnership (Limited Partnership) management
Weifang Xingxing United Chemical Co., Ltd. Weifang, China Weifang, China Chemical 50.00% Equity method
Zhuhai Dechen New Third Board Equity Zhuhai, China Zhuhai, China Investment 50.00% Equity method
Investment Fund Company management
(Limited Partnership)
Goldtrust Futures Co., Ltd. Changsha Changsha Futures 35.43% Equity method
Weifang Chenrong Growth Driver Replacement Weifang Weifang Investment 44.44% Equity method
Equity Investment Fund Partnership (Limited management
Partnership)
Guangdong Nanyue Bank Co., Ltd., Guangdong Guangdong Bank 16.62% Equity method
2019 AnnuAl RepoRt 259
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IX. Interest in other entities (Cont’d )
3. Interest in joint arrangements or associates (Cont’d )
(2) Key financial information of major joint ventures
Unit: RMB
Closing balance/Amount for the year Opening balance/Amount for the prior year
Weifang Sime Darby Weifang Xingxing Weifang Sime Darby Weifang Xingxing
Item West Port Co., Ltd. United Chemical Co., Ltd. West Port Co., Ltd. United Chemical Co., Ltd.
Current assets 26,890,506.23 94,334,994.14 55,386,175.28 97,755,183.56
Of which: Cash and cash equivalents 8,299,040.10 25,959,739.14 53,489,910.53 35,030,150.70
Non-current assets 543,566,206.60 32,100,379.42 528,403,804.86 38,098,361.81
Total assets 570,456,712.83 126,435,373.56 583,789,980.14 135,853,545.37
Current liabilities 16,216,196.08 27,927,549.31 1,236,372.30 32,584,182.76
Non-current liabilities 389,517,611.14 389,620,042.41 389,620,042.41
Total liabilities 405,733,807.22 27,927,549.31 390,856,414.71 32,584,182.76
Minority interest
Equity interest attributable to shareholders
of the parent company 164,722,905.61 98,507,824.25 192,933,565.43 103,269,362.61
Share of net assets based on shareholding 82,361,452.81 49,253,912.13 96,466,782.72 51,634,681.31
Adjustments
– Goodwill
– Unrealised profit arising from intra-group
transactions 7,365,218.95 44,562,645.26 6,693,074.99 57,618,555.81
– Others
Carrying amount of investment in joint ventures 89,726,671.76 93,816,557.39 103,159,857.71 109,253,237.12
Fair value of investments in joint ventures with
public quoted prices
Revenue 29,834,105.08 132,763,766.49 166,613,896.54
Finance expenses 20,667,999.05 -394,709.39 -346,852.57 -8,403.59
Income tax expenses 4,706,185.72 8,790,141.65
Net profit -26,827,919.17 14,118,557.12 -3,214,369.59 26,370,063.88
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income -26,827,919.17 14,118,557.12 -3,214,369.59 26,370,063.88
Dividend received from joint ventures
during the period 23,000,000.00
260 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d )
3. Interest in joint arrangements or associates (Cont’d )
(3) Key financial information of major associates
Unit: RMB
Closing balance/Amount for the year Opening balance/Amount for the prior year
Ningbo Kaichen Zhuhai Dechen New Ningbo Kaichen Zhuhai Dechen New
Huamei Equity Third Board Equity Huamei Equity Third Board Equity
Investment Fund Investment Fund Investment Fund Investment Fund
Partnership (Limited Company (Limited Partnership (Limited Company (Limited
Item Partnership) Partnership) Partnership) Partnership)
Current assets 43,709,912.78 5,810,979.79 79,292,150.81 5,492,635.42
Including: Cash and cash equivalents
Non-current assets 154,450,006.00 99,020,000.00 119,000,000.00 99,020,000.00
Total assets 198,159,918.78 104,830,979.79 198,292,150.81 104,512,635.42
Current liabilities 21,826.94 5,000.00 13,135.40 5,000.00
Non-current liabilities
Total liabilities 21,826.94 5,000.00 13,135.40 5,000.00
Minority interest
Equity interest attributable to shareholders of
the parent company 198,138,091.84 104,825,979.79 198,279,015.41 104,507,635.42
Share of net assets based on shareholding 79,255,236.74 52,412,989.90 79,311,606.16 52,253,817.72
Adjustments
– Goodwill
– Unrealised profit arising from intra-group
transactions
– Others 120,273,610.78 120,273,610.78
Carrying amount of investment in associates 199,528,847.52 52,412,989.90 199,585,216.94 52,253,817.72
Fair value of investments in joint ventures with
public quoted prices
Revenue
Finance expenses
Income tax expenses
Net profit -154,058.98 318,344.37 1,510,109.81 670,768.61
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income -154,058.98 318,344.37 1,510,109.81 670,768.61
Dividend received from joint ventures during
the period
2019 AnnuAl RepoRt 261
XIII Financial Report
IX. Interest in other entities (Cont’d )
3. Interest in joint arrangements or associates (Cont’d )
(3) Key financial information of major associates (Cont’d)
Closing balance/Amount for the period Opening balance/Amount for the prior period
Weifang Chenrong Weifang Chenrong
Growth Driver Growth Driver
Replacement Equity Replacement Equity
Goldtrust Investment Fund Goldtrust Investment Fund
Futures Partnership (Limited Futures Partnership (Limited
Item Co., Ltd. Partnership) Co., Ltd. Partnership)
Current assets 514,865,137.33 8,000,250.00
Of which:Cash and cash equivalents
Non-current assets 13,965,721.72 407,000,000.00
Total assets 528,830,859.05 415,000,250.00
Current liabilities 281,568,856.43 8,000,000.00
Non-current liabilities 30,000,000.00
Total liabilities 311,568,856.43 8,000,000.00
Minority interests
Equity interest attributable to shareholders of the parent company 217,262,002.62 407,000,250.00
Share of net assets based on shareholding 76,975,927.53 180,870,911.10
Adjustments
– Goodwill 104,073,292.25
– Unrealised profit arising from intra-group transactions
– Others 11,683,737.93 -22,870,911.10
Carrying amount of investment in joint ventures 192,732,957.71 158,000,000.00
Fair value of investments in joint ventures with public quoted
prices
Revenue 48,222,356.65
Financial cost
Income tax expenses
Net profit 329,683.17 250.00
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income 329,683.17 250.00
Dividend received from joint ventures during the period
262 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
IX. Interest in other entities (Cont’d )
3. Interest in joint arrangements or associates (Cont’d )
(3) Key financial information of major associates (Cont’d)
Closing balance/Amount Opening balance/Amount
for the period for the prior period
Guangdong Nanyue Guangdong Nanyue
Item Bank Co., Ltd. Bank Co., Ltd.
Current assets 43,993,240,945.90
Of which:Cash and cash equivalents
Non-current assets 162,549,835,269.08
Total assets 206,543,076,214.98
Current liabilities 172,504,238,508.02
Non-current liabilities 17,098,918,091.65
Total liabilities 189,603,156,599.67
Minority interests
Equity interest attributable to shareholders of the
parent company 16,847,722,509.11
Share of net assets based on shareholding 2,800,091,481.01
Adjustments
– Goodwill
– Unrealised profit arising from intra-group
transactions
– Others
Carrying amount of investment in joint ventures 2,800,091,481.01
Fair value of investments in joint ventures with
public quoted prices
Revenue 11,008,440,467.50
Financial cost
Income tax expenses
Net profit 1,634,495,792.15
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income 1,634,495,792.15
Dividend received from joint ventures during the period
2019 AnnuAl RepoRt 263
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IX. Interest in other entities (Cont’d )
3. Interest in joint arrangements or associates (Cont’d )
(4) Summary financial information of non-major joint ventures and associates
Unit: RMB
Closing balance/ Opening balance/
Amount for Amount for
the year the prior year
Joint ventures: — —
Total carrying amount of investment 9,669,667.61 3,572,834.79
Total amount of the following items based on shareholding — —
– Net profit 2,216,832.82 485,538.07
– Other comprehensive income
– Total comprehensive income 2,216,832.82 485,538.07
Associates: — —
Total carrying amount of investment 10,359,850.83 18,761,580.99
Total amount of the following items based on shareholding -494,921.70 -11,838,692.59
– Net profit -494,921.70 -11,838,692.59
– Other comprehensive income
– Total comprehensive income -494,921.70 -11,838,692.59
(5) Excess loss of joint ventures or associates
Unit: RMB
Accumulated Unrecognised Unrecognised
unrecognised loss (or share of loss (or share of
loss incurred for net profit) for net profit) for
Name of joint ventures or associates prior periods the period the period
Arjo Wiggins Chenming Specialty
Paper Co., Ltd. 7,308,869.16 7,308,869.16
264 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
X. Risk relating to financial instruments
Main financial instruments of the Group include monetary funds, bills receivable, accounts receivable, other receivables,
non-current assets due within one year, other current assets, other non-current financial assets, long-term receivables,
short-term borrowings, accounts payable, other payables, short-term borrowings, non-current liabilities due within one year,
long-term borrowings, bonds payable and Long-term payables. Details of financial instruments refer to related notes. The
risks associated with these financial instruments and the risk management policies adopted by the Company to mitigate
these risks are described below. The management of the Company manages and monitors these exposures to ensure that
the above risks are controlled in a limited extent.
1. Risk management goals and policies
The Group aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverse
effects on the Group’s financial performance from financial risk. Based on such objectives, the Group’s risk
management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk
limits and devise corresponding internal control procedures, and to monitor risks faced by the Group. Such risk
management policies and internal control systems are reviewed regularly to adapt to changes in market conditions
and the Group’s activities. The internal audit department of the Group undertakes both regular and ad-hoc reviews of
risk management controls and procedures.
Risks associated with the financial instrument of the Group 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 Group’s risk management structure, make risk
management policies and related guidelines, and supervise the implementation of risk management. The Group has
already made risk management risks to identify and analyse risks that the Group face. These policies mentioned
specific risks, covering market, credit risk and liquidity risk etc. The Group regularly assesses market environment and
the operation of the Group changes to determine if to make alteration to risk management policy and systems. The
Group’s risk management is implemented by Risk Management Committee according to the approval of the board
of directors. Risk Management Committee work closely with other business department of the Group to identify,
evaluating and avoiding certain risks. The Group’s internal audit department will audit the risk management control
and procedures regularly and report the result to audit committee of the Group.
The Group spreads risks through diverse investment and business lines, and through making risk management policy
to reduce risks of single industry, specific area and counterpart.
(1) Credit risks
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty.
The Group manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable,
accounts receivable, other receivables and long-term receivables etc.
2019 AnnuAl RepoRt 265
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X. Risk relating to financial instruments (Cont’d )
1. Risk management goals and policies (Cont’d )
(1) Credit risks (Cont’d)
The Group’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listed
banks. The Group anticipated that the bank deposit does not have significant credit risk.
For bill receivable, accounts receivables, other receivables and long-term receivables, the Group set related
policies to control exposure of credit risks. The Group evaluate client’s credit quality and set related credit
period based on the client’s financial status, credit records and other factors such as current market situation
etc. The Group keep monitor the client’s credit record and for client with deteriorate credit records, the Group
will ensure the credit risk is under control in whole by means of written notice of payment collection, shorten or
cancel credit period.
The Group’s debtor spread over different industry and area. The Group continued to assess the credit evaluation
to receivables and purchase credit guarantee insurance if necessary.
The biggest credit risk exposure of the Group is the carrying amount of each financial assets in the balance
sheet. The Group did not provide financial guarantee which resulted in credit risks.
The amount of top 5 accounts receivable of the Group accounted for 29.05% (2018: 26.99%) of the Group’s
total accounts receivables. The amount of top 5 other receivable of the Group accounted for 87.09% (2018:
87.42%) of the Group’s total other receivables.
(2) Liquidity risk
Liquidity risk refers to the risks that the Group will not be able to meet its obligations associated with its financial
liabilities that are settled by delivering cash or other financial assets.
To manage the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents to finance
the Group’s operations and mitigate the effects of fluctuations in cash flows. The management of the Group
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 to meet
short-term and long-term funding needs.
Operating cash was generated from capital and bank and other borrowings. As of 31 December 2019, the
Group’s unused bank loan credit is RMB34,072.1416 million (31 December 2018: 29,594.6933 million)
266 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
X. Risk relating to financial instruments (Cont’d )
1. Risk management goals and policies (Cont’d )
(2) Liquidity risk (Cont’d)
As at the end of the period, the financial assets and financial liabilities of the Group are analysed by their
maturity date as below at their undiscounted contractual cash flows (in ten thousand RMB):
2019.12.31
Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total
Financial assets:
Monetary funds 1,906,656.98 1,906,656.98
Accounts receivable 307,736.22 307,736.22
Accounts receivable financial 44,291.59 44,291.59
Other receivables 270,183.01 270,183.01
Long-term receivables 17,413.54 23,488.20 81,470.83 122,372.57
Other current assets 808,452.56 808,452.56
Non-current assets due within one year 697,303.80 697,303.80
Total financial assets 4,034,624.16 17,413.54 23,488.20 81,470.83 4,156,996.73
Financial liabilities:
Short-term borrowings 3,688,315.60 3,688,315.60
Short-term borrowings 151,504.82 151,504.82
Accounts payable 435,108.76 435,108.76
Other payables 238,605.99 238,605.99
Non-current liabilities due within one year 566,295.89 566,295.89
Other current liabilities 22,240.25 22,240.25
Long-term borrowings 521,440.85 117,319.88 86,672.98 188,600.26 914,033.97
Bonds payable 116,920.09 8,907.00 125,827.09
Lease liabilities 457.07 443.29 472.83 7,220.12 8,593.31
Long-term payables 64,272.98 96,887.59 83,321.65 87,671.33 332,153.55
Total financial liabilities and contingent
liabilities 5,102,071.31 703,090.99 223,557.76 170,467.46 283,491.71 6,482,679.23
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X. Risk relating to financial instruments (Cont’d )
1. Risk management goals and policies (Cont’d )
(2) Liquidity risk (Cont’d)
As at the beginning of the period, the financial assets and financial liabilities of the Group at the reporting date
are analysed by their maturity date as below at their undiscounted contractual cash flows (in ten thousand
RMB):
2018.12.31
Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total
Financial assets:
Monetary funds 1,929,277.47 1,929,277.47
Bills receivable 121,461.65 121,461.65
Accounts receivable 378,336.41 378,336.41
Other receivables 214,899.40 214,899.40
Long-term receivables 465,770.86 288,900.54 48,142.11 2,341.27 805,154.78
Other current assets 1,029,380.61 1,029,380.61
Non-current assets due within one year 400,750.33 400,750.33
Total financial assets 4,074,105.87 465,770.86 288,900.54 48,142.11 2,341.27 4,879,260.65
Financial liabilities:
Short-term borrowings 4,022,794.54 4,022,794.54
Short-term borrowings 421,896.96 421,896.96
Accounts payable 415,022.86 415,022.86
Other payables 155,092.92 155,092.92
Non-current liabilities due within one year 713,832.58 713,832.58
Other current liabilities 281,695.65 281,695.65
Long-term borrowings 449,364.59 101,103.32 74,692.59 162,530.95 787,691.45
Bonds payable 209,756.25 209,756.25
Long-term payables 75,471.44 113,768.58 97,839.01 102,946.54 390,025.57
Total financial liabilities and contingent
liabilities 6,010,335.51 524,836.03 424,628.15 172,531.60 265,477.49 7,397,808.78
The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from the
carrying amount of the line items of the balance sheet.
Financial guarantees issued do not represent the amount to be paid.
268 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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X. Risk relating to financial instruments (Cont’d )
1. Risk management goals and policies (Cont’d )
(3) Market risk
Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow of
a financial instrument will be fluctuated due to the changes in market price.
Interest risk
Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated
due to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument and
unrecognised financial instrument (e.g. loan commitments).
The Group’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowing
and bonds payable. Financial liabilities issued at floating rate expose the Group to cash flow interest rate risk.
Financial liabilities issued at fixed rate expose the Group to fair value interest rate risk. The Group determines
the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market
conditions and to maintain an appropriate combination of financial instruments at fixed rate and floating rate
through regular reviews and monitors.
The Group’s finance department continuously monitors the interest rate position of the Group. The Group did
not enter into any interest rate hedging arrangements. But the management is responsible to monitor the risks
of interest rate and consider to hedge significant interest risk if necessary. Increase in interest rates will increase
the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate
interest-bearing borrowings, and therefore could have a material adverse effect on the Group’s financial result.
The management will make adjustments with reference to the latest market conditions. These adjustments may
include enter into interest swap agreement to mitigate its exposure to the interest rate risk.
Interest bearing financial instrument held by the Group are as follows (in ten thousand RMB):
Balance for
Item Balance for the year the prior year
Financial instrument with fixed interest rate
Financial liabilities
Of which: Short-term borrowings 3,688,315.60 4,022,794.54
Long-term borrowings 914,033.97 779,893.45
Bonds payable 125,827.09 209,756.25
Total 4,728,176.66 5,012,444.24
Financial instrument with float interest rate
Financial assets
Of which: Monetary funds 288,790.99 237,947.99
Total 288,790.99 237,947.99
The financial instruments held by the Group at the reporting date expose the Group to fair value interest rate
risk. This sensitivity analysis as above has been determined assuming that the change in interest rates had
occurred at the reporting date and arisen from the recalculation of the above financial instrument issued at new
interest rates. The non-derivative tools issued at floating interest rate held by the Group at the reporting date
expose the Group to cash flow interest rate risk. The effect to the net profit and shareholder’s equity illustrated
in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interest expenses
or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.
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X. Risk relating to financial instruments (Cont’d )
1. Risk management goals and policies (Cont’d )
(3) Market risk (Cont’d)
Exchange rate risk
Exchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuated
due to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that are
denominated in a currency other than the functional currency in which they are measured.
The principal business of the Group 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 currency
transactions as recognized by the Group (assets and liabilities in foreign currencies and foreign currency
transactions are mainly denominated in US dollar, Japanese yen, Euro and South Korean Won). Finance
department of the headquarters of the Group is responsible for monitoring the scale of foreign currency
transactions and assets and liabilities in foreign currencies to reduce the foreign exchange risks to the largest
extent;
The following table details the financial assets and liabilities held by the Group which denominated in foreign
currencies and amounted to RMB as at 31 December 2019 are as follows (in RMB ten thousands):
Liabilities denominated in foreign Asset denominated in foreign
currency currency
As at the As at the
As at the end beginning of As at the end beginning of
Item of the period the period of the period the period
USD 453,753.14 993,813.43 147,730.57 312,831.30
EUR 9,890.43 64,547.56 5,131.53 10,962.14
HKD 3,150.80 63.69 83.54
KRW 245.41
YEN 4.97 941.18 916.13
GBP 1.86 2.59
Total 466,794.37 1,058,365.96 153,868.82 325,041.11
The Company closely monitors the impact of exchange rate changes on the Company’s foreign exchange
risk. The Company has not taken any measures to avoid foreign exchange risks. However, the management is
responsible for monitoring exchange rate risks and will consider hedging significant exchange rate risks when
necessary.
With other variables unchanged, the after-tax effect of the possible reasonable changes in the exchange rate of
foreign currency to RMB on the current profit and loss of the Group is as follows (in RMB ten thousands):
Increase (decrease) in after-tax profits Balance for the year Balance for the prior year
Increase in exchange rate of USD 5% -15,301.13 5% -34,049.11
Decrease in exchange rate of USD -5% 15,301.13 -5% 34,049.11
Increase in exchange rate of Euro 5% -237.95 5% -2,679.27
Decrease in exchange rate of Euro -5% 237.95 -5% 2,679.27
270 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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X. Risk relating to financial instruments (Cont’d )
2. Capital management
The objective of the Group’s capital risk management is to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to
shareholders, return capital to shareholders, issue new shares or disposes assets to reduce its liabilities.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by total
capital. As at 31 December 2019, the Group’s gearing ratio is 73.11% (31 December 2018: 75.43%).
XI. Fair value
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMB
Fair value as at the end of the period
Item Level 1 Level 2 Level 3 Total
I. Continuous measurement of fair value — — — —
(I) Other non-current financial assets 147,445,653.55 147,445,653.55
(II) Biological assets
1. Consumable biological assets 1,541,004,633.42 1,541,004,633.42
Total assets continuously measured at fair value 1,688,450,286.97 1,688,450,286.97
During the year, there were no transfers of fair value measurements of financial assets and financial liability between
Level 1 and Level 2 and no transfers into or out of Level 3.
2. Quantitative Information About Significant Unobservable Inputs Used in the Level 3 Fair Value
Measurement that Are Significant
Fair value as at Valuation Unobservable
Item the end of the period techniques inputs Range (ton/RMB)
Equity instrument investments:
Shandong Hongqiao Venture 96,445,653.55 Cost method
Capital Co., Ltd.
Consumable biological assets: — — — —
Forestry 1,541,004,633.42 Replacement cost method Cost per mu for the first year of Eucalyptus 800
Cost per mu for the first year of Pines 580
Roll back method of market price Unit price per ton of Eucalyptus wood 580
Unit price per ton of wet pine 540
Unit price per ton of Chinese fir 850
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XII. Related parties and related party transactions
1. Parent company of the Company
Shareholding Voting right
of the parent of the parent
Place of company in company in
Name of parent company incorporation Business nature Registered capital the Company the Company
Chenming Holdings Co., Ltd. Shouguang Investment in 1,238,787,700.00 27.87% 27.87%
manufacture of paper,
electricity,
steam, and arboriculture
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office.
2. Subsidiaries of the Company
Please refer to Note IX. 1. Interest in subsidiaries for details.
3. Joint ventures and associates of the Company
Please refer to Note IX. 3. Interest in joint ventures or associates for details.
Balance of related party transaction between the Company and its joint ventures or associates during the period or
prior periods are as follows:
Name of joint ventures or associates Relation
Shouguang Chenming Huisen New-style Construction Materials Co., Ltd. A joint venture of the Company
Xuchang Chenming Paper Co., Ltd. An associate of the Company
Weifang Sime Darby West Port Co., Ltd. A joint venture of the Company
Jiangxi Jiangbao Media Colour Printing Co., Ltd. An associate of the Company
Jiangxi Chenming Port Co., Ltd. An associate of the Company
Weifang Xingxing Joint Chemical Co., Ltd A joint venture of the Company
Guangdong Nanyue Bank Co., Ltd. An associate of the Company
272 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
4. Other related parties
Name of other related parties Relation
Shandong Shouguang Jinxin Investment Development Shareholder of the Company’s largest shareholder
Holdings Group Co., Ltd.
Shouguang Henglian Enterprise Investment Limited Shareholder of the Company’s largest shareholder
Shouguang Ruifeng Enterprise Investment Limited Shareholder of the Company’s largest shareholder
Chenming Holdings (Hong Kong) Limited Subsidiary of the Company’s largest shareholder
Zhanjiang Chenming Real Estate Co., Ltd. Subsidiary of the Company’s largest shareholder
Qingdao Hongji Weiye Investment Co., Ltd. Subsidiary of the Company’s largest shareholder
Shouguang Hengying Real Estate Co., Ltd. Subsidiary of the Company’s largest shareholder
Shouguang Hengtai Enterprise Investment Co., Ltd. A company invested by the Directors and
senior management of the Company
Shouguang Huixin Construction Materials Co., Ltd. A company invested by the Directors and
senior management of the Company
Shouguang Chenming Guangyuan Real Property Co., Ltd. A company invested by the Directors and
and its subsidiaries senior management of the Company
Qingdao Chenming Nonghai Investment Co., Ltd. A company invested by the Directors and
and its subsidiaries senior management of the Company
Nanchang Chenjian New-style Wall Materials Co., Ltd. A company invested by the Directors and
senior management of the Company
Shouguang Hengde Enterprises Investment Co., Ltd. A company invested by the Directors and
senior management of the Company
Zhejiang Huaming Investment Management Co., Ltd. Directors and senior management served
and its subsidiaries by the Company’s Directors
Hebei Chenming Zhongjin Real Estate Development Co., Ltd. Directors and senior management served
and its subsidiaries by the Company’s Supervisors
Wuhan Chenming Zhongjin Real Estate Co., Ltd. Directors and senior management served
and its subsidiaries by the Company’s Supervisors
Wuhan Rongsheng Zhongjin Development and Directors and senior management served
Investment Co., Ltd. and its subsidiaries by the Company’s Supervisors
Qingzhou Chenming Denaturation Amylum Co., Ltd. Investee of the Company
Anhui Time Source Corporation Investee of the Company
Shandong Hongqiao Venture Capital Co., Ltd. Investee of the Company
Shanghai Hengzheng Venture Investment Center Investee of the Company
(Limited Partnership)
Lide Technology Co., Ltd. Investee of the Company
Jiangxi Jiuyu Energy Co., Ltd. and its subsidiaries Directors and senior management served by the
Company’s Directors in the past twelve months
Chen Hongguo, Hu Changqing, Li Xingchun, Geng Guanglin, Key management personnel
Li Feng, Chen Gang, Dong Lianming and Yuan Xikun
2019 AnnuAl RepoRt 273
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
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
Whether the
Transaction Transaction
Details of related party Amount for the facility facility is Amount for
Related party transaction reporting period approved exceeded the prior period
Jiangxi Jiuyu Procurement of natural 381,124,206.33 600,000,000.00 No 347,639,077.35
Energy Co., Ltd. gas and medium oil, etc.
Weifang Xingxing Joint Procurement of hydrogen 80,638,768.49 No 85,728,655.93
Chemical Co., Ltd. peroxide etc.
Table on sales of goods/providing of services
Unit: RMB
Details of related Amount for the Amount for the
Related party party transaction reporting period prior period
Shouguang Chenming Huisen New-style Sales of electricity and gas 7,064,454.19 6,528,609.08
Construction Materials Co., Ltd.
Shouguang Huixin Construction Sales of cement, 13,402,439.72 19,056,566.01
Materials Co., Ltd. coal, oil, etc.
274 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(2) Guarantee
The Company as guarantor
Unit: RMB
Whether
performance
Amount under Starting date Expiry date of of guarantee
Party being guaranteed guarantee of guarantee guarantee is completed
Weifang Sime Darby West Port Co., Ltd. 135,000,000.00 2017-12-20 2027-12-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 135,000,000.00 2019-2-2 2020-1-31 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,600,977.22 2019-1-14 2020-1-13 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019-1-22 2020-1-21 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 125,000,000.00 2019-2-15 2020-2-14 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019-3-22 2020-3-22 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2019-6-3 2020-6-2 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 89,000,000.00 2019-7-18 2020-1-13 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 53,000,000.00 2019-7-29 2020-1-21 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2019-8-16 2020-8-14 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2019-8-21 2020-8-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 86,000,000.00 2019-9-12 2020-3-30 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019-9-12 2020-3-30 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 99,600,000.00 2019-9-6 2020-9-6 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,108,549.49 2019-8-7 2020-8-7 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 25,000,000.00 2019-10-9 2020-10-8 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2019-10-14 2020-10-13 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 80,000,000.00 2019-10-16 2020-10-15 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 110,000,000.00 2019-11-1 2020-4-28 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 29,500,000.00 2019-11-5 2020-5-4 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 80,000,000.00 2019-11-27 2020-5-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 91,875,000.00 2019-11-22 2020-5-22 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2019-11-25 2020-5-25 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 34,000,000.00 2019-11-5 2020-11-4 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 115,000,000.00 2019-11-8 2020-11-7 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2019-11-13 2020-11-13 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 166,668,000.00 2019-11-5 2020-11-14 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2019-12-5 2020-6-5 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 97,000,000.00 2019-12-9 2020-12-8 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019-12-17 2020-12-16 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019-10-12 2020-3-12 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 40,461,960.00 2019-11-13 2020-11-5 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 48,833,400.00 2015-6-3 2020-5-21 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 14,000,000.00 2015-6-5 2020-5-21 No
2019 AnnuAl RepoRt 275
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(2) Guarantee
Whether
performance
Amount under Starting date Expiry date of of guarantee
Party being guaranteed guarantee of guarantee guarantee is completed
Zhanjiang Chenming Pulp & Paper Co., Ltd. 15,347,640.00 2018-2-13 2020-2-11 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 49,000,000.00 2018-2-23 2020-2-11 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 10,000,000.00 2018-2-26 2020-2-11 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 10,000,000.00 2018-2-28 2020-2-11 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,000,000.00 2018-10-31 2020-10-30 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 330,000,000.00 2018-10-31 2020-10-30 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2018-12-18 2020-10-31 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019-7-12 2021-7-12 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2019-12-4 2021-12-3 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 140,000,000.00 2019-12-27 2022-12-27 No
Shandong Chenming Paper Sales Co., Ltd. 690,643,800.00 2019-1-24 2020-1-16 No
Shandong Chenming Paper Sales Co., Ltd. 100,000,000.00 2019-3-19 2020-3-13 No
Shandong Chenming Paper Sales Co., Ltd. 50,000,000.00 2019-5-29 2020-5-28 No
Shandong Chenming Paper Sales Co., Ltd. 150,000,000.00 2019-7-30 2020-6-12 No
Shandong Chenming Paper Sales Co., Ltd. 270,000,000.00 2019-7-30 2020-7-29 No
Shandong Chenming Paper Sales Co., Ltd. 280,000,000.00 2019-9-6 2020-3-6 No
Shandong Chenming Paper Sales Co., Ltd. 254,102,620.85 2019-11-5 2020-5-4 No
Shandong Chenming Paper Sales Co., Ltd. 420,133,926.55 2019-11-22 2020-5-21 No
Shandong Chenming Financial Leasing
Co., Ltd. 200,000,000.00 2017-9-21 2020-9-21 No
Huanggang Chenming Pulp & Paper Co., Ltd. 75,000,000.00 2016-6-24 2020-3-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 32,770,000.00 2016-6-24 2020-6-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 530,000.00 2017-1-5 2020-6-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 32,240,000.00 2017-1-5 2020-9-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 38,240,000.00 2017-1-5 2020-12-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 38,240,000.00 2017-1-5 2021-3-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 43,690,000.00 2017-1-5 2021-6-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 43,690,000.00 2017-1-5 2021-9-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 3,900,000.00 2017-2-3 2021-9-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 36,260,000.00 2017-2-3 2021-12-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 40,160,000.00 2017-2-3 2022-3-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 40,160,000.00 2017-2-3 2022-6-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 33,420,000.00 2018-9-19 2020-6-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 45,264,554.67 2018-11-14 2020-9-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 44,360,657.92 2017-4-12 2020-3-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 66,431,750.00 2017-4-12 2020-6-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 10,316,460.00 2019-9-29 2020-9-28 No
276 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(2) Guarantee
Whether
performance
Amount under Starting date Expiry date of of guarantee
Party being guaranteed guarantee of guarantee guarantee is completed
Huanggang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2019-12-23 2020-12-22 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 2019-1-7 2020-1-7 No
Jiangxi Chenming Paper Co., Ltd. 64,285,135.37 2019-1-18 2020-1-15 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 2019-2-28 2020-2-28 No
Jiangxi Chenming Paper Co., Ltd. 22,800,000.00 2019-3-15 2020-3-14 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 2019-3-21 2019-3-21 No
Jiangxi Chenming Paper Co., Ltd. 150,000,000.00 2019-3-29 2020-3-29 No
Jiangxi Chenming Paper Co., Ltd. 90,000,000.00 2019-3-29 2020-3-29 No
Jiangxi Chenming Paper Co., Ltd. 70,000,000.00 2019-5-22 2020-5-21 No
Jiangxi Chenming Paper Co., Ltd. 73,000,000.00 2019-12-6 2020-12-4 No
Jiangxi Chenming Paper Co., Ltd. 150,000,000.00 2019-12-2 2020-3-2 No
Jiangxi Chenming Paper Co., Ltd. 19,360,407.00 2019-6-28 2022-6-27 No
Jiangxi Chenming Paper Co., Ltd. 200,000,000.00 2019-7-1 2020-6-27 No
Jiangxi Chenming Paper Co., Ltd. 300,000,000.00 2019-10-23 2022-6-27 No
Jiangxi Chenming Paper Co., Ltd. 85,000,000.00 2019-11-22 2022-6-27 No
Shouguang Meilun Paper Co., Ltd. 114,750,000.00 2019-8-6 2020-2-3 No
Shouguang Meilun Paper Co., Ltd. 249,935,732.90 2019-9-30 2020-9-30 No
Shouguang Meilun Paper Co., Ltd. 100,000,000.00 2019-10-16 2020-1-14 No
Shouguang Meilun Paper Co., Ltd. 99,507,360.09 2019-12-9 2020-12-3 No
Shouguang Meilun Paper Co., Ltd. 168,622,526.92 2019-12-9 2020-6-8 No
Chenming (HK) Limited 133,006,977.54 2019-6-19 2020-6-10 No
Chenming (HK) Limited 271,095,132.00 2019-1-12 2020-1-10 No
Chenming (HK) Limited 31,352,288.05 2018-4-23 2021-4-7 No
Chenming (HK) Limited 144,686,388.00 2018-5-4 2021-4-6 No
Chenming (HK) Limited 83,016,780.00 2018-5-17 2021-5-5 No
Chenming (HK) Limited 52,181,976.00 2019-4-30 2022-4-22 No
Chenming (HK) Limited 140,221,620.00 2018-5-11 2020-4-11 No
Chenming (HK) Limited 97,666,800.00 2018-11-30 2020-10-30 No
Jilin Chenming Paper Co., Ltd. 196,031,220.00 2019-3-15 2020-1-17 No
Jilin Chenming Paper Co., Ltd. 40,000,000.00 2019-9-3 2020-3-17 No
Jilin Chenming Paper Co., Ltd. 20,025,000.00 2019-11-15 2020-5-14 No
Jilin Chenming Paper Co., Ltd. 48,000,000.00 2019-11-15 2020-5-14 No
Shanghai Chenming Pulp & Paper Sales
Co., Ltd. 30,000,000.00 2019-8-30 2020-8-7 No
Shanghai Chenming Pulp & Paper Sales
Co., Ltd. 20,000,000.00 2019-12-27 2020-12-24 No
Total 12,912,203,217.01
2019 AnnuAl RepoRt 277
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(3) Related party lending and borrowing
Unit: RMB
Related party Borrowing amount Starting date Expiry date Description
Borrowing
Chenming Holdings Co., Ltd. 708,440,865.27 3 September 2019 2 September 2020
Lending
Weifang Sime Darby West
Port Co., Ltd. 59,500,000.00 9 July 2018 8 July 2022
(4) Interests of related party lending and borrowing
Details of related Amount during Amount during
Related party party transaction the year the prior year
Weifang Sime Darby West Port Co., Ltd. Interest income 4,052,621.83 2,363,749.98
Chenming Holdings Co., Ltd. Interest expenses 27,905,072.21 4,820,277.79
(5) Remuneration of key management staff
Unit: RMB
Amount during Amount during the
Item the year prior year
Remuneration of key management staff 3,057.25 2,460.15
(6) Other related party transactions
① Distribution band of remuneration of key management staff
Amount during Amount during
Band of annual remuneration the year the prior year
Total 3,057.25 RMB24.6015 million
Of which: (number of staff in each band of amount)
RMB4.80-5.20 million 2 1
RMB3.60-4.00 million
RMB3.20-3.60 million
RMB2.80-3.20 million 1
RMB2.40-2.80 million 1
RMB2.00-2.40 million 2 3
RMB1.60-2.00 million 3 1
RMB1.20-1.60 million 5
RMB0.80-1.20 million 2 1
Below RMB0.80 million 21 15
278 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(5) Other related party transactions (Cont’d)
② Breakdown of remuneration of key management staff
Amount during the year (RMB’ 0,000)
Basic annual Social welfare Payments of Total
Key management staff remuneration contribution housing funds (RMB’ 0,000)
Yin Meiqun 11.67 11.67
Yang Biao 11.67 11.67
Sun Jianfei 11.67 11.67
Pan Ailing 11.20 11.20
Huang Lei 5.37 5.37
Liang Fu 5.37 5.37
Wang Fengrong 5.37 5.37
Sub-total of independent non-executive
Directors 62.32 62.32
Li Chuanxuan 11.67 11.67
Han Tingde 11.67 11.67
Yang Guihua 5.37 5.37
Zhang Hong 11.20 11.20
Sub-total of non-executive Directors 39.91 39.91
Chen Hongguo 488.20 7.1 3.7 499.00
Hu Zhangqing 288.90 11.10 3.90 303.90
Li Xingchun 499.00 499.00 499.00
Geng Guanglin 151.60 7.10 3.70 162.40
Li Feng 176.00 7.10 3.70 186.80
Chen Gang 86.70 6.50 3.50 96.70
Sub-total of executive Directors 1690.40 38.90 18.50 1747.80
Pan Ailing Reflected in the aforementioned independent non-executive Directors
Zhang Hong Reflected in the aforementioned non-executive Directors
Li Xinggui 17.10 5.30 2.00 24.40
Qiu Lanju 20.70 4.20 2.00 26.90
Li Dong 0
Sun Yinghua 7.30 3.60 2.50 13.40
Zhang Xiaofeng 1.12 1.12
Total of Supervisor 46.22 13.10 6.50 65.82
Sub-total of other senior management
members 1,068.90 45.20 27.30 1,141.40
Total 2,907.75 97.20 52.30 3,057.25
2019 AnnuAl RepoRt 279
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(5) Other related party transactions (Cont’d)
Amount during the year (RMB’ 0,000)
Basic annual Social welfare Payments of Total
Key management staff remuneration contribution housing funds (RMB’ 0,000)
Pan Ailing 12.00 12.00
Huang Lei 12.00 12.00
Liang Fu 12.00 12.00
Wang Fengrong 12.00 12.00
Sub-total of independent non-
executive Directors 48.00 48.00
Yang Guihua 12.00 12.00
Zhang Hong 12.00 12.00
Sub-total of non-executive
Directors 24.00 24.00
Chen Hongguo 491.03 5.63 2.34 499.00
Hu Changqing 190.46 7.82 1.72 200.00
Yin Tongyuan 120.9 1.82 1.48 124.20
Geng Guanglin 146.24 5.63 2.34 154.21
Li Feng 132.51 5.63 2.34 140.48
Chen Gang 178.12 5.63 2.34 186.09
Sub-total of executive Directors 1259.26 32.16 12.56 1303.98
Li Dong 0
Sun Yinghua 60.05 5.63 2.34 68.02
Yang Hongqin 12.90 2.17 0.83 15.90
Zhang Xiaofeng 2.50 2.50
Total of Supervisors 75.45 7.80 3.17 86.42
Sub-total of other senior
management members 946.77 34.54 16.48 997.79
Total 2,353.48 74.5 32.21 2,460.19
280 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
5. Related party transactions (Cont’d )
(5) Other related party transactions (Cont’d)
③ The 5 highest paid individuals of the Company during the year comprised of 3 directors and 2 other senior
management members of the Company. The remuneration bands of the 2 senior management members
were RMB2.00-2.40 million and RMB2.40-2.80 million.
A. Remuneration of the five highest paid individuals
Amounts Amounts during
during the year the prior year
Item (RMB’ 0,000) (RMB’ 0,000)
Basic annual remuneration 1,751.10 1262.58
Provident fund 15.00 11.08
Social welfare contribution 32.40 30.34
Total 1,798.50 1304.00
B. Distribution band of remuneration of the five highest paid individuals
Number of Number of
individuals during individuals during
Band of annual remuneration the year the prior year
RMB4.80-5.20 million 2 1
RMB3.20-3.60 million
RMB2.80-3.20 million 1
RMB2.40-2.80 million 1
RMB2.00-2.40 million 1 3
RMB1.60-2.00 million 1
RMB1.20-1.60 million
④ During the year, no other emoluments were paid by the Company to the directors of the Company and the
5 highest paid individuals as an inducement to join or upon joining the Company or as compensation for
loss of office. None of the directors waived any emoluments during the year.
2019 AnnuAl RepoRt 281
XIII Financial Report
XII. Related parties and related party transactions (Cont’d )
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB
Closing balance Opening balance
Item Related party Book balance Bad debt Book balance Bad debt
Prepayments Shouguang Hengyuan Energy Co., Ltd. 20,179,937.87 25,586,691.33
Other receivables Shouguang Hengyuan Energy Co., Ltd. 10,000,000.00 757,910.97
Accounts receivable Shouguang Chenming Huisen New-style 2,008,185.60 61,132.76 774,832.20 38,741.61
Construction Materials Co., Ltd.
Prepayments Jiangxi Jiuyu Energy Co., Ltd. 15,358,225.83 33,567,041.92
Other receivables Weifang Sime Darby West Port Co., Ltd. 64,889,583.26 5,151,661.58 60,836,961.43 304,184.80
(2) Accounts payable
Unit: RMB
Closing book Opening
Item Related party balance book balance
Accounts payable Weifang Xingxing Joint Chemical Co., Ltd 26,905,494.34 18,544,025.96
Other payables Chenming Holdings Co., Ltd. 708,440,865.27 376,000,000.00
Other payables Shouguang Hengtai Enterprise 44,392,007.69
Investment Company Limited
Accounts payable Jiangxi Jiuyu Energy Co., Ltd. 3,054,956.65
Other current liabilitiesGuangdong Nanyue Bank Co., Ltd. 400,000,000.00
Other non-current Guangdong Nanyue Bank Co., Ltd. 400,000,000.00
liabilities
(3) Deposits with related parties
Unit: RMB
Closing book Opening
Item Related party balance book balance
Bank deposit Guangdong Nanyue Bank Co., Ltd. 85,668.46 996,956.00
Other monetary funds Guangdong Nanyue Bank Co., Ltd. 2,414,668,000.00 355,113,225.32
(4) Loans from related parties
Unit: RMB
Closing book Opening
Item Related party balance book balance
Short-term Guangdong Nanyue Bank Co., Ltd. 2,948,970,000.00 496,670,000.00
borrowings
282 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XIII. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
(1) Capital commitment
Item Closing balance Opening balance
Contracted but not yet recognised in the financial statements
Commitments in relation to acquisition and construction of
long-term assets 260,421,348.84 1,463,816,242.90
Total 260,421,348.84 1,463,816,242.90
2. Contingency
(1) Significant contingency as at the balance sheet date
In October 2005, the Company and Hong Kong ArjowigginsHKK2Limited (“HKK2”) jointly established
ArjoWiggins Chenming Specialty Paper Co., Ltd. in Shouguang, Shandong Province, which is engaged in the
production of special paper, decoration paper and draft paper. However, such company experienced poor
management due to financial crisis. Hence, such company was forced to dissolve in October 2008.
In October 2012, HKK2 submitted for arbitration application to Hong Kong International Arbitration Centre, Hong
Kong Special Administration of PRC, on the ground of default of the joint venture agreement by the Company.
In November 2015, Hong Kong International Arbitration Centre announced arbitration result, stating that the
Company should compensate HKK2 with economic loss of RMB167 million, arbitration fee of HK$3.30 million
and legal fee of USD3.54 million, together with interest thereon calculated at 8% per annum. In October 2016,
the Company received a statutory demand, stating that if the Company fails to perform the arbitration results
within 21 days, the liquidation application on H shares of the Company will be submitted. Subsequently, HKK2
submitted H shares liquidation application to the arbitration centre.
In November 2016, the Company submitted application to the Court of First Instance of the High Court of the
HKSAR and received an injunction, stating that “the applicant is prohibited from applying for liquidation on the
Company”.
In February 2017, HKK2 submitted an appeal to the court. In June 2017, the court dismissed the injunction
received by the Company. In the same month, the Company received the liquidation application submitted
by the defendant to the High Court of Hong Kong, which alleged that the Company should compensate the
defendant with economic loss of RMB167 million, legal fee of USD3.54 million and arbitration fee of HK$3.30
million, together with interest thereon due to failure in compliance of the arbitration results.
In 2017, the Company made provision of RMB325,259,082.28 for the pending litigation. However, as of 31
December 2019, judgment of the court of Hong Kong was yet to be made, and the expected loss was uncertain.
Hence, such provision was still stated under the balance sheet.
As at 31 December 2019, the Group has no other contingency that should be disclosed.
2019 AnnuAl RepoRt 283
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XIV. Post-balance sheet event
1. Significant events after the balance sheet date
Unit: RMB
Effect to financial
positions and Reason for not
Item Content operating results reliably estimated
Significant external Investment Investment in overseas Investment in overseas Establishing a company has
subsidiaries subsidiaries a wide-ranging impact on
financial conditions and
operating results
2. Profit distribution after the balance sheet date
Unit: (RMB)
Prefits or dividends declared upon approval 610,109,834.70
3. Description of other events after the balance sheet date
As of 27 March, 2019 (the date of approval of the report by the Board of Directors), the Group has no other events
that should be disclosed after the balance sheet date.
284 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XV. Other material matters
1. Discontinued operation
Unit: RMB
Amount for
Item Amount for the period the last period
Revenue from discontinued operations (A) 278,633,403.31 421,749,990.14
Less: Termination of operating expenses (B) 203,049,365.06 282,840,629.66
Total profit from discontinued operations (C) 75,584,038.25 138,909,360.48
Less: income tax expense for termination of operations (D) 11,759,914.64 16,901,157.85
Net profit from operating activities (E = C-D) 63,824,123.61 122,008,202.63
Asset impairment loss/(reversal) (F)
Total proceeds from disposal (G) 277,000,000.00
Disposal of related income tax expenses (H) 41,550,000.00
Net profit of disposal (I = G-H) 235,450,000.00
Net profit from discontinued operations (J = E + F + I) 299,274,123.61 122,008,202.63
Of which: Discontinued operating profit attributable to
shareholders of the parent company 179,564,474.17 48,803,281.05
Discontinued operating profit attributable to minority
shareholders 119,709,649.44 73,204,921.58
Net cash flow from operating activities 41,903,992.38 75,115,059.89
Net cash flow from investing activities -33,026,830.74 -94,118,688.20
Net cash flow from financing activities 0.00 32,071,241.87
2. Segment information
(1) Basis for determination and accounting policies
According to the Group’s internal organizational structure, management requirements and internal reporting
system, the Group’s operating business is divided into 5 reporting segments. These report segments are
determined based on the financial information required by the company’s daily internal management. The
management of the Group regularly evaluates the operating results of these reporting segments to determine
the allocation of resources to them and evaluate their performance.
The Group’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) Magnesium ore segment, which produces and sells magnesium ore;
(4) Investment real estate segment, which is responsible for real estate rental;
(5) Other segments, which is responsible for the above segments otherwise.
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XV. Other material matters (Cont’d )
2. Segment information (Cont’d )
(1) Basis for determination and accounting policies (Cont’d)
Segment report information is disclosed in accordance with the accounting policies and measurement standards
adopted by each segment when reporting to management. These accounting policies and measurement basis
are consistent with the accounting policies and measurement basis used in preparing the financial statements.
(2) Financial Information of Reporting Segment
Unit: (RMB’ 0,000)
Financial Investment Inter-segment
Item Machine paper Services Magnesite real estate Others offset Total
Main business income 2,780,454.93 239,856.57 27,863.34 10,509.43 76,415.73 95,556.59 3,039,543.41
Main business cost 2,088,496.22 90,577.44 12,511.28 13,695.70 63,180.48 91,072.69 2,177,388.43
Total assets 9,045,841.65 3,178,178.27 574,470.33 477,198.61 3,479,797.86 9,795,890.99
Total liabilities 6,842,942.67 1,631,402.71 310,649.29 251,954.72 1,875,035.70 7,161,913.71
4. Government Subsidies
(1) Government subsidies included in deferred income will be subsequently measured using the gross method
Unit: RMB
Amount
transferred
New subsidy to profit or Presentable
Opening amount for loss for Closing items transferred Asset-related/
Item of subsidies Type Balance the period the period Others balance to profit or loss return-related
National Science and Technology Financial appropriation 1,617,224.68 164,699.68 1,452,525.00 Other revenue Asset-related
Support Program Project
Funding
Sewage treatment and water Financial appropriation 64,466,819.64 1,192,682.93 63,274,136.71 Other revenue Asset-related
saving reconstruction
Financial subsidies for technical Financial appropriation 180,966,256.91 12,783,808.11 168,182,448.80 Other revenue Asset-related
transformation project
Funding for environmental Financial appropriation 749,420,276.75 49,191,971.56 700,228,305.19 Other revenue Asset-related
protection
Industrial logistics park Financial appropriation 51,960,000.00 51,960,000.00 Asset-related
reconstruction compensation
Zhanjiang Forest Pulp & Paper Financial appropriation 71,141,834.42 4,094,632.92 67,047,201.50 Other revenue Asset-related
Integration Item
Huanggang Forest Pulp and Financial appropriation 681,564,072.66 681,564,072.66 Asset-related
Paper Integration Item
Others Financial appropriation 61,258,712.55 23,954,067.30 37,304,645.25 Other revenue、 Asset-related
financial cost
Total 1,862,395,197.61 91,381,862.50 1,771,013,335.11
286 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XV. Other material matters (Cont’d )
4. Government Subsidies (Cont’d )
(2) Government subsidies calculated into the current profit and loss using the total method
Unit: RMB
Amount credited to Amount credited
profit or loss for to profit or loss for Presentable items Asset-related/
Subsidy Item Type the prior period the period included in profit or loss revenue-related
National Science and Technology Support Program
Project Funding Financial appropriation 164,700.00 164,700.00 Other revenue Asset-related
Sewage treatment and water saving reconstruction Financial appropriation 1,192,682.88 1,192,682.88 Other revenue Asset-related
Financial subsidies for technical transformation items Financial appropriation 13,582,557.60 110,054,807.72 Other revenue Asset-related
Zhanjiang Forest Pulp & Paper Integration Item Financial appropriation 5,396,664.12 4,094,632.92 Other revenue Asset-related
Industrial logistics park reconstruction compensation Financial appropriation 6,626,701.00 4,705,900.00 Other revenue Asset-related
Financial discount Financial appropriation 235,712,512.89 22,364,612.22 financial cost Asset-related
Research and development grants Financial appropriation 3,766,800.00 74,923,512.88 Other revenue revenue-related
Funding for environmental protection Financial appropriation 49,261,012.64 49,361,843.85 Other revenue revenue-related
Risk subsidy Financial appropriation 29,000,000.00 0.00 Other revenue revenue-related
Government awards Financial appropriation 586,334.54 228,000,000.00 Other revenue revenue-related
VAT is levied and reimbursed immediately Financial appropriation 4,699,443.06 1,217,058.15 Other revenue revenue-related
Afforestation subsidy Financial appropriation 14,230,270.00 3,891,820.00 Other revenue revenue-related
Tax return Financial appropriation 24,863,195.05 80,382,428.92 Other revenue revenue-related
Enterprise reform and development subsidies Financial appropriation 203,933,687.56 31,070,010.00 Non-operating income revenue-related
Investment promotion subsidy Financial appropriation 0.00 41,542,500.00 Non-operating income revenue-related
Others Financial appropriation 40,491,906.20 17,307,907.75 Non-operating income, revenue-related
Other revenue
Total 633,508,467.54 670,274,417.29
4. Net Current Assets and Total Assets less Current Liabilities
(1) Net current assets
2019.12.31 2018.12.31
Current assets 4,495,243.39 4,796,751.18
Less: Current liabilities 5,269,876.89 6,141,468.86
Net current assets -774,633.50 -1,344,717.68
(2) Total assets less current liabilities
2019.12.31 2018.12.31
Total assets 9,795,890.99 10,531,873.48
Less: Current liabilities 5,269,876.89 6,141,468.86
Total assets less current liabilities 4,526,014.10 4,390,404.63
2019 AnnuAl RepoRt 287
XIII Financial Report
XVI. Major Item Notes of the Parent Company’s Financial Statements
1. Bill receivable
Closing balance Opening Balance
Provision Provision
Bill type Book balance for bad debts Book value Book balance for bad debts Book value
Bank acceptance bill 2,230,000,000.00 2,230,000,000.00 436,662,187.80 436,662,187.80
Commercial acceptance draft 1,024,460,000.00 1,024,460,000.00
Total 3,254,460,000.00 3,254,460,000.00 436,662,187.80 436,662,187.80
(1) Bill receivable pledged at the end of the period
Amount pledged at
Type the end of the period
Bank acceptance bill 152,714,290.24
Commercial acceptance draft
Total 152,714,290.24
(2) Bills receivable endorsed or discounted at the end of the period but not yet due
Amount determinated Amount not confirmed
Type at the end of the period at the end of the period
Bank acceptance bill 420,262,029.16 2,230,000,000.00
Commercial acceptance draft 1,024,460,000.00
Total 420,262,029.16 3,254,460,000.00
288 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Major Item Notes of the Parent Company’s Financial Statements
2. Accounts receivable
(1) Disclosure of Receivables classified
Unit: RMB
Closing balance Opening Balance
Book balance Provision for bad debts Book balance Provision for bad debts
Type Amount Proportion Amount Accrual ratio Book value Amount Proportion Amount Accrual ratio Book value
Accounts receivable with single item
provision for bad debts 778,063.57 1.73% 778,063.57 100.00%
Of which:
Total accounts receivable with bad debt
provision by group 44,083,258.79 98.27% 4,878,588.79 11.07% 39,204,670.00 1,349,962,797.42 100.00% 685,832.38 0.05% 1,349,276,965.04
Of which:
Receivables from related parties 31,427,654.36 70.06% 157,138.27 0.50% 31,270,516.09 1,342,192,951.98 99.42% 1,342,192,951.98
Receivables from dealer customers 12,655,604.43 28.21% 4,721,450.52 37.31% 7,934,153.91 7,769,845.44 0.58% 685,832.38 8.83% 7,084,013.06
Total 44,861,322.36 100.00% 5,656,652.36 12.61% 39,204,670.00 1,349,962,797.42 100.00% 685,832.38 0.05% 1,349,276,965.04
Provision for bad debts per single item:
Closing balance
Provision for Expected credit
Name Book balance bad debts loss rate (%) Reasons for provision
SANAYE GHAZAIYE Iran clients less likely to
MASTER FOODEH CO. 778,063.57 778,063.57 100% repay
Total 778,063.57 778,063.57 100% –
2019 AnnuAl RepoRt 289
XIII Financial Report
XVI. Major Item Notes of the Parent Company’s Financial Statements (Cont’d )
2. Accounts receivable (Cont’d )
(1) Disclosure of Receivables classified (Cont’d)
Total provision for bad debts by group:
Total accounts item by group: Accounts receivable fromrelated parties
Unit: RMB
Closing balance
Accounts Provision for Expected credit
Aging receivable bad debts loss rate
With 1 year 31,427,654.36 157,138.27 0.50%
Total 31,427,654.36 157,138.27 0.50%
Total accounts item by group: Accounts receivable from non-related parties
UUnit: RMB
Closing balance
Accounts Provision for Expected credit
Aging receivable bad debts loss rate
With 1 year 8,152,783.26 218,629.35 2.68%
1-2 years
2-3 years
Over 3 years 4,502,821.17 4,502,821.17 100.00%
Total 12,655,604.43 4,721,450.52 37.31%
290 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
1. Accounts receivable (Cont’d )
(1) Disclosure of accounts receivable by category (Cont’d)
If the provision for bad debts of accounts receivable is made in accordance with the general model of ECLs,
please disclose the information about provision for bad debts with reference to the way of disclosure of other
receivables:
√ Applicable □ Not applicable
Disclosed by ageing:
Unit: RMB
Ageing Book balance
Within 1 year (including 1 year) 40,358,501.19
1-2 years
2-3 years
Over 3 years 4,502,821.17
Total 44,861,322.36
(2) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Recovery Closing
Category balance Provision or reversal Written off balance
Bad debt provision 685,832.38 4,970,819.98 5,656,652.36
(4) Top five accounts receivable based on closing balance of debtors
The top five accounts receivable based on closing balance of debtors for the period amounted to
RMB38,430,605.62 in total, accounting for 85.67% of the total closing balance of accounts receivable. The
closing balance of the corresponding bad debt provision amounted to RMB4,648,891.69 in total.
2019 AnnuAl RepoRt 291
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
3. Other receivables
Unit: RMB
Item Closing balance Opening balance
Interest receivable 0 77,257,506.25
Other receivables 13,975,590,537.58 19,328,057,454.99
Total 13,975,590,537.58 19,405,314,961.24
(1) Interest receivable
1) Classification of interest receivable
Unit: RMB
Item Closing balance Opening balance
Fixed term deposit 0 77,257,506.25
Total 0 77,257,506.25
(2) Other receivables
1) Other receivables by nature
Unit: RMB
Nature Closing book balance Opening book balance
Open credit 14,082,545,251.05 19,297,217,793.30
Guarantee deposit 5,454,233.36 45,241,076.47
Advances 526,752.62 7,681,197.42
Insurance premium 13,979.13 9,958,377.28
Reserve and borrowings 8,089,922.34 466,935.72
Others 74,361,611.85 39,175,451.96
Total 14,170,991,750.35 19,399,740,832.15
292 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
3. Other receivables (Cont’d )
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision
As at the end of the period, bad debt provision in phase 1 is analyzed as follows:
Unit: RMB
Expected credit
loss rate in the Provision for
Type Book balance next 12 months bad debts Book value Reason
Provision for bad debts per item 92,164,832.92 92,164,832.92
Interest receivable 92,164,832.92 92,164,832.92
Dividends receivable
Total provision for bad debts by group 14,168,200,849.23 1.36% 192,610,311.64 13,975,590,537.59
Receivables from government 1,577,924.30 100% 1,577,924.30
Receivables from related parties 13,041,636,606.52 0.5% 65,208,183.03 12,976,428,423.49
Other receivables 1,124,986,318.41 11.18% 125,824,204.31 999,162,114.10
Total 14,260,365,682.15 1.35% 192,610,311.64 14,067,755,370.51
As at the end of the period, bad debt provision in phase 3 is analyzed as follows:
Expected
credit loss
rate over Bad debt
Category Book balance the entire life provision Book value Reason
Shouguang Paper Mill No.2 1,500,000.00 100% 1,500,000.00 Overdue for a prolonged
period and unlikely to
be recovered.
Arjo Wiggins Chenming Specialty 1,290,901.12 100% 1,290,901.12 Overdue for a prolonged
Paper Co., Ltd. period and unlikely to
be recovered.
Total 2,790,901.12 100% 2,790,901.12
2019 AnnuAl RepoRt 293
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
3. Other receivables (Cont’d )
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision (Cont’d)
Changes in carrying book balances with significant changes in loss provision for the year
√ Applicable □ Not applicable
Disclosed by ageing:
Unit: RMB
Ageing Book balance
Within 1 year (including 1 year) 10,816,421,382.30
1-2 years 3,307,579,124.71
2-3 years 6,172,674.00
Over 3 years 40,818,569.34
Subtotal 14,170,991,750.35
3) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Recovery Closing
Category balance Provision or reversal Written off balance
Bad debt provision 71,683,377.16 123,717,835.61 195,401,212.77
294 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
3. Other receivables (Cont’d )
(2) Other receivables (Cont’d)
4) Top five other 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 the period was RMB11,142,774,722.18, which accounted for 78.63% of the closing balance of
the total accounts receivable. The closing balance of corresponding bad debt provision amounted to
RMB55,713,873.61.
4. Long-term equity investments
Unit: RMB
Closing balance Opening balance
Item Book balance Impairment provision Book value Book balance Impairment provision Book value
Investment in subsidiaries 23,275,652,649.90 23,275,652,649.90 22,114,152,649.90 22,114,152,649.90
Investment in joint ventures 93,516,339.37 93,516,339.37 106,732,692.50 106,732,692.50
Investment in associates 266,605,874.56 5,994,545.96 260,611,328.60 266,532,100.84 266,532,100.84
Total 23,635,774,863.83 5,994,545.96 23,629,780,317.87 22,487,417,443.24 22,487,417,443.24
2019 AnnuAl RepoRt 295
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
4. Long-term equity investments (Cont’d )
(1) Investment in subsidiaries
Unit: RMB
Change for the period Closing balance
Opening balance Additional Withdrawn Impairment Closing balance provision of
Investee (book value) contribution contribution provision Others (book value) impairment
Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00
Chenming GmbH 4,083,235.00 4,083,235.00
Shandong Chenming Paper Group
(Fuyu) Sales Co., Ltd. 1,000,000.00 1,000,000.00
Haicheng Haiming Mining Co., Ltd. 144,000,000.00 144,000,000.00 0.00
Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00
Huanggang Chenming Pulp & Paper Co., Ltd. 1,250,000,000.00 1,000,000,000.00 2,250,000,000.00
Huanggang Chenming Arboriculture
Development Co., Ltd. 70,000,000.00 70,000,000.00
Jilin Chenming Paper Co., Ltd. 1,501,350,000.00 1,501,350,000.00
Jinan Chenming Investment
Management Co., Ltd. 100,000,000.00 100,000,000.00
Jiangxi Chenming Paper Co., Ltd. 822,867,646.40 822,867,646.40
Shandong Chenming Power
Supply Holdings Co., Ltd. 157,810,117.43 157,810,117.43
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 264,493,210.21 264,493,210.21
Shandong Grand View Hotel Co., Ltd. 80,500,000.00 80,500,000.00
Zhanjiang Chenming Pulp & Paper Co., Ltd. 5,027,500,000.00 27,500,000.00 5,055,000,000.00
Shouguang Chenming Modern
Logistic Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Art Paper Co., Ltd. 113,616,063.80 113,616,063.80
Shouguang Meilun Paper Co., Ltd. 4,449,441,979.31 4,449,441,979.31
Shouguang Shun Da Customs
Declaration Co, Ltd. 1,500,000.00 1,500,000.00
Shandong Chenming Paper Sales Co., Ltd. 662,641,208.20 100,000,000.00 762,641,208.20
Shouguang Chenming Import
and Export Trade Co., Ltd. 250,000,000.00 250,000,000.00
Shouguang Chenming Papermaking
Machine Co., Ltd. 2,000,000.00 2,000,000.00
Shouguang Chenming Industrial
Logistics Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Hongxin Packaging
Co., Ltd. 3,730,000.00 3,730,000.00
Shandong Chenming Group Finance Co., Ltd. 4,000,000,000.00 4,000,000,000.00
Chenming Arboriculture Co., Ltd. 45,000,000.00 45,000,000.00
Shanghai Chenming Industry Co., Ltd. 3,000,000,000.00 3,000,000,000.00
Chenming (HK) Limited 118,067,989.55 118,067,989.55
Chenming Paper USA Co., Ltd. 6,407,800.00 6,407,800.00
Shandong Coated Paper Sales Co. Ltd. 20,000,000.00 20,000,000.00
Weifang Chenming Growth Driver
Replacement Equity Investment Fund
Partnership (Limited Partnership) 158,000,000.00 158,000,000.00
Total 22,114,152,649.90 1,305,500,000.00 144,000,000.00 23,275,652,649.90
296 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
4. Long-term equity investments (Cont’d )
(2) Investment in associates and joint ventures
Unit: RMB
Change for the period
Investment Adjustment Closing
Opening gain or loss of other Other Distribution of balance
balance Additional Withdrawn recognised under comprehensive change in cash dividend or Impairment Closing balance provision of
Investee (book value) contribution contribution equity method income equity interest profit declared provision Others (book value) impairment
I. Joint ventures
Shouguang Chenming Huisen
New-style Construction
Materia s Co., Ltd 3,572,834.79 2,216,832.82 2,000,000.00 3,789,667.61
Weifang Sime Darby West
Port Co., Ltd. 103,159,857.71 -13,433,185.95 89,726,671.76
Subtotal 106,732,692.50 -11,216,353.13 2,000,000.00 93,516,339.37
II. Associates
Jiangxi Jiangbao Media Colour
Printing Co., Ltd 811,998.75 -811,998.75 0
Zhuhai Dechen New Third Board
Equity Investment Fund
Company (Lim ted Partnership) 52,253,817.72 159,172.19 52,412,989.91
Ningbo Kaichen Huamei Equity
Investment Fund Partnership
(Lim ted Partnership 199,585,216.94 -56,369.42 199,528,847.52
Chenming (Qingdao) Asset
Management Co., Ltd. 7,886,521.47 782,969.70 8,669,491.17
Xuchang Chenming Paper
Co., Ltd. 5,994,545.96 5,994,545.96 0.00 5,994,545.96
Subtotal 266,532,100.84 73,773.72 5,994,545.96 260,611,328.60 5,994,545.96
Total 373,264,793.34 -11,142,579.41 2,000,000.00 5,994,545.96 354,127,667.97 5,994,545.96
2019 AnnuAl RepoRt 297
XIII Financial Report
XVI. Notes to major items in financial statement of the Company (Cont’d )
5. Revenue and operating costs
Unit: RMB
Amount for the reporting period Amount for the prior period
Item Revenue Costs Revenue Costs
Principal activities 5,832,105,007.21 4,281,782,302.88 4,196,033,317.73 2,902,204,877.94
Other activities 1,082,049,793.98 994,302,334.92 1,478,808,522.94 1,378,583,504.42
Total 6,914,154,801.19 5,276,084,637.80 5,674,841,840.67 4,280,788,382.36
Whether the New Revenue Standard has been implemented
√ Yes □ No
6. Investment income
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Income from long-term equity investments accounted for using
the cost method 1,085,829,000.00 590,000,000.00
Income from long-term equity investments accounted for using
the equity method -11,142,579.41 -16,957,355.99
Investment gain on disposal of long-term equity investments 277,000,000.00
Investment gain from disposal of held-for-trading financial assets 784,345.77 155,750,000.00
Total 1,352,470,766.36 728,792,644.01
298 SHANDONG CHENMING PAPER HOLDINGS LIMITED
XIII Financial Report
XVII. Supplementary information
1. Breakdown of extraordinary gains or losses for the current period
√ Applicable □ Not applicable
Unit: RMB
Item Amount Remark
Profit or loss from disposal of non-current assets 135,669,108.82
Government grants (except for the government grants closely related to the normal
operation of the Company and granted constantly at a fixed amount or quantity
in accordance with a certain standard based on state policies) accounted for in
profit or loss for the current period 623,277,014.49
Gain arising from investment costs for acquisition of subsidiaries, associates and
joint-ventures by the corporation being less than its share of fair value of
identifiable net assets of the investees on acquisition 364,597,001.77
Profit or loss from debt restructuring -55,792,548.82
Change in fair value of consumable biological assets 26,692,741.61
Non-operating gains and losses other than the above items 24,876,982.31
Less: Effect of income tax 131,148,729.27
Effect of minority interest 33,934,072.32
Total 954,237,498.59
The Company defines non-recurring profit and loss according to the definition in Explanatory Announcement No.
1 on Information Disclosure of Companies Offering Their Securities to the Public – Non-recurring Profit and Loss
and classifies non-recurring profit and loss listed in Explanatory Announcement No. 1 on Information Disclosure of
Companies Offering Their Securities to the Public – Non-recurring Profit and Loss as nonrecurring profit and loss,
please explain the reason.
□ Applicable √ Not applicable
2. Return on net assets and earnings per share
Earnings per share
Rate of return on
net assets
on weighted Basic Diluted
Profit for the reporting period average basis (RMB per share) (RMB per share)
Net profit attributable to ordinary shareholders
of the Company 5.57% 0.33 0.33
Net profit after extraordinary gains or losses
attributable to ordinary shareholders of
the Company 0.09% 0.01 0.01
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
2019 AnnuAl RepoRt 299
XIV Documents Available for Inspection
I. The financial statements signed and sealed by the legal representative, financial representative and head of the financial
department of the Company;
II. The original copy of the auditor’s report which is sealed by the accounting firm and signed and sealed by the certified public
accountant;
III. The original copies of the documents and announcements of the Company disclosed in the designated newspaper and on
the 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.
300 SHANDONG CHENMING PAPER HOLDINGS LIMITED
