SHANDONG CHENMING PAPER HOLDINGS LIMITED
Annual Report 2022
March 2023
I Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the
“Directors”), supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company 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.
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 Management Discussion and Analysis.
The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capital
from reserves.
2022 ANNUAL REPORT 1
I Important Notice, Table of Contents and Definitions
Table of Contents
I Important Notice, Table of Contents and Definitions ........................................................................................ 1
II Company Profile and Key Financial Indicators ................................................................................................. 6
III Chairman’s Report ............................................................................................................................................ 11
IV Management Discussion and Analysis.............................................................................................................. 13
V Directors’ Report ............................................................................................................................................... 45
VI Corporate Governance ...................................................................................................................................... 56
VII Environment and Social Responsibility ............................................................................................................. 100
VIII Material Matters ................................................................................................................................................ 109
IX Changes in Share Capital and Shareholders .................................................................................................... 139
X Preference Shares ............................................................................................................................................. 149
XI Bonds ................................................................................................................................................................ 150
XII Financial Report ................................................................................................................................................ 159
2
I Important Notice, Table of Contents and Definitions
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
accountants.
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.
2022 ANNUAL REPORT 3
I Important Notice, Table of Contents and Definitions
Definitions
Item Definition
Company, Group, Chenming Group, Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries
Paper or Chenming Paper Company
Parent Company or Shouguang Headquarters means Shandong Chenming Paper Holdings Limited
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 Pulp & Paper Co., Ltd.
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
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Shouguang Art Paper means Shouguang Chenming Art Paper Co., Ltd.
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Chenming Investment means Shandong Chenming Investment Limited
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)
4
I Important Notice, Table of Contents and Definitions
Item Definition
Chenchuang Fund means Weifang Chenchuang Equity Investment Fund Partnership (Limited
Partnership)
Dongxing Investment means Dongxing Securities Investment Co., Ltd.
Chongqing Trust means Chongqing International Trust Co., Ltd.
Chenming Asset Management means Chenming (Qingdao) Asset Management Co., Ltd.
Corporate Bonds means 18 Chenming Bond 01
Perpetual Bonds means 17 Lu Chenming MTN001
the reporting period or the year means The period from 1 January 2022 to 31 December 2022
the beginning of the year or the period means 1 January 2022
the end of the year or the period means 31 December 2022
the prior year means The period from 1 January 2021 to 31 December 2021
2022 ANNUAL REPORT 5
II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation Stock code 000488
B 200488
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Stock code 01812
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Name in Chinese of the Company
Short name in Chinese of the Company
Name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
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 address 262700
Changes of the registered address of the Company Nil
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 Nongsheng East Road, 22nd Floor, World Wide House, Central,
Shouguang City, Shandong Province Hong Kong
Telephone 0536-2158008 00852-21629600
Facsimile 0536-2158977 00852-25010028
Email address chenmmingpaper@163.com liamchu@li-partners.com
III. Information disclosure and places for inspection
Websites of the stock exchanges where the Company Domestic: http://www.szse.cn; overseas: http://www.hkex.com.hk
discloses its annual report
Names and websites of the media where the Company China Securities Journal, Shanghai Securities News, Securities
discloses its annual report Times, Securities Daily, Hong Kong Commercial Daily and
CNINFO (http://www.cinifo.com.cn)
Places for inspection of the Company’s annual report Securities investment department of the Company
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
6
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 Public Accountants Liu Jian and Jiang Le
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
2022 2021 prior year 2020
Revenue (RMB) 32,004,367,320.91 33,019,812,294.14 -3.08% 30,736,517,996.90
Net profit attributable to shareholders 189,290,120.82 2,065,513,108.71 -90.84% 1,712,029,078.52
of the Company (RMB)
Net profit after extraordinary gains or losses -361,459,377.16 1,743,876,537.12 -120.73% 1,119,103,808.75
attributable to shareholders of the Company (RMB)
Net cash flows from operating activities (RMB) 3,449,824,242.37 8,581,888,192.64 -59.80% 11,259,802,676.28
Basic earnings per share (RMB per share) 0.03 0.56 -94.64% 0.36
Diluted earnings per share (RMB per share) 0.03 0.56 -94.64% 0.36
Rate of return on weighted average net assets 0.55% 9.56% Decreased by 9.01 5.84%
percentage points
Increase/decrease
as at the end of
the year compared
to the end of the
As at the end of 2022 As at the end of 2021 prior year As at the end of 2020
Total assets (RMB) 84,301,017,409.62 82,869,661,681.08 1.73% 91,575,457,828.62
Net assets attributable to shareholders of the
Company (RMB) 19,084,565,494.92 19,117,985,306.48 -0.17% 24,276,968,789.00
2022 ANNUAL REPORT 7
II Company Profile and Key Financial Indicators
Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interest
payment deferred and accumulated to subsequent periods for Perpetual Bonds. When calculating financial indicators
such as earnings per share and rate of return on weighted average net assets, the interest on Perpetual Bonds of
RMB89,700,000.00 during the reporting period is deducted.
The lower of the Company’s net profit before or after extraordinary gains or losses in the last three accounting years is
negative, and the audit report for the last year shows that the Company’s ability to continue as a going concern is uncertain
Yes √ No
The lower of net profit before or after extraordinary gains or losses is negative
√ Yes No
Item 2022 2021 Remark
Revenue (RMB) 32,004,367,320.91 33,019,812,294.14 Revenue from sales of
Deduction to revenue (RMB) 1,030,770,460.26 2,203,901,882.20 materials of
Revenue after deduction (RMB) 30,973,596,860.65 30,815,910,411.94 RMB903,160,256.93,
and other revenue of
RMB127,610,203.33.
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.
VIII. Key Financial Indicators by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Revenue 8,514,983,059.74 8,161,445,306.09 8,679,605,529.93 6,648,333,425.15
Net profit attributable to shareholders of
the Company 113,917,827.90 116,223,635.86 10,434,396.87 -51,285,739.81
Net profit after extraordinary gains or losses
attributable to shareholders of the Company 99,637,959.12 73,769,968.01 -18,272,552.33 -516,594,751.96
Net cash flows from operating activities 222,704,964.47 775,559,244.98 150,935,364.72 2,300,624,668.20
8
II Company Profile and Key Financial Indicators
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
2022 2021 2020 2019 2018
Revenue 3,200,437 3,301,981 3,073,652 3,039,543 2,887,576
Profit before tax 18,227 230,618 217,227 204,848 320,632
Tax -13,509 21,650 26,606 29,518 64,158
Profit for the current period attributable to shareholders of the Company 18,929 206,551 171,203 165,657 250,983
Minority interests 12,807 2,417 19,418 9,673 5,491
Basic earnings per share (RMB/share) 0.03 0.56 0.36 0.33 0.51
Rate of return on weighted average net assets (%) 0.55% 9.56% 5.84% 5.57% 8.51%
Unit: RMB’0,000
For the year ended 31 December
2022 2021 2020 2019 2018
Total assets 8,430,102 8,286,966 9,157,546 9,795,891 10,531,873
Total liabilities 6,057,276 6,029,463 6,577,519 7,161,914 7,944,704
Minority interests 464,369 345,705 152,329 117,003 82,296
Equity attributable to shareholders of the Company 1,908,457 1,911,799 2,427,697 2,516,974 2,504,873
Net current assets (liabilities) -1,917,930 -1,766,446 -1,516,398 -774,633 -1,344,718
Total assets less current liabilities 3,240,227 3,233,471 4,052,922 4,526,014 4,390,405
2022 ANNUAL REPORT 9
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable Not applicable
Unit: RMB
Item Amount for 2022 Amount for 2021 Amount for 2020 Description
Profit or loss from disposal of non-current assets
(including write-off of provision for assets impairment) 161,509,859.17 162,163,302.50 -51,477,216.37
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 in compliance with
national policies and regulations) accounted for in profit
or loss for the current period 314,934,315.62 261,974,874.53 943,720,129.34
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 and financial liabilities held for
trading, as well as investment gains from disposal of
financial assets held for trading, financial liabilities held
for trading and financial assets available for sale -35,178,162.53 -54,802,461.29 21,166,216.02
Profit or loss from debt restructuring 967,464.91 24,593,731.72 -14,942,498.74
Reversal of provision for impairment of receivables
individually tested for impairment 275,585,463.86
Profit or loss from changes in the fair value of consumable
biological assets subsequently measured at fair value 9,924,233.72 -41,899.05 -13,329,852.55
Other non-operating income and expenses other than the
above items -37,391,130.09 -15,461,704.28 8,582,997.62
Loss on abnormal work stoppage -24,567,901.71
Less: Effect of income tax 137,333,913.66 60,135,956.19 120,949,832.54
Effect of minority interests (after tax) 2,268,633.02 -3,346,683.65 155,276,771.30
Total 550,749,497.98 321,636,571.59 592,925,269.77
Details of other gain or loss items that fall within the definition of extraordinary gain or loss:
Applicable √ Not applicable
The Company did not have details of other gain or loss items that fall within the definition of extraordinary gain or loss.
Explanation on the extraordinary gain or loss items as illustrated in the Explanatory Announcement on 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 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.
10
III Chairman’s Report
Dear shareholders,
I am pleased to present the report of the Company for the financial year ended 31 December 2022 to all shareholders, and on
behalf of the board of directors, I would like to express my sincere gratitude to all shareholders for their care and support for the
Company.
In 2022, the Company overcame the disturbance of external factors such as rising raw material prices and multiple outbreaks of
the economic environment, sustained steady operation, continued to maintain profitability, and demonstrated strong resilience in
development.
Seeking development in the “new normal”
The Company used flexible and versatile strategies to reduce costs and increase efficiency against an extremely harsh economic
environment, seeking maximum operational benefits. On the one hand, we kept up with market changes to timely adjust product
strategies and purchasing strategies, and further strengthened our inventory, capital and financial risk management to ensure
safety and stability of the capital chain. We also introduced strategic investors to increase our capital strength. On the other
hand, we seized the opportunities arising from a sharp decline in the overseas paper product supply, accelerated our “overseas
expansion” strategy, and extended our global footprint. During the reporting period, both sales volume and prices of the products
of the Company rose overseas with a significant increase of the sales. Meanwhile, the Company comprehensively improved its
product and service quality to seek improvement in products’ added value, and develop stable customer relationships. During
the reporting period, the Company maintained the sales volume of its major machine-made paper products at a high level, and
the product prices also rose year on year. The Company still made profit amid pressure despite a significantly narrowing
profit squeeze of the Company due to weak market demand and higher production costs. In 2022, the Company realised net
profit of RMB317 million.
Gaining strength for sustainable development
Chinese papermaking companies have long been dependent on imported pulp, and the full implementation of the “waste ban”
has further boosted the demand for alternative raw materials. In order to avoid dependence on external pulp and adapt to the
need for upgrading the papermaking raw material structure, the Company develops a comparative advantage in production
costs by continuously deepening the layout of a “pulp and paper integration” strategy. At present, the Company are equipped
with wood pulp production lines at its major production bases with total wood pulp production capacity of 4.30 million tonnes,
basically realising broadleaf wood pulp self-sufficiency. The Company is also planning to build its softwood wood pulp production
capacity to further improve its raw material self-sufficiency structure and refine its upstream supply chain.
The Company has pulp and papermaking capacity of more than 11 million tonnes with economies of scale. We will strive to
achieve optimal production capacity by making overall arrangements and planning scientifically. The Company has seven series
of products such as culture paper, white cardboard and coated paper, which are oriented to different fields of production and life,
and will further shift to green, lightweight and high-end development in the future. The Company has built production capacity of
approximately 2 million tonnes of high bulk cardboard, coated cardboard and food package board in, among others, Zhanjiang
Shouguang and Jiangxi, and constantly improved products’ added value to seize market opportunities brought about by the “plastic
ban”.
The sustainable competitiveness of an enterprise depends on the intensity of its knowledge and technology elements. Therefore,
the Company attaches great importance to the independent innovation cultivation, makes full use of the R&D advantages of the
national enterprise technology centre and post-doctoral working station, and constantly enhances its R&D strength. As at the
end of the reporting period, the Company had obtained more than 380 national patents, and had taken the lead among domestic
peers in passing ISO9001 quality system certification, ISO14001 environmental protection system certification and FSC-COC
international forest system certification in China. In addition, the Company’s major production lines had reached the international
advanced level.
2022 ANNUAL REPORT 11
III Chairman’s Report
Striving for innovation amid change and progress amid stability
Although uncertainties persist in the short run, the economic environment stabilised with orderly work and production
resumption, and an expected gradual recovery of market demand. In the long run, there will be still a huge paper demand to
be satisfied in China with reference to China’s GDP per capita heading for the level of a medium-level developed country by
2035, and the historical experience of developed countries. In addition, the industry landscape has been continuously
optimised with the advantages of the top companies further strengthened due to environmental protection, the market factor,
and others.
In an unprecedented complex situation, only by adapting to trends and responding flexibly can the initiative be seized. In the
future, we will strive for innovation amid change and progress amid stability in the following four aspects:
We will firmly promote the “pulp-paper integration” strategy. We will ensure the “quality and quantity” of the self-sufficient pulp
supply, which will be supplemented by a flexible procurement strategy, to constantly consolidate our cost advantage of
raw materials.
We will promote mutual facilitation between production and sales. We will capitalise on market demand to produce products
which can best meet customer demand, and help market development based on product quality. We will take advantage of our
intensive sales network, capitalise on the changes of customer demand, and promote the optimisation of the product structure
and product quality.
We will strengthen our financial management. We will strengthen the management of the working capital and cash flows, and
strike a balance between the financing size and financing costs.
We will adhere to green development. We will strengthen pollution prevention and control and improve resource utilisation
efficiency.
On behalf of the board of directors, I would like to take this opportunity to express my heartfelt gratitude to all colleagues,
partners, clients and investors for their understanding, supporting and acknowledgement of our enterprise in the previous year.
Chen Hongguo
Chairman
30 March 2023
12
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Management Discussion and Analysis
I. Industry Situation of the Company during the Reporting Period
The industry in which the Company operates is paper making and paper product industry.
The paper making industry is one of the basic industries of the national economy that has the typical characteristics of
large-scale industrial production such as continuous and efficient operation and significant scale benefits, which is closely
related to social and economic development and people’s lives. Since the reform and opening up, with the sustained and
rapid development of the national economy, China’s paper making industry has gradually begun to transform from extensive
growth to intensive growth. At the same time, driven by the upgrade of social demand, the increase of environmental
protection policies, the continuous progress of technology and the change of resource supply, the reduction of low-end
production capacity has been accelerated, and the structure of the paper making industry has been continuously optimised.
However, the close connection between the paper making industry and the macroeconomy also renders the industry more
sensitive to changes in the macroeconomy.
During the reporting period, the global economic environment became widespread. Affected by the international situation
and economic environment resurgence, energy and logistics costs remained high with higher inflation risks. Consumption
and the supply chain operation were frustrated to a significant extent with greater pressure downward pressure on the
economy. For the papermaking industry, on the one hand, production costs rose significantly due to soaring
upstream pulp, energy and transportation prices. On the other hand, the rise of paper product prices failed to keep
pace with production costs due to factors such as sluggish downstream consumption and weak demand. A
significantly narrowing profit squeeze in the industry intensified pressure on operation.
In terms of output, revenue and profitability, according to data from the Ministry of Industry and Information Technology, in
2022, the national output of machine-made paper and paperboard was 136.914 million tonnes, down 1.3% year on year.
Revenue of papermaking and paper product enterprises above designated size was RMB1,522.89 billion, up 0.4% year on
year. Total profit was RMB62.11 billion, down 29.8% year on year. The output and revenue size in the industry remained
stable, but the profit level dropped significantly.
Although the short-term performance of the industry is relatively low, the industry is expected to realise profit recovery with
the gradual stabilisation of the economic environment and the gradual recovery of market demand. In the long run,
China’s paper products market still has large scope for development, according to the national “dual circulation”
strategy and “China’s GDP per capita heading for the level of a medium-level developed country by 2035”.
2022 ANNUAL REPORT 13
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period
The Company is a large modern conglomerate principally engaged in pulp production and paper making, and the
machine-made paper business is the major source of revenue and profit of the Company. At present, the Company has
production bases in Shandong, Guangdong, Jiangxi, Hubei, Jilin and other places, with annual pulp and paper production
capacity of more than 11 million tonnes. It is the first domestic paper making enterprise that achieves a balance between
pulp production and paper making capacity. During the reporting period, continuously taking “revitalising the Chinese
papermaking industry” as its mission, the Company had been committed itself to implementing a pulp and paper integration
strategy. It deepened the development of pulp production and papermaking, its major operation, and realised revenue
of RMB32,004 million and net profit of RMB317 million. There was no significant change in the principal activities of the
Company.
1. Products
The Company attaches great importance to technology research and development and brand benefits. Adopting
the market-oriented approach, the Company adheres to technological innovation, continuously improves the level
of technological research and development and product service quality, develops green and low-carbon products
with high technological content and high added value, and comprehensively enhances the core competitiveness of
products. At present, the Company has the largest and most advanced pulping and papermaking production lines in
the world, with machine-made paper products covering more than 200 types in seven series, including culture paper,
coated paper, white cardboard, copy paper, industrial paper, special paper, and household paper. The Company
owns “BIYUNTIAN”, “GOLDEN MINGYANG”, “CHENMING CLOUDY MIRROR”, “CHENMING CLOUDLY LION”,
“CHENMING SNOW SHARK”, “CHENMING EAGLE”, “CHENMING GONGHAO”, “XINGZHILIAN” and other famous
brands, with each major product ranking among the highest in terms of market share in China. It is the enterprise with
the largest variety of products and the most complete products in the domestic paper making industry.
During the reporting period, the Company was shortlisted for the list of “Top 500 Most Valuable Brands in China in
2022” and won the title of “2022 Shandong Province Science and Technology Leading Enterprise”. Its main products
such as culture paper, coated paper and household paper were selected into the first batch of “Shandong’s Good
Product” brand list, and its poplar coated white cardboard, Xingzhilian tissue paper and Xingzhilian toilet paper had
won the national “Green Design Products” award, fully demonstrating the Company’s excellent achievement in brand
building and strong brand value.
14
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period (Continued)
1. Products (Continued)
Category Major brands and types Major production companies Range of application
Culture paper series 1. “BIYUNTIAN”, “CLOUDY MIRROR”, “CLOUDY Shouguang Headquarters Printing publications, textbooks, magazines, covers, illustrations,
LEOPARD” and “YUNJIN” all-wood pulp offset paper Zhanjiang Chenming notebooks, test papers, teaching materials, reference books, etc.
and electrostatic base paper Jilin Chenming
2. “CLOUDY LION” and “CLOUDY CRANE” original white
offset paper
3. “CLOUDY PINE” and “GREEN PINE” light weight paper
4. Blueprint paper, colour offset paper, pure texture paper,
non-fluorescent offset paper, PE offset paper
5. Beige and high white book paper
6. Light weight coated paper
Coated paper series 1. “SNOW SHARK” and “EAGLE” one-sided coated paper Shouguang Headquarters Double-sided coated paper is suitable for high quality printing, such
2. “SNOW SHARK”, “EAGLE” and “RABBIT” double-sided Shouguang Meilun as high-grade picture albums, picture, magazines and so on,
coated paper promotional materials such as interior pages of high-end books,
3. “EAGLE” and “RABBIT” matte coated paper wall calendars, posters and so on, and suitable for suitable for
high-speed sheet printing and high-speed rotary printing;
One-sided coated paper is suitable for upscale tobacco package
paper, adhesive sticker, shopping bags, slipcases, envelopes,
gift wrapping and so on, and suitable for large format printing and
commercial printing
White cardboard series 1. White cardboard of “LIYA” series, white cardboard Shouguang Headquarters High-end gift boxes, cosmetics boxes, tags, shopping bags, publicity
and ivory cardboard of “LIPIN” and “POPLAR” series, Jiangxi Chenming pamphlets, high-end postcards; cigarette package printing of
high bulk cardboard and ivory cardboard of “LIZZY” Zhanjiang Chenming medium and high quality; milk package, beverage package,
and “BAIYU” series, and super high bulk cardboard of disposable paper cups, milk tea cups, and noodle bowls.
“LIYING” and “BAIYU” series
2. Food package board of “LIYA” and “LIZZY” series
3. Coated cattle card and LIYA book card
4. Playcard paper board
5. Chenming cigarette cardboard
Copy paper series “GOLDEN MINGYANG” and “GOLDEN CHENMING” Shouguang Meilun Printing and copying business documents, training materials, and
copy paper, “BOYA” and “BIYUNTIAN” copy paper, Zhanjiang Chenming writing.
“MINGYANG”, “LUCKY CLOUDS”, “BOYANG” and
“SHANYIN” copy paper, and “GONGHAO” and
“TIANJIAN” copy paper
Industrial paper series High-grade yellow anti-sticking base paper, ordinary yellow/ Shouguang Headquarters Anti-stick base paper is mainly used for producing the paper base of
white anti-sticking base paper and PE paper Jiangxi Chenming stripping paper or anti-sticking base paper;
Zhanjiang Chenming
Cast coated base paper is suitable for producing adhesive paper or
playcard compound paper after coating
Special paper series Thermal paper and glassine paper Shouguang Art Paper High-grade adhesive backing paper for electronics, medicine, food,
washing supplies, supermarket labels, double-sided tapes, etc.
Household paper series Toilet paper, facial tissue, pocket tissue, napkin, paper Shouguang Meilun Daily toilet supplies; used in restaurants and other catering industries,
towels and “XINGZHILIAN” and used in public toilets in hotels, guesthouses, and office
buildings, and also suitable for home and other environment.
2022 ANNUAL REPORT 15
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period (Continued)
2. Operation model
During the reporting period, the Company’s business model did not underwent major changes.
(1) Purchase model
The Company has established a supply chain management centre which adopts a supply chain management
model of “centralised procurement by the Group, source as the first priority, hierarchical separation and onevote
veto”. Through continuous improvement of the procurement information system, the Company has fully realised
machine control management, and optimised the authorisation approval process, effectively standardising
the procurement management system. Based on the needs of production bases, the Group integrates the
resources of related parties and implements centralised procurement. The Company seeks sources and high-
quality suppliers through industry exhibitions, on-site inspections and competitive factory research to strengthen
procurement at source and reduce procurement costs; and introduces a supplier competition mechanism
by establishing a three-level joint review mechanism for suppliers and implementing a system of eliminating
substandard suppliers, so as to improve supply quality. Meanwhile, the Company actively cooperates with
financial institutions and third parties in the supply chain financial business, and fully utilises the funds from
contributing parties to lower procurement costs, deepen strategic cooperation and enhance supply chain
competitiveness.
(2) Production model
The Company has committed itself to implementing a pulp and paper integration strategy. Adhering to the
concept of “placing green development and environmental protection as its priority”, the Company has actively
promoted clean production and vigorously carried out energy conservation and emission reduction, aiming to be
a resource-saving and environmentally friendly model enterprise. It is innovating an integrated use of resources
and a circular industrial development mode, and an “ecological chain” featuring resources, products and
recycled resources has been established. As for production process, the Company takes planned management
as the focus and implements a hierarchical planned management model for the Group, the Company,
factories and workshops. Its production volume is determined based on the sales, its production is arranged
scientifically, and its inventories are under strict control. The Group has set up a production scheduling centre
to monitor the operation of the production lines of each subsidiary around the clock on a real-time basis, so as
to ensure normal production. It has actively built and promoted the MES management system, and realised the
timely information transfer between the management and the production control unit through bridging the gap
between the ERP and DCS systems.
(3) Marketing model
The Company has always adhered to the marketing concept of “Good faith, Win-Win and Sharing” while
wholeheartedly serving its customers. 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. The sales companies’ management systems are divided into product
lines, product companies, management areas, and branches to achieve matrix management. The sales
companies are divided into product companies of culture paper series, coated paper series, white cardboard
series, electrostatic paper series, special paper series and household paper series according to product line.
Each product company has its administrative district. A regional general manager is responsible for his/her
administrative district, under which branch companies are set up. The chief representatives of the branch
companies have full authority to deal with branch business.
16
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period (Continued)
2. Operation model (Continued)
(3) Marketing model (Continued)
The Company has implemented a three-level scheduling mechanism. Branch companies, administrative
districts, and sales companies schedule task indicators daily to ensure the effective implementation of the plans.
It sticks to a “four-level visit mechanism” to gain deep market insights and meet customer needs. Meanwhile,
by leveraging its comprehensive information systems, the Company has realised It-based management. It has
also established and improved the complaint handling system and customer satisfaction system to enhance the
Company’s marketing management level.
(4) R&D Mode
The Company is market-oriented, and innovation is it driving force. It highly values technological R&D, and has
formed a variety of R&D modes such as independent R&D, technology introduction, and industry university
research cooperation. At present, the Company has a number of domestically leading innovative R&D platforms,
including the national enterprise technology centre, the post-doctoral working station, the state certified CNAS
pulp and paper testing centre, Shandong Pulp and Paper Making Engineering Lab and the Guangdong Pulp and
Paper Production Technology Research Centre, which have enhanced its independent innovation capabilities.
Meanwhile, on the basis of introducing internationally advanced pulp and paper production lines and advanced
technologies, the Company has made technological improvements and re-innovations, and established
new standards for processes and product quality, forming distinctive core technologies. The Company also
works hard on the following aspects: carrying out academic research with colleges and universities and R&D
institutions such as Qilu University of Technology, Qingdao University of Science and Technology, Tianjin
University of Science and Technology, and Institute of Chemical Industry of Forest Products of the Chinese
Academy of Forestry, introducing, digesting and absorbing scientific research and innovation achievements,
accelerating the industrialisation of new and high technologies, optimising product mix, and improving the
competitiveness of its products in the market.
3. The position of the Company in the industry during the reporting period
The papermaking industry is a strategic and fundamental industry closely related to national economic and social
development. In 2022, the papermaking industry had a narrowing profit squeeze with declining prosperity due to
a sharp rise in the prices of raw materials, power and logistics in the upstream market and the weak demand in
the downstream market. According to data of the Ministry of Industry and Information Technology, total profit of
papermaking and paper product enterprises above designated size nationwide in 2022 was RMB62.11 billion, down
nearly 30% year on year. According to data of the National Bureau of Statistics, as of December 2022, the number of
loss-making papermaking and paper product enterprises was 1,799, representing a year-on-year increase of 40.9%.
In this context, the Company responded flexibly and stubbornly, and continued to make profit amid difficulties,
thereby showing its strong resilience.
2022 ANNUAL REPORT 17
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period (Continued)
3. The position of the Company in the industry during the reporting period (Continued)
As a leading player in the paper making industry of China, the Company has implemented the strategy of innovative
operation, quickened its pace in growth driver replacement and led the way in full industry chain operation, and
has emerged as the only paper making enterprise in China to achieve capacity balance between pulp production
and paper making. Currently, the Company has the annual pulp and paper production capacity of over 11 million
tonnes, tops the industry in its paper product variety and ranks among the best in China in terms of the market share
of its major products. During the reporting period, the Company strove to implement its strategy of pulp and paper
integration, with a coordinated development pattern further formed with Shouguang in the north, Huanggang in the
middle, and Zhanjiang in the south. The Company seized opportunities in overseas markets and improved its global
sales network, thus significantly growing sales to overseas markets. The Company strengthened its management,
prevented and controlled risks, and laid the foundation for its sustainable development. The Company optimised the
product structure, improved service quality, and strove to increase products’ added value, which further consolidated
its leading position in the industry. The Company had won awards such as “Top 500 Chinese Enterprises”, “Fortune
China 500” and “Top 10 Enterprises in the PRC Light Industry – Paper Sector”, which reflected the high recognition
and full affirmation of the Company from all walks of life.
III. Analysis of Core Competitiveness
After innovation and development for more than 60 years, the Company has created a strong brand influence and cultivated
a solid comprehensive competitiveness. It promotes product upgrades, enhances R&D strength and improves core
competitiveness by building a supply chain. The core competitiveness of the Company did not underwent major changes
during the reporting period. The details of the core competitiveness of the Company are as follows:
1. Advantages of pulp and paper integration
The Company has unwaveringly implemented a pulp and paper integration strategy. At present, its major production
bases located in Shouguang, Zhanjiang, and Huanggang are equipped with chemical pulp production lines, with
total production capacity of wood pulp reaching 4.30 million tonnes. It is the first modern large-scale paper making
company that basically realises wood pulp self-sufficiency in China. A complete supply chain not only creates cost
advantage for the Company, but also safeguards the safety, stability and quality of upstream raw materials, and
renders strong support for the Company to maintain its long-term competitiveness.
2. Scale advantages
The paper making industry is a typical capital-intensive and technology-intensive industry that follows the laws of
economies of scale. The Company is a leading player in the paper making industry in China. Its large-scale production
bases can be found in the major markets in Southern, Central, Northern, and Northeast China, with annual pulp and
paper production capacity reaching 11 million tonnes, where reasonable production scale creates the marginal cost
advantage. Meanwhile, by leveraging the scale advantages, the Company has built an international logistics centre
and railway dedicated lines and docks, and constructed a comprehensive logistics service platform covering container
shipping, bonded warehousing, transfer and storage at stations and terminals, realising the improvement of logistics
efficiency and the stability of logistics costs.
3. Product advantages
The Company is an enterprise that offers the widest and the most complete product range in the paper making
industry. The product series include culture paper, white paper board, coated paper, copy paper, household paper,
thermal paper, etc., with each major product ranking among the best in terms of market share. The Company has
attached great importance to technology research and development. By introducing the most advanced pulping
and paper making technology and equipment in the world, it persists in technological innovation and work process
optimisation, so as to help improve product quality and structure upgrade, continuously improve the brand value of
Chenming, and enhance brand benefits.
18
IV Management Discussion and Analysis
III. Analysis of Core Competitiveness (Continued)
4. Industry layout advantages
Closely centring on the pulp and paper integration strategy, the Company has integrated resources and established
its production bases in the core target market to promote the coordinated development of all regions. Currently, the
Company adopts the market-oriented approach and has production bases in Shandong, Guangdong, Jiangxi, Hubei,
Jilin and other places. With all products sold at close distances, the Company substantially reduces transportation
costs while improving service efficiency, achieving a “win-win” between the Company and its users.
5. Advantages in technical equipment
The Company highly values the introduction and upgrades of technical equipment, actively push equipment and
technology upgrade forward and boasts the largest and most advanced pulping and paper making production
line in the world. The Company’s major production equipment has been imported from internationally renowned
manufacturers, including Metso and Valmet of Finland, Voith of Germany, Andritz of Austria, etc. and reached the
advanced international level, thus ensuring production efficiency and product quality.
6. Advantages in research and innovation
The Company has scientific research institutions including the national enterprise technology centre, the post-doctoral
working station, the state certified CNAS pulp and paper testing centre. At the same time, the Company actively
carries out in-depth industry-university-research cooperation with prestigious domestic universities and research
institutes, continuously improves technical innovation capabilities and scientific research and development levels,
and develops a series of new products with high technology contents and high added value as well as proprietary
technologies. The Company and its subsidiaries Zhanjiang Chenming, Shouguang Meilun, Jiangxi Chenming, Jilin
Chenming, Huanggang Chenming and Wuhan Chenming are high and new technology enterprises. As at the end
of the reporting period, the Company had obtained over 380 national patents, and took the lead in obtaining the
ISO9001 quality system certification, the ISO14001 environmental protection system certification and the FSC-COC
international forest system certification among domestic peers.
7. Team management advantages
The Company possesses a complete and reasonable talent structure consisting of experienced personnel, including
high-end talents specialising in production, technology, sales, finance, laws, etc. In the course of business operations,
the stable core team has developed a corporate culture that ties in with the Company’s development, summarised
management experience with industry characteristics, and formed a team advantage integrating management and
culture, allowing it to accurately grasp the industry development trend. At the same time, the Company has paid
attention to the construction of a talent reserve and cultivation mechanism. With advanced business concepts and
enormous development space, the Company has attracted an array of high-calibre professionals and improved the
level of human capital construction, providing solid guarantee for the Company’s long-term sustainable development.
2022 ANNUAL REPORT 19
IV Management Discussion and Analysis
III. Analysis of Core Competitiveness (Continued)
8. Advantages in environmental governance capacity
The Company has actively upheld the concept of “lucid waters and lush mountains are invaluable assets”, adhered to
the development idea of “placing green development and environmental protection as its priority”, always regarded
environmental protection as the “life project”, clung to the green development model of clean production and
resource recycling, and earnestly shouldered the corporate responsibility of environmental protection. In recent years,
the Company and its subsidiaries have invested more than RMB8 billion in total in environmental protection, and 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 protection indicators rank high in China 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, which is the largest middle water reuse project in the domestic paper industry.
The reclaimed water recycle rate attains the industry-leading level. The reclaimed water quality meets drinking water
standards, which can save hundreds of thousands cubic metres of fresh water every day. Meanwhile, in response
to the “dual carbon” policy, the Company actively introduces photovoltaic power generation and biomass power
generation, continuously optimises the energy structure and improves the level of low-carbon production.
IV. Analysis of principal operations
1. Overview
During the reporting period, operating costs of papermaking companies remained high as prices of bulk raw
materials, energy and power as well as international logistics soared due to factors such as the further development
of public health events, the international political turmoil and high inflation. Meanwhile, in the downstream market,
the price transmission mechanism did not work due to weak demand in the domestic market and the year-on-year
decrease in sales volume, resulting in a narrowing corporate profit squeeze. Against a challenging situation, the
Company coordinated economic environment prevention and control, and production and operation with firm
confidence against difficulties, and consolidated its profitability by strengthening internal management, optimising
cost structure, curbing raw material costs, expanding overseas sales and other measures. In 2022, the Company
produced 5.02 million tonnes and sold 5.15 million tonnes of machine-made paper, realising revenue of RMB32,004
million and net profit of RMB317 million.
20
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2022 2021 Increase/
Amount % of revenue Amount % of revenue decrease
Total revenue 32,004,367,320.91 100% 33,019,812,294.14 100% -3.08%
By industry
Machine-made paper 28,398,850,766.51 88.73% 28,822,796,809.32 87.29% -1.47%
Chemical pulp 1,043,284,411.27 3.26% 248,980,922.18 0.75% 319.02%
Mould processing 308,596,084.40 0.96% 429,452,007.72 1.30% -28.14%
Electricity and steam 288,447,315.51 0.90% 303,940,594.69 0.92% -5.10%
Construction materials 265,496,913.56 0.83% 349,945,005.51 1.06% -24.13%
Hotel and property rentals 238,020,274.82 0.74% 148,941,357.80 0.45% 59.81%
Chemicals 169,232,476.00 0.53% 131,104,964.35 0.40% 29.08%
Others 1,292,439,078.84 4.04% 2,584,650,632.57 7.83% -50.00%
By product
White paper board 9,061,724,789.41 28.31% 9,579,581,625.05 29.01% -5.41%
Duplex press paper 8,449,759,248.92 26.40% 7,287,152,353.07 22.07% 15.95%
Coated paper 4,149,820,827.47 12.97% 4,310,744,513.87 13.06% -3.73%
Electrostatic paper 4,077,351,284.38 12.74% 3,857,097,045.49 11.68% 5.71%
Anti-sticking raw paper 973,542,096.46 3.04% 1,168,436,835.30 3.54% -16.68%
Thermal paper 582,687,847.45 1.82% 540,941,351.36 1.64% 7.72%
Other machine-made paper 1,103,964,672.42 3.45% 2,078,843,085.18 6.30% -46.90%
Chemical pulp 1,043,284,411.27 3.26% 248,980,922.18 0.75% 319.02%
Mould processing 308,596,084.40 0.96% 429,452,007.72 1.30% -28.14%
Electricity and steam 288,447,315.51 0.90% 303,940,594.69 0.92% -5.10%
Construction materials 265,496,913.56 0.83% 349,945,005.51 1.06% -24.13%
Hotel and property rentals 238,020,274.82 0.74% 148,941,357.80 0.45% 59.81%
Chemicals 169,232,476.00 0.53% 131,104,964.35 0.40% 29.08%
Others 1,292,439,078.84 4.04% 2,584,650,632.57 7.83% -50.00%
By geographical segment
Mainland China 23,860,251,349.91 74.55% 28,894,011,653.20 87.51% -17.42%
Other countries and regions 8,144,115,971.00 25.45% 4,125,800,640.94 12.49% 97.39%
By sales mode
Distribution 20,430,260,632.51 63.84% 21,812,237,365.81 66.06% -6.34%
Direct sales 11,574,106,688.40 36.16% 11,207,574,928.33 33.94% 3.27%
2022 ANNUAL REPORT 21
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
2. Revenue and cost (Continued)
(2) Industries, products, regions and sales model accounting for over 10% of revenue or operating profit of the
Company
√ Applicable Not applicable
Unit: RMB
Increase/ Increase/
Increase/ decrease of decrease of
decrease of operating gross profit
revenue as costs as margin as
compared compared compared
to the to the to the
corresponding corresponding corresponding
period of the period of the period of the
Revenue Operating costs Gross profit prior year prior year prior year
By industry
Machine-made paper 28,398,850,766.51 24,448,024,979.32 13.91% -1.47% 10.89% -9.60%
By product
White paper board 9,061,724,789.41 7,826,962,810.39 13.63% -5.41% 19.66% -18.09%
Duplex press paper 8,449,759,248.92 7,407,821,676.66 12.33% 15.95% 23.37% -5.27%
Coated paper 4,149,820,827.47 3,457,680,224.04 16.68% -3.73% 10.45% -10.70%
Electrostatic paper 4,077,351,284.38 3,497,341,216.24 14.23% 5.71% 11.35% -4.34%
By geographical segment
Mainland China 23,860,251,349.91 20,280,445,319.82 15.00% -17.42% -5.78% -10.51%
Other countries and regions 8,144,115,971.00 7,093,280,387.18 12.90% 97.39% 91.82% 2.53%
By sales mode
Distribution 20,430,260,632.51 17,608,282,200.91 13.81% -6.34% 5.53% -9.69%
Direct sales 11,574,106,688.40 9,765,443,506.09 15.63% 3.27% 14.39% -8.20%
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
22
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
2. Revenue and cost (Continued)
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes No
Increase/
By industry Item Unit 2022 2021 decrease
Machine-made paper Sales ’0,000 tonnes 515 545 -5.50%
Production output ’0,000 tonnes 502 550 -8.73%
Inventories ’0,000 tonnes 32 45 -28.89%
Explanation on why the related data varied by more than 30%
Applicable √ Not applicable
(4) Performance of material sales contracts and material procurement contracts of the Company during the
reporting period
Applicable √ Not applicable
2022 ANNUAL REPORT 23
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
2. Revenue and cost (Continued)
(5) Composition of operating costs
By industry
Unit: RMB
2022 2021
% of % of
operating operating Increase/
By industry Item Amount costs Amount costs decrease
Machine-made paper Raw materials 13,880,562,601.16 56.78% 13,227,151,426.95 60.00% 4.94%
Energy and power 3,551,871,417.54 14.53% 2,771,580,665.06 12.57% 28.15%
Chemicals 3,219,278,883.07 13.17% 2,737,960,681.46 12.42% 17.58%
Depreciation 1,015,882,589.52 4.16% 918,340,112.21 4.17% 10.62%
Shipping fee 991,532,365.83 4.06% 986,623,212.89 4.48% 0.50%
Labour costs 300,586,979.17 1.23% 282,029,126.21 1.28% 6.58%
Other production costs 1,488,310,143.03 6.09% 1,123,094,139.11 5.09% 35.52%
Subtotal 24,448,024,979.32 100.00% 22,046,779,363.89 100.00% 10.89%
Chemical pulp Raw materials 483,207,371.49 59.18% 120,467,023.13 62.81% 301.11%
Energy and power 123,647,038.01 15.14% 25,242,326.28 13.16% 389.84%
Chemicals 112,068,893.16 13.72% 24,936,130.39 13.00% 349.42%
Accumulated Depreciation 35,364,701.70 4.33% 8,363,834.05 4.36% 322.83%
Labour costs 10,463,973.85 1.28% 2,568,596.08 1.34% 307.38%
Other production costs 51,810,755.29 6.34% 10,228,642.84 5.33% 406.53%
Subtotal 816,562,733.50 100.00% 191,806,552.77 100.00% 325.72%
Power and steam Raw materials 214,274,012.48 79.34% 198,834,959.40 76.47% 7.76%
Depreciation 26,624,446.17 9.86% 19,199,537.95 7.38% 38.67%
Labour costs 8,596,817.64 3.18% 6,844,347.79 2.63% 25.60%
Energy and power 6,245,631.23 2.31% 25,124,584.80 9.66% -75.14%
Chemicals 470,492.88 0.17% 746,078.65 0.29% -36.94%
Other production costs 13,862,506.91 5.13% 9,269,615.37 3.56% 49.55%
Subtotal 270,073,907.31 100.00% 260,019,123.96 100.00% 3.87%
Construction materials Raw materials 158,431,654.76 69.34% 222,297,889.45 70.37% -28.73%
Energy and power 22,399,396.93 9.80% 32,115,179.94 10.17% -30.25%
Shipping fee 16,755,150.18 7.33% 14,416,949.06 4.56% 16.22%
Labour costs 8,353,153.12 3.66% 14,568,778.00 4.61% -42.66%
Depreciation 6,753,081.28 2.96% 9,626,644.95 3.05% -29.85%
Other production costs 15,800,412.81 6.92% 22,887,012.53 7.24% -30.96%
Subtotal 228,492,849.08 100.00% 315,912,453.93 100.00% -27.67%
24
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
2. Revenue and cost (Continued)
(6) Change of scope of consolidation during the reporting period
√ Yes No
During the year, 2 subsidiaries were newly established, namely Jiangxi Chenming Tea Co., Ltd. and Shouguang
Meichen Energy Technology Co., Ltd., and 1 subsidiary was deregistered, namely Qingdao Chenming Pulp &
Paper Electronic Commodity Spot Trading Co., Ltd. 2 subsidiaries were acquired not within the definition of
business, namely Shanxi Fuyin Industrial Trading Co., Ltd. and Chongmin Culture Development (Shanghai) Co.,
Ltd.
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period
Applicable √ Not applicable
(8) Sales to major customers and major suppliers
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 6,798,742,733.13
Total sales to top 5 customers as a percentage of the total sales for the year 21.24%
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
No. Name of customer Sales (RMB) total sales for the year (%)
1 Customer A 2,770,087,211.84 8.66%
2 Customer B 1,518,310,296.02 4.74%
3 Customer C 1,049,894,583.17 3.28%
4 Customer D 748,277,000.85 2.34%
5 Customer E 712,173,641.25 2.23%
Total 6,798,742,733.13 21.24%
Other explanation of the major customers
Applicable √ Not applicable
2022 ANNUAL REPORT 25
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
2. Revenue and cost (Continued)
(8) Sales to major customers and major suppliers (Continued)
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 5,703,690,083.06
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 20.84%
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
No. Name of supplier Purchases (RMB) purchases for the year (%)
1 Supplier A 1,938,274,888.85 7.08%
2 Supplier B 1,042,029,772.30 3.81%
3 Supplier C 1,004,164,032.28 3.67%
4 Supplier D 911,744,349.39 3.33%
5 Supplier E 807,477,040.24 2.95%
Total 5,703,690,083.06 20.84%
Other explanation of the major suppliers
Applicable √ Not applicable
3. Expenses
Unit: RMB
Increase/ Reasons for material
2022 2021 decrease (%) changes
Selling and distribution expenses 242,181,274.09 293,509,692.51 -17.49% Sales volume and wages or salaries
decreased year on year during the
reporting period.
General and administrative expenses 750,546,703.34 942,360,735.54 -20.35% Production interruption loss was
adjusted in operating costs during
the reporting period.
Finance expenses 2,146,556,149.06 2,387,471,286.46 -10.09% Interest expenses of the Company
decreased year on year during the
reporting period.
26
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
4. Research and development expenditure
√ Applicable Not applicable
Objectives to be Expected impact on the future
Name of major R&D project Project purpose Project progress achieved development of the Company
Technological development of high-bulk Saving raw materials Industrialisation To become Improving product quality, lowering
electrostatic paper stage domestically transportation costs and
leading production costs, and improving
the Company’s economic
benefits.
Technological development of white Enhancing product Small testing stage To become Improving customer satisfaction with
cardboard for handbags functionality or improving domestically products and increasing market
performance leading share.
Technological development of green-yellow Enhancing product Industrialisation To become Improving customer satisfaction with
vision protection culture paper functionality or improving stage domestically products and increasing market
performance leading share.
Technological development of moisture-proof Enhancing product Pilot testing stage To become Improving customer satisfaction with
electrostatic copy paper functionality or improving domestically products and increasing market
performance leading share.
Technological development of coated paper Enhancing product Pilot testing stage To become Improving customer satisfaction with
for high-end books and periodicals functionality or improving domestically products and increasing market
performance leading share.
New technology development of high strength Enhancing product Small testing stage To become Improving customer satisfaction with
paper for journals functionality or improving domestically products and increasing market
performance leading share.
Technological development of thermal paper Enhancing product Small testing stage To become Improving customer satisfaction with
for menus functionality or improving domestically products and increasing market
performance leading share.
Technological development of rapid Reducing energy Pilot testing stage To become Improving product quality, lowering
oxidisation of corn starch consumption or domestically production costs and improving
improving energy leading the Company’s economic
efficiency benefits.
2022 ANNUAL REPORT 27
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
4. Research and development expenditure (Continued)
R&D personnel of the Company
Percentage
2022 2021 of change
R&D headcount 1,370 1,900 -27.89%
Ratio of R&D personnel 12.62% 15.45% -2.83%
Academic background of R&D personnel
Bachelor’s degree 135 185 -27.03%
Master’s degree 3 11 -72.73%
Age composition of R&D personnel
Under 30 305 387 -21.19%
30~40 years old 717 1,034 -30.66%
Research and development expenditure of the Company
Percentage
2022 2021 of change
R&D expenditure (RMB) 1,290,281,540.10 1,453,766,371.46 -11.25%
R&D expenditure to revenue 4.03% 4.40% -0.37%
Amount of R&D expenditure capitalised (RMB) 0.00 0.00 0.00
Capitalised R&D expenditure to R&D expenditure 0.00% 0.00% 0.00%
Reasons for and effects of significant changes in the composition of the Company’s R&D personnel
Applicable √ Not applicable
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
28
IV Management Discussion and Analysis
IV. Analysis of principal operations (Continued)
5. Cash flows
Unit: RMB
Increase/
Item 2022 2021 decrease (%)
Subtotal of cash inflows from operating activities 36,218,528,896.13 39,306,294,223.43 -7.86%
Subtotal of cash outflows from operating activities 32,768,704,653.76 30,724,406,030.79 6.65%
Net cash flows from operating activities 3,449,824,242.37 8,581,888,192.64 -59.80%
Subtotal of cash inflows from investing activities 271,463,678.75 1,321,827,995.68 -79.46%
Subtotal of cash outflows from investing activities 2,716,434,567.72 1,156,106,779.05 134.96%
Net cash flows from investing activities -2,444,970,888.97 165,721,216.63 -1575.35%
Subtotal of cash inflows from financing activities 37,596,224,354.35 33,237,001,445.83 13.12%
Subtotal of cash outflows from financing activities 39,577,284,434.80 43,177,497,483.93 -8.34%
Net cash flows from financing activities -1,981,060,080.45 -9,940,496,038.10 80.07%
Net increase in cash and cash equivalents -1,009,455,697.51 -1,220,254,116.77 17.27%
Explanation on main effects of material changes in relevant data year-on-year
√ Applicable Not applicable
(1) Net cash flows from operating activities decreased by 59.80% as compared to the corresponding period of the
prior year mainly because the Company’s cash payment for purchasing goods increased significantly due to a
year-on-year rise in the prices of raw materials such as wood chips, raw coal and chemicals during the reporting
period.
(2) Net cash flows from investment activities decreased by 1,575.35% as compared to the corresponding period
of the prior year mainly because net cash inflow from investing activities decreased year on year due to the
the participation in the establishment of joint ventures by Jiangxi Chenming, a subsidiary, during the reporting
period for the purpose of revitalising the assets of the financial lease business, capitalising on the asset
management capabilities of government platforms, and consolidating and optimising the resource allocation.
(3) Net cash flows from financing activities increased by 80.07% as compared to the corresponding period of the
prior year mainly due to the decrease in liabilities due to be repaid during the reporting period.
Explanation on reasons leading to the material difference between net cash flows from operating activities during the
reporting period and net profit for the year
Applicable √ Not applicable
2022 ANNUAL REPORT 29
IV Management Discussion and Analysis
V. Analysis of non-principal operations
√ Applicable Not applicable
Unit: RMB
As a percentage
Amount of total profit Reason Is it sustainable?
Other income 242,223,168.86 132.89% Receipt of government grants Including RMB104 million which
related to daily business activities is the annual amortisation amount
of government grants received in
prior periods, which is sustainable
Gain or loss arising from -25,253,928.81 -13.86% Fluctuations of fair values of the No
the change in fair value shares of China Bohai Bank as well
as forestry assets and other non-
current financial assets
Credit impairment loss -86,076,968.56 -47.23% Bad debt provisions for receivables No
Gain on disposal of assets 161,092,513.76 88.38% Gains from disposal of land and No
plant during the reporting period
Non-operating income 77,248,685.76 42.38% Mainly the receipt of government No
grants not related to daily business
activities
VI. Analysis of assets and liabilities
1. Material changes of asset items
Unit: RMB
As of the end of 2022 As of the beginning of 2022
As a percentage As a percentage Percentage
Amount of total assets Amount of total assets change Description
Inventories 6,821,916,159.95 8.09% 5,282,631,922.12 6.37% 1.72% Mainly due to an increase in the Company’s
raw material inventory, and an increase
of development costs resulting from the
transfer of the equity interest in Shanxi
Fuyin to the leasing company for debt
offsetting as at the end of the reporting
period.
Non-current assets 3,998,724,415.85 4.74% 5,216,934,172.61 6.30% -1.56% Mainly due to a year-on-year decrease in the
due within one financial lease payments due within one
year year as at the end of the reporting period.
Other current 1,180,807,801.62 1.40% 1,903,929,492.85 2.30% -0.90% Mainly due to the refund of value-added tax
assets (VAT) credit refund during the reporting
period.
Long-term equity 4,277,013,369.56 5.07% 1,894,794,764.19 2.29% 2.78% Mainly due to the investment made by Jiangxi
investments Chenming and Chenming Leasing in
Shouguang Jintou Industrial Investment
Partnership (Limited Partnership) during the
reporting period.
30
IV Management Discussion and Analysis
VI. Analysis of assets and liabilities (Continued)
1. Material changes of asset items (Continued)
As of the end of 2022 As of the beginning of 2022
As a percentage As a percentage Percentage
Amount of total assets Amount of total assets change Description
Fixed assets 33,797,738,695.30 40.09% 35,653,492,676.15 43.02% -2.93% Mainly due to the relocation, upgrade and
transformation of Wuhan Chenming’s
equipment being included to construction
in progress during the reporting period, and
the impact of provision for depreciation
during the reporting period.
Short-term 36,385,048,295.02 43.16% 33,523,025,186.22 40.45% 2.71% Mainly due to the increase in the size of short-
borrowings term debts as at the end of the reporting
period.
Non-current 4,673,505,241.86 5.54% 6,601,311,227.98 7.97% -2.43% Mainly due to the Company’s repayment of
liabilities due medium-term notes and bonds payable
within one year due within one year during the reporting
period.
Long-term 3,982,236,251.08 4.72% 5,276,340,154.98 6.37% -1.65% Mainly due to the Company’s reduction in loan
borrowings size during the reporting period.
Long-term 3,160,771,126.31 3.75% 2,358,901,022.99 2.85% 0.90% Mainly due to an increase in the Company’s
payables financing for certain equipment during the
reporting period.
A higher proportion of overseas assets
Applicable √ Not applicable
2022 ANNUAL REPORT 31
IV Management Discussion and Analysis
VI. Analysis of assets and liabilities (Continued)
2. Assets and liabilities measured at fair value
√ Applicable Not applicable
Unit: RMB
Profit or loss Cumulative
from change fair value Impairment
in fair value change provided Purchases Disposal
Opening during the charged to during the during the during the Other Closing
Item balance period equity period period period changes balance
Financial assets
1. Held-for-trading financial assets
(excluding derivative financial assets) 110,886,182.88 -36,177,738.00 -120,976,372.27 74,708,444.88
2. Other non-current financial asset 519,927,003.25 5,350,000.00 62,860,000.00 263,000,000.00 1,526,241.63 786,750,761.62
3. Consumable biological assets
measured at fair value 1,519,305,850.77 9,924,233.72 29,984,996.65 41,007,081.77 73,629,347.42 1,496,607,818.84
Total 2,150,119,036.90 -20,903,504.28 -58,116,372.27 304,007,081.77 75,155,589.05 2,358,067,025.34
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
Unit: RMB
Carrying amount as at
Item the end of the period Reasons for such restriction
Monetary funds 11,840,974,836.57 As deposits for bank acceptance bills, letter
of credit, letter of guarantee, loans, deposit
reserves and interest receivable
Fixed assets 10,063,641,052.69 As collateral for bank borrowings and long-
term payables
Investment properties 4,895,514,630.65 As collateral for bank borrowings
Intangible assets 1,033,897,418.27 As collateral for bank borrowings and long-
term payables
Accounts receivable 100,000,000.00 As collateral for borrowings
Accounts receivable financing/bills 8,497,931.30 As collateral for obtaining letters of credit
receivable
Total 27,942,525,869.48
32
IV Management Discussion and Analysis
VII. Analysis of investments
1. Overview
√ Applicable Not applicable
Investments during the
corresponding period of
Investments during the reporting period (RMB) prior year (RMB) Change
3,362,620,040.00 1,707,210,000.00 96.67%
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Progress as Profit or loss
Investment Source Period of at the date of Estimated from investment Involvement Date of Disclosure
Name of investee Principal activities Form of investment amount Shareholding of fund Partner(s) investment Product type balance sheet return for the period in lawsuit disclosure index
Shouguang Jintou Investment using self- Newly 2,360,000,000.00 49.57% Self-owned Shouguang Jintou Asset Long-term Equity Completed N/A -2,699.92 No 22 November http://www.
Industrial Investment owned funds, enterprise established funds and Management Co., investment 2022 cninfo.com.
Partnership (Limited management, and contribution Ltd., Shouguang cn
Partnership) enterprise management of the Xianglin Enterprise
consulting creditor’s Management Co.,
rights of the Ltd. and Shandong
financial Jinming New Materials
leasing Co., Ltd.
business
Jiaohui Chenming Equity investment, Newly 263,000,000.00 50% Self-owned BOCOM Financial Assets 7 years Equity Completed N/A 1,911,813.60 No 29 July 2022 http://www.
Zhuli (Suzhou) investment management established funds Investment Co., Ltd. investment cninfo.com.
Emerging Industry and asset management and BOCOM Capital cn
Development Fund through private equity Management Co., Ltd.
Partnership (Limited funds
Partnership)
Shanxi Fuyin Industrial Sales of agricultural and Acquisition 368,000,000.00 100% Self-owned Subsidiary Long-term Trading Completed N/A 0.00 No 8 December http://www.
Trading Co., Ltd. sideline products, sales funds 2022 cninfo.com.
of chemical products, cn
sales of metal materials,
etc.
Chongmin Culture Real estate development Acquisition 100% Self-owned Subsidiary Long-term Property Completed N/A 0.00 No 8 December http://www.
Development and operation, and funds operation 2022 cninfo.com.
(Shanghai) Co., Ltd. property services cn
Shouguang Meichen Research and development Newly 361,620,040,00 100% Investment with Subsidiary Long-term Electricity Completed N/A -102,335.93 No N/A N/A
Energy Technology of power saving established self-owned and steam
Co., Ltd. technology, sales of equipment generation
paper products
Jiangxi Chenming Tea Internet sales of food, Newly 10,000,000.00 100% Self-owned Subsidiary Long-term Tea plantation Completed N/A -1,975,450.93 No N/A N/A
Co., Ltd. general sales of food established funds and sales
Total 3,362,620,040.00 168,673.18
2022 ANNUAL REPORT 33
IV Management Discussion and Analysis
VII. Analysis of investments (Continued)
3. Material non-equity investments during the reporting period
Applicable √ Not applicable
4. Financial asset investment
(1) Security investments
√ Applicable Not applicable
Unit: RMB
Book value at Profit or loss Accumulated Purchased Sold Book value
Accounting the beginning from changes in changes in fair amount in amount in Profit or loss at the end of
Abbreviation of Initial measurement of the reporting fair value in the value included the current the current during the the reporting Classification in
Type of security Stock code stock name investment cost model period current period in equity period period reporting period period account Source of fund
Domestic and foreign 09668 China Bohai Bank 195,684,817.15 Measured at 110,886,182.88 -36,177,738.00 -120,976,372.27 0.00 0.00 -36,177,738.00 74,708,444.88 Held-for-trading Self-owned
shares fair value financial assets funds
Total 195,684,817.15 110,886,182.88 -36,177,738.00 -120,976,372.27 0.00 0.00 -36,177,738.00 74,708,444.88
Disclosure date of announcement in relation to the 20 June 2020
consideration and approval of securities investments by
the Board
Disclosure date of announcement in relation to the Not applicable
consideration and approval of securities investments by
the shareholders’ general meeting (if any)
(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.
34
IV Management Discussion and Analysis
VIII. Disposal of material assets and equity interest
1. Disposal of material assets
√ Applicable Not applicable
Net profit
contribution
to the Net profit
Company contribution
from the to the Carried out
beginning of Company on schedule
the period on asset Relationship with or not, if not,
up to the disposal as Pricing Related counterparty(ies) Relevant Relevant the reasons
Transaction disposal Effect of a percentage basis of party (applicable to asset title debt fully and measures
consideration date disposal on of total net disposal of transaction related party fully transferred transferred taken by the Disclosure Disclosure
Counterparty(ies) Asset disposed Disposal date (RMB’0,000) (RMB’0,000) the Company profit assets or not transactions) or not or not Company date index
Shouguang Land and plant 18 December 16,350.91 -253.14 Disposal of assets did 38.47% Market No N/A No Yes Yes N/A N/A
Land of Shandong 2022 not affect the normal price
Reserve Chenming operation of the
Centre No. 1 Factory Company. Meanwhile,
the realisation of idle
assets was able to
replenish the liquidity.
2. Disposal of material equity interest
Applicable √ Not applicable
2022 ANNUAL REPORT 35
IV Management Discussion and Analysis
IX. Analysis of major subsidiaries and investees
√ Applicable Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the 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 6,713,808,892.00 25,386,729,557.96 8,809,784,591.78 12,333,411,837.39 106,223,344.21 162,214,497.02
Pulp & Paper Co., press paper, electrostatic
Ltd. paper, and white paper
board
Shouguang Meilun Subsidiary Production and sale of 4,801,045,519.00 15,789,342,178.96 8,490,192,588.62 8,877,750,999.39 406,927,308.71 384,015,682.06
Paper Co., Ltd. coated paper, culture
paper, household paper
and chemical pulp
Huanggang Chenming Subsidiary Production and sale of 3,245,000,000.00 8,439,240,135.43 3,556,852,689.97 4,717,482,595.22 271,191,525.79 271,059,517.61
Pulp & Paper Co., chemical pulp
Ltd.
36
IV Management Discussion and Analysis
IX. Analysis of major subsidiaries and investees (Continued)
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Methods to acquire and dispose
of subsidiaries during the Impact on overall production and
Name of company reporting period operation and results
Jiangxi Chenming Tea Co., Ltd. Newly established Net profit decreased by RMB1.98 million.
Shouguang Meichen Energy Technology Newly established Net profit decreased by RMB100,000.
Co., Ltd.
Shanxi Fuyin Industrial Trading Co., Ltd. Acquisition No effect.
Chongmin Culture Development Acquisition No effect.
(Shanghai) Co., Ltd.
Qingdao Chenming Pulp & Paper Deregistered Net profit increased by RMB6,800.
Electronic Commodity Spot Trading
Co., Ltd.
Particulars of major subsidiaries and investees
1. During the reporting period, benefited from their cost advantages brought about by the pulp-paper integration, as well
as the substantial increase in the export volume of their major products, Zhanjiang Chenming and Shouguang Meilun
enjoyed a relatively strong profitability.
2. During the reporting period, due to the high price of wood pulp, Huanggang Chenming’s sales of wood pulp
increased.
2022 ANNUAL REPORT 37
IV Management Discussion and Analysis
X. Structured entities controlled by the Company
Applicable √ Not applicable
XI. Outlook on the future development of the Company
(i) Overview and trend of the industry
The paper making industry is closely related to national economic security, and the consumption level of paper and
paper board is an important indicator to measure the economy and civilisation of a country. Since the reform and
opening up, with the sustained and rapid development of the national economy, China’s papermaking industry has
gradually begun to transform from extensive growth to intensive growth. Driven by the tightening of environmental
protection policies and other factors, the papermaking industry’s production capacity and market concentration
have been continuously improved, and the industry pattern becomes excellent, but there is still much scope for
improvement. In 2022, due to factors such as a sharp increase in upstream production costs and the sluggish
demand in the downstream market, the overall profitability of the papermaking industry declined, and the number
of loss-making papermaking enterprises above designated size increased. Repeated market tests accelerated the
clearing up of low-end enterprises, and likely promoted the industry structure improvement.
During the reporting period, the “waste ban” continued to be implemented, and the transformation of the raw material
structure of the papermaking industry accelerated. The “plastic limit” achievements continued to be consolidated,
which promoted the development of high-end and light-weighted products in the product structure. The “double
carbon” policy was fully implemented, and the green development concept had driven the industry to improve its
environmental protection level. The decrease in the supply of overseas paper products brought new “overseas
expansion” opportunities for Chinese companies, and the leading papermaking companies accelerated their overseas
layout. The weak domestic market demand promoted resources optimisation and reorganisation, and the industry
pattern had been continuously optimised. International pulp prices remained high, and domestic leading companies
accelerated the whole industrial chain layout, while domestic paper prices gradually bottomed out, and large
companies had announced price rises, marking an imminent recovery of industry prosperity.
In the long run, according to the national “double circulation” strategy and the goal of China’s GDP per capita heading
for the level of a medium-level developed country by 2035, China’s paper market demand in the future will still grow
greatly, indicating potential market demand. With the improvement of people’s pursuit of quality of life, high-end,
environmentally friendly, lightweight and customised products will be more popular, and it is imperative to optimise
and upgrade the product structure. As both product functions and supporting services are important, upgrading
product services will become an important channel to increase products’ added value. Large-scale pulp and paper
companies have accelerated industry integration through M&A and joint venture activity, which further improves
industry concentration. The industry has continuously improved the resource utilisation rate, and transformed towards
the use of clean, renewable, high energy density and low emission resources. It is inevitable for large companies to
enhance their comprehensive competitiveness through the whole industrial chain development.
38
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company (Continued)
(ii) Development strategy of the Company
The Company always takes “revitalising the Chinese papermaking industry” as its mission and adheres to the general
keynote of a green, low-carbon, recycling and sustainable development with scientific development as main theme.
Centring on efficiency enhancement, the Company focuses on pulp production and papermaking as major operation.
The Company will adhere to the strategic layout of pulp and paper integration, vigorously implement the innovation-
driven development strategy, and accelerate the growth driver replacement. With transformation and upgrade guided
by green ecology, the Company will fully exploit its advantages in full industry chain. The Company will commit itself
to implementing the green development strategy. Leveraging technological advancement, advanced equipment and
strict management, it will properly carry out clean production, develop a circular economy, and build a resource-
saving and environment-friendly enterprise benchmark, so that it can seek development while protecting the
environment, and improve the level of environmental protection in scientific development, achieving both economic
and environmental benefits. Adhering to the strategy of strengthening the enterprise with talents, the Company will
improve the talent training, introduction, use and incentive mechanism, and actively cultivate high-end, compound,
innovative and international talent teams, so as to promote the Company’s high-quality development, consolidate
its position as a leading Chinese papermaking enterprise, and develop Chenming as a RMB100 billion enterprise
with sustainable operation for a century, striving to become the most globally competitive world-class papermaking
enterprise!
(iii) Operation plans for 2023
2023 is the first year to fully implement the spirit of the 20th National Congress of the China Communist Party. The
report to the 20th National Congress put forward that we must continue to focus on the real economy in pursuing
economic growth, which is in line with the Company’s direction to focus on its principal activities and strengthen
industrial production. In a new year, the Company will continue to conscientiously implement the management
policy of “people-orientation, refined management, problem-orientation, and practical work” in the complicated and
changing industry and market landscape. It will pay close attention to corporate operation management, strengthen
financial risk management and control, comprehensively realise potential and increase efficiency, and unswervingly
promote the Company’s high-quality development.
1. Adhere to profitability priority and improve sales
In 2023, the market situation remains complicated and ever-changing. Following the Group’s strategic
deployment, the sales companies will be market-oriented to seize price rise opportunities, scientifically and
rationally allocate various resources, strengthen channel management, expand to overseas markets, and further
improve the sales management level. The details are as follows: According to the market capacity and customer
distribution, we will integrate inefficient markets to enhance organisational efficiency; strengthen profitability
management, actively seek sources of growth, adjust product structure, and focus on the promotion and sales
growth of key products, especially cigarette cardboard, liquid package cardboard and food cardboard. We
will strengthen channel construction, further develop direct sales customers, develop high-quality distributors,
optimise overseas layout, set up management areas and branches, and further expand the market scope. We
will make full use of the Company’s industrial layout advantages, promote the close-range market distribution of
high-profitability products, and improve service efficiency and product competitiveness.
2022 ANNUAL REPORT 39
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company (Continued)
(iii) Operation plans for 2023 (Continued)
2. Strengthen financing control and realise stable operation.
In 2023, the Company will focus on profitability, refine fund management, strictly control financial expenses,
take various measures to reduce the gearing ratio, and optimise the capital structure. The details are as follows:
We will rationally plan long, medium and short-term financing, strengthen cooperation with large state-owned
banks in medium and long-term low-cost financing, further broaden financing channels for medium and long-
term equipment collection and improve the asset utilisation rate. We will continue to promote the market-
oriented exit of strategic investors of Shouguang Meilun and Zhanjiang Chenming, effectively replace minority
equity financing of subsidiaries with equity financing of the Company, and reduce the debt repayment pressure.
We will strengthen asset management, continuously reduce the size of the financial leasing business, dispose of
inefficient assets and idle assets, improve asset management level, and ensure the Company’s stable operation.
3. Strictly control production and promote production and efficiency
In 2023, the Company will focus on producing marketable products, promote the continuous increase of high-
profitability products, ensure the stable operation of pulp and paper production lines, advance the construction
of pulp and paper projects, and keep improving the profitability indicators and operation quality of production
systems. The details are as follows. According to the changes of raw material prices, we will timely carry
out domestic raw materials substitution and process optimisation adjustment to optimise product structure.
We will strictly control the process, strictly implement the paper machine standard parameters, stabilise the
operation of papermaking machines and pulp production lines, and ensure the pulp and paper production and
efficiency improvement. We will build a safety and quality monitoring network, strictly supervise safety and
quality, implement the safety production responsibility system, and ensure safety production. We will strengthen
equipment management, strictly implement the control and implementation of equipment information system,
and realise machine-controlled early warning management for equipment spot inspection, periodic maintenance
and equipment overhaul. We will implement project management, and focus on pushing Huanggang phase II
project, Zhanjiang Chenming special paper project with annual production capacity of 180,000 tonnes, and
Shouguang Headquarters softwood bleaching chemical pulp project with annual production capacity of 300,000
tonnes forward.
4. Strengthen cost control and improve supply chain management level
In 2023, the Company will further strengthen supplier management, upgrade the level of cooperation
organisations, broaden procurement channels, fully exploit market potential, strictly control procurement costs,
and comprehensively improve supply chain management level. The details are as follows: We will strengthen the
construction of raw material sourcing channels, cooperate with high-quality suppliers in Australia, Thailand and
Vietnam and other countries, and set up offices to ensure a stable supply of high-quality raw materials. We will
conduct in-depth study and analysis of market rules, seize the timing for procurement, determine reasonable
procurement quantity, and improve procurement efficiency. We will introduce new processes and technologies,
optimise the use of raw materials, deepen domestic product substitution, and exploit the cost potential. We
will strengthen cooperation with strategic cooperation customers, strive for financial support to the maximum
extent, and reduce financial costs. We will develop innovative ideas, further promote consignment mode, reduce
capital occupation, and achieve efficiency improvement in supply chain management.
40
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company (Continued)
(iii) Operation plans for 2023 (Continued)
5. Strengthen basic management to help high quality development
In 2023, the Company will continue to pay close attention to the basic management, focus on operating
profit management, study and implement the profitability-enhancing measures in view of the key and weak
management links. The details are as follows: We will further consolidate team building, optimise staffing,
strengthen employee training, improve performance appraisal management methods, and proceed with
the transformation and upgrade to human capital management from human resource management to help
continuous human capital adding value. We will strengthen the internal audit supervision management, improve
internal review coverage, check and correct mistakes, strictly investigate and deal with breaches of regulations
and disciplines, and improve the supervision and rectification implementation rate. We will further strengthen
the system construction, timely rectify the problems in the operation and management process, formulate
and improve the excellent management system, ensure that all key issues are well-founded and effectively
implemented, improve the management level, and realise high-quality development.
(iv) Future capital requirements and source of funds
Future capital requirements of the Company will mainly focus on: the continuous investment in existing production
facilities due to technology upgrade or production expansion; and capital requirement for business expansion and
daily operation. The phase II whole industry chain project of Huanggang Chenming, the softwood bleached chemical
pulp project with annual production capacity of 300,000 tonnes and the special paper project with annual production
capacity of 180,000 tonnes of Zhanjiang Chenming planned and constructed by the Company will be partly funded by
self-owned funds of the Company, as well as government guide funds, policy support funds and syndicated loans.
While focusing on the development of its main business of pulp and paper making and improving its operating
performance, the Company will expand its financing channels and optimise financing structure through well planned
long and short-term bond issue, introduction of third-party strategic investors, refinancing and other means, thus
providing stable financial support for the operation and development of the Company.
(v) Risk factors likely to be faced and measures to be taken
1. Macroeconomic and policy risk
Paper making industry is a basic raw materials industry, thus is being supported by national industry policies.
Over the years, relevant competent departments issued a series of relevant policies and regulations, including
the Policy on the Development of Papermaking Industry, aiming to improve industry structure, enhance product
technology standard, energy saving and emission reduction, as well as eliminate outdated production capacity.
With the continuous economic development, the policies on the papermaking industry may further adjust in
the future. In addition, the fiscal and financial policies, bank interest rate, import and export policy and other
policies may be adjusted in the future. All the above industrial policies and related policy adjustments will have
an impact on the Company’s operation and development.
Focusing on its principal operation on pulp production and papermaking, the Company will strive to its
innovation-driven strategy. Centring on improving quality and efficiency, the Company will comprehensively
optimise industrial structure and regional layout, establish coordinated, efficient industry system, and respond
to challenges arose by leveraging on its cost advantages, thus realising steady growth in operating results. At
the same time, the Company will strengthen the financial information system construction, regulate financial
management, expand financing channels, lower capital cost and strengthen its macroeconomic and policy risk
aversion capability.
2022 ANNUAL REPORT 41
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company (Continued)
(v) Risk factors likely to be faced and measures to be taken (Continued)
2. Environmental protection risk
In recent years, policies such as the Announcement on Adjusting the Catalogue of Prohibited Commodities
in Processing Trade, The 14th Five-Year (2021-2025) Plan for National Economic and Social Development of
the People’s Republic of China and the Outline of Long-term Goals for 2035, the Opinions on Accelerating the
High-Quality Development of the Manufacturing Services Industry and the Guiding Opinions on Accelerating
the Establishment and Improvement of a Green, Low-Carbon and Cyclical Economic System have been issued
one after another, with increasingly stringent environmental protection requirements. Such higher national
environmental protection standards will further increase the investment in pollution control by enterprises in the
industry and increase the operating costs of the Company in the short term.
The Company always adheres to the development idea of “placing green development and environmental
protection as its priority” and conducts clean production. The Company widely adopts new technologies for
energy saving and emission reduction and strives 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 of
170,000 cubic metres every day. At the same time, the Company actively explores the comprehensive utilisation
of innovative resources and industrial recycling development models, and built three major circular economy
ecological chains of “resources-products-renewable resources”.
3. Risk of price fluctuation of raw materials
Wood pulp and wood chips are the major raw materials of the industry. If the prices of wood pulp and wood
chips fluctuate sharply in the future, they will bring upward pressure on the production costs of enterprises,
which will have a certain impact on the normal production and operation of enterprises in the industry.
The Company strives to implement the development strategy of pulp and paper integration. At present,
its production capacity of wood pulp has reached 4.3 million tonnes, and it has cultivated a strong self-
sufficiency of wood pulp. At the same time, it has established a more comprehensive supply chain management
mechanism, practiced source procurement, carried out long-term cooperation, closely followed the price trends
of the raw materials market, and strove to improve its forecasting ability, in order to minimise the impact of
fluctuations in raw material prices on the Company.
42
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company (Continued)
(v) Risk factors likely to be faced and measures to be taken (Continued)
4. Risk of intensifying market competition
As a strategic and fundamental industry closely related to the national economy, the papermaking industry
has made significant progress along with the steady development of the Chinese economy. Although the
papermaking industry has accelerated the elimination of outdated production capacity after several rounds
of environmental protection policies, the industry structure has been optimised. However, there remains the
phenomena of a large number of enterprises, excess and scattered production capacity, a large number of mid
– and low-end products, and product homogeneity. The market competition is fierce.
The Company will focus on improving product quality and supporting services, improve process technology,
strengthen research and development capabilities, and enhance scientific and technological added value. Being
market-oriented, it will produce products that meet market demand and enhance core competitiveness, with a
view to ensuring a stable and sustainable improvement in its operating results.
5. Risk of the financial leasing business
The Company may suffer from loss if the lessees of its financial leasing business cannot make full 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.
Chenming Leasing has comprehensive risk prevention and control measures for the financial leasing business,
with strong risk resistance and low risk of default. At present, the Company focuses on the development of
its principal activities, i.e. pulp production and paper making, and continues to reduce the size of the financial
leasing business. As at the end of the reporting period, the balance of financial leases of Chenming Leasing
decreased to RMB5.79 billion.
2022 ANNUAL REPORT 43
IV Management Discussion and Analysis
XII. Reception of research investigations, communications and interviews during the reporting
period
√ Applicable Not applicable
Major discussion
points and information Index of the basic
Date of reception Site of reception Way of reception Type of recipient Recipient provided particulars of the survey
2 April 2022 Panorama Interactive Others Individuals and Investors participating
Company and industry For details, please
Platform for Investors institutions in the 2021 annual overview, the refer to the Investor
Relationship results briefing of the
Company’s 2021 Relations Activity
Company operating results and Record Sheet on
future prospects, www.cninfo.com.cn
project progress, etc.
4 May 2022 Meeting room of the Conference call Institutions Guosheng Securities, Company’s operating For details, please
Company JIC Trust, Donghai conditions, business refer to the Investor
Funds, etc. conditions, industry Relations Activity
outlook, etc. for the Record Sheet on
first quarter of 2022 www.cninfo.com.cn
5 September 2022 Meeting room of the Conference call Institutions Guosheng Securities, Company’s operating For details, please
Company Ping An Asset conditions, production refer to the Investor
Management, Horizon capacity, project Relations Activity
Asset, GTS Fund progress, etc. for the Record Sheet on
first half of 2022 www.cninfo.com.cn
16 November 2022 Panorama Interactive Others Individuals and Investors who Corporate governance, Panorama “Investor
Platform for Investors institutions participated in development strategy, relations Interactive
Relationship the 2022 Investor operating status, etc. Platform” (http://
Online Collective ir.p5w.net)
Reception Day of
Listed Companies in
Shandong
44
V 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 2022.
I. Principal activities
Please refer to “II. Principal operations of the Company during the Reporting Period” and “IV. Analysis of principal
operations” under section IV “Management Discussion and Analysis” for details of principal activities of the Company.
II. Results and profit distribution
Please refer to section XII “Financial Report” for the results of the Group for the year ended 31 December 2022.
III. Dividends
During the reporting period, as the domestic market demand was insufficient due to the economic environment, the sales
volume of machine-made paper decreased year on year. At the same time, due to the rising prices of wood chips,
chemicals, raw coal and other raw materials as well as energy prices, the Company faced great cost pressure. The net
profit attributable to shareholders of the Company for the reporting period decreased as compared with the
corresponding period of the prior year. Considering factors such as the current macroeconomic environment and the
Company’s strategic planning, the Board proposed not to pay cash dividend, issue bonus shares and increase share
capital from reserves for 2022 to further reduce its liability size, optimise its capital structure, enhance the Company’s
financial resilience, and satisfy the capital needs for, among other things, day-to-day production and operation, and
project construction, thereby enhancing risk resistance, securing the sustainable and steady development of the pulp
production and paper making business, the principal business of the Company, and better safeguarding the long-term
interests of all shareholders, subject to approval of shareholders at the forthcoming annual general meeting of the Company
held on 12 May 2023 (the “AGM”).
2022 ANNUAL REPORT 45
V Directors’ Report
IV. Closure of register of members
The register of members of the Company will be closed from 9 May 2023 (Tuesday) to 12 May 2023 (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 12 May 2023 (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 8 May 2023 (Monday).
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 RMB805,000.00 (2021: RMB1,142,550.00) to non-profit making organisations.
VII. Subsidiaries
Please refer to “IX. Analysis of major subsidiaries and investees” under section IV “Management Discussion and Analysis”
and “XVII. Matters of significant of subsidiaries of the Company” under section VIII “Material Matters” for the details of
acquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to “II. Financial Statements 1. Consolidated Balance Sheet” under section XII “Financial Report” for the details
of changes in property, plant and equipment of the Group for the year ended 31 December 2022.
IX. Share capital
Please refer to “I. Changes in shares” under section IX “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2022.
X. Pre-emptive rights
In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.
XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Company Law. As at 31
December 2022, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB9,857,716,037.54 (2021: RMB9,760,083,766.83) as set out in “II. Financial
Statements 1. Consolidated Balance Sheet” under section XII “Financial Report”.
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V Directors’ Report
XII. Directors
As at 31 December 2022, the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Hu Changqing
Mr. Li Xingchun
Mr. Li Feng
Mr. Li Weixian
2. Non-executive Directors
Mr. Han Tingde
Mr. Li Chuanxuan
3. Independent Non-executive Directors
Ms. Yin Meiqun
Mr. Yang Biao
Mr. Sun Jianfei
Mr. Li Zhihui
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 2022 to June 2025. They may be re-elected for
another term upon expiry of tenure. The term of office of independent non-executive Directors is the same as that of
other Directors. They may be re-elected for consecutive terms, but the consecutive terms shall not be more than six
years.
XIII. Directors’ and Supervisors’ service contracts
All Directors and Supervisors have entered into service contracts with the Company for a term from 15 June 2022 to 15
June 2025.
None of the Directors and Supervisors 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.
2022 ANNUAL REPORT 47
V Directors’ Report
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. Directors, Supervisors and Senior Management” in section VI “Corporate Governance” and
“XII. Related parties and related party transactions” in section XII “Financial Report”.
In 2022, the Company had 24 Senior Management members in total, which included Directors, Supervisors and the 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 1
4.0 million to 4.8 million 0
3.6 million to 4.0 million 0
3.2 million to 3.6 million 1
2.8 million to 3.2 million 0
2.4 million to 2.8 million 1
2.0 million to 2.4 million 1
1.6 million to 2.0 million 5
1.2 million to 1.6 million 1
0.8 million to 1.2 million 0
Below 0.8 million 14
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.
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V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and chief executives
As at 31 December 2022, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
as follows:
The Company
Number of shares (A shares)
held as at the end of the
Name Position reporting period (shares)
Directors
Chen Hongguo (Note 1) Chairman and general manager 31,080,044
Hu Changqing Executive Director and vice chairman 3,792,857
Li Xingchun Executive Director and vice chairman 5,000,000
Li Feng Executive Director and deputy general manager 3,156,027
Li Weixian Executive Director and deputy general manager 1,562,100
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 –
Li Zhihui Independent non-executive Director –
Supervisors
Li Kang Supervisor 149,300
Pan Ailing Supervisor –
Zhang Hong Supervisor –
Sang Ailing Supervisor –
Qiu Lanju Supervisor –
Associated corporations
Number of Number of
shares held at shares held at
the beginning the end of the
Name of associated of the reporting Change during reporting period
Name Position corporations period (shares) the period (+/-) (shares)
Chen Hongguo Chairman Shouguang Henglian 231,000,000 – 231,000,000
Enterprise Investment Co.
Ltd. (Note 2)
Note 1: Save for the 31,080,044 A shares held personally, Chen Hongguo is deemed to be interested in the 3,861,322 A shares held by his spouse,
Li Xueqin.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 76.79% equity interests in Shouguang Henglian Enterprise Investment Co.
Ltd., (hereinafter referred to as “Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo.
As a result, the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by
Shouguang Henglian is also deemed to be held by Chen Hongguo.
2022 ANNUAL REPORT 49
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and chief executives (Continued)
Save as disclosed above, as at 31 December 2022, none of the Directors, Supervisors or chief executives of the 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 the 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”). Save
as disclosed above, as at 31 December 2021, 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 the 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 2022, 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 2022, 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):
Approximate shareholding as
a percentage of
Number of shares Total share Class of
Name held (shares) capital (%) shares (%)
Chenming Holdings Co., Ltd. 457,322,919A shares (L) 15.35 26.21
Chenming Holdings (Hong Kong) Limited 210,717,563 B shares (L) 7.07 29.83
Chenming Holdings (Hong Kong) Limited 153,414,000 H shares (L) 5.15 29.04
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above, as at 31 December 2022, 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 “IX. Personnel of the Company” under section VI “Corporate Governance”, and “2. (8) Sales to major
customers and major suppliers” of “IV. Analysis of principal operations” under section IV “Management Discussion and
Analysis” for details of the relationship between the Company and its employees, customers and suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors or Supervisors 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 and Supervisor.
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V 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
As considered and approved at the 2020 second extraordinary general meeting, the 2020 first class meeting for holders
of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company held on
15 May 2020, the Company implemented the 2020 restricted A share incentive scheme. As considered and approved at
the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session of the
Supervisory Committee of the Company held on 29 May 2020, an aggregate of 79.6 million restricted A shares were granted
to 111 participants. In particular, Mr. Chen Hongguo, Mr. Hu Changqing, Mr. Li Xingchun, Mr. Li Feng and Mr. Li Weixian,
all being Directors, were granted 20 million shares, 5 million shares, 5 million shares, 3 million shares and 2 million shares,
respectively.
Save for the above, neither was the Company nor any of its subsidiaries a party to any arrangements to enable any Director
to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
XXII. 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 2022.
XXIII. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “XI. Outlook on the future development
of the Company” under section IV “Management Discussion and Analysis” for details of major risk factors of the Company.
XXIV. Material matters
Please refer to section VIII “Material Matters” for details of material matters of the Company.
XXV. Future development
Please refer to “(I) Overview and trends of the industry”, “(II) Development strategy of the Company”, “(III) Operating plan
for 2023” and “(IV) Future capital requirements and source of funds” of “XI. Outlook on the future development of the
Company” under section IV “Management Discussion and Analysis” for details of future development of the Company.
XXVI. Environment, social and governance report and social responsibility
Please refer to section VII “Environment and social responsibility” for details of fulfilment of social responsibility. The
Company will publish the environment, social and governance report as required by the Hong Kong Listing Rules on the
website of CNINFO and the website of the Hong Kong Stock Exchange on the same date as the 2022 annual report.
2022 ANNUAL REPORT 51
V Directors’ Report
XXVII. Purchase, sale and redemption of shares
1. Repurchase and cancellation of some restricted shares granted under the 2020 A-share Restricted
Stock Incentive Scheme
On July 18, 2022, the Company convened the second extraordinary meeting of the tenth session of the Board and the
first extraordinary meeting of the tenth session of the Supervisory Committee, at which the Company considered and
approved the Resolution on the Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme
and Repurchase and Cancellation of Certain Restricted Shares. In view of the fact that 15 of the proposed participants
of the Company’s 2020 Restricted A Share Incentive Scheme failed to comply with the unlocking conditions of the
2020 Restricted A Share Incentive Scheme (Draft) due to, among others, resignation, change of duty and removal from
office. According to the authorisation granted at the 2020 second extraordinary general meeting, the 2020 first class
meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares
of the Company, the Board will repurchase and cancel certain restricted shares granted to the persons mentioned
above but not yet unlocked, with a repurchase of 4,466,000 shares at a repurchase price of RMB2.5184172 per share.
Calculated based on the repurchase price plus bank loan interest for the same period, the total amount of repurchase
payment was RMB12.3669 million. On 18 October 2022, the Company completed the repurchase and cancellation
procedures of the 4,466,000 restricted A shares at the Shenzhen Branch of China Securities Depository and Clearing
Corporation Limited.
Save for the above, the Company and its subsidiaries did not purchase, sell or redeem any listed securities of the
Company during the reporting period.
XXVIII. 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 maintained a sufficient prescribed amount of public float as required under the Hong Kong
Listing Rules.
XXIX. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2022 have been reviewed
by the Audit Committee of the Company.
XXX. Gearing ratio
As at 31 December 2022, the Company’s gearing ratio (including minority interest) was 60.88%, representing a decrease of
0.67 percentage point from 61.55% for 2021.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
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V Directors’ Report
XXXI. Going concern basis
Established in 1958, the Company is a leading paper making enterprise in China and one of the top 500 Chinese
enterprises. It is also a modern large-scale comprehensive conglomerate mainly engaged in pulp production and paper
making. It 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. As a large integrated pulp and paper enterprise in China that achieves
a complete balance of pulp production and paper making, the Company have maintained a leading position among its
industry peers for over 20 consecutive years in terms of its main indicators of corporate economic efficiency.
The Company has good sustainable profitability. In 2022, the Company realised revenue of RMB32,004 million, net profit of
RMB317 million and net cash inflows from operating activities of RMB36,219 million.
In compiling the accounts for the year ended 31 December 2022, the Directors have chosen and thoroughly applied the
appropriate accounting policies with due and reasonable judgement and estimates having been made, and prepared the
accounts on a going concern basis. The auditor of the Company has prepared the 2022 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.
XXXII. Connected transactions
On 30 March 2022, each of Qingdao Chenming Nonghai Financial Leasing Co., Ltd. (“Qingdao Chenming”) and Chenming
Leasing, both are the indirect wholly-owned subsidiaries of the Company, entered into a loan transfer agreement with
Kunpeng Asset Management Co., Ltd. (“Kunpeng Asset”), pursuant to which, each of Qingdao Chenming and Chenming
Leasing intended to sell the loans with a total carrying amount of approximately RMB305 million to Kunpeng Asset at a total
consideration of RMB304 million.
Chenming Holdings is a connected person of the Company. As Qinghai Chenming Industrial Co., Ltd. is owned as to 67%
by Chenming Holdings and Kunpeng Asset is owned as to 51% by the former, Kunpeng Asset is also a connected person
of the Company. Accordingly, the transactions under these loan transfer agreements constitute connected transactions of
the Company under Chapter 14A of the Listing Rules.
The Board believes that the disposal of the loans can improve the asset management efficiency of the Company, further
reduce the size of the financial leasing business, accelerate the capital recovery of the financial leasing business of the
Company, enhance the liquidity of the assets of the Company, and improve the asset-liability structure and operating cash
flows, which will in turn provide financial support for the sound business development of the Company and is conducive to
promoting the business development of the Company.
For details, please refer to the announcement dated 30 March 2022 of the Company.
Save as disclosed above, for the year ended 31 December 2022, the Group did not enter into any connected transaction
required under the Listing Rules of the Stock Exchange. The related party transactions entered into by the Group during the
year ended 31 December 2022 are set out in Note XII to the financial statements. Save as disclosed above, these related
party transactions do not constitute connected transactions or continuing connected transactions (as defined in the Listing
Rules of the Stock Exchange) of the Group.
2022 ANNUAL REPORT 53
V Directors’ Report
XXXIII. Major investment, acquisition and disposal
During the year ended 31 December 2022, the Group entered into the following major transaction agreements.
1. Entering into capital contribution agreement for the introduction of investors to contribute capital to
Zhanjiang Chenming
On 27 June 2022, the Company, CDB Development Fund Co., Ltd., Beijing Chuanfa Investment Management Co.,
Ltd., Xiamen International Trade Industry Development Equity Investment Fund Partnership (Limited Partnership) and
Zhanjiang Chenming entered into a capital contribution agreement, pursuant to which Xiamen International Trade
Industry Development Equity Investment Fund Partnership (Limited Partnership) agreed to inject capital in an amount
of RMB400,000,000 to Zhanjiang Chenming pursuant to the terms and conditions under the capital contribution
agreement.
On 28 July 2022, the Company, BOCOM Financial Assets Investment Co., Ltd. and Zhanjiang Chenming entered into
a capital contribution agreement, pursuant to which BOCOM Financial Assets Investment Co., Ltd. agreed to inject
capital in a total amount of RMB500,000,000 to Zhanjiang Chenming pursuant to the terms and conditions under the
capital increase agreement. On the same date, the Company, Jiaohui Chenming Zhuli (Suzhou) Emerging Industry
Development Fund Partnership (Limited Partnership) and Zhanjiang Chenming entered into a capital contribution
agreement, pursuant to which Jiaohui Chenming Zhuli (Suzhou) Emerging Industry Development Fund Partnership
(Limited Partnership) agreed to inject capital in a total amount of RMB500,000,000 to Zhanjiang Chenming pursuant
to the terms and conditions of the capital increase agreement.
For details, please refer to the announcements of the Company dated 27 June 2022 and 28 July 2022.
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V Directors’ Report
XXXIII. Major investment, acquisition and disposal (Continued)
2. Purchase of Assets by issue of consideration shares and cash payment
On 21 November 2022, the Company and Dongxing Securities Investment Co., Ltd. entered into the Agreement
on Assets Purchase by Issuance of Shares, pursuant to which the Company conditionally purchased 1.19% equity
interest in Shouguang Meilun held by Dongxing Securities Investment Co., Ltd. On the same date, the Company,
Chenming Investment, Chongqing International Trust Inc. and Chenming (Qingdao) Asset Management Co., Ltd.
entered into the Agreement on Asset Purchase by Issuance of Shares and Cash Payment, pursuant to which
the Company conditionally purchased 44.44% limited partnership share in Chenrong Fund held by Chongqing
International Trust Inc., and Chenming Investment purchase 0.22% general partnership share in Chenrong Fund held
by Chenming (Qingdao) Asset Management Co., Ltd. by cash payment. The shares issued for the asset purchase by
the issuance of shares are domestic-listed RMB ordinary shares (A shares) with a par value of RMB1.00 per share.
The pricing benchmark date for the asset purchase by the issuance of shares is the announcement date of the first
resolution of the Board to consider the transactions. Under amicable negotiations among the parties, the price of the
asset purchase by the issuance of shares was set at RMB4.42/share.
The benchmark date for the audit and valuation of the subject assets involved in this transaction is 30 September
2022. As at the end of this reporting period, the audit and valuation work was not completed. The transaction price
of the subject assets of the transactions will be based on the results of the valuation report issued by the valuation
agency and filed with the state-owned assets supervision and administration institution or its authorised unit,
determined through negotiations by the parties to the transactions, and agreed by the parties through signing a
supplementary agreement. The final number of the shares to be issued is subject to the number approved by the
CSRC. Should there be any distribution of dividend, issue of bonus shares, conversion of capital reserve into share
capital of the Company from the pricing benchmark date to the issue date of the issuance, the issue price will be
adjusted accordingly in accordance with the relevant rules of Shenzhen Stock Exchange, and the number of shares
issued will also be adjusted accordingly.
For details, please refer to the announcement of the Company dated 21 November, 2022.
3. Concluded a partnership agreement on the establishment of a limited partnership enterprise
On 21 November 2022, Shouguang Jintou Asset Management Co., Ltd. (the general partner), Shouguang Xianglin
Enterprise Management Co., Ltd. (a limited partner) and Shandong Jinming Trade Co., Ltd. (a limited partner) entered
into a partnership agreement in relation to the establishment of a limited partnership with Shanghai Chenming
Financial Leasing Co., Ltd. (a limited partner), a subsidiary of the Company, and Jiangxi Chenming (a limited partner).
The name of the limited partnership is Shouguang Jintou Industrial Investment Partnership (Limited Partnership)
(tentative name, subject to industrial and commercial registration), and the total capital contribution to be made by
all partners is RMB4.761 billion, of which Shouguang Jintou Asset Management Co., Ltd. made cash contribution
of RMB1 million, Shouguang Xianglin Enterprise Management Co., Ltd. made cash contribution of RMB1.2 billion,
Shandong Jinming Trade Co., Ltd. made cash contribution of RMB1 million, Shanghai Chenming Financial Leasing
Co., Ltd. made contribution of its creditor’s rights in accounts receivable arising from the financial leasing business
with an appraised value of RMB1.16 billion, and Jiangxi Chenming made cash contribution of RMB1.2 billion.
For details, please refer to the announcement of the Company dated 21 November, 2022.
XXXIV. Tax relief
The Company is not aware of any tax relief available to shareholders as a result of holding securities of the Company.
2022 ANNUAL REPORT 55
VI Corporate Governance
I. Corporate governance in practice
Taking the actual situation of the Company into account, the Company continuously improved its legal person governance
structure, strengthened its internal control system, proactively organised Directors, Supervisors and the Senior Management
of the Company to attend the special training sessions of the regulatory departments to enhance their competence, and
continuously strengthened its information disclosure in strict compliance with the requirements of the Company Law (
), the Securities Law ( ), the Code of Corporate Governance for Listed Companies ( ), the
Rules Governing Listing of Stocks on Shenzhen Stock Exchange ( ), the Listing Rules of Hong
Kong Stock Exchange and the related requirements as required by the CSRC, thereby further enhancing the standardised
operation level of the Company.
As of the end of the reporting period, the actual practice of corporate governance complied with the requirements of the
regulatory documents issued by the CSRC regarding the governance of listed companies.
(I) Shareholders and general meeting
The Company regulates the convening, holding and proceedings of shareholder meetings in strict compliance with the
requirements of the Rules Governing Shareholders’ General Meetings of Listed Companies, the Articles of Association
and the Company’s Rules of Procedure of the General Meeting of Shareholders, and both on-site voting and online
voting are provided as channels to participate in such meetings. Where material matters which affect the interests of
minority shareholders are considered, the votes by minority shareholders are counted separately to ensure that the
minority shareholders enjoy equal status and all shareholders can exercise their rights in full. During the reporting
period, the general meetings convened by the Company were witnessed by lawyers with issue of their legal opinions
to effectively safeguard the legitimate rights and interests of the listed company and all 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 the Board, the
Supervisory Committee and internal departments of the Company operated independently, which complied with the
relevant provisions of the CSRC on the independence of listed companies. The controlling shareholder and beneficial
controllers strictly regulated their behaviour, and exercised their rights and performed their obligations in accordance
with the laws, and there was no appropriation of capital and assets of the Company by the controlling shareholder,
beneficial controllers and their related parties.
(III) Directors and the Board
The Board of the Company has a total of 11 Directors, of which 4 are independent Directors. They are professionals
with professional knowledge in finance, law, management, etc., ensuring the quality and level of decision-making
by the Board. During the reporting period, the Board held a total of 12 meetings, and the convening and holding
of Board meetings were in strict compliance with the Articles of Association and the Rules of Procedure of Board
Meetings and other relevant provisions. Directors of the Company were able to diligently perform their duties. They
attended meetings on time and reviewed each proposal earnestly, which had pivotal impact on decision in corporate
governance. Independent Directors performed their duties independently and expressed their independent opinions
on material matters, which solidly safeguarded the interests of the Company and the investing public.
The four special committees under the Board of the Company, namely the Strategic Committee, the Audit Committee,
the Nomination Committee and the Remuneration and Assessment Committee, performed their duties normally and
provided scientific and professional opinions for the decision-making of the Board during the reporting period.
56
VI Corporate Governance
I. Corporate governance in practice (Continued)
(IV) Supervisors and the Supervisory Committee
The Supervisory Committee of the Company has a total of 5 Supervisors, including 3 shareholder representative
Supervisors and 2 employee representative Supervisors. During the reporting period, the Supervisory Committee
of the Company held a total of 8 meetings. The Supervisory Committee strictly followed the requirement of relevant
laws and regulations including the Company 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 to
supervise the Company’s operation and management, decision-making procedures, financial position and the duty of
care and diligence of the Company’s Directors and Senior Management, so as to safeguard the legitimate interests of
the Company and the shareholders.
(V) Information disclosure and transparency
The Company earnestly fulfils its information disclosure obligation, and makes true, accurate, timely, complete and
fair disclosure in respect of the Company’s information without false information, misleading statement or material
omission in accordance with the requirements of the Articles of Association, Rules Governing the Listing of Stocks
on Shenzhen Stock Exchange, the Listing Rules of Hong Kong Stock Exchange and relevant laws and regulations
of the CSRC. During the reporting period, the Company issued a total of more than 160 periodic reports, interim
announcements, and related documents through the designated information disclosure media, and a total of more
than 180 periodic reports, interim announcements, and related documents through the website of the Hong Kong
Stock Exchange, ensuring that all shareholders had fair access to company-related information and had full right to
know.
(VI) Prevention and control of insider information
During the reporting period, the Company strictly complied the provisions of the “Registration Management System
of Personnel with Insider Information” to strengthen the confidentiality of insider information and improve 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. There was no case
where insiders use inside information to buy and sell company shares before the disclosure of material and sensitive
information that affects the stock price of the Company, and there is no case where they are investigated by the
regulatory authorities.
(VII) Relevant stakeholders
During the reporting period, the Company always insisted on honest operation and was able to fully respect and
safeguard the legitimate rights and interests of stakeholders such as bankers and other creditors, employees,
suppliers and consumers, strengthened communication and exchange with all parties, and actively cooperate to
jointly promote the sustainable, stable and healthy development of the Company.
Any material non-compliance of the laws, administrative regulations and the regulatory documents on the 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 laws, administrative regulations and the regulatory documents on the
governance of listed companies issued by the CSRC in respect of the actual governance of the Company.
2022 ANNUAL REPORT 57
VI Corporate Governance
II. Particulars about the independence in terms of assets, personnel, finance, organisations,
and business from the controlling shareholder and beneficial controllers
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 Company 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
58
VI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
Attendance rate
Meeting Type of meeting of investors Convening date Disclosure date Resolutions of meeting
2021 annual general Annual general 20.22% 11 May 2022 12 May 2022 http://www.cninfo.com.
meeting meeting cn (announcement no.:
2022-032)
2022 first extraordinary Extraordinary general 19.81% 15 June 2022 16 June 2022 http://www.cninfo.com.
general meeting meeting cn (announcement no.:
2022-049)
2022 second Extraordinary general 20.85% 23 December 24 December http://www.cninfo.com.
extraordinary general meeting 2022 2022 cn (announcement no.:
meeting 2022-096)
2. Extraordinary general meeting requested by holders of the preference shares with voting right
restored
Applicable √ Not applicable
2022 ANNUAL REPORT 59
VI Corporate Governance
V. Directors, Supervisors and Senior Management
1. General information
Increase in Decrease in
Shareholding the number the number Shareholding
at the of shares of shares at the
Date of beginning of held during held during Other end of
Status of the beginning Date of the the period the period the period changes the period Reason for
Name Position office Gender Age of the term end of the term (shares) (shares) (shares) (shares) (shares) changes
Chen Hongguo Chairman In office M 58 6 September 15 June 2025 31,080,044 0 0 0 31,080,044 N/A
2001
General manager 15 June 2022 15 June 2025
Hu Changqing Vice chairman In office M 57 23 June 2018 15 June 2025 5,042,857 0 1,250,000 0 3,792,857 Personal capital
needs
Li Xingchun Vice chairman In office M 57 11 June 2019 15 June 2025 5,000,000 0 0 0 5,000,000 N/A
Li Feng Director In office M 49 19 June 2020 15 June 2025 3,906,027 0 750,000 0 3,156,027 Personal capital
needs
Deputy general 15 June 2022 15 June 2025
manager
Li Weixian Director In office M 41 15 June 2022 15 June 2025 2,240,200 0 678,100 0 1,562,100 Personal capital
needs
Deputy general 6 November 15 June 2025
manager 2019
Han Tingde Director In office M 54 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Li Chuanxuan Director In office M 45 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Li Zhihui Independent In office M 64 15 June 2022 15 June 2025 0 0 0 0 0 N/A
Director
Sun Jianfei Independent In office M 50 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Director
Yin Meiqun Independent In office F 52 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Director
Yang Biao Independent In office M 43 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Director
Li Kang Supervisor In office F 41 27 July 2020 15 June 2025 149,300 0 0 0 149,300 N/A
Chairman of the 15 June 2022 15 June 2025
Supervisory
Committee
Pan Ailing Supervisor In office F 58 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Zhang Hong Supervisor In office F 58 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Qiu Lanju Supervisor In office F 49 11 June 2019 15 June 2025 0 0 0 0 0 N/A
Sang Ailing Supervisor In office F 44 19 April 2021 15 June 2025 0 0 0 0 0 N/A
Li Xueqin Deputy general In office F 57 18 March 2003 15 June 2025 3,861,322 0 0 0 3,861,322 N/A
manager
Li Zhenzhong Deputy general In office M 49 20 March 2011 15 June 2025 2,113,000 0 166,600 0 1,946,400 Personal capital
manager needs
Li Mingtang Deputy general In office M 55 15 June 2022 15 June 2025 1,000,000 0 250,000 0 750,000 Personal capital
manager needs
Ge Guangming Deputy general In office M 52 15 June 2022 15 June 2025 0 0 0 0 0 N/A
manager
Dong Lianming Financial In office M 48 12 October 15 June 2025 1,069,600 0 210,000 0 859,600 Personal capital
controller 2018 needs
Yuan Xikun Secretary to the In office M 37 16 May 2018 15 June 2025 344,700 0 0 0 344,700 N/A
Board
Chu Hon Leung Hong Kong In office M 40 11 June 2019 15 June 2025 0 0 0 0 0 N/A
company
secretary
Chen Gang General manager Resigned M 50 8 August 2021 15 June 2022 1,139,700 0 200,000 0 939,700 Personal capital
needs
Total 56,946,750 0 3,504,700 0 53,442,050
During the reporting period, did any Director and Supervisor resign and was any member of the Senior Management
dismissed during their term of office
Yes √ No
60
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
1. General information (Continued)
Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable Not applicable
Name Position Type Date Reason
Li Weixian Director Elected 15 June 2022 Election of the new session, and elected as a
Director of the tenth session of the Board at
the 2022 first extraordinary general meeting.
Li Zhihui Independent Elected 15 June 2022 Election of the new session, and elected as an
Director independent Director of the tenth session
of the Board at the 2022 first extraordinary
general meeting.
Li Kang Chairman of the Elected 15 June 2022 Elected as the chairman of the Supervisory
Supervisory Committee at the first meeting of the tenth
Committee session of the Supervisory Committee.
Chen Hongguo General manager Appointed 15 June 2022 Appointed as the general manager of the
Company at the first meeting of the tenth
session of the Board.
Li Feng Deputy general Appointed 15 June 2022 Appointed as a deputy general manager of the
manager Company at the first meeting of the tenth
session of the Board.
Li Mingtang Deputy general Appointed 15 June 2022 Appointed as a deputy general manager of the
manager Company at the first meeting of the tenth
session of the Board.
Ge Guangming Deputy general Appointed 15 June 2022 Appointed as a deputy general manager of the
manager Company at the first meeting of the tenth
session of the Board.
Chen Gang General manager Resigned upon 15 June 2022 Resigned upon expiry of the term
expiry of the
term
2022 ANNUAL REPORT 61
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment
Professional background, major working experiences and current duties at the Company of Directors, 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 (
), Labour Medal on Enriching Shandong Province (
), Excellent Entrepreneur of Shandong Province ( ), Nationwide May 1st Labor Medal
( ), Nationwide Excellent Entrepreneur ( ) and USA RISI CEO of
the Year ( “ CEO ”). He is 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. He is currently the chairman and general manager of Chenming Holdings, the chairman
and general manager 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 1987. He had held various positions in the Company such as the chief of the
technological reform department, the chief officer of branch factory, and the deputy general manager. He
is currently a director of Chenming Holdings and a vice chairman of the Company.
Mr. Li Xingchun holds a doctorate from School of Engineering Management and Engineering at Nanjing
University and is a visiting professor of Shanghai Finance University. He has successively worked in
Ctrip.com, Fuyou Securities Co., Ltd. ( ) and Western Development Holdings Co.,
Ltd., accumulating more than 30 years of experience in industry, securities, trust and other fields. He is
currently the chairman of Leadbank Technology Ltd., director of Western Leadbank Fund Management
Co., Ltd., independent director of Huadian International Power Co., Ltd., chairman of Kunpeng Asset
Management Co., Ltd., and a vice chairman of the Company.
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He 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, marketing director, deputy general
manager and general manager of Wuhan Chenming. He is currently a director of Chenming Holdings, and
an executive Director and deputy general manager of the Company. Mr. Li Feng is the younger brother of
Ms. Li Xueqin, a deputy general manager of the Company.
Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as the
deputy manager of a sales company of the Company, manager of a sales company, general manager of
Jiangsu district of a sales company, chairman of a household paper company, product general manager,
deputy marketing director and marketing director of a sales company, the general manager of the Group,
and chairman of the financial division of a group. He is currently an executive Director and deputy general
manager of the Company.
62
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment (Continued)
1. Brief biographies of Directors (Continued)
(2) Brief biographies of non-executive Directors
Mr. Han Tingde graduated with a bachelor’s degree. He was the deputy general manager and the 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 manager 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. He is currently the manager of the
bond business department of Hengtai Changcai Securities Co., Ltd., and a non-executive Director of the
Company.
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 Environmental and Resources
Protection Law Society of Shanghai Law Society ( ), the director
of the Chinese Society of Environmental and Resources Law ( ), and an
appraisal expert of environmental damage forensics in China. He has been selected into the Shanghai
Pujiang Talent Programme. 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. He concurrently serves as a
director of Jiangsu Guanlian New Material Technology Co., Ltd., and is currently a non-executive Director
of the Company.
(3) Brief biographies of independent non-executive Directors
Mr. Li Zhihui holds a doctorate degree in economics, and is a professor and advisor to doctoral students.
He currently serves as the head of the Institute of Finance, the School of Economics, Nankai University,
a director of the China Society for Finance and Banking, a director of the China International Finance
Society, a member of the China Financial Publishing House’s teaching material editorial committee and
a visiting professor at Tianjin Foreign Studies University. He also serves as an independent director of
Shandong Gold Futures Co., Ltd., a director of Henan Anyang Shangdu Rural Commercial Bank Co., Ltd.,
an independent director of Henan Yiyang Rural Commercial Bank Co. Ltd., an external director of Xinxing
Heavy Industries Group Co., Ltd. and an external supervisor of Dezhou Bank Co., Ltd. He is currently an
independent Director of the Company.
2022 ANNUAL REPORT 63
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment (Continued)
1. Brief biographies of Directors (Continued)
(3) Brief biographies of independent non-executive Directors (Continued)
Mr. Sun Jianfei holds a doctorate in finance, and is a professor. He was a lecturer at University of
Nevada, Reno, and concurrently served as the consultant of hedge funds such as Eagle Peak Fund LP.
From August 2010 to February 2017, he was an assistant professor at Antai College of Economics &
Management, Shanghai Jiao Tong University. He was selected in the National Academic Leadership
Talent Programme in Accounting (Standby List) ( ( ) ) organised by the
Ministry of Finance, as well as the Shanghai Pujiang Talent Programme. From February 2017 to August
2020, he was a professor at the Institute for Social and Economic Research of Nanjing Audit University,
and a part-time professor at Antai College of Economics & Management and Advanced Institute of
Finance, Shanghai Jiao Tong University. He is currently an Associate professor of Shanghai Advanced
Institute of Finance of Shanghai Jiao Tong University, supervisor of Boyang (Shanghai) Energy Technology
Co., Ltd., independent director of Nanya New Material Technology Co., Ltd., independent director of
Suzhou Tianwo Technology Co., Ltd., independent director of Cubic Digital Technology Co., Ltd., and an
independent Director of the Company.
Mr. Yang Biao holds a doctorate in law, and is currently a professor and advisor to doctoral students. He
is current a professor of the School of Law of Sun Yat-sen University. He is, among others, one of the
“Guangzhou Top Ten Young and Middle-aged Jurists”, an outstanding young talent in the “Guangdong
Special Support Programme”, a selected member in the “Double Thousand Plan ( )” of the
Ministry of Education and the Central Politics and Law Committee, a training candidate in the “Thousand-
Hundred-Ten project ( )” for universities in Guangdong Province, a member of the first council
of the Civil Prosecution Professional Committee of the Procuratorial Research Association of the China
Law Society, 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, an expert certified in Major Administrative Decision-Making and Argumentation in Guangzhou
and a member of the Expert Committee of the Department of Emergency Management of Guangdong
Province. He has also served as an independent director of Guangdong Tianhe Agricultural Resources
Co., Ltd., an independent director of Qiaoyi Logistics Co., Ltd., an external director of Science City
(Guangzhou) Investment Group Co., Ltd., a director of Guangzhou Zhongda Nansha Technology
Innovation Industrial Park Co., Ltd., a director of Guangzhou Zhongda Intellectual Property Service
Co., Ltd., an external supervisor of Dongguan Rural Commercial Bank Co., Ltd., and a supervisor of
Guangzhou Chuanwen Education Consulting Co., Ltd. He is currently an independent Director of the
Company.
Ms. Yin Meiqun holds a doctorate in accounting, and is a professor, an advisor to doctoral students, and a
certified public accountant in China. She paid academic visits to Sweden, Finland, Denmark and the Iowa
State University in the United States. From July 1993 to June 2007, she was a professor in the department
of accounting at Harbin University of Science and Technology. From July 2007 to August 2021, she was
a professor of Beijing International Studies University. She is currently a professor of China University of
Political Science and Law, 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 member of the IMA China Management Accounting Expert Committee, an
independent director of Beijing Life Insurance Co., Ltd, and an independent director of China Best Group
Holding Limited. She is currently an independent Director of the Company.
64
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment (Continued)
2. Brief biographies of Supervisors
Ms. Li Kang is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She joined the
Company in 2001. She has successively served as the section chief, deputy minister, minister, assistant to the
general manager of the management section of purchasing department, and deputy financial controller of the
Company. She is currently the chairman of the Supervisory Committee of the Company, responsible for the
management of the audit department.
Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She is
currently a level-2 professor of the School of Management, an advisor to doctoral students, and the chief of
the Investment and Financing Research Centre ( ) in Shandong University and a non-practising
member of CICPA (Chinese Institute of Certified Public Accountants). She is also the vice chairperson of the
Accounting Institute, Shandong Province ( ), a council member of Shandong Comparative
Management Association, a visiting scholar at University of Connecticut in the United States and a state-level
candidate for the New Century Ten Million Talents Project ( “ ”). She is a specialist entitled
to the State Council Special Allowance ( ), and a special expert of the Taishan Scholar. She
is the chief expert of the Major Tender Projects of National Social and Science Fund (
). She has finished various research projects at national and provincial level. She is also an independent
director of Shandong Xinhua Medical Equipment Co., Ltd., and an independent director of Shandong Sunway
Chemical Group Co., Ltd. She is currently a Supervisor of the Company.
Ms. Zhang Hong holds a doctoral degree in Economics, and is currently a professor and advisor to 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, an independent director of Shandong Hi-
speed Road & Bridge Group Co., Ltd., an independent director of Vosges Group Co., Ltd., an independent
director of China National Heavy Duty Truck Group Jinan Truck Co., Ltd., and an independent director of Cisen
Pharmaceutical Co., Ltd. She is currently a Supervisor of the Company.
Ms. Qiu Lanju graduated with a diploma. She joined the Company in 1995 and served as the deputy chief of
the price audit section of the Company’s inspection department, the chief of the implementation section of the
procurement department, the chief of the general management section of the procurement department, and
the director of the procurement department. She is currently an employee representative Supervisor of the
Company, responsible for the management of the human resources department.
Ms. Sang Ailing holds a bachelor’s degree and is a member of the Communist Party of the PRC. She joined the
Company in 2000 and served as the chief of the personnel management section of the marketing department
of a sales company, the deputy director and director of the marketing department of a sales company, etc. She
is currently a deputy director of the marketing department of the Company and an employee representative
Supervisor of the Company.
2022 ANNUAL REPORT 65
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment (Continued)
3. Brief biographies of Senior Management
Mr. Chen Hongguo is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He is a
senior economist and holds the titles including Nationwide Light Industry Top Ten Youth Experts (
), Labour Medal on Enriching Shandong Province ( ),
Excellent Entrepreneur of Shandong Province ( ), Nationwide May 1st Labor Medal (
), Nationwide Excellent Entrepreneur ( ) and USA RISI CEO of the Year
( “ CEO ”). He is a 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. He
is currently the chairman and general manager of Chenming Holdings, the chairman and general manager 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.
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 ( ), Model Worker
in the Country ( ) and Nationwide May 1st Labour Medal ( )” and a deputy of
the Tenth, Eleventh, Twelfth and Thirteenth 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, the chairman and general manager of the Company.
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined 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, marketing director, deputy general manager
and general manager of Wuhan Chenming. He is currently a director of Chenming Holdings, and an executive
Director and deputy general manager of the Company. Mr. Li Feng is the younger brother of Ms. Li Xueqin, a
deputy general manager of the Company.
Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as a deputy
manager of a sales company of the Company, manager of a sales company, general manager of Jiangsu district
of a sales company, chairman of a household paper company, product general manager, deputy marketing
director and marketing director of a sales company, the general manager of the Group, and chairman of the
financial division of a group. He is currently an executive Director and deputy general manager of the Company.
Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined 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 culture paper products, general manager of a sales company.
He is currently a deputy general manager of the Company.
Mr. Li Mingtang is a member of the Communist Party of the PRC. He joined the Company in 2002 and had
served as principal representative of the Jiangsu management region and Jinan branch of a sales company,
assistant to general manager and general manager of a culture paper products company, and deputy general
manager of a coated linerboard products company. He is currently a deputy general manager of the Company.
66
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment (Continued)
3. Brief biographies of Senior Management (Continued)
Mr. Ge Guangming is a member of the Communist Party of the PRC. He joined the Company in 1995 and
had served as a deputy general project manager of the Company, deputy general manager of Jilin Chenming,
assistant to general manager of the Company, and deputy general manager responsible for the Zhanjiang
Chenming project and the Huanggang Chenming Pulp & Paper project. He is currently a 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.
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 Date of the or allowance from
Name of shareholder shareholder of beginning of Date of the end of the shareholder
Name of employee of the Company the Company the term the term of the Company
Chen Hongguo Chenming Holdings Chairman and 22 September 2016 29 December 2023 No
Company Limited general manger
Hu Changqing Chenming Holdings Director 22 September 2016 29 December 2023 No
Company Limited
Li Xueqin Chenming Holdings Director 22 September 2016 29 December 2023 No
Company Limited
Li Feng Chenming Holdings Director 13 August 2021 29 December 2023 No
Company Limited
Explanation of the Nil
employment at the
shareholder of the
Company
2022 ANNUAL REPORT 67
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
2. Employment (Continued)
3. Brief biographies of Senior Management (Continued)
Employment at other units
√ Applicable Not applicable
Whether receiving
any remuneration or
Name of Date of the Date of the allowance from
employee Name of other units Position at other units beginning of the term end of the term other units
Yang Biao Guangdong Guangzhou Daily Media Co., Ltd. Independent director 19 August 2019 19 August 2022 Yes
Yang Biao Guangdong Tianhe Agricultural Means of Production Co., Ltd. Independent director 17 May 2018 16 May 2024 Yes
Yang Biao Qiaoyi Logistics Co., Ltd. Independent director 31 March 2021 31 March 2024 Yes
Yang Biao Dongguan Rural Commercial Bank Co., Ltd. External supervisor 1 October 2019 1 October 2025 Yes
Sun Jianfei Nanya New Material Technology Co., Ltd. Independent director 4 August 2017 29 September 2023 Yes
Sun Jianfei Suzhou Thvow Technology Co., Ltd. Independent director 8 May 2020 Yes
Sun Jianfei Cubic Digital Technology Co., Ltd. Independent director 18 May 2021 18 May 2024 Yes
Sun Jianfei Zhejiang Yueling Co., Ltd. Independent director 1 November 2016 13 May 2022 Yes
Yin Meiqun Shangqiu Dingfeng Wood Co., Ltd. Independent director 21 April 2021 20 April 2024 Yes
Yin Meiqun China Best Group Holding Limited Independent director 1 December 2021 30 November 2024 Yes
Li Zhihui Tianjin Troila Information Technology Co., Ltd. Independent director 31 August 2019 17 October 2022 Yes
Li Xingchun Huadian International Power Co., Ltd. Independent director 30 June 2020 29 June 2023 Yes
Pan Ailing Shinva Medical Instrument Co., Ltd. Independent director 27 July 2020 26 July 2023 Yes
Pan Ailing Lu Thai Textile Co., Ltd. Independent director 6 June 2016 9 June 2022 Yes
Pan Ailing Shandong Denghai Seed Industry Co., Ltd., Independent director 12 April 2019 10 May 2022 Yes
Pan Ailing Shandong Sunway Chemical Group Co., Ltd. Independent director 15 May 2020 15 May 2023 Yes
Zhang Hong Shandong Zhangqiu Blower Co., Ltd. Independent director 27 March 2019 22 April 2022 Yes
Zhang Hong Sunvim Group Co., Ltd. Independent director 15 July 2019 27 May 2023 Yes
Zhang Hong Sinotruck Jinan Truck Co., Ltd. Independent director 28 April 2020 27 April 2023 Yes
Zhang Hong Cisen Pharmaceutical Co., Ltd. Independent director 8 December 2020 8 December 2023 Yes
Zhang Hong Shandong Hi-speed Road & Bridge Group Co., Ltd. Independent director 23 April 2019 22 June 2023 Yes
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
68
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
3. Remuneration of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors,
Supervisors and the Senior Management
(1) Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual
remuneration of each of the executive Directors and the Senior Management of the Company was in the band 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. As approved at the 2022 first extraordinary general meeting of the Company, 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.
2022 ANNUAL REPORT 69
VI Corporate Governance
V. Directors, Supervisors and Senior Management (Continued)
3. Remuneration of Directors, Supervisors and Senior Management (Continued)
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors,
Supervisors and the Senior Management (Continued)
Unit: RMB’0,000
Total Received
remuneration remuneration
before tax from related
received from parties of the
Name Position Gender Age Status the Company Company
Chen Hongguo Chairman and general manager M 58 In office 359.99 No
Hu Changqing Vice chairman M 57 In office 224.65 No
Li Xingchun Vice chairman M 57 In office 480.00 Yes
Li Feng Director and deputy general manager M 49 In office 195.03 No
Li Weixian Director and deputy general manager M 41 In office 256.04 No
Han Tingde Director M 54 In office 20.00 No
Li Chuanxuan Director M 45 In office 20.00 No
Li Zhihui Independent Director M 64 In office 10.00 No
Sun Jianfei Independent Director M 50 In office 20.00 No
Yin Meiqun Independent Director F 52 In office 20.00 No
Yang Biao Independent Director M 43 In office 20.00 No
Li Kang Chairman of the Supervisory Committee F 41 In office 66.96 No
Pan Ailing Supervisor F 58 In office 10.00 No
Zhang Hong Supervisor F 58 In office 10.00 No
Qiu Lanju Supervisor F 49 In office 62.55 No
Sang Ailing Supervisor F 44 In office 22.50 No
Li Xueqin Deputy general manager F 57 In office 165.28 No
Li Zhenzhong Deputy general manager M 49 In office 189.61 No
Li Mingtang Deputy general manager M 55 In office 163.38 No
Ge Guangming Deputy general manager M 52 In office 143.64 No
Dong Lianming Financial controller M 48 In office 189.25 No
Yuan Xikun Secretary to the Board M 37 In office 76.64 No
Chu Hon Leung Hong Kong company secretary M 40 In office 0.00 No
Chen Gang General manager M 50 Resigned 26.54 No
Total 2,752.06
Note: The total pre-tax remuneration received by Directors, Supervisors and the Senior Management from the Company is the remuneration
during their tenure.
70
VI Corporate Governance
VI. Performance of Directors during the reporting period
1. Board meetings during the reporting period
Meeting Convening date Disclosure date Resolutions of meeting
The twelfth meeting of the ninth 30 March 2022 31 March 2022 http://www.cninfo.com.cn
session of the Board (announcement no.: 2022-011)
The thirteenth meeting of the ninth 29 April 2022 N/A The Company’s 2022 First Quarterly
session of the Board Report was considered and
approved. It was exempted
from disclosure by resolution
announcement.
The twenty-fourth extraordinary 23 May 2022 24 May 2022 http://www.cninfo.com.cn
meeting of the ninth session of (announcement no.: 2022-033)
the Board
The twenty-fifth extraordinary 30 May 2022 31 May 2022 http://www.cninfo.com.cn
meeting of the ninth session of (announcement no.: 2022-046)
the Board
The first meeting of the tenth 15 June 2022 16 June 2022 http://www.cninfo.com.cn
session of the Board (announcement no.: 2022-051)
The first extraordinary meeting of 27 June 2022 28 June 2022 http://www.cninfo.com.cn
the tenth session of the Board (announcement no.: 2022-055)
The second extraordinary meeting 18 July 2022 19 July 2022 http://www.cninfo.com.cn
of the tenth session of the (announcement no.: 2022-059)
Board
The third extraordinary meeting of 28 July 2022 29 July 2022 http://www.cninfo.com.cn
the tenth session of the Board (announcement no.: 2022-067)
The second meeting of the tenth 30 August 2022 N/A The Full Text and Summary of the
session of the Board Company’s 2022 Interim Report
was considered and approved. It
was exempted from disclosure by
resolution announcement.
The third meeting of the tenth 28 October 2022 31 October 2022 http://www.cninfo.com.cn
session of the Board (announcement no.: 2022-076)
The fourth extraordinary meeting 21 November 2022 22 November 2022 http://www.cninfo.com.cn
of the tenth session of the (announcement no.: 2022-084)
Board
The fifth extraordinary meeting of 7 December 2022 8 December 2022 http://www.cninfo.com.cn
the tenth session of the Board (announcement no.: 2022-092)
2022 ANNUAL REPORT 71
VI Corporate Governance
VI. Performance of Directors during the reporting period (Continued)
2. Attendance of Directors at Board meetings and general meetings
Attendance of Directors at Board meetings and general meetings
Number of
attendance
required
for Board Absent
meetings Attendance Attendance Attendance from Board
during the at Board at Board at Board Absence meetings twice Attendance
reporting meetings in meetings by meetings by from Board in a row at general
Name of Directors period person communication proxy meetings (in person) meetings
Chen Hongguo 12 0 12 0 0 No 0
Hu Changqing 12 0 12 0 0 No 3
Li Xingchun 12 0 12 0 0 No 3
Li Feng 12 0 12 0 0 No 3
Li Weixian 8 0 8 0 0 No 2
Han Tingde 12 0 12 0 0 No 3
Li Chuanxuan 12 0 12 0 0 No 3
Li Zhihui 8 0 8 0 0 No 2
Sun Jianfei 12 0 12 0 0 No 3
Yin Meiqun 12 0 12 0 0 No 3
Yang Biao 12 0 12 0 0 No 3
Explanation for absent from Board meetings twice in a row (in person)
During the reporting period, none of the Directors was absent from Board meetings twice in a row (in person).
3. Objections from Directors on related issues of the Company
Were there any objections on related issues of the Company from Directors?
Yes √ No
There was no objection on related issues of the Company from Directors during the reporting period.
72
VI Corporate Governance
VI. Performance of Directors during the reporting period (Continued)
4. Other details about the performance of duties by Directors
Were there any suggestions from Directors adopted by the Company?
√ Yes No
Explanation on the adoption or non-adoption with related suggestions from the Directors
During the reporting period, Directors of the Company performed their duties with integrity, diligence, responsibility
and faithfulness, actively participated in corporate governance and decision-making activities, attended the Board
meetings of the Company, carefully reviewed various proposals that need to be reviewed at Board meetings,
and made resolutions in strict compliance with the regulations and requirements of the Company Law, the Rules
Governing Listing of Stocks on Shenzhen Stock Exchange, the Guidelines for Self-discipline Regulation of Listed
Companies of Shenzhen Stock Exchange No. 1 – Standard Operation of Listed Companies on the Main Board and the
Articles of Association and other relevant laws, regulations and regulatory documents. In accordance with the Rules
for Independent Directors of Listed Companies, Work System of Independent Directors and other regulations, the
independent Directors of the Company performed their duties independently, diligently and responsibly. During the
reporting period, the independent Directors of the Company paid attention to the appropriation of funds of the Company
by the controlling shareholder and other related parties of the Company and external guarantees, and issued special
explanation. They issued prior approval opinions for the estimated cap of ordinary related party transactions for 2022,
and the debt transfer of financial leasing business and related party transactions, and also issued independent and
impartial opinions for the Company’s external guarantees, appointment of audit firm, election of the new session and
other matters which had a significant impact on minority shareholders during the reporting period, which effectively
safeguarded the overall interests of the Company and the legitimate rights and interests of all shareholders, especially
minority shareholders, and further enhanced the standardised operation level of the Company.
2022 ANNUAL REPORT 73
VI Corporate Governance
VII. Special committees under the Board during the reporting period
Number of
Name of the meeting Important opinion Details of
committee Member convened Convening date Details of the meeting and advice Other performance of duty objection
Audit Yin Meiqun, Li 2 30 March 2022 Reviewed the Company’s Agreed to submit to the Communication with external Nil
Committee Chuanxuan and 2021 Financial Final Board for review auditing institution engaged
Sun Jianfei Accounts Report, Full by the Company and the
Text and Summary financial department of the
of the Company’s Company in respect of the
2021 Annual Report, 2021 financial report auditing,
Proposal on the review of the 2021 auditor’s
Appointment of report and financial report;
Auditor for 2022 and review of the independence,
Proposal on Provision professional competence,
for Impairment of investor protection ability,
Assets in 2021 and practice qualifications of
Grant Thornton.
29 April 2022 Reviewed the 2022 First Agreed to submit to the Review of the 2022 first quarterly Nil
Quarterly Report of the Board for review report of the Company.
Company
Yin Meiqun, Li 2 30 August 2022 Reviewed the Full Text Agreed to submit to the Review of the 2022 interim Nil
Zhihui and Sun and Summary of the Board for review financial statements of the
Jianfei 2022 Interim Report of Company; paying attention
the Company to the appropriation of
funds of the Company by
the controlling shareholder
and other related parties of
the Company and external
guarantees.
28 October 2022 Reviewed the 2022 Third Agreed to submit to the Review of the 2022 third Nil
Quarterly Report of the Board for review quarterly report of the
Company Company.
74
VI Corporate Governance
VII. Special committees under the Board during the reporting period (Continued)
Number of
Name of the meeting Important opinion Details of
committee Member convened Convening date Details of the meeting and advice Other performance of duty objection
Remuneration Yang Biao, Li 3 30 March 2022 Reviewed the Proposal Agreed to submit to the Determination of the Nil
and Xingchun and on Determination Board for review remuneration of Directors,
Assessment Sun Jianfei of Remuneration of Supervisors and the Senior
Committee Directors, Supervisors Management based on
and Senior the operations of the
Management for 2021 Company, and the duty and
performance appraisal of
executive Directors, Senior
Management, and Supervisors
who assume specific
management positions in the
Company in 2021.
23 May 2022 Reviewed the Proposal Agreed to submit to the Determination of the allowances Nil
on Allowances for non- Board for review for non-executive Directors
executive Directors and independent non-
and Independent non- executive Directors upon
executive Directors of comprehensive consideration
the Tenth Session of with reference to the
the Board remuneration of directors of
other listed companies of the
same size, as well as based
on the Company’s actual
operations and the duties of
non-executive Directors and
independent non-executive
Directors.
18 July 2022 Reviewed the Proposal Agreed to submit to the Review of the performance Nil
on the Fulfilment of the Board for review appraisal indicators at the
Unlocking Conditions company level and the
of the Restricted performance appraisal
Shares Granted under indicators at individual level
the 2020 Restricted of the participants, and
A Share Incentive determination of the list of
Scheme during the participants who do not meet
First Unlocking Period, the unlocking conditions as
and the Proposal well as the repurchase price
on the Adjustment and repurchase quantity of
to the Repurchase restricted shares.
Price of the 2020
Restricted A Share
Incentive Scheme
and Repurchase and
Cancellation of Certain
Restricted Shares
2022 ANNUAL REPORT 75
VI Corporate Governance
VII. Special committees under the Board during the reporting period (Continued)
Number of
Name of the meeting Important opinion Details of
committee Member convened Convening date Details of the meeting and advice Other performance of duty objection
Nomination Sun Jianfei, Chen 1 23 May 2022 Reviewed the Proposal Agreed to submit to the Review of the qualification Nil
Committee Hongguo and Yin on the Election of Board for review and work experience of the
Meiqun Candidates for Non- candidates for Directors.
independent Directors
of the Tenth Session
of the Board, and
the Proposal on the
Election of Candidates
for Independent Non-
executive Directors of
the Tenth Session of
the Board
Strategic Chen Hongguo, Hu 1 28 October 2022 Reviewed the Proposal Agreed to submit to the Comprehensive understanding Nil
Committee Changqing and on the Investment Board for review of the purpose, prospects and
Yang Biao and Construction of funding of the construction
Softwood Bleached projects and feasibility
Chemical Pulp analysis of the construction
Project with Annual projects according to the
Production Capacity feasibility report.
of 300,000 Tonnes
and the Proposal on
Zhanjiang Chenming’s
Investment and
Construction of
Special paper Project
with Annual Production
Capacity of 180,000
Tonnes
76
VI Corporate Governance
VIII. Performance of duties by the Supervisory Committee
Were there any risks of the Company identified by the Supervisory Committee when performing its duties during the
reporting period?
Yes √ No
None of those issues under the supervision was objected by the Supervisory Committee during the reporting period.
IX. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) as at the end of the reporting period 2,596
Number of staff at major subsidiaries (person) as at the end of the reporting period 7,462
Total number of staff (person) as at the end of the reporting period 10,855
Total number of staff receiving remuneration during the period (person) 10,855
Number of retired/resigned staff the Company and its major subsidiaries are required to
compensate (person) 0
Specialty composition
Number of people
Category of specialty composition (person)
Production staff 7,259
Sales staff 500
Technical staff 465
Financial staff 177
Administrative staff 1,203
Other staff 1,251
Total 10,855
Education level
Number of people
Category of education level (person)
Postgraduate and above 21
Undergraduate 887
Post-secondary 2,178
Technical secondary and below 7,769
Total 10,855
2022 ANNUAL REPORT 77
VI Corporate Governance
IX. Personnel of the Company (Continued)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. 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 2023, the Company will further enhance cooperation with
professional training institutions to enhance training quality. Meanwhile, the Company will innovate its way of learning
and build a practical online learning platform. We will also develop quality training materials and improve existing ones
by levels, initiating targeted training programmes. 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, the training focuses on leadership. A team of excellent quality is built through training.
4. Labour outsourcing
Applicable √ Not applicable
X. Profit distribution of the Company and conversion of capital reserves into share capital
Formulation, implementation or adjustment of profit distribution policy, especially the cash dividend during the reporting
period
Applicable √ Not applicable
78
VI Corporate Governance
X. Profit distribution of the Company and conversion of capital reserves into share capital
(Continued)
The Company was profitable during the reporting period and the Parent Company’s profit available for distribution to
shareholders was positive, but no cash dividend distribution plan was proposed
√ Applicable Not applicable
Explanation on why it was profitable during the reporting Use and plan of use of the Company’s undistributed profits
period and the Parent Company’s profit available for
distribution to shareholders was positive but no cash
dividend distribution plan was proposed
During the reporting period, as the domestic market demand The retained undistributed profits of the Company are
was insufficient due to the economic environment, the sales accumulated and carried forward to the next year,
volume of machine-made paper decreased year on year. At which will be mainly used for day-to-day operation and
the same time, due to the rising prices of wood chips, development, repayment of interest-bearing liabilities
chemicals, raw coal and other raw materials as well as and project construction of the Company to ensure the
energy prices, the Company faced great cost pressure. The normal production, operation and business expansion of
net profit attributable to shareholders of the Company for the Company, and to provide a reliable guarantee for the
the reporting period decreased as compared with the implementation of the Company’s medium and long-term
corresponding period of the prior year. Considering factors development strategy, thus effectively safeguarding the
such as the current macroeconomic environment and the interests of the Company and all shareholders, especially
Company’s strategic planning, in order to further reduce its small and medium shareholders.
liability size, optimise its capital structure, enhance the
Company’s financial resilience, and satisfy the capital needs
for, among other things, day-to-day production and
operation, and project construction, thereby enhancing risk
resistance, securing the sustainable and steady
development of the pulp production and paper making
business, the principal business of the Company, and better
safeguarding the long-term interests of all shareholders.
Profit distribution and conversion of capital reserves into share capital during the reporting period
Applicable √ Not applicable
The Company does not propose distribution of cash dividends or bonus shares for the year, and there will be no increase of
share capital from reserves.
2022 ANNUAL REPORT 79
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measures of the Company
√ Applicable Not applicable
1. Equity incentives
1. On 30 March 2020, the Company convened the ninth extraordinary meeting of the ninth session of the Board, at
which the Company considered and approved the Resolution in Relation to the 2020 Restricted Share Incentive
Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary and other resolutions. On the
same date, the fourth extraordinary meeting of the ninth session of the Supervisory Committee of the Company
considered and approved the above resolutions and verified the list of proposed participants of the incentive
scheme. Independent Directors of the Company issued independent opinions on the incentive scheme.
2. On 3 April 2020, the Company announced the list of participants through the Company’s internal website for
a period from 3 April 2020 to 12 April 2020. During the period, the Supervisory Committee of the Company
and relevant departments did not receive any objection against the proposed participants. The Supervisory
Committee verified the list of participants under the grant of the incentive scheme.
3. On 15 May 2020, the Company convened the 2020 second extraordinary general meeting, the 2020 first class
meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed
shares, at which the Company considered and approved the Resolution in Relation to the 2020 Restricted
Share Incentive Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary and other
resolutions. On 16 May 2020, the Company disclosed the Self-Examination Report for the Trading of Shares of
the Company by Insiders and Participants of the 2020 Restricted A Share Incentive Scheme.
4. On 29 May 2020, the Company convened the tenth extraordinary meeting of ninth session of the Board and the
fifth extraordinary meeting of the ninth session of the Supervisory Committee, at which the Company considered
and approved the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive
Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants,
approving the issue of 79,600,000 restricted A shares to 111 participants at the price of RMB2.85 per share on
29 May 2020.
5. On 15 July 2020, the 79,600,000 restricted A shares granted to the participants were listed.
6. On 18 July 2022, the Company convened the second extraordinary meeting of the tenth session of the Board
and the first extraordinary meeting of the tenth session of the Supervisory Committee, at which the Company
considered and approved the Resolution on the Fulfilment of the Unlocking Conditions of the Restricted
Shares Granted under the 2020 Restricted A Share Incentive Scheme during the First Unlocking Period and the
Resolution on the Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and
Repurchase and Cancellation of Certain Restricted Shares. The independent Directors of the Company issued
independent opinions to agree with such resolutions.
96 participants fulfilled the unlocking conditions for the first unlocking period under the 2020 Restricted A Share
Incentive Scheme with 29,948,000 restricted shares being eligible for unlocking. 15 participants had resigned,
had changed duty, and had removed from office, which failed to comply with the unlocking conditions. The
total number of restricted shares that have been granted to and held by the participants and have not yet been
unlocked is 4,466,000, representing 5.61% of the total number of restricted shares granted under the 2020
Restricted A Share Incentive Scheme.
7. On 27 July 2022, 29,948,000 restricted A shares that were unlocked were listed for trading.
80
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measures of the Company (Continued)
1. Equity incentives (Continued)
8. On 9 October 2022, Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi
Tong Yan Zi (2022) No. 371C000576), in which they verified the change in the registered capital and paid-
in capital (share capital) of the Company as of 30 September 2022. Verification result: As of 30 September
2022, the registered capital and paid-in capital (share capital) of the Company upon the change amounted to
RMB2,979,742,200.00 and RMB2,979,742,200.00, respectively.
9. On 18 October 2022, the Company completed the procedures for the repurchase and cancellation of 4,466,000
restricted A shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.
Equity incentives granted to Directors and the Senior Management of the Company
√ Applicable Not applicable
Unit: share
Number Exercise Number
of newly price of of newly
Number granted Number Number the shares Market Number of Number of granted
of share share of shares of shares exercised Number price at the restricted unlocked restricted Number of
options held options exercisable exercised during the of share end of the shares held shares shares Grant price restricted
at the during the during the during the reporting options held reporting at the during the during the of restricted shares held
beginning of reporting reporting reporting period at the end period beginning current reporting shares at the end
Name Position the period period period period (RMB/share) of the period (RMB/share) of the period period period (RMB/share) of the period
Chen Chairman and 0 0 0 0 0 0 4.98 20,000,000 8,000,000 0 2.85 12,000,000
Hongguo general manager
Hu Vice chairman 0 0 0 0 0 0 4.98 5,000,000 2,000,000 0 2.85 3,000,000
Changqing
Li Xingchun Vice chairman 0 0 0 0 0 0 4.98 5,000,000 2,000,000 0 2.85 3,000,000
Li Feng Director and deputy 0 0 0 0 0 0 4.98 3,000,000 1,200,000 0 2.85 1,800,000
general manager
Li Weixian Director and deputy 0 0 0 0 0 0 4.98 2,000,000 800,000 0 2.85 1,200,000
general manager
Li Xueqin Deputy general 0 0 0 0 0 0 4.98 3,000,000 1,200,000 0 2.85 1,800,000
manager
Li Zhenzhong Deputy general 0 0 0 0 0 0 4.98 2,000,000 800,000 0 2.85 1,200,000
manager
Li Mingtang Deputy general 0 0 0 0 0 0 4.98 1,000,000 400,000 0 2.85 600,000
manager
Dong Financial controller 0 0 0 0 0 0 4.98 1,000,000 400,000 0 2.85 600,000
Lianming
Yuan Xikun Secretary to the 0 0 0 0 0 0 4.98 300,000 120,000 0 2.85 180,000
Board
Total 0 0 0 0 0 42,300,000 16,920,000 0 25,380,000
Remarks Nil
(if any)
2022 ANNUAL REPORT 81
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measures of the Company (Continued)
1. Equity incentives (Continued)
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.
2. Implementation of employee shareholding plans
Applicable √ Not applicable
3. Other employee incentive measures
Applicable √ Not applicable
82
VI Corporate Governance
XII. Construction and implementation of internal control system during the reporting period
1. Construction and implementation of internal control system
During the reporting period, in accordance with the Basic Internal Control Norms for Enterprises and its supporting
guidelines, taking internal and external environment, internal organisation and management requirements into account,
the Company updated and improved its internal control system in a timely manner, comprehensively reviewed and
revised the daily work and business flows and internal control systems of each department and business segment
of the Company, supplemented and revised the relevant content of the Internal Control Management Manual, and
established a scientifically designed, concise and applicable internal control system with effective operation.
The internal control of the Company was able to cover the main aspects of the Company’s operation and
management, and there were no major omissions. The units, businesses and events included in the evaluation scope
and high-risk areas covered the main aspects of the Company’s operation and management, and there were no major
omissions. The design of the internal control system of the Company was sound and reasonable. The implementation
of internal controls was effective and there were no major omissions.
Through the operation, analysis and evaluation of the internal control system, the Company effectively prevented risks
in operation and management and promoted the realisation of internal control objectives.
2. Particulars of material deficiencies in internal control detected during the reporting period
Yes √ No
XIII. The Company’s management and control of subsidiaries during the reporting period
Issue
encountered
Integration during Implemented Solution Follow-up
Name of the company Integration plan progress integration solution progress solution
Shanxi Fuyin Industrial In December 2022, the leasing company Completed Nil N/A N/A N/A
Trading Co., Ltd. acquired 100% equity interest in
Chongmin Culture Shanxi Fuyin, which holds 100% equity Completed Nil N/A N/A N/A
Development interest in Chongmin Culture. The
(Shanghai) Co., Ltd. major asset of Chongmin Culture is a
comprehensive property integrating
commercial, office and apartment
purposes located at Xinzhuang
Business District, Minhang District,
Shanghai, the business, assets, finance
and personnel of which have been fully
taken over by the Company, and the
project is currently under construction
as scheduled.
2022 ANNUAL REPORT 83
VI Corporate Governance
XIV. Self-assessment report on internal control or auditor’s report on internal control
1. Self-assessment report on internal controls
Date of disclosure of assessment report on internal controls 31 March 2023
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 99.80%
Percentage of revenue included in assessment to revenue in consolidated financial
statements of the Company 99.10%
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Qualitative criteria Indicators of material deficiencies in the internal control of financial Indicators of material deficiencies in the internal control of non-financial
reporting include: ineffective control environment, material loss to reporting include: major failure as a result of the decision making
and adverse impact on the Company as a result of misconduct process; lack of control system or occurrence of systematic failure in
by Directors, Supervisors and Senior Management; material principal activities and lack of effective compensation control, high
misstatement of non-exceptional incidents; ineffectiveness in turnover rate of mid to senior level management and senior technical
supervision of internal control of the Company by the Board, or its staff; failure to address the findings of internal control assessment,
delegated authorities, and the internal audit department. in particular material deficiencies; and other factors which impose
Indicators of major deficiencies in internal control of financial material adverse impact on the Company.
reporting include: failure in selecting and applying accounting Indicators of major deficiencies in internal control of nonfinancial
policies in accordance with generally accepted accounting reporting include: general failure as a result of the decision-making
principles; failure to establish procedures and control measures to process; deficiencies in major business procedure or system; high
prevent corrupt practices; failure to establish corresponding control turnover rate of key staff; failure to address the findings of internal
mechanism for the accounting of unusual or special transactions control assessment, in particular major deficiencies; and other factors
or failure to implement or set up the corresponding compensation which impose great adverse impact to the Company.
control; failure to reasonably ensure the truthfulness and accuracy Indicators of general deficiencies in internal control of non-financial
in the preparation of financial statement, as a result of one or more reporting include: low efficiency of decision-making process;
deficiencies in the control of financial reporting as of the end of the deficiencies in general business procedure or system; high turnover
period. rate of employees; and failure to rectify general deficiencies.
General deficiencies: other deficiencies in internal control that do not
constitute material or major deficiencies.
Quantitative General deficiencies: deviation of less than or equal to 0.1% from the General deficiencies: quantitative criterion (financial loss) less than
criteria target of accounting error/the total revenue; Major deficiencies: RMB5,000,000; major deficiencies: quantitative criterion (financial loss)
deviation of 0.1% – 0.5% from the target of accounting error/the between RMB5,000,000 and RMB20,000,000; material deficiencies:
total revenue; material deficiencies: deviation greater than 0.5% quantitative criterion (financial loss) over RMB20,000,000.
from the target of accounting error/the total revenue.
Number of material deficiencies in financial reporting 0
Number of material deficiencies in non-financial reporting 0
Number of major deficiencies in financial reporting 0
Number of major deficiencies in non-financial reporting 0
84
VI Corporate Governance
XIV. Self-assessment report on internal control or auditor’s report on internal control (Continued)
2. Auditor’s report on internal control
√ Applicable Not applicable
Auditor’s opinion contained in the auditor’s report on internal control
We are of the opinion that Shandong Paper Company 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 2022.
Disclosure of auditor’s report on internal control Disclosed
Date of disclosure of auditor’s report on internal control 31 March 2023
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
XV. Rectification of problems found in self-inspection under the special initiative on corporate
governance of the listed company
Not applicable
2022 ANNUAL REPORT 85
VI Corporate Governance
XVI. 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.
(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 ordinary 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.
As regards its corporate governance functions, the Board is responsible for: (1) formulating, reviewing and making
recommendations on the Company’s corporate governance policies and practices; (2) reviewing and monitoring
the training and continuous professional development of the Directors and Senior Management of the Company; (3)
reviewing and monitoring the Company’s policies and practices on compliance with legal and regulatory requirements;
(4) formulating, reviewing and monitoring the code of conduct and compliance manual applicable to employees and
Directors of the Company; and (5) reviewing the Company’s compliance with the Code on Corporate Governance
and disclosure in the Corporate Governance Report. During the reporting period, the Board had performed the above
duties.
86
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(iii) Board (Continued)
The Board comprised five executive Directors: Chen Hongguo (Chairman), Hu Changqing, Li Xingchun, Li Feng and Li
Weixian; two non-executive Directors: Han Tingde and Li Chuanxuan; and four independent non-executive Directors:
Li Zhihui, Sun Jianfei, Yin Meiqun and Yang Biao. Please refer to part V of this section for their brief biographies.
The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration 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
the 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 management
and the Senior Management of the Company have to get prior approval from, among others, the Board, before they
make any decision or enter into any commitment on behalf of the Company. 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 C.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respect
of legal action against its Directors. During the reporting period, the Company arranged director liability insurance for
Directors to safeguard the rights and interests of Directors to perform their duties in compliance.
During the reporting period, the Board held 12 meetings, 5 of which were regular meetings and 7 were extraordinary
meetings. None of the Directors were absent from any Board meetings.
Attendance at the relevant meetings (attention required/attended)
Remuneration
Audit Nomination and Assessment Strategic
Board Committee Committee Committee Committee General
Name Position meetings meetings meetings meetings meetings meetings
I. Executive Directors
Chen Hongguo Chairman 12/12 N/A 1/1 N/A 1/1 3/0
Hu Changqing Vice chairman 12/12 N/A N/A N/A 1/1 3/3
Li Xingchun Vice chairman 12/12 N/A N/A 3/3 N/A 3/3
Li Feng Executive Director 12/12 N/A N/A N/A N/A 3/3
Li Weixian Executive Director 8/8 N/A N/A N/A N/A 2/2
II. Non-executive Directors
Li Chuanxuan Director 12/12 2/2 N/A N/A N/A 3/3
Han Tingde Director 12/12 N/A N/A N/A N/A 3/3
III. Independent non-executive
Directors
Li Zhihui Independent Director 8/8 2/2 N/A N/A N/A 2/2
Sun Jianfei Independent Director 12/12 4/4 1/1 3/3 N/A 3/3
Yin Meiqun Independent Director 12/12 4/4 1/1 N/A N/A 3/3
Yang Biao Independent Director 12/12 N/A N/A 3/3 1/1 3/3
2022 ANNUAL REPORT 87
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(iii) Board (Continued)
Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of the
Board had any financial, business, family relations or material connections with each other.
The Board held 5 regular meetings during the year, each by giving a 10-day notice in advance to ensure that 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.
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 training courses 2022 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 manager
Mr. Chen Hongguo is the Chairman and general manager of the Company. Please refer to part V of this section for his
brief biographies.
According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1)
presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and 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.
88
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(iv) Chairman and general manager (Continued)
The general manager of the Company exercises the duties of a chief executive officer. The general manager 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.
Mr. Chen Hongguo is the chairman and general manager of the Company. The Board believes that Mr. Chen Hongguo
has a thorough understanding of the culture and the operation model of the Company. As the Chairman and general
manager of the Company, he can facilitate the planning and implementation of the business strategies of the Group,
which is more conducive to the management and operational efficiency of the Group. The responsibilities of the
Chairman and the general manager are clearly defined and the Board structure of the Company ensures a balance of
power and provides sufficient checks and balances, thus effectively safeguarding the interests of the Company and
investors.
(v) Independent non-executive Directors
There are four 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. Yin Meiqun
and Sun Jianfei, 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 part V of this section 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, have been
elected at the general meetings with a term of three years from June 2022 to June 2025. They may be re-elected for
another term upon expiry of tenure. The term of office of independent non-executive Directors is the same as that of
other Directors. They may be re-elected for consecutive terms, but the consecutive terms shall not be more than six
years.
(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.
2022 ANNUAL REPORT 89
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(viii) Board committees
Pursuant to Code on Corporate Governance, the Board has established four committees, namely, Audit Committee,
Remuneration and Assessment Committee, Strategic Committee and Nomination Committee, for overseeing 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.
(ix) Audit Committee
The Audit Committee of the Company comprises three members. The members of the ninth session of the Audit
Committee of the Board included Yin Meiqun (as the chairman), Li Chuanxuan and Sun Jianfei. Two of them, including
the chairman, are independent non-executive Directors. On 15 June 2022, the Company completed the election of
the new session of the Board, and convened the first meeting of the tenth session of the Board on the same day to
consider and elect the members of the Audit Committee of the new session of the Board, including Yin Meiqun (as the
chairman), Li Zhihui and Sun Jianfei, all of whom 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) supervising and evaluating the work of the
external auditor; (2) supervising and evaluating the internal audit; (3) reviewing the financial reports of the Company
and express opinions on them; (4) supervising and evaluating the internal control of the Company; (5) coordinating
the communication between management, internal audit department and relevant departments and external audit;
(6) dealing with other matters as delegated by the Board and other matters involved in laws and regulations and the
regulations of Shenzhen Stock Exchange.
The Audit Committee discussed with the management of the Company the accounting standards and 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 2022 prepared in accordance with China Accounting Standards for Business
Enterprises.
Particulars of the meetings held by the Audit Committee during the reporting period are detailed in part VII 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 Audit Committee reviews the adequacy and effectiveness
of the risk management and internal control systems at least once a year. The management has provided confirmation
to the Audit Committee (and the Board) on the adequacy and effectiveness of these systems for the year ended 31
December 2022. The Audit Committee (as well as the Board) was satisfied with the adequacy and effectiveness of the
related systems.
90
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(ix) Audit Committee (Continued)
Risk Management and Internal Control (Continued)
In respect of internal control system, procedures have been designed for safeguarding assets against 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.
(x) Remuneration and Assessment Committee
The Remuneration and Assessment Committee of the Company comprises three members, including Yang Biao (as
the chairman), Li Xingchun and Sun Jianfei. Two of them, 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 VII of this section.
(xi) Nomination Committee
The Nomination Committee of the Company comprises three members. The Nomination Committee of the ninth
session of the Board includes Sun Jianfei (as the chairman), Chen Hongguo and Yin Meiqun. Two of them, including
the chairman, are independent non-executive Directors. On 15 June 2022, the Company completed the election of
the new session of the Board, and convened the first meeting of the tenth session of the Board on the same day to
consider and elect the members of the Nomination Committee of the new session of the Board, including Li Zhihui (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.
2022 ANNUAL REPORT 91
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xi) Nomination Committee (Continued)
The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the 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 VII of
this section.
(xii) Strategic Committee
The Company set up a Strategic Committee which comprised three members, including Chen Hongguo (as the
chairman), 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.
Particulars of the meetings held by the Strategic Committee during the reporting period are detailed in part VII of this
section.
92
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xiii) Auditor
On 19 June 2020, the Company convened the 2019 annual general meeting, and considered and approved the
Resolution in relation to the Appointment of the Auditor for 2020, and continued to engage Grant Thornton (Special
General Partnership) as the domestic auditor of the Company for 2020 and be responsible for domestic auditing of
the Company for 2020.
On 18 June 2021, the Company convened the 2020 annual general meeting, and considered and approved the
Resolution in relation to the Appointment of the Auditor for 2021, and continued to engage Grant Thornton (Special
General Partnership) as the domestic auditor of the Company for 2021 and be responsible for domestic auditing of
the Company for 2021.
On 11 May 2022, the Company convened the 2021 annual general meeting, and considered and approved the
Resolution in relation to the Appointment of the Auditor for 2022, and continued to engage Grant Thornton (Special
General Partnership) as the domestic auditor of the Company for 2022 and be responsible for domestic auditing of
the Company for 2022.
(xiv) Remuneration for the Auditor
The financial statements for 2022 prepared in accordance with Accounting Standards for Business Enterprises by the
Group were audited by Grant Thornton (Special General Partnership). In 2022, the Company paid the auditor a total
of RMB2.5 million (tax inclusive; tax exclusive amount: RMB2.3585 million) in respect of financial statements audit
for 2021 and a total of RMB0.8 million (tax inclusive; tax exclusive amount: RMB0.7547 million) in respect of audit
services in relation to internal control for 2021.
Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements of
the Group in XII. Financial Report of this annual report.
In addition to the aforesaid annual financial report and internal control audit fees paid to Grant Thornton (Special
General Partnership) totaling RMB3.1132 million (tax exclusive), other tax- exclusive audit expenses incurred due to
the audit of R&D expenses and the audit of income tax settlement and payment totaled RMB2.5156 million.
(xv) Supervisors and Supervisory Committee
The Supervisory Committee comprises three shareholder representatives and two employee representatives. The
shareholder representative Supervisors shall be elected and removed at a general meeting and the employee
representative Supervisors shall be elected and removed democratically by the employees of the Company. During
the reporting period, the Supervisory Committee of the Company convened 8 meetings, and all Supervisors attended
Supervisory Committee meetings convened during the year, and carefully reviewed the 2021 Annual Report, 2022
First Quarterly Report, 2022 Interim Report and 2022 Third Quarterly Report, and issued special opinions. 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.
(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.
2022 ANNUAL REPORT 93
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xvii) Communications with Shareholders
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 May 2022 by the Company, two extraordinary general meetings were
convened in 2022. The attendance record of Directors at each general meeting is set out below:
Name Directors attending general meetings in person
2021 annual general meeting Hu Changqing, Li Chuanxuan, Li Feng, Han Tingde, Li Chuanxuan,
Sun Jianfei, Yin Meiqun, Yang Biao
2022 first extraordinary general meeting Hu Changqing, Li Chuanxuan, Li Feng, Han Tingde, Li Chuanxuan,
Sun Jianfei, Yin Meiqun, Yang Biao;
Li Zhihui (Director candidate), Li Weixian (Director candidate)
2022 second extraordinary general meeting Hu Changqing, Li Chuanxuan, Li Feng, Li Weixian, Han Tingde, Li
Chuanxuan, Li Zhihui, Sun Jianfei, Yin Meiqun, Yang Biao
94
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xvii) Communications with Shareholders (Continued)
General meetings (Continued)
The Company’s external auditor also attended the Annual General Meeting and scrutinised voting.
Code F.2.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit,
remuneration and nomination committees to attend the annual general meeting.
Mr. Chen Hongguo, the chairman of the Company and the chairman of the Strategic Committee, was absent from the
annual general meeting due to business commitments.
Code C.1.6 of the code provisions – This code provision requires independent non-executive directors and other non-
executive directors, as equal board members, should give the board of the directors and any committees on 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.
During the year, all independent non-executive Directors and other non-executive Directors of the Company attended
the all general meetings without absence.
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.
2022 ANNUAL REPORT 95
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xvii) Communications with Shareholders (Continued)
Shareholders’ right
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 100 of the Articles of Association of the Company, Shareholder(s) alone or in aggregate
holding 10% or more of the Company’s voting 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.
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 voting shares for ninety
consecutive days or more shall be entitled to convene and preside over the meeting on a unilateral basis.
Pursuant to Article 101 of the Articles of Association of the Company, if Shareholders determine to convene
a general meeting on their own, they shall give a written notice to the Board and file the same with 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 stock exchange upon the issuance of the
notice of general meeting and the announcement of resolutions of the general meeting.
Pursuant to Article 102 of the Articles of Association of the Company, the Board and its secretary 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.
Pursuant to Article 103 of the Articles of Association of the Company, if a general meeting is convened by
shareholders on their own, all necessary expenses incurred shall be borne by the Company.
96
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xvii) Communications with Shareholders (Continued)
Shareholders’ right (Continued)
2. Procedures for sending shareholders’ enquiries to the 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,
Shouguang City, Shandong Province Hong Kong
Telephone 0536-2158008 00852-21629600
Facsimile 0536-2158977 00852-25010028
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 111 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 convener ten days before the convening of the General Meeting. The convener
shall issue supplementary notice of the General Meeting to disclose the name of the shareholders who propose
the extraordinary motions, their shareholding ratio and the specific content of the new motions within two days
after receiving the proposed motions.
Save for provided above, the convener 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.
The Board has reviewed the interaction with Shareholders during the reporting period, and is satisfied with the
implementation of the shareholder communications policy of the Company and its effectiveness.
2022 ANNUAL REPORT 97
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xviii) Internal Control
For details of internal control of the Company, please refer to XII. Internal control system development and
implementation during the reporting period and XIV. Self-assessment report on internal control or auditor’s report on
internal control of this section.
(xix) Articles of Association
On 11 May 2022, 15 June 2022 and 18 July 2022, the Company amended the new Articles of Association. The
amendments were primarily relating to deletion of the chapters in relation to preference shares, and contents including
guarantees, relevant duty performance regulations for independent Directors, the number of Board members, changes
in shares after repurchase and cancellation of certain restricted shares, etc. The 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. As at the date of the report, the Board is composed of 10 male Directors and 1 female
Directors. The Nomination Committee and the Board will seize the opportunity to gradually increase the proportion of
female Directors in the Board when they select and recommend a suitable Director candidate.
The composition of the Board of the Company is basically diversified. For details, please refer to (iii) Board of this
section.
98
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Continued)
(xxi) Dividend policy
During the reporting period, as the domestic market demand was insufficient due to the economic environment, the
sales volume of machine-made paper decreased year on year. At the same time, due to the rising prices of wood
chips, chemicals, raw coal and other raw materials as well as energy prices, the Company faced great cost
pressure. The net profit attributable to shareholders of the Company for the reporting period decreased as
compared with the corresponding period of the prior year. Considering factors such as the current macroeconomic
environment and the Company’s strategic planning, the Board proposed not to pay cash dividend, issue bonus
shares and increase share capital from reserves for 2022 to further reduce its liability size, optimise its capital
structure, enhance the Company’s financial resilience, and satisfy the capital needs for, among other things, day-
to-day production and operation, and project construction, thereby enhancing risk resistance, securing the
sustainable and steady development of the pulp production and paper making business, the principal business of
the Company, and better safeguarding the long-term interests of all shareholders.
2022 ANNUAL REPORT 99
VII Environment and Social Responsibility
I. Major environmental protection matters
Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental protection
authority?
√ Yes No
Environmental protection related policies and industry standards
1. The Company, during its own production and operation process, strictly abides by relevant environmental
protection laws and regulations as follows:
The Environmental Protection Law of the People’s Republic of China, the Law on the Prevention and Control of Air
Pollution of the People’s Republic of China, the Law on the Prevention and Control of Water Pollution of the People’s
Republic of China, the Law on the Prevention and Control of Environmental Pollution by Solid Waste of the People’s
Republic of China, the Law on Noise Pollution Prevention and Control of the People’s Republic of China, Regulations
on the Administration of Pollutant Discharge Permit, and Regulations on Groundwater Management, and the
Measures for the Emergency Administration of Environmental Contingencies.
2. The Company strictly implements national, industry and local standards for pollutant discharge as follows:
Exhaust gas: Integrated Emission Standard of Air Pollutants (GB 16297-1996), Emission Standard of Air Pollutants for
Thermal Power Plants (GB 13223-2011), Emission Standard for Odor Pollutants (GB 14554-93), Emission Standard of
Air Pollutants for Boilers (DB44/765-2019), Emission Standard of Air Pollutants for Thermal Power Plants (DB37/664-
2019), Regional and Integrated Emission Standard of Air Pollutants (DB37/2376-2019), and Emission Standard of Air
Pollutants for Building Materials Industry (DB37/2373-2018).
Wastewater: Integrated Wastewater Discharge Standard (GB 8978-1996), Wastewater Quality Standards for Discharge
to Municipal Sewers (GB/T 31962-2015), Discharge Standard of Water Pollutants for the Pulp and Paper Industry (GB
3544-2008) and Discharge Limits of Water Pollutants (DB44/26-2001), and the wastewater influent standard of local
wastewater treatment plants.
Noise: Emission Standard for Industrial Enterprises Noise at Boundary (GB 12348-2008).
Environmental protection administrative licensing
The issue dates and the validity periods of pollution discharge permits of subsidiaries are as follows:
Shandong Chenming Paper Holdings Limited: Issued on 7 December 2021 and valid up to 26 December 2026.
Shouguang Meilun Paper Co., Ltd.: Issued on 7 December 2021 and valid up to 26 December 2026.
Jiangxi Chenming Paper Co., Ltd.: Issued on 11 June 2020 and valid up to 27 June 2025.
Jilin Chenming Paper Co., Ltd.: Issued on 10 December 2021 and valid up to 9 December 2026.
Zhanjiang Chenming Pulp & Paper Co., Ltd.: Issued on 30 May 2022 and valid up to 29 May 2027.
Huanggang Chenming Pulp & Paper Co., Ltd.: Issued on 14 September 2021 and valid up to 13 September 2026.
Wuhan Chenming Hanyang Paper Holdings Co., Ltd.: Issued on 26 April 2020 and canceled due to the suspension of
production on 29 December 2022.
100
VII Environment and Social Responsibility
Industry emission standards and the status of pollutant emissions involved in production and operation
activities
Category
of major Name of major
pollutants pollutants Number of Approved
Name of company and specific and specific Way of emission Distribution of emission Pollutant emission total Excessive
or subsidiary pollutants pollutants emission outlets outlets Emission concentration standards implemented Total emissions emissions emissions
Shandong Exhaust gas SO2 Organised 2 Chenming Industrial Park Power plant no. 1: 10.5mg/m3 35mg/m3 Power plant no. 1: 17.1t 160.32t/year No
Chenming emission Power plant no. 2: 10.7mg/m3 Power plant no. 2: 19.6t
Paper Holdings Exhaust gas NOx Organised 2 Chenming Industrial Park Power plant no. 1: 39.2mg/m3 50mg/m3 Power plant no. 1: 63.8t 233.91t/year No
Limited emission Power plant no. 2: 39.4mg/m3 Power plant no. 2: 72.0t
Exhaust gas Particulates Organised 2 Chenming Industrial Park Power plant no. 1: 0.467mg/m3 5mg/m3 Power plant no. 1: 0.679t 23.39t/year No
emission Power plant no. 2: 0.876mg/m3 Power plant no. 2: 1.61t
Wastewater COD Indirect 2 Chenming Industrial Park Sewage outlet no. 1: 175mg/L 300mg/L Sewage outlet no. 1: 1,609t 6,510.74t/ No
emission Sewage outlet no. 2: 179mg/L Sewage outlet no. 2: 2,088t year
Wastewater Ammonia Indirect 2 Chenming Industrial Park Sewage outlet no. 1: 5.28mg/L 30mg/L Sewage outlet no. 1: 47.5t 650.7t/year No
nitrogen emission Sewage outlet no. 2: 1.57mg/L Sewage outlet no. 2: 18.2t
Wastewater Total nitrogen Indirect 2 Chenming Industrial Park Sewage outlet no. 1: 15.5mg/L 70mg/L Sewage outlet no. 1: 136 1519.1 t/year No
emission Sewage outlet no. 2: 15.2mg/L Sewage outlet no. 2: 171
Shouguang Meilun Exhaust gas SO2 Organised 4 Chenming Industrial Park Power plant no. 1: 11.8mg/m3 35mg/m3 (self-owned Power plant no. 1: 21.6t 342.89t/year No
Paper Co., Ltd. emission Power plant no. 2: 12.6mg/m3 power plant), 50mg/m3 Power plant no. 2: 25.3t
Alkali recovery: 1.62mg/m3 (chemical pulp mill) Alkali recovery: 15.5t
Lime kiln: 7.54mg/m3 Lime kiln: 10.7t
Exhaust gas NOx Organised 4 Chenming Industrial Park Power plant no. 1: 31.1mg/m3 50mg/m3 (self-owned Power plant no. 1: 55.1t 1,202.75t/ No
emission Power plant no. 2: 30.2mg/m3 power plant), 100mg/m3 Power plant no. 2: 57.0t year
Alkali recovery: 76.4mg/m3 (chemical pulp mill) Alkali recovery: 733t
Lime kiln: 32.7mg/m3 Lime kiln: 47.4t
Exhaust gas Particulates Organised 4 Chenming Industrial Park Power plant no. 1: 0.46mg/m3 5mg/m3 (self-owned Power plant no. 1: 0.847t 121.979t/ No
emission Power plant no. 2: 0.804mg/m3 power plant), 10mg/m3 Power plant no. 2: 1.54t year
Alkali recovery: 0.568mg/m3 (chemical pulp mill) Alkali recovery: 5.41t
Lime kiln: 0.870mg/m3 Lime kiln: 1.18t
2022 ANNUAL REPORT 101
VII Environment and Social Responsibility
Category
of major Name of major
pollutants pollutants Number of Approved
Name of company and specific and specific Way of emission Distribution of emission Pollutant emission total Excessive
or subsidiary pollutants pollutants emission outlets outlets Emission concentration standards implemented Total emissions emissions emissions
Wuhan Chenming Exhaust gas SO2 Organised 2 Within Qianneng Electric 130T/h furnace: 3.25mg/m3 50mg/m3 1.44381t 102.58t/year No
Hanyang Paper emission Power factory area 75T/h furnace: 7.36mg/m3
Holdings Co., Exhaust gas NOx Organised 2 Within Qianneng Electric 130T/h furnace: 55.13mg/m3 100mg/m3 14.8345t 205.16t/year No
Ltd. emission Power factory area 75T/h furnace: 46.15mg/m3
Exhaust gas Particulates Organised 2 Within Qianneng Electric 130T/h furnace: 1.57 mg/m3 20mg/m3 0.89747t 41.032t/year No
emission Power factory area 75T/h furnace: 5.18mg/m3
Wastewater COD Direct emission 1 Total wastewater 40.16mg/L 80mg/L 28.67t 184.3t/year No
discharge
Wastewater Ammonia Direct emission 1 Total wastewater 1.812mg/L 8mg/L 0.44t 17.3t/year No
nitrogen discharge
Wastewater Total nitrogen Direct emission 1 Total wastewater 5mg/L 12mg/L 4.95t – No
discharge
Jiangxi Chenming Exhaust gas SO2 Organised 1 Thermal power plant 240T/h furnace: 12.35mg/m3 200mg/m3 41.526t 806t/year No
Paper Co., Ltd. emission
Exhaust gas NOx Organised 1 Thermal power plant 240T/h furnace: 29.05mg/m3 200mg/m3 97.6932t 806t/year No
emission
Exhaust gas Particulates Organised 1 Thermal power plant 240T/h furnace: 4.6mg/m3 30mg/m3 15.4547t 135t/year No
emission
Wastewater COD Direct emission 1 Total wastewater 44.72mg/L 90mg/L 204.5406t 1,260t/year No
discharge
Wastewater Ammonia Direct emission 1 Total wastewater 1.13mg/L 8mg/L 5.1817t 112t/year No
nitrogen discharge
Wastewater Total nitrogen Direct emission 1 Total wastewater 4.93mg/L 12mg/L 21.754t – No
discharge
Jilin Chenming Exhaust gas SO2 Organised 3 (2 in use, Within factory area 4.87mg/m3 100mg/m3 3.65t 97t/year No
Paper Co., Ltd. emission 1 spare)
Exhaust gas NOx Organised 3 (2 in use, Within factory area 32.07mg/m3 100mg/m3 23.76t 213t/year No
emission 1 spare)
Exhaust gas Particulates Organised 3 (2 in use, Within factory area 9.22mg/m3 30mg/m3 6.23t 51.66t/year No
emission 1 spare)
Wastewater COD Indirect 1 Total wastewater 126.58mg/L 500mg/L 558.46t 6,000t/year No
emission discharge
Wastewater Ammonia Indirect 1 Total wastewater 1.6mg/L 45mg/L 7.13t 500t/year No
nitrogen emission discharge
Wastewater Total nitrogen Indirect 1 Total wastewater 5.93mg/L 50mg/L 24.65t – No
emission discharge
Zhanjiang Exhaust gas SO2 Organised 5 Within factory area Power plant no. 1: 7.6mg/m3 1#2#3#4# circulating 56.409t 620t/year No
Chenming Pulp emission Power plant no. 2: 6.86mg/m3 fluidised bed boilers:
& Paper Co., Power plant no. 3: 3.42mg/m3 35mg/m3
Ltd. Power plant no. 4:: 7.47mg/m3
Exhaust gas NOx Organised 5 Within factory area Alkali recovery: 123.04mg/m3 Alkali recovery: 200mg/m3 1,302.598t 1,800t/year No
emission Power plant no. 1: 12.12mg/m3 1#2#3#4# circulating
Power plant no. 2: 9.71mg/m3 fluidised bed boilers:
Power plant no. 3: 8.05mg/m3 50mg/m3
Power plant no. 4:: 6.53mg/m3
Exhaust gas Particulates Organised 5 Within factory area Power plant no. 1: 1.81mg/m3 1#2#3#4# circulating 11.853t 195.06t/year No
emission Power plant no. 2: 1.08mg/m3 fluidised bed boilers:
Power plant no. 3: 0.76mg/m3 10mg/m3
Power plant no. 4:: 0.93mg/m3
Wastewater COD Direct emission 1 Within factory area 39.14mg/L 90mg/L 778.432t 1943t/year No
Wastewater Ammonia Direct emission 1 Within factory area 1.27mg/L 8mg/L 25.065t 43.9t/year No
nitrogen
Wastewater Total nitrogen Direct emission 1 Within factory area 4.82mg/L 12mg/L 96.167t 320.4t/year No
102
VII Environment and Social Responsibility
Category
of major Name of major
pollutants pollutants Number of Approved
Name of company and specific and specific Way of emission Distribution of emission Pollutant emission total Excessive
or subsidiary pollutants pollutants emission outlets outlets Emission concentration standards implemented Total emissions emissions emissions
Huanggang Exhaust gas SO2 Organised 1 Lime kiln chimney 18.59 mg/m3 80mg/m3 13.76t 142.872t/ No
Chenming Pulp emission year
& Paper Co., Exhaust gas SO2 Organised 1 Alkali furnace chimney 3.43 mg/m3 200mg/m3 11.170t 328.417t/ No
Ltd. emission year
Exhaust gas NOx Organised 1 Lime kiln chimney 135.16 mg/m3 180mg/m3 107.36t 181.887t/ No
emission year
Exhaust gas NOx Organised 1 Alkali furnace chimney 171.08 mg/m3 200mg/m3 587.576t 950.829t/ No
emission year
Exhaust gas Particulates Organised 1 Lime kiln chimney 16.40 mg/m3 200mg/m3 12.03t 45.311t/year No
emission
Exhaust gas Particulates Organised 1 Alkali furnace chimney 13.00 mg/m3 30mg/m3 44.019t 83.759t/year No
emission
Wastewater COD Indirect 1 Total wastewater 15.13 mg/L 150mg/L 128.04t 398.911t/ No
emission discharge year
Wastewater Ammonia Indirect 1 Total wastewater 0.10 mg/L 14mg/L 0.85t 39.891t/year No
nitrogen emission discharge
Wastewater Total nitrogen Indirect 1 Total wastewater 1.20mg/L 15mg/L 10.21t – No
emission discharge
I. Major environmental protection matters (Continued)
Treatment of pollutants
1. Shandong Chenming Paper Group Co., Ltd.
Its own power plant uses the exhaust gas treatment process of limestone-gypsum desulfurisation+SNCR selective
non-catalytic reduction denitration +electric and bag composite dust removal+wet type electric dust removal. In 2022,
the environmental protection exhaust gas treatment facilities operated well, and were overhauled in time according
to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and the exhaust gas was
discharged up to the standard after treatment.
Its sewage treatment plant uses the traditional activated sludge wastewater treatment process, and the wastewater
which is treated up to the standard is discharged into the sewage treatment plant of Shouguang Zhongye Water Co.,
Ltd. In 2022, the wastewater treatment facilities operated well, and were overhauled in time according to the overhaul
plan. The daily average wastewater indicator did not exceed the standard, and the wastewater was discharged up to
the standard after treatment.
2. Shouguang Meilun Paper Co., Ltd.
Its own power plant uses the exhaust gas treatment process of limestone-gypsum desulfurisation+SNCR selective
non-catalytic reduction denitration+electric and bag composite dust removal+wet type electric dust removal. The
chemical pulp alkali recovery furnace uses the exhaust gas treatment process of PSCR denitration+electrostatic dust
removal, and the chemical pulp lime kiln uses the exhaust gas treatment process of ozone denitration+ electrostatic
dust removal+wet type electric dust removal. In 2022, the environmental protection exhaust gas treatment facilities
operated well, and were overhauled in time according to the overhaul plan. The daily average exhaust gas indicator
did not exceed the standard, and the exhaust gas was discharged up to the standard after treatment.
2022 ANNUAL REPORT 103
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)
Treatment of pollutants (Continued)
3. Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
The Qianneng Electric Power uses the exhaust gas treatment process of limestone desulfurisation+SCR catalytic
reduction+SNCR selective non-catalytic reduction denitrification+electric and bag composite dust removal. In 2022,
the environmental protection exhaust gas treatment facilities operated well, and were overhauled in time according
to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and the exhaust gas was
discharged up to the standard after treatment.
Water pollutants are treated by physicochemical+biochemical+Fenton treatment methods, and the 20,000-tonne
treatment process is: catchment well-conditioning-primary settling-cooling tower-aeration tank-secondary settling
tank-Fenton-re-conditioning tank-clarifier. The water treatment process has operated normally, and the average
discharge in 2022 was: COD at 56mg/L, with the discharge standard at 80mg/L, ammonia nitrogen at 1.71mg/L,
with the discharge standard at 8mg/L and total nitrogen at 2.22mg/L, with the discharge standard at 12mg/L. All the
pollutants were discharged up to the standard.
4. Jiangxi Chenming Paper Co., Ltd.
Its own power plant uses the exhaust gas treatment process of ammonia desulfurisation+SNCR catalytic reduction
denitrification+ electric and bag composite dust removal+90-metre desulfurisation and denitrification tower. The
aerobic section of the sewage treatment plant is equipped with a negative pressure exhaust device to recover and
treat the exhaust gas from anaerobic and aerobic sections, and uses the process of alkali spraying+biofiltration+water
washing. In 2022, the environmental protection exhaust gas treatment facilities operated well, and were overhauled
in time according to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard, and the
exhaust gas was discharged up to the standard after treatment.
Industrial wastewater is collected by a catchment well with large particles removed by grids and fibres in the
wastewater recovered by inclined mesh, and then flow into the settling tank for preliminary settling and cooling in
free-flowing. When the water temperature reaches 38°C, the water is pumped into a high-concentration primary
settling tank and a low-concentration primary settling tank. After the pre-acidification treatment, organic matter which
can be easily decomposed from the polymer decomposed through a hydrolysis acidification tank. In the biochemical
process, the biogas produced is recovered for power generation, and the biochemical water enters into the anaerobic
section, and gets into aeration and other aerobic systems with cooled low-concentration water. A stable COD value
is achieved through the aerobic system. In order to better treat the water, the aerobic water enters into the in-depth
treatment system, and is treated up to the standard through the processes such as Fenton treatment, settling tank
treatment, inclined plate settling, and flocculation settling. In the process of wastewater treatment, the suspended
matter in the water body is removed from the sludge produced which is treated by the processes such as plate-and-
frame filtering and belt machine desliming, which meets the requirements of Table II of GB3544. A reclaimed water
recycling device is in place to recycle some water which meets the requirements.
5. Jilin Chenming Paper Co., Ltd.
Its own power plant uses low-temperature combustion, staged combustion and SCR denitrification outside the
furnace, and uses bag filter for flue gas dust removal, and uses wet desulfurisation process of limestone inside the
furnace + limestone-gypsum outside the furnace, and the discharge is up to the standard.
The sewage station uses the treatment process of anaerobic (IC reactor)+aerobic (jet aeration)+in-depth treatment
(Fenton advanced oxidation), and the discharge is up to the standard.
104
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)
Treatment of pollutants (Continued)
6. Zhanjiang Chenming Pulp and Paper Co., Ltd.
Atmospheric pollutant treatment: bag filter dust removal+wet limestone-gypsum desulfurisation+SCR denitration
system. Atmospheric pollutant treatment facilities operate normally. In 2022, the average emissions were lower than
the emission standards, and the total pollutant emissions were lower than the approved total emissions. In 2022,
the total particulate emissions were 11.853 tonnes, which were lower than the standard of 195.06 tonnes/year, the
nitrogen oxides were 1302.598 tonnes, which were lower than the total 1800 tonnes/year, and the sulphur dioxide was
56.409 tonnes, which was lower than the total 620 tonnes/year. The discharge was up to the standard.
Water pollutants are treated by physicochemical+biochemical+Fenton treatment methods, and the 86.000-tonne
treatment process is: catchment well-conditioning-primary settling-cooling tower-aeration tank-secondary settling
tank-Fenton-re-conditioning tank-clarifier. The 30,000-tonne treatment process is: catchment well-primary settling
tower – hydrolysis tank-IC tower – aeration tank-secondary settling tank-Fenton-oxidation callback tank-final settling
tank. The water treatment process has operated normally. In 2022, the average discharge was: COD at 56mg/L, as
compared with the discharge standard at 80mg/L, ammonia nitrogen at 1.71mg/L, as compared with the discharge
standard at 8mg/L and total nitrogen at 2.22mg/L, as compared with the discharge standard at 12mg/L. All the
pollutants were discharged up to the standard.
7. Huanggang Chenming Pulp & Paper Co., Ltd.
The alkali furnace uses polymer denitration outside the furnace+electrostatic dust removal and alkaline melt from
the process able to absorb sulphur dioxide. The discharge is up to the standard. The lime kiln uses limestone to fix
sulphur and five electrostatic precipitators to remove dust. The discharge is up to the standard.
The sewage treatment uses physical settling+aerobic biochemical treatment+Fenton in-depth treatment process. The
discharge is up to the standard.
The lime kiln scrubbing tower which was constructed with an investment of RMB4.2 million came into use on 1
May 2022. It can effectively reduce the emission concentration of sulphur dioxide and hydrogen sulphide to below
10 mg/m3.
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.
2022 ANNUAL REPORT 105
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)
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.
Measures taken to reduce its carbon emissions during the reporting period and their effectiveness
√ Applicable Not applicable
1. The Group strengthened energy management, and compared and analysed the consumption of coal, electricity, on a
daily basis with strict control.
2. The Group implemented the conversion of old and new energy sources, eliminated high energy-consuming
equipment, replaced high-efficiency inverter and energy-saving motors, and reduced energy consumption.
3. According to the zero position of the air cover of the paper machine dryer, the Group reduced the frequency of the fan
appropriately to improve the drying efficiency by raising the zero position and save electricity consumption.
4. For moisture content of screening unit and squeezing unit of paper machine, the Group reduced out of the press
moisture and the amount of steam used of drying unit by adjusting the lip plate flow rate, retention rate and line
pressure and other measures.
5. The Group strengthened daily energy-saving management by developing a system for temperature of air conditioning
and switching on and off of various power supplies, with tracking and inspection.
6. The Group vigorously developed clean energy and energy recycling projects to reduce carbon emissions. The
Shouguang Chenming 33 MW and Zhanjiang Chenming 24 MW photovoltaic power generation projects was
underway.
7. The Group carried out energy saving and emission reduction at different factories, so that the amount of clean water
was under strict control, the amount of water produced by membrane treatment was increased and the amount of
wastewater recycled was increased.
106
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)
Investment in environmental governance and protection and payment of environmental protection tax
The Company has always adhered to the concept of “green development, ecological Chenming”, and clung to the
development model of “clean production” and resource recycling. A green ecology is incorporated in the whole process of
production and operation. The Company has invested more than RMB8 billion in total to construct 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 protection indicators rank high
in China. During the reporting period, the Company paid environmental protection tax according to law. The Company’s
environmental protection tax mainly results from atmospheric pollutants. According to the Environmental Protection
Tax Law of People’s Republic of China and its implementation rules, the pollutants shall be calculated according to the
automatic monitoring data of pollutants if automatic pollutant monitoring equipment which complies with national provisions
and monitoring standards is installed and used. Taxable atmospheric pollutants are determined according to the pollution
equivalent quantity converted from the amount of pollutant discharge. The taxable atmospheric pollutants discharged
from each outlet, or where there is no outlet, are to be ranked in decreasing order of pollution equivalent quantity, and
environmental taxes are to be levied on the top three pollutants. In 2022, the Company paid environmental protection tax
amounting to RMB13.4381 million.
Administrative penalties for environmental problems during the reporting period
Impact on the production
Name of company and operation of the Corrective measures of the
or subsidiary Reasons for penalty Violations Penalty results listed company Company
Jiangxi Chenming Excessive emission of On 12 September 2021, the Nanchang On 7 January 2022, Jiangxi Chenming Control at source ensured
Paper Co., Ltd. polluted water Municipal Ecological Environment the Nanchang had completed that the indicators of each
Bureau conducted an onsite Municipal Ecological rectification, and section reached the required
inspection of Jiangxi Chenming. Environment Bureau paid the fine on range through strict control
After testing, the suspended solids issued the Decision time. There was no on the operation of the water
of the wastewater samples collected on Administrative significant adverse treatment system. Water
from the wastewater discharge Penalty and impact on the listed intake stabilisation avoided
outlet amounted to 59.33 mg/L, imposed a fine of company the impact of excessive water
and the chromaticity amounted to RMB401,000 on volume to affect the indicator
64, which were 0.98 times and 0.28 Jiangxi Chenming. of suspended solids in the
times higher than the standard, effluent. The monitoring
respectively. Therefore, the of drainage indicators was
wastewater discharge exceeded the strengthened. They were
standard. adjusted on time to ensure
that the discharge met the
standards.
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.
2022 ANNUAL REPORT 107
VII Environment and Social Responsibility
II. Social responsibility
In 2022, adhering to the philosophy of “Creating high-quality paper products and sincerely repaying the society”, the
Company paid attention to the creation of social value while pursuing economic benefits, and took the initiative to perform
social responsibility. It was awarded various honorary titles such as “2022 Environmental and Social Responsibility
Enterprise”, “Enterprises with Excellent Contribution in Supporting Education Development” and “2022 Top 500 High-tech
Enterprises for Philanthropy in China”. For details, please refer to the 2022 Environment, Social and Governance Report of
Shandong Chenming Paper Holdings Limited published by the Company on CNINFO on 31 March 2023.
III. Consolidate and expand the achievements of poverty alleviation and rural revitalisation
For a long time, the Company has always taken “revitalising the Chinese papermaking industry” as its own responsibility,
staying true to original aspiration, bravely taking responsibility, giving consideration to both righteousness and benefit, and
attaching importance to virtue. In order to consolidate and expand the poverty alleviation achievements and fully support
rural revitalisation, the Company actively participates in various charitable activities while focusing on the development of
its principal activities. It has participated in the “Daily Donation with Compassion” activity in Shouguang City for more than
ten years in a row, helping the disadvantaged groups out of poverty through charitable relief projects such as “Aid for the
Disabled”, “Special Life Assistance” and “Poverty Alleviation Activities” and the staff mutual aid foundation of the Company.
During the COVID-19 economic environment prevention and control period, the Company actively implemented economic
environment prevention measures, built its own safety barrier, and steadily promoted production resumption in the
production bases. Meanwhile, the Company donated money and materials worth of more than RMB13 million to the
economic environment area to help recover the local economies. During the reporting period, the Board considered and
approved the investment in and construction of the softwood bleaching chemical pulp project with annual production
capacity of 300,000 tonnes and the investment in and construction of the special paper project with annual production
capacity of 180,000 tonnes by Zhanjiang Chenming in Taiping Town, Mazhang District, Zhanjiang City. Upon completion,
the projects will create employment opportunities and promote the economic development of township areas. In the
future, the Company will give full play to its own advantages, continue to actively participate in poverty alleviation activities
while developing and expanding business, help the recipients get rid of poverty and become rich with pragmatic
measures, keep promoting rural revitalisation, and practicing social responsibility with high quality.
108
VIII Material Matters
I. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period
√ Applicable Not applicable
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Undertaking Shandong Chenming Undertaking to 1. I/The Company has provided information and documents related to 21 November Until the Implementing as
made Paper Holdings provide true, the transaction (including but not limited to original written materials, 2022 implementation normal
during asset Limited and accurate and duplicate materials or oral testimony). I/The Company guarantees that of the
restructuring its Directors, complete the copies or photocopies of the documents and materials provided restructuring is
Supervisors and information are the same as the originals, and the signatures and seals of these completed.
Senior Management documents and materials are true, ensures that the relevant information
(Chen Hongguo, and documents provided for the transaction are true, accurate and
Hu Changqing, Li complete, and there are no false records, misleading statements or
Xingchun, Feng Li, Li major omissions, and bears individual and joint legal responsibilities
Weixian, Han Tingde, for the authenticity, accuracy and completeness of the information
Li Chuanxuan, Li provided. 2. The Company/I guarantee that there are no false records,
Zhihui, Sun Jianfei, Yin misleading statements or major omissions in the information disclosure
Meiqun, Yang Biao, and application documents of the transaction. If the information
Li Kang, Qiu Lanju, provided or disclosed in the transaction is suspected to contain false
Sang Ailing, Pan records, misleading statements or major omissions, thus causing
Ailing, Zhang Hong, Li losses to investors, the Company/I will be jointly and severally liable for
Xueqin, Li Zhenzhong, compensation. 3. If the transaction is placed on file for investigation by
Li Mingtang, Ge the judicial authorities or by the CSRC because of the false records,
Guangming, Dong misleading statements or major omissions in the information provided
Lianming, Yuan Xikun or disclosed, the Directors, Supervisors and Senior Management
and Chu Hon Leung) members who hold the shares of the Company will suspend the
transfer of the shares (if any) before the case investigation conclusion
is clear, and submit the written application for transfer suspension and
the stock account to the Board within two trading days after receiving
the notice of filing the investigation. The Board shall apply to the stock
exchange and the depository and clearing corporation for locking up
on their behalf. If the lock-up application is not submitted within two
trading days, the Board is authorised to directly submit the identity
and account information of the Directors, Supervisors and Senior
Management members of the Company to the stock exchange and
the depository and clearing corporation for lock-up after verification.
If the Board fails to submit the identity and account information of
the directors, supervisors and Senior Management members to the
stock exchange and the depository and clearing corporation, the
stock exchange and the depository and clearing corporation shall be
authorised to directly lock up the relevant shares. If the investigation
concludes that there are violations of laws and regulations, the relevant
Directors, Supervisors and Senior Management members promise
to lock up the shares and voluntarily use them for compensation to
relevant investors.
2022 ANNUAL REPORT 109
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Chenming Holdings, Undertaking on 1. This reorganisation is conducive to improving the Company’s 21 November Until the Implementing as
Company Limited, the principle profitability, enhancing the sustainable operation ability, and protecting 2022 implementation normal
Chenming Holdings transaction the interests of investors and minority shareholders. We agree to this of the
(Hong Kong) Limited. opinions and reorganisation in principle. 2. During the period from the first disclosure restructuring is
share changes of the reorganisation plan to its completion, the company will not completed.
during the reduce its shareholding in the Company. This commitment letter is
reorganisation legally binding on the company from the date of signing, and the
period company is willing to bear all the legal responsibility of the economic
losses, claims and extra expenses caused to Chenming Paper for
violating the above commitments.
Chen Hongguo, Hu Undertaking On 12 August 2022, the Company published an announcement on the 21 November Until the Implementing as
Changqing, Li on the preliminary disclosure of disposal of shares by certain Directors and 2022 completion normal
Xingchun, Feng Li, Li shareholding Senior Management members, namely Hu Changqing, Li Feng, Li date of the
Weixian, Han Tingde, reduction Weixian, Li Zhenzhong, Li Mingtang, Dong Lianming and Yuan Xikun. implementation
Li Chuanxuan, Li plan during Due to personal capital needs, the Directors and Senior Management of the
Zhihui, Sun Jianfei, Yin the asset members mentioned above intended to dispose of 3,753,100 shares restructuring
Meiqun, Yang Biao, restructuring by centralised bidding or bulk transaction within 6 months after the plan
Li Kang, Qiu Lanju, date of the announcement of disposal of shares. For details, please
Sang Ailing, Pan refer to the relevant announcement of CNINFO (www.cninfo.com.
Ailing, Zhang Hong, Li cn). Apart from the plan of disposal of shares by certain Directors and
Xueqin, Li Zhenzhong, Senior Management members as disclosed above, I have no other
Li Mingtang, Ge plan to dispose of shares from the date of the first disclosure of the
Guangming, Dong reorganisation plan to its completion. This commitment letter is legally
Lianming, Yuan Xikun binding on me from the date of signing, and I am willing to bear all legal
and Chu Hon Leung responsibilities for all economic losses, claims and extra expenses
caused to Chenming Paper by violating the above commitments.
110
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Chenming Holdings Commitment letter 1. The company, and its all directors, supervisors and senior management 21 November Until the Implementing as
Company Limited, on no insider members, as well as the entities controlled by the above-mentioned 2022 completion normal
Chenming Holdings trading subjects, have not been placed on file for investigation on suspicion of date of the
(Hong Kong) insider trading related to the transaction. In the last 36 months, there implementation
Limited, Shandong is no case that the CSRC had imposed administrative punishment or of the
Chenming Paper the judicial organs had lawfully investigated criminal responsibility for restructuring
Holdings Limited participating in insider trading related to major asset reorganisation, plan
and their directors, and there has been no case that the above personnel are not
supervisors and allowed to participate in the transaction according to Article 13 of the
senior management Guidelines for Supervision of Listed Companies No.7 – Supervision
(Chen Hongguo, of Abnormal Stock Trading Related to Major Asset Restructuring of
Hu Changqing, Li Listed Companies. 2. The company and its directors, supervisors and
Xingchun, Li Feng, Li senior management members guarantee to take necessary measures
Weixian, Han Tingde, to keep the information and materials involved in the transaction strictly
Li Chuanxuan, Li confidential.
Zhihui, Sun Jianfei, Yin
Meiqun, Yang Biao,
Li Kang, Qiu Lanju,
Sang Ailing, Pan
Ailing, Zhang Hong, Li
Xueqin, Li Zhenzhong,
Li Mingtang, Ge
Guangming, Dong
Lianming, Yuan Xikun
and Chu Hon Leung)
2022 ANNUAL REPORT 111
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Dongxing Securities Undertaking to 1. The company has provided the Company and the intermediaries 21 November Until the Implementing as
Investment Co., provide true, serving for the transaction with relevant information and documents 2022 completion normal
Ltd., Chongqing accurate and of the company (including but not limited to original written materials, date of the
International Trust Inc., complete duplicate materials or oral testimony). The company guarantees that implementation
Chenming (Qingdao) information the copies or photocopies of the documents and materials provided of the
Asset Management are consistent with the originals, and the signatures and seals of restructuring
Co., Ltd. these documents and materials are true, ensures that the relevant plan
information and documents provided for the transaction are true,
accurate and complete, and there are no false records, misleading
statements or major omissions, and bears individual and joint legal
responsibilities for the authenticity, accuracy and completeness of
the information provided. 2. During the period of the transaction,
the company will disclose the information about the transaction to
the Company in a timely manner in accordance with relevant laws,
regulations and rules, and the relevant provisions of the CSRC and
Shenzhen Stock Exchange, so as to ensure the authenticity, accuracy
and completeness of such information and guarantee that there are
no false records, misleading statements or major omissions in such
information. If the relevant information provided by the company for
the transaction does not meet the above requirements and causes
losses to the Company and investors, the company will bear individual
and joint liability for compensation. 3. If the information provided or
disclosed for the transaction is suspected of false records, misleading
statements or major omissions, and is put on file for investigation by
the judicial authorities or by the CSRC, the shares of Chenming Paper
will not be transferred before the investigation conclusion is formed,
and the written application for transfer suspension and the securities
account will be submitted to the Board of Chenming Paper within two
trading days after receiving the notice of filing for investigation, and the
Board will apply to the stock exchange and the depository and clearing
corporation for locking up on behalf of the company. If the locking
up application is not submitted within two trading days, the company
authorises the Board to directly submit the identity and account
information of the company to the stock exchange and the depository
and clearing corporation for locking up after verification. If the Board
fails to submit the identity and account information of the company
to the stock exchange and the depository and clearing corporation,
the company authorises the stock exchange and the depository and
clearing corporation to directly lock up the relevant shares. If the
investigation concludes that there is a violation of laws and regulations,
the company promises to lock up the shares and voluntarily use them
for compensation to relevant investors.
112
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Dongxing Securities Undertaking on 1. The company will not transfer the shares acquired from the transaction 21 November Twelve months Implementing as
Investment Co., Ltd. share lock-up within 12 months from the date when the shares acquired in the 2022 from the date normal
transaction are issued. However, if the CSRC requests to adjust the of completion
lock-up period of the subject shares, it shall be adjusted according of share
to relevant requirements. 2. The above-mentioned “shares acquired issuance
in the transaction” include the shares acquired during the lock-up
period due to the distribution of stock dividends and the increase of
capital reserves. 3. After the shares of Chenming Paper acquired in
the transaction are unlocked, the company’s disposal of shares must
comply with the Company Law of the People’s Republic of China,
the Securities Law of the People’s Republic of China, the Rules
Governing Listing of Stocks on Shenzhen Stock Exchange, Shenzhen
Stock Exchange Implementation Rules on the Share Lessening by the
Shareholders, Directors, Supervisors and Senior Management of Listed
Companies, and the Articles of Association of Shandong Chenming
Paper Holdings Limited, and other provisions of laws, regulations, rules
and normative documents.
Chongqing International Chongqing Trust (the “company”), as the trustee of Chongqing Trust 21 November Twelve months Implementing as
Trust Inc. Huiyu No. 6 Collective Fund Trust Plan (“Huiyu No. 6” or the “Plan”), 2022 from the date normal
represents Huiyu No. 6 as the counterparty of the Company in the of completion
transaction, and will hold shares of the Company after the transaction of share
is completed. The company has made the following commitments issuance
on the lock-up period of the shares of the Company acquired in the
transaction (the “subject shares”): 1. The shares of the Company
acquired by the company (representing Huiyu No. 6) in the transaction
will not be transferred within 12 months from the date when the shares
acquired in the transaction are issued, but if the CSRC requests to
adjust the lock-up period of the subject shares, it shall be adjusted
according to relevant requirements. 2. “The shares of the Company
acquired in the transaction” as mentioned above include shares of the
Company acquired during the lock-up period due to the distribution
of stock dividends by the Company and the increase of capital
reserves. 3. The company (representing Huiyu No. 6) shall abide by
the Company Law of the People’s Republic of China, the Securities
Law of the People’s Republic of China, the Rules Governing Listing
of Stocks on Shenzhen Stock Exchange, Shenzhen Stock Exchange
Implementation Rules on the Share Lessening by the Shareholders,
Directors, Supervisors and Senior Management of Listed Companies,
and the Articles of Association of Shandong Chenming Paper Holdings
Limited, and other provisions of laws, regulations, rules and normative
documents.
2022 ANNUAL REPORT 113
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Dongxing Securities Explanation and 1. The company has a clear ownership of the subject assets, which can 21 November Until the Implementing as
Investment Co., Ltd., commitment be legally disposed of, and there are no rights restrictions or defects 2022 completion normal
Chenming (Qingdao) letter of the such as pledge, guarantee, freezing and seizure, nor major legal date of the
Asset Management counterparty disputes such as litigation and arbitration. 2. During the period from the implementation
Co., Ltd. on the valuation benchmark date of the subject assets of the transaction to of the
ownership of the asset delivery date, the company will not set any third-party rights restructuring
the underlying such as mortgage and pledge on the subject assets. 3. The company plan
assets waives the pre-emptive right to buy the shares transferred by other
shareholders of the target company. 4. There are no legal obstacles to
the target asset transfer by the company, nor other relevant investment
agreements or other arrangements that restrict transactions.
Chongqing International Chongqing Trust (the “company”), as the trustee of Chongqing Trust 21 November Until the Implementing as
Trust Inc. Huiyu No. 6 Collective Fund Trust Plan (“Huiyu No. 6” or the “Plan”), 2022 completion normal
represents Huiyu No. 6 as the transaction counterparty of the Company, date of the
and hereby promises as follows: 1. The company (representing Huiyu implementation
No. 6) has a clear ownership of the subject assets and can make legal of this
disposal. There are no rights restrictions or defects such as pledge, restructuring
guarantee, freezing and seizure, nor major legal disputes such as plan
litigation and arbitration. 2. During the period from the asset valuation
benchmark date to the asset delivery date, the company (representing
Huiyu No. 6) will not set any third-party rights such as mortgage and
pledge on the subject assets. 3. The company (representing Huiyu No.
6) waives the pre-emptive right to buy the shares transferred by other
shareholders of the target company. 4. In addition, there are no legal
obstacles to the target asset transfer by the company (representing
Huiyu No. 6), nor other investment agreements or other arrangements
that restrict transactions.
Dongxing Securities Undertaking on 1. The company, its controlling shareholder, all directors, supervisors and 21 November Until the Implementing as
Investment Co., absence of senior management members, and the entities controlled by the above- 2022 completion normal
Ltd., Chongqing insider trading mentioned subjects have not been placed on file for investigation for date of the
International Trust Inc., suspected insider trading related to this transaction. In the last 36 implementation
Chenming (Qingdao) months, there is no case that the CSRC has imposed administrative of this
Asset Management punishment or the judicial organs have lawfully investigated criminal restructuring
Co., Ltd. responsibility for participating in insider trading related to major asset plan
reorganisation, and there is no case that the above personnel are not
allowed to participate in the transaction according to Article 13 of the
Guidelines for Supervision of Listed Companies No.7 – Supervision
of Abnormal Stock Trading Related to Major Asset Restructuring of
Listed Companies. 2. The company, its controlling shareholder and its
all directors, supervisors and senior management members guarantee
to take necessary measures to keep the confidential materials
and information involved in the transaction strictly confidential in
accordance with the requirements of applicable laws and regulations.
114
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Dongxing Securities Commitment 1. The company and its major management personnel did not receive 21 November Until the Implementing as
Investment Co., Ltd., on no illegal any criminal punishment or administrative punishment related to the 2022 completion normal
Chenming (Qingdao) matters in the securities market in the last five years, and there was no major civil date of the
Asset Management past five years litigation or arbitration related to economic disputes; 2. The company implementation
Co., Ltd. and its major management personnel did not fail to repay large debts of the
on schedule or fulfil their commitments, were not taken administrative restructuring
supervision measures by the CSRC, or were not disciplined by stock plan
exchanges; 3. The company had no other major illegal acts that
damaged the investors’ legitimate rights and interests and social public
interests, nor other bad records.
Chongqing International Commitment Chongqing Trust (the “company”), as the trustee of Chongqing Trust 21 November Until the Implementing as
Trust Inc. on no illegal Huiyu No. 6 Collective Fund Trust Plan (“Huiyu No. 6” or the “plan”), 2022 completion normal
matters in the represents Huiyu No. 6 as the counterparty of the transaction, and date of the
past five years makes the following commitments on the plan and the relevant implementation
information of the company: (1) Commitments of the plan: 1. Since of this
its establishment, the plan has not been subject to administrative restructuring
punishment or criminal punishment related to the securities market, plan
and there are no major civil lawsuits or arbitrations related to economic
disputes; 2. There is no failure to repay large debts, fulfil commitments,
take administrative supervision measures by the CSRC or be disciplined
by stock exchanges on the plan; 3. There are no other major illegal acts
that damage the investors’ legitimate rights and interests and social
public interests in the plan, nor other bad records. (2) Commitments of
the company: 1. The company and its major management personnel
did not receive any criminal punishment or administrative punishment
related to the securities market in the last five years, and there were
no major civil lawsuits or arbitrations related to economic disputes
(except for other products managed by the company as litigants);
2. The company and its major management personnel did not fail to
repay large debts on schedule or fulfil their commitments, were not
taken administrative supervision measures by the CSRC, or were not
disciplined by stock exchanges; 3. The company had no other major
illegal acts that damage the investors’ legitimate rights and interests
and social public interests, nor other bad records.
2022 ANNUAL REPORT 115
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Undertaking Chenming Holdings Co., Non-competitive (1) Chenming Holdings Co., Ltd. (“Chenming Holdings”) shall not engage, 22 May 2008 During the Implementing as
made on initial Ltd. undertaking whether solely, jointly, or by representing itself or any other persons period when normal
public offering or companies, and shall not procure its associates (as defined in Chenming
or refinancing The Listing Rules of Hong Kong Stock Exchange) to engage, in any Holdings was
business which competes with the business of the Company and its the major
subsidiaries (“Chenming Group” or “we”) directly or indirectly, in any shareholder of
country and region which our business exists (or any part of the world if the Company
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 abovementioned 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.
116
VIII Material Matters
I. Performance of undertakings (Continued)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Continued)
Party involved in Type of Undertaking Particulars on
Undertaking undertaking undertaking Details of undertaking date Term the performance
Chenming Holdings Co., Defective (1) According to the plan on defective properties of the Company, 16 January During the Implementing as
Ltd. properties Chenming Holdings Co., Ltd. (“Chenming Holdings”) has guaranteed 2008 period when normal
and undertaken that: according to the application of the Company, Chenming
for defective property(ies) owned by the Company and its holding Holdings was
subsidiary company which situated in the administrative area of the major
Shouguang city, Chenming Holdings will purchase it (them) and have shareholder of
it(them) being transferred to itself pursuant to the law in accordance the Company
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.
Whether undertakings performed on time Yes
If the undertakings are not performed within specified N/A
period, details of the specific reasons for the incomplete
performance and the next steps should be provided
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
2022 ANNUAL REPORT 117
VIII Material Matters
II. Appropriation of funds of the Company by the controlling shareholder and other related
parties for non-operating purposes
Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and other related parties for non-
operating purposes during the reporting period.
III. External guarantees against the rules and regulations
Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during the reporting
period.
IV. Opinions of the Directors regarding the latest “modified auditor’s report”
Applicable √ Not applicable
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. Changes in accounting policies, accounting estimates or correction of major accounting
errors as compared to the financial report for the prior year
√ Applicable Not applicable
Changes in accounting policies as a result of application of new accounting standards
Prior to the changes, the Company applied the Accounting Standards for Business Enterprises – Basic Standards and
various specific accounting standards, application guidelines thereof, interpretations and other related rules promulgated by
the Ministry of Finance.
Upon the changes, the Company will apply the Interpretation No. 15 and the Interpretation No. 16 promulgated by the
Ministry of Finance on 31 December 2021 and 13 December 2022, respectively.
On 31 December 2021, the Accounting Standards for Business Enterprises Interpretation No. 15 (Cai Hui [2021] No. 35,
hereinafter referred to as “Interpretation No. 15”) regarding regulations on the Accounting Treatment for the External Sales
of Products or By-Products Produced Prior to Reaching the Intended Use of Fixed Assets or During the R&D Process and
the Determination of Onerous Contracts were promulgated, and were applied by the Company since 1 January 2022.
On 13 December 2022, the Accounting Standards for Business Enterprises Interpretation No. 16 (Cai Hui [2022] No. 31,
hereinafter referred to as “Interpretation No. 16”) regarding the Accounting Treatment for the Income Tax Impacts of
Dividends in Relation to Financial Instruments Classified as Equity Instrument by the Issuer and the Accounting Treatment
for the Reclassification of Cash-Settled Share-Based Payment as Equity-Settle Share-Based Payment by an Enterprise
were promulgated, and were applied by the Company since the date of promulgation.
Other unchanged parts remain to be applicable in accordance with the Accounting Standards for Business Enterprises –
Basic Standards and various specific accounting standards, application guidelines thereof, interpretations and other related
rules promulgated by the Ministry of Finance in prior period.
118
VIII Material Matters
VII. 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 year, 2 subsidiaries were newly established, namely Jiangxi Chenming Tea Co., Ltd. and Shouguang Meichen
Energy Technology Co., Ltd., and 1 subsidiary was deregistered, namely Qingdao Chenming Pulp & Paper Electronic
Commodity Spot Trading Co., Ltd. 2 subsidiaries were acquired not within the definition of business, namely Shanxi Fuyin
Industry and Trade Co., Ltd. and Chongmin Culture Development (Shanghai) Co., Ltd.
VIII. Engagement or dismissal of accounting firms
Current accounting firm engaged
Grant Thornton (Special
Name of the domestic accounting firm General Partnership)
Remuneration of the domestic accounting firm (RMB’0,000) 330
Continued term of service of the domestic accounting firm 4
Name of certified public accountants of the domestic accounting firm Liu Jian and Jiang Lei
Continued term of service of certified public accountants of the domestic accounting firm 3
Whether to appoint another accounting firm during the period
Yes √ No
Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
√ Applicable Not applicable
During the year, the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal control
of the Company for 2022. The Company paid RMB800,000 as internal control audit fees during the reporting period. The
Company engaged Guotai Junan Securities Co., Ltd. as its domestic financial advisor due to the change of listing venue
of the domestic listed foreign shares and their listing and trading on the Main Board of The Stock Exchange of Hong Kong
Limited by conversion, and did not pay for the financial advisor fees during the reporting period. The Company engaged
Guotai Junan Capital Limited as its overseas financial advisor, and paid HK$1,000,000 as financial advisor fees during the
reporting period. The Company engaged Huaying Securities Co., Ltd. as its financial advisor in respect of the issuance of
shares and payment of cash consideration for acquisition of assets, and did not pay for the financial advisor fees during the
reporting period.
IX. Prospects of withdrawal from listing subsequent to the publication of the annual report
Applicable √ Not applicable
X. Matters related to bankruptcy and reorganisation
Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
2022 ANNUAL REPORT 119
VIII Material Matters
XI. Material litigation and arbitration
√ Applicable Not applicable
General information Whether
on the litigation provisions are Enforcement of Date of
(arbitration) Amount involved made Progress Trial results and impact judgment disclosure Disclosure index
Summary of matters not RMB930.7005 million No Apart from one litigation case For litigation (arbitration) with judgment In the progress Not applicable Not applicable
subject to disclosure with subject amount of made, the court ordered relevant of execution
as material litigation RMB25.3 million was still defendant and guarantor to settle
(arbitration) in which at the first instance stage, outstanding loans to the Company,
Chenming Leasing is judgments were made in line with the request of the
the plaintiff for most of the litigations Company and would not have any
(arbitrations), and entered significant impact on the operation
the execution stage. and financial condition of the
Company.
Summary of matters not RMB72.5720 million No Litigations (arbitrations) Conclusions have not yet made. It Not yet Not applicable Not applicable
subject to disclosure were being proceeded is expected that there would not entered the
as material litigation pursuant to the litigation be any significant impact on the execution
(arbitration) in which procedures. Some of the operation and financial condition of stage
the Company and litigations (arbitrations) the Company.
other subsidiaries of have commenced court
the Company are the session and pending for
plaintiff judgment, while some of
them were under trial.
120
VIII Material Matters
XI. Material litigation and arbitration (Continued)
General information Whether
on the litigation provisions are Enforcement of Date of
(arbitration) Amount involved made Progress Trial results and impact judgment disclosure Disclosure index
Summary of matters not RMB104.9522 million No Litigations (arbitrations) Conclusions have not yet made. It Not yet Not applicable Not applicable
subject to disclosure were being proceeded is expected that there would not entered the
as material litigation pursuant to the litigation be any significant impact on the execution
(arbitration) in which procedures. Some of the operation and financial condition of stage
the Company and litigations (arbitrations) the Company.
other subsidiaries of have commenced court
the Company are the session and pending
defendants for judgment. First
instance judgments were
made for some of the
litigations (arbitrations)
and appeal was made
by counterparty or the
Company. Some of the
litigations (arbitrations)
were under trial.
XII. Punishment and rectification
√ Applicable Not applicable
Disclosure Disclosure
Name Type Reason Type of investigation punishment Conclusion (if any) date index
Jiangxi Chenming Subsidiary Excessive emission General administrative penalties On 12 September 2021, the Nanchang Municipal Ecological Environment Bureau N/A N/A
Paper Co., Ltd. of polluted water conducted an on-site inspection of Jiangxi Chenming. After testing, the
suspended solids of the wastewater samples collected from the wastewater
discharge outlet amounted to 59.33 mg/L, and the chromaticity amounted
to 64, which were 0.98 times and 0.28 times higher than the standard,
respectively. Therefore, the wastewater discharge exceeded the standard.
On 7 January 2022, the Nanchang Municipal Ecological Environment
Bureau issued the Decision on Administrative Penalty and imposed a fine of
RMB401,000 on Jiangxi Chenming. As at the disclosure date of the Report,
Jiangxi Chenming had completed rectification, and paid the fine on time.
Rectification
√ Applicable Not applicable
(1) Control at source ensured that the indicators of each section reached the required range through strict control on the
operation of the water treatment system. (2) Water intake stabilisation avoided the impact of excessive water volume
to affect the indicator of suspended solids in the effluent. (3) The monitoring of drainage indicators was strengthened.
They were adjusted on time to ensure that the discharge met the standards.
2022 ANNUAL REPORT 121
VIII Material Matters
XIII. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable √ Not applicable
XIV. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Amount of Percentage Amount of Whether
Relationship Types of the Subject matter of Pricing basis of Related party related party as the amount transactions exceeding Settlement of Market price of
with the related party the related party the related party transaction transactions of similar approved approved related party available similar Disclosure
Related party Company transactions transactions transaction price (RMB’0,000) transactions (RMB’0,000) cap transactions transaction date Disclosure index
Weifang Sime Darby West Port Joint venture Labour service Port miscellaneous Market price Market price 6,332.89 5.90% 10,000.00 No Bank acceptance Not applicable 31 March 2022 http://
Co., Ltd. fees and telegraphic www.cninfo.com.cn
transfer
Total 6,332.89 10,000.00
Particulars on refund of bulk sale Nil
Estimated total amount for day-to-day related party transactions to be conducted during the period (by types of Nil
transactions) and their actual implementing during the reporting period (if any)
Reasons for large differences between transaction price and market reference price (if applicable) N/A
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable √ Not applicable
There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
during the reporting period.
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
Was there any non-operating related creditors’ rights and debts transaction
√ Yes No
Creditor’s rights receivable from any related party
122
VIII Material Matters
XIV. Significant related party transactions (Continued)
4. Related creditors’ rights and debts transactions (Continued)
Amount Amount
increased recovered
Was there any during the during the Interest for
Relationship non-operating Opening current current the current Closing
with the capital balance period period Interest period balance
Related party Company Reason occupation (RMB’0,000) (RMB’0,000) (RMB’0,000) rate (RMB’0,000) (RMB’0,000)
Shouguang Meite A joint venture Financial support No 1,729.92 – – 6.00% 99.20 1,829.12
Environmental
Technology Co., Ltd.
Weifang Sime Darby West A joint venture Financial support No 8,066.79 – 1,296.61 6.00% 397.75 7,167.93
Port Co., Ltd.
Effect of related creditors’ The above creditors’ rights did not
rights on the operating affect the ordinary operation
results and financial of the Company. Moreover,
position of the they catered to the needs
Company for development of existing
businesses of Shouguang Meite
Environmental and Weifang
Sime Darby West Port and
lowered the financing costs.
Debts payable to any related party
Amount
increased Amount repaid
Opening during the during the Interest for the Closing
Relationship with balance current period current period Interest current period balance
Related party the Company Reason (RMB’0,000) (RMB’0,000) (RMB’0,000) rate (RMB’0,000) (RMB’0,000)
Chenming Holdings Company The controlling Financial – 23,500.00 23,500.00 7.00% 47.25 –
Limited shareholder support
Guangdong Nanyue Bank Co., An associate Borrowing 220,100.00 190,910.00 220,100.00 Market 4,825.54 190,910.00
Ltd. interest rate
Effect of related debts on the operating results and financial position Financial support was provided by Chenming Holdings without requiring any pledge or
of the Company guarantee, which was a testament to its support and confidence in the future development of
the Company, and helped the Company promote project construction and satisfy its needs
for working capital.
2022 ANNUAL REPORT 123
VIII Material Matters
XIV. Significant related party transactions (Continued)
5. Deals with related financial companies
Applicable √ Not applicable
There were no deposits, loans, credits, or other financial services between the Company, its related financial
companies and the related parties.
6. Deals between financial companies controlled by the company and related parties
Applicable √ Not applicable
There were no deposits, loans, credits, or other financial services between the financial companies controlled by the
Company and the related parties.
7. Other significant related party transactions
√ Applicable Not applicable
There was no other significant related party transaction of the Company during the reporting period.
XV. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable √ Not 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.
124
VIII Material Matters
XV. Material contracts and implementation (Continued)
1. Custody, contracting and leasing (Continued)
(3) Leasing
√ Applicable Not applicable
Leasing description:
As a lessee
The Company has simplified the treatment of short-term leases and leases of low-value assets by not recognising
right-of-use assets and lease liabilities. The charges to expense for short-term leases, low-value assets and variable
lease payments not included in the measurement of lease liabilities during the current period are as follows:
Unit: RMB
Item 2022
Low-value leases 7,345,715.07
Total 7,345,715.07
As a lessor
Where an operating lease is formed:
According to paragraph 58 of the new lease standard, the lessor shall disclose in the notes the following information
related to operating leases:
Lease income, and make separate disclosure of income related to variable lease payments not included in lease
receipts;
Unit: RMB
Item 2022
Lease income 190,694,151.90
2022 ANNUAL REPORT 125
VIII Material Matters
XV. Material contracts and implementation (Continued)
1. Custody, contracting and leasing (Continued)
As a lessor (Continued)
The amount of undiscounted lease receipts to be received in each of the five consecutive fiscal years after the
balance sheet date and the total amount of undiscounted lease receipts to be received in the remaining years.
Unit: RMB
Year 2022.12.31
Within 1 year after the balance sheet date 199,136,847.34
1 to 2 years after the balance sheet date 192,606,625.78
2 to 3 years after the balance sheet date 166,116,775.62
3 to 4 years after the balance sheet date 142,350,767.99
4 to 5 years after the balance sheet date 132,326,292.11
More than 5 years after the balance sheet date 131,251,761.59
Total 963,789,070.43
Items that bring profit or loss of more than 10% of the total profit of the Company during the reporting period
Applicable √ Not applicable
The Company did not have any leasing project that brought profit or loss to the Company amounting to more
than 10% of the total profit of the Company during the reporting period.
126
VIII Material Matters
XV. Material contracts and implementation (Continued)
2. Significant guarantees
√ Applicable Not applicable
(1) Guarantees
During the reporting period, the Company provided guarantee to subsidiaries and the guarantee amount
incurred was RMB10,005.0265 million. As at 31 December 2022, 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 RMB11,974.3434 million, representing 62.74% of the equity
attributable to shareholders of the Company as at the end of 2022.
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 Counter- Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Collateral guarantee Term or not or not
Weifang Sime Darby West 24 July 2017 17,500.00 20 December 2017 11,480.00 General guarantee Credit guarantee No 10 years No No
Port Co., Ltd.
Zhanjiang Runbao Trading 30 March 2022 16,000.00 25 April 2022 16,000.00 Pledge 34.64% equity Remaining equity transfer 2 years No No
Co., Ltd. interest in Wuhan payment of RMB160
Chenming million
Zhanjiang Dingjin Trading 7 December 2022 13,558.19 7 December 2022 13,558.19 Pledge Properties Remaining equity transfer 3 years No No
Co., Ltd. payment of RMB136
million
Shanghai Shuilan Trading 7 December 2022 45,700.00 7 December 2022 45,700.00 Pledge 100% equity interest 80% equity interest in 3 years No No
Co., Ltd. in Shanghai Taixing Port held by
Chongmin Shanghai Huahao
Total external guarantees approved during the 75,258.19 Total actual external guarantees during the reporting period (A2) 75,258.19
reporting period (A1)
Total external guarantees approved at the end of 92,758.19 Balance of total actual guarantees at the end of the reporting period (A4) 86,738.19
the reporting period (A3)
2022 ANNUAL REPORT 127
VIII Material Matters
XV. Material contracts and implementation (Continued)
2. Significant guarantees (Continued)
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee Counter- Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Collateral guarantee Term or not or not
Zhanjiang Chenming Pulp & 30 March 2019 142,404.00 16 October 2020 142,404.00 General guarantee No No 5 years No No
Paper Co., Ltd.
Zhanjiang Chenming Pulp & 30 March 2022 1,050,000.00 12 May 2022 273,881.95 General guarantee No No 1 year No No
Paper Co., Ltd.
Shouguang Meilun Paper 27 March 2020 4,900.00 30 April 2022 4,900.00 General guarantee No No 5 years No No
Co., Ltd.
Shouguang Meilun Paper 30 March 2022 500,000.00 6 July 2022 121,883.76 General guarantee No No 1 year No No
Co., Ltd.
Jiangxi Chenming Paper 30 March 2019 50,245.00 19 January 2022 50,245.00 General guarantee No No 5 years No No
Co., Ltd.
Jiangxi Chenming Paper 30 March 2022 400,000.00 19 May 2022 124,289.38 General guarantee No No 1 year No No
Co., Ltd.
Huanggang Chenming Pulp 25 March 2021 2,000.00 22 April 2022 2,000.00 General guarantee No No 7 years No No
& Paper Co., Ltd.
Huanggang Chenming Pulp 30 March 2022 350,000.00 19 May 2022 68,500.00 General guarantee No No 1 year No No
& Paper Co., Ltd.
Huanggang Chenming 30 March 2022 500,000.00 General guarantee No No 1 year No No
Paper Technology Co.,
Ltd.
Huanggang Chenming Pulp 30 March 2022 30,000.00 General guarantee No No 1 year No No
& Fiber Trading Co., Ltd.
Jilin Chenming Paper Co., 30 March 2022 30,000.00 23 May 2022 11,658.00 General guarantee No No 1 year No No
Ltd.
Wuhan Chenming Hanyang 30 March 2022 50,000.00 General guarantee No No 1 year No No
Paper Holdings Co., Ltd.
Shouguang Chenming Art 30 March 2022 20,000.00 General guarantee No No 1 year No No
Paper Co., Ltd.
Shandong Chenming Group 30 March 2022 30,000.00 General guarantee No No 1 year No No
Finance Co., Ltd.
Kunshan Tuoan Plastic 30 March 2022 10,000.00 General guarantee No No 1 year No No
Products Co., Ltd.
Zhanjiang Chenming 30 March 2022 30,000.00 General guarantee No No 1 year No No
Arboriculture
Development Co., Ltd.
Shouguang Hongyi 30 March 2022 5,000.00 General guarantee No No 1 year No No
Decorative Packaging
Co., Ltd.
Chenming (Singapore) Co., 30 March 2022 40,000.00 General guarantee No No 1 year No No
Ltd.
Chenming (HK) Limited 30 March 2022 200,000.00 26 September 2022 17,411.50 General guarantee No No 1 year No No
Jiangxi Chenming Tea Co., 30 March 2022 10,000.00 General guarantee No No 1 year No No
Ltd.
128
VIII Material Matters
XV. Material contracts and implementation (Continued)
2. Significant guarantees (Continued)
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee Counter- Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Collateral guarantee Term or not or not
Shandong Chenming Pulp & 30 March 2019 45,996.80 7 April 2022 45,996.80 General guarantee No No 5 years No No
Paper Sales Co., Ltd.
Shandong Chenming Pulp & 30 March 2022 350,000.00 28 July 2022 158,632.26 General guarantee No No 1 year No No
Paper Sales Co., Ltd.
Shanghai Chenming Pulp & 30 March 2022 150,000.00 31 May 2022 13,500.00 General guarantee No No 1 year No No
Paper Sales Co., Ltd.
Shouguang Chenming 30 March 2019 10,000.00 14 January 2022 10,000.00 General guarantee No No 5 years No No
Import and Export Trade
Co., Ltd.
Shouguang Chenming 30 March 2022 50,000.00 General guarantee No No 1 year No No
Import and Export Trade
Co., Ltd.
Hainan Chenming 30 March 2022 100,000.00 16 May 2022 8,000.00 General guarantee No No 1 year No No
Technology Co., Ltd.
Chenming (Overseas) Co., 30 March 2022 40,000.00 General guarantee No No 1 year No No
Ltd.
Shanghai Hongtai Property 30 March 2022 10,000.00 General guarantee No No 1 year No No
Management Co., Ltd.
Nanchang Chenming 30 March 2022 10,000.00 General guarantee No No 1 year No No
Arboriculture
Development Co., Ltd.
Shouguang Chenming 30 March 2022 5,000.00 General guarantee No No 1 year No No
Papermaking Machine
Co., Ltd.
Shouguang Hongxiang 30 March 2022 5,000.00 General guarantee No No 1 year No No
Printing and Packaging
Co., Ltd.
Shouguang Chenming 30 March 2022 5,000.00 General guarantee No No 1 year No No
Modern Logistic Co.,
Ltd.
Shandong Grand View Hotel 30 March 2022 5,000.00 General guarantee No No 1 year No No
Co., Ltd.
Total amount of guarantee provided for subsidiaries 3,985,000.00 Total amount of guarantee provided for subsidiaries during the reporting period (B2) 1,000,502.65
approved during the reporting period (B1)
Total amount of guarantee provided for subsidiaries 4,240,545.80 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4) 1,053,302.65
approved as at the end of the reporting period (B3)
2022 ANNUAL REPORT 129
VIII Material Matters
XV. Material contracts and implementation (Continued)
2. Significant guarantees (Continued)
Guarantees between subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee Counter- Fulfilled parties
Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Collateral guarantee Term or not or not
Chenming (HK) Limited 30 March 2019 6,393.50 17 March 2020 6,393.50 General guarantee No No 5 years No No
Shouguang Meilun Paper Co., Ltd 4 December 2020 30,400.00 4 December 2020 30,400.00 Pledge Properties No 3 years No No
Wuhan Chenming Hanyang Paper 4 December 2020 600.00 4 December 2020 600.00 Pledge Properties No 3 years No No
Holdings Co., Ltd.
Huanggang Chenming Pulp & 4 December 2020 20,000.00 4 December 2020 20,000.00 Pledge Properties No 3 years No No
Paper Co., Ltd.
Total amount of guarantee provided for subsidiaries 0.00 Total amount of guarantee provided for subsidiaries during the reporting period (C2) 0.00
approved during the reporting period (C1)
Total amount of guarantee provided for subsidiaries 57,393.50 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4) 57,393.50
approved as at the end of the reporting period (C3)
Total amount of guarantee provided (i.e. sum of the above
three guarantee amount)
Total amount of guarantee approved during the reporting 4,060,258.19 Total amount of guarantee during the reporting period (A2+B2+C2) 1,075,760.84
period (A1+B1+C1)
Total amount of guarantee approved as at the end of the 4,390,697.49 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 1,197,434.34
reporting period (A3+B3+C3)
The percentage of total amount of guarantee provided (i.e. 62.74%
A4+B4+C4) to the net assets of the Company
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D) 0.00
Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 293,309.06
Total amount of guarantee provided in excess of 50% of net assets (F) 243,206.07
Sum of the above three amount of guarantee (D+E+F) 536,515.13
For the unexpired guarantee contract, the guarantee liability has occurred during the reporting period or there is evidence showing that it is possible to bear joint liability for repayment No
(if any)
Providing external guarantees in violation of prescribed procedures (if any) No
130
VIII Material Matters
XV. Material contracts and implementation (Continued)
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.
4. Other material contracts
Applicable √ Not applicable
The Company did not have any other material contracts during the reporting period.
2022 ANNUAL REPORT 131
VIII Material Matters
XVI. Other matters of significance
√ Applicable Not applicable
1. Issuance of shares and asset purchase through cash payments
On 21 November 2022, the Company held the fourth extraordinary meeting of the tenth session of the Board and
the second extraordinary meeting of the tenth session of the Supervisory Committee, and considered and approved
relevant resolutions including the Resolution on Asset Purchase through Issuance of Shares and Cash Payment.
The Company intended to acquire 1.19% equity interests in Shouguang Meilun (corresponding capital contribution
of RMB57,210,526 to Shouguang Meilun) held by Dongxing Investment and 44.44% limited partnership share in
Chenrong Fund held by Chongqing Trust through issuance of shares. Shandong Chenming Investment Co., Ltd., a
wholly-owned subsidiary of the Company, intended to acquire 0.22% general partnership share in Chenrong held by
Chenming (Qingdao) Asset Management Co., Ltd. (“Chenming Asset Management”) through cash payment. The type
of shares issued by the Company for asset purchase was domestic-listed RMB ordinary shares (A shares), with issue
price of RMB4.42 per share. As of the end of the reporting period, the audit and evaluation on subject asset under the
transaction have not yet completed.
For details, please refer to the relevant announcements (announcement no.: 2022-084 and 2022-085) of the Company
published on CNINFO on 22 November 2022.
132
VIII Material Matters
XVI. Other matters of significance (Continued)
2. Information disclosure index for 2022
Announcement no. Subject matter Date of publication Publication website and index
2022-001 Announcement on the Continued Pledge of Shares held by 15 January 2022 http://www.cninfo.com.cn
Shareholders
2022-002 Announcement on the Recognition of the Company and its 11 February 2022 http://www.cninfo.com.cn
Subsidiaries as High and New Technology Enterprises
2022-003 Announcement on the Development of Equipment Financing 24 February 2022 http://www.cninfo.com.cn
Business by a Subsidiary
2022-004 The First Indicative Announcement on Adjustment of Coupon 25 February 2022 http://www.cninfo.com.cn
Rate of “18 Chenming Bond 01” and Implementation
Measures for Resale by Investors
2022-005 The Second Indicative Announcement on Adjustment of 1 March 2022 http://www.cninfo.com.cn
Coupon Rate of “18 Chenming Bond 01” and Implementation
Measures for Resale by Investors
2022-006 The Third Indicative Announcement on Adjustment of Coupon 3 March 2022 http://www.cninfo.com.cn
Rate of “18 Chenming Bond 01” and Implementation
Measures for Resale by Investors
2022-007 Announcement on Pledge of Shares and Partial Release of 12 March 2022 http://www.cninfo.com.cn
Pledge of Shares by Shareholders
2022-008 Announcement on the Development of Equipment Financing 14 March 2022 http://www.cninfo.com.cn
Business by a Subsidiary
2022-009 Announcement on the 2021 Annual Online Performance Briefing 28 March 2022 http://www.cninfo.com.cn
2022-010 Announcement on the Development of Equipment Financing 29 March 2022 http://www.cninfo.com.cn
Business by a Subsidiary
2022-011 Announcement on Resolutions of the Twelfth Meeting of the 31 March 2022 http://www.cninfo.com.cn
Ninth Session of the Board of Directors
2022-012 Announcement on Resolutions of the Twelfth Meeting of the 31 March 2022 http://www.cninfo.com.cn
Ninth Session of the Supervisory Committee
2022-013 Notice of 2021 Annual General Meeting 31 March 2022 http://www.cninfo.com.cn
2022-014 2021 Annual Report Summary 31 March 2022 http://www.cninfo.com.cn
2022-015 Special Statement on Securities Investment in 2021 31 March 2022 http://www.cninfo.com.cn
2022-016 Announcement on Appointment of Auditor for 2022 31 March 2022 http://www.cninfo.com.cn
2022-017 Announcement on the Expected Continuing Related Party 31 March 2022 http://www.cninfo.com.cn
Transaction in 2022
2022-018 Announcement on the Development of Equipment Financing 31 March 2022 http://www.cninfo.com.cn
Business
2022 ANNUAL REPORT 133
VIII Material Matters
XVI. Other matters of significance (Continued)
2. Information disclosure index for 2022 (Continued)
Announcement no. Subject matter Date of publication Publication website and index
2022-019 Announcement on Carrying out Factoring Business of Accounts 31 March 2022 http://www.cninfo.com.cn
Receivable
2022-020 Announcement on Expected Provision of Guarantees to 31 March 2022 http://www.cninfo.com.cn
Subsidiaries for 2022
2022-021 Special Statement on the Proposed Non-Distribution of Profit 31 March 2022 http://www.cninfo.com.cn
for 2021
2022-022 Announcement on the Amendments to the Company’s Relevant 31 March 2022 http://www.cninfo.com.cn
Systems
2022-023 Announcement on the Provision of External Guarantees 31 March 2022 http://www.cninfo.com.cn
2022-024 Announcement on Loan Transfer and Related Party Transaction 31 March 2022 http://www.cninfo.com.cn
2022-025 Announcement on Results of Resale by Bondholders of “18 31 March 2022 http://www.cninfo.com.cn
Chenming Bond 01”
2022-026 Shandong Chenming Paper Holdings Limited Announcement on 31 March 2022 http://www.cninfo.com.cn
Payment of 2022 Interest with Respect to the First Tranche of
Corporate Bonds Publicly Issued to Qualified Investors in 2018
2022-027 Announcement on Receipt of Government Subsidies by 1 April 2022 http://www.cninfo.com.cn
Subsidiaries
2022-028 Announcement on the Proposed Resale of “18 Chenming Bond 7 April 2022 http://www.cninfo.com.cn
01” Sale-back Bonds
2022-029 Announcement on Pledge of Shares and Partial Release of 21 April 2022 http://www.cninfo.com.cn
Pledge of Shares by Shareholders
2022-030 2022 First Quarterly Report 30 April 2022 http://www.cninfo.com.cn
2022-031 Announcement on the Results of Resale of “18 Chenming Bond 10 May 2022 http://www.cninfo.com.cn
01” Bonds
2022-032 Announcement on Resolutions of 2021 Annual General Meeting 12 May 2022 http://www.cninfo.com.cn
2022-033 Announcement on Resolutions of the Twenty-fourth 24 May 2022 http://www.cninfo.com.cn
Extraordinary Meeting of the Ninth Session of the Board of
Directors
2022-034 Announcement on Resolutions of the Seventh Extraordinary 24 May 2022 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Supervisory Committee
2022-035 Declaration by Nominator of Independent Director (Li Zhihui) 24 May 2022 http://www.cninfo.com.cn
2022-036 Declaration by Nominator of Independent Director (Sun Jianfei) 24 May 2022 http://www.cninfo.com.cn
2022-037 Declaration by Nominator of Independent Director (Yang Biao) 24 May 2022 http://www.cninfo.com.cn
2022-038 Declaration by Nominator of Independent Director (Yin Meiqun) 24 May 2022 http://www.cninfo.com.cn
134
VIII Material Matters
XVI. Other matters of significance (Continued)
2. Information disclosure index for 2022 (Continued)
Announcement no. Subject matter Date of publication Publication website and index
2022-039 Declaration by Candidate for Independent Director (Li Zhihui) 24 May 2022 http://www.cninfo.com.cn
2022-040 Declaration by Candidate for Independent Director (Sun Jianfei) 24 May 2022 http://www.cninfo.com.cn
2022-041 Declaration by Candidate for Independent Director (Yang Biao) 24 May 2022 http://www.cninfo.com.cn
2022-042 Declaration by Candidate for Independent Director (Yin Meiqun) 24 May 2022 http://www.cninfo.com.cn
2022-043 Announcement on the Purchase of Liability Insurance for 24 May 2022 http://www.cninfo.com.cn
Directors, Supervisors and Senior Management
2022-044 Notice of the First Extraordinary General Meeting of 2022 24 May 2022 http://www.cninfo.com.cn
2022-045 Announcement on Credit Rating Adjustment 30 May 2022 http://www.cninfo.com.cn
2022-046 Announcement on Resolutions of the Twenty-fifth Extraordinary 31 May 2022 http://www.cninfo.com.cn
Meeting of the Ninth Session of the Board of Directors
2022-047 Notice on Cancellation of Certain Resolutions of 2022 First 31 May 2022 http://www.cninfo.com.cn
Extraordinary General Meeting and Supplementary Notice of
the General Meeting
2022-048 Announcement on Receipt of Government Subsidies by 1 June 2022 http://www.cninfo.com.cn
Subsidiaries
2022-049 Announcement on Resolutions of the First Extraordinary General 16 June 2022 http://www.cninfo.com.cn
Meeting of 2022
2022-050 Announcement on the Election of Employee Representative 16 June 2022 http://www.cninfo.com.cn
Supervisors
2022-051 Announcement on Resolutions of the First Meeting of the Tenth 16 June 2022 http://www.cninfo.com.cn
Session of the Board of Directors
2022-052 Announcement on Resolutions of the First Meeting of the Tenth 16 June 2022 http://www.cninfo.com.cn
Session of the Supervisory Committee
2022-053 Announcement on the Progress of Litigation 21 June 2022 http://www.cninfo.com.cn
2022-054 Announcement on the Continued Pledge of Shares held by 28 June 2022 http://www.cninfo.com.cn
Shareholders
2022-055 Announcement on Resolutions of the First Extraordinary Meeting 28 June 2022 http://www.cninfo.com.cn
of the Tenth Session of the Board
2022-056 Announcement on Capital Increase and Introduction of Strategic 28 June 2022 http://www.cninfo.com.cn
Investors of a Majority-owned Subsidiary
2022-057 Announcement on Pledge of Shares and Partial Release of 13 July 2022 http://www.cninfo.com.cn
Pledge of Shares by Shareholders
2022-058 2022 Interim Results Forecast 16 July 2022 http://www.cninfo.com.cn
2022-059 Announcement on Resolutions of the Second Extraordinary 19 July 2022 http://www.cninfo.com.cn
Meeting of the Tenth Session of the Board of Directors
2022-060 Announcement on Resolutions of the First Extraordinary Meeting 19 July 2022 http://www.cninfo.com.cn
of the Tenth Session of the Supervisory Committee
2022-061 Review Opinions on Relevant Matters Proposed at the First 19 July 2022 http://www.cninfo.com.cn
Extraordinary Meeting of the Tenth Session of the Supervisory
Committee
2022 ANNUAL REPORT 135
VIII Material Matters
XVI. Other matters of significance (Continued)
2. Information disclosure index for 2022 (Continued)
Announcement no. Subject matter Date of publication Publication website and index
2022-062 Announcement on Fulfilment of the Unlocking Conditions for 19 July 2022 http://www.cninfo.com.cn
the First Unlocking Period under the 2020 Restricted A Share
Incentive Scheme
2022-063 Announcement on Adjustment to the Repurchase Price of the 19 July 2022 http://www.cninfo.com.cn
2020 Restricted A Share Incentive Scheme and Repurchase
and Cancellation of Certain Restricted Shares
2022-064 Announcement on Repurchase and Cancellation of Certain 19 July 2022 http://www.cninfo.com.cn
Restricted Shares and Notice to Creditors
2022-065 Indicative Announcement on Release of Restricted Shares for 25 July 2022 http://www.cninfo.com.cn
the First Unlocking Period under the 2020 Restricted A Share
Incentive Scheme for Listing and Trading
2022-066 Announcement on Continued Pledge of Shares held by 26 July 2022 http://www.cninfo.com.cn
Shareholders and Partial Release of Pledge of Shares by
Shareholders
2022-067 Announcement on Resolution of the Third Extraordinary Meeting 29 July 2022 http://www.cninfo.com.cn
of the Tenth Session of the Board of Directors
2022-068 Announcement on Capital Increase and Introduction of Strategic 29 July 2022 http://www.cninfo.com.cn
Investors of a Majority-owned Subsidiary
2022-069 Announcement on Pledge of Shareholders’ Shares 29 July 2022 http://www.cninfo.com.cn
2022-070 Announcement on Continued Pledge of Shares held by 6 August 2022 http://www.cninfo.com.cn
Shareholders
2022-071 Announcement on the Preliminary Disclosure of Disposal of 13 August 2022 http://www.cninfo.com.cn
Shares by Certain Directors and Senior Management of the
Company
2022-072 2022 Interim Report Summary 31 August 2022 http://www.cninfo.com.cn
2022-073 Announcement in respect of Provision of Guarantee in Favour of 13 October 2022 http://www.cninfo.com.cn
a Subsidiary for Technological Transformation Project
2022-074 Announcement on Completion of Repurchase and Cancellation 21 October 2022 http://www.cninfo.com.cn
of Certain Restricted Shares
2022-075 Announcement on the Release of Pledge of Shares held by 27 October 2022 http://www.cninfo.com.cn
Shareholders
2022-076 Announcement on Resolutions of the Third Meeting of the Tenth 31 October 2022 http://www.cninfo.com.cn
Session of the Board of Directors
2022-077 Announcement on Resolutions of the Third Meeting of the Tenth 31 October 2022 http://www.cninfo.com.cn
Session of the Supervisory Committee
2022-078 2022 Third Quarterly Report 31 October 2022 http://www.cninfo.com.cn
2022-079 Announcement on Investment in Coniferous Wood Bleached 31 October 2022 http://www.cninfo.com.cn
Chemical Pulp Project with Annual Production Capacity of
300,000 Tonnes
136
VIII Material Matters
XVI. Other matters of significance (Continued)
2. Information disclosure index for 2022 (Continued)
Announcement no. Subject matter Date of publication Publication website and index
2022-080 Announcement on Investment in Construction of Special Paper 31 October 2022 http://www.cninfo.com.cn
Project with Annual Production Capacity of 180,000 Tonnes
by Zhanjiang Chenming
2022-081 Announcement on Continued Pledge of Shares held by 5 November 2022 http://www.cninfo.com.cn
Shareholders
2022-082 Announcement on Expiry of Approval Regarding Change of 12 November 2022 http://www.cninfo.com.cn
Listing Venue of the Domestic Listed Foreign Shares and Their
Listing and Trading on the Main Board of the Stock Exchange
of Hong Kong Limited by Conversion
2022-083 Announcement on Participation in the 2022 Annual Online Group 12 November 2022 http://www.cninfo.com.cn
Reception Day for Investors of Listed Companies in Shandong
Jurisdiction
2022-084 Announcement on Resolutions of the Fourth Extraordinary 22 November 2022 http://www.cninfo.com.cn
Meeting of the Tenth Session of the Board of Directors
2022-085 Announcement on Resolutions of the Second Extraordinary 22 November 2022 http://www.cninfo.com.cn
Meeting of the Tenth Session of the Supervisory Committee
2022-086 Indicative Announcement on General Risks Regarding Asset 22 November 2022 http://www.cninfo.com.cn
Purchase Through Issuance of Shares and Cash Payments
2022-087 Announcement on Not Convening General Meeting for 22 November 2022 http://www.cninfo.com.cn
Consideration of Matters Regarding Asset Purchase Through
Issuance of Shares and Cash Payments at the Moment
2022-088 Opinions of Supervisory Committee on Asset Purchase Through 22 November 2022 http://www.cninfo.com.cn
Issuance of Shares and Cash Payments
2022-089 Announcement on Involvement in the Establishment of Limited 22 November 2022 http://www.cninfo.com.cn
Partnership Company by a Subsidiary
2022-090 Announcement on Pledge of Shares and Continued Pledge of 25 November 2022 http://www.cninfo.com.cn
Shares held by Shareholders
2022-091 Announcement on the Implementation Progress of the Share 7 December 2022 http://www.cninfo.com.cn
Disposal Plan by Certain Directors and Senior Management of
the Company
2022-092 Announcement on Resolutions of the Fifth Extraordinary Meeting 8 December 2022 http://www.cninfo.com.cn
of the Tenth Session of the Board of Directors
2022-093 Announcement of Repayment of Debts by Pledge of Equity and 8 December 2022 http://www.cninfo.com.cn
Provision of External Guarantees
2022-094 Announcement on Provision of External Guarantees 8 December 2022 http://www.cninfo.com.cn
2022-095 Notice of 2022 Second Extraordinary General Meeting 8 December 2022 http://www.cninfo.com.cn
2022-096 Poll Results of the 2022 Second Extraordinary General Meeting 24 December 2022 http://www.cninfo.com.cn
2022 ANNUAL REPORT 137
VIII Material Matters
XVII. Matters of significant of subsidiaries of the Company
√ Applicable Not applicable
1. Introduction of strategic investors by Zhanjiang Chenming
On 27 June 2022, the first extraordinary meeting of the tenth session of the Board of the Company considered and
approved the Proposal on Capital Contribution and Introduction of Strategic Investors of a Majority-owned Subsidiary.
Given the recognition of Zhanjiang Chenming for its bright development prospect, Xiamen International Trade Industry
Development Equity Investment Fund Partnership (Limited Partnership) made capital contribution to Zhanjiang
Chenming in the amount of RMB400 million, of which RMB266,351,374 was included in the registered capital and the
remaining RMB133,648,626 was included in the capital reserve.
On 28 July 2022, the third extraordinary meeting of the tenth session of the Board of the Company considered and
approved the Proposal on the Capital Contribution for Share Increase and Introduction of Strategic Investors for a
Controlling Subsidiary. BOCOM Financial Assets Investment Co., Ltd. (“BOCOM Investment”) and Jiaohui Chenming
Zhuli (Suzhou) Emerging Industry Development Fund Partnership (Limited Partnership) (“Jiaohui Chenming Fund”)
contributed capital to Zhanjiang Chenming, with a total capital contribution of RMB1,000 million. BOCOM Investment
and Jiaohui Chenming Fund contributed RMB500 million and RMB500 million, respectively.
For details, please refer to the relevant announcements (announcement no.: 2022-055, 2022-056 and 2022-068) of
the Company published on CNINFO on 28 June and 29 July 2022.
2. Business status of Chenming Leasing
At present, the Company focuses on the development of its principal activities, i.e. pulp production and paper making,
and continues to reduce the size of the financial leasing business. As at the end of the reporting period, the balance
of financial leases of Chenming Leasing decreased to RMB5.79 billion. Some financial lease receivables of Chenming
Leasing were overdue due to factors such as the resurgent economic environment and the weak domestic economic
environment with the overdue principals amounting to RMB1,791 million, for which provisions of RMB663 million
were made, and a provision coverage rate of 37.02%. Certain assets have been seized through litigation. The
Company has resorted to, among other things, control of the underlying assets, litigation for seizure, recovery
for guarantors and debt reconstruction with the overall risks under control.
3. Construction and put into production of Shouguang Meilun household paper project
In order to optimise resources allocation, accelerate growth driver replacement and facilitate industry upgrade and
transformation, the Company relocated the household paper production line of Wuhan Chenming to Shouguang
Meilun. In September 2022, the household paper relocation project of Shouguang Meilun commenced trial operation.
In December 2022, the project was officially put into production. Total investment of the project amounted to RMB460
million. The full set of equipment and control system of production was sourced from Valmet in Finland. The whole
product line adopted most advanced equipment and system in the world, including double headbox, sharper, shoe
press, Yankee dryer, high-temperature air cover, as well as the complete set of automatic DCS system, QCS system,
electric transmission system and MES system, thus realising full automatic control. The width of paper-making
machine is 5,600mm, with operation speed up to 2,000m/min. The project uses 100% virgin wood pulp as raw
material. Products will undergo 450 high-temperature sterilisation, and can be used for the production for different
types of high-end paper products such as toilet paper roll, pocket tissue, facial tissue, napkin and paper towels, with
annual production capacity up to 49,000 tonnes.
138
IX 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
Shares
converted
Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage
I. Restricted shares 84,733,521 2.84% -23,243,684 -23,243,684 61,489,837 2.06%
1. Shares held by other domestic
investors 84,733,521 2.84% -23,243,684 -23,243,684 61,489,837 2.06%
Including: Shares held by
domestic natural persons 84,733,521 2.84% -23,243,684 -23,243,684 61,489,837 2.06%
II. Non-restricted shares 2,899,474,679 97.16% 18,777,684 18,777,684 2,918,252,363 97.94%
1. RMB ordinary shares 1,664,784,163 55.79% 18,777,684 18,777,684 1,683,561,847 56.50%
2. Domestic listed foreign shares 706,385,266 23.67% 706,385,266 23.71%
3. Overseas listed foreign shares 528,305,250 17.70% 528,305,250 17.73%
III. Total number of shares 2,984,208,200 100.00% -4,466,000 -4,466,000 2,979,742,200 100.00%
The reasons for such changes
√ Applicable Not applicable
During the reporting period, 29,948,000 RMB ordinary shares were released under the first unlocking period of the
2020 Restricted A Share Incentive Scheme. In particular, 11,170,316 RMB ordinary shares were subject to 75%
automatic lock-up for unlocking restricted shares held by Directors and Senior Management of the Company under
Equity Incentive Scheme. The number of non-restricted shares increased by 18,777,684 in aggregate, while the
number of restricted shares decreased by 18,777,684 in aggregate. During the reporting period, 4,466,000 restricted
A shares held by participants but yet to be released were repurchased and cancelled as the unlocking conditions
were not met. The number of restricted shares had decreased by 4,466,000 shares.
2022 ANNUAL REPORT 139
IX Changes in Share Capital and Shareholders
I. Changes in shares (Continued)
1. Changes in shares (Continued)
Approval of changes in shareholding
√ Applicable Not applicable
On 18 July 2022, the second extraordinary meeting of the tenth session of the Board and the first extraordinary
meeting of the tenth session of the Supervisory Committee considered and approved the Resolution on the Fulfilment
of the Unlocking Conditions of the Restricted Shares Granted under the 2020 Restricted A Share Incentive Scheme
during the First Unlocking Period and the Resolution on the Adjustment to the Repurchase Price of the 2020
Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares. Independent
Directors of the Company express their independent consent opinions.
There were 96 participants who fulfilled the unlocking conditions under the first unlocking period of the 2020
Restricted A Share Incentive Scheme, with 29,948,000 shares eligible for unlocking. There were 15 participants who
did not fulfilled the unlocking conditions as he/she had resigned, changed duty and removed from office. The number
of restricted shares held by participants but yet to be released amounted to 4,466,000 in aggregate, representing
5.61% of total number of shares granted under the 2020 Restricted A Share Incentive Scheme.
Transfer of shares arising from changes in shareholding
Applicable √ Not 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
140
IX Changes in Share Capital and Shareholders
I. Changes in shares (Continued)
2. Changes in restricted shares
√ Applicable Not applicable
Unit: share
Restricted Restricted Restricted
shares at the shares released shares increased Restricted
beginning of during the during the shares at the
Name of shareholders period period period end of period Reason for restriction Date of release from restriction
Chen Hongguo 23,310,033 0 0 23,310,033 Restricted shares of the participants of In accordance with the equity incentive
the Share Incentive Scheme plan (draft) and relevant requirements
Locked-up shares of Directors, for shares held by Directors,
Supervisors and Senior Management Supervisors and Senior Management
Hu Changqing 5,032,143 0 1,250,000 3,782,143 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Li Xingchun 5,000,000 0 1,250,000 3,750,000 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Li Feng 3,679,520 0 750,000 2,929,520 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Li Weixian 2,003,600 0 442,700 1,560,900 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Li Kang 111,975 0 0 111,975 Locked-up shares of Directors, In accordance with relevant
Supervisors and Senior Management requirements for shares held by
Directors, Supervisors and Senior
Management
Li Xueqin 3,000,000 0 104,009 2,895,991 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Li Zhenzhong 2,084,750 0 500,000 1,584,750 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Li Mingtang 1,000,000 0 250,000 750,000 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
2022 ANNUAL REPORT 141
IX Changes in Share Capital and Shareholders
I. Changes in shares (Continued)
2. Changes in restricted shares
Restricted Restricted Restricted
shares at the shares released shares increased Restricted
beginning of during the during the shares at the
Name of shareholders period period period end of period Reason for restriction Date of release from restriction
Dong Lianming 1,000,000 0 250,000 750,000 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Yuan Xikun 333,525 0 75,000 258,525 Restricted shares of the participants of 26 July 2022
the Share Incentive Scheme
Locked-up shares of Directors,
Supervisors and Senior Management
Chen Gang 1,104,775 0 504,775 600,000 Restricted shares of the participants of 400,000 restricted shares under the
the Share Incentive Scheme Equity Incentive Scheme were
Locked-up shares of Directors, released on 26 July 2022;
Supervisors and Senior Management 104,775 locked-up shares of Directors,
Supervisors and Senior Management
were released on 14 December 2022.
Geng Guanglin 2,716,950 0 2,716,950 0 Restricted shares of the participants of 2,000,000 restricted shares under
the Equity Incentive Scheme the Equity Incentive Scheme were
Locked-up shares of Directors, released on 18 October 2022;
Supervisors and Senior Management 716,950 locked-up shares of Directors,
Supervisors and Senior Management
were released on 9 December 2022.
Li Dong 56,250 0 56,250 0 Locked-up shares of Directors, 9 December 2022
Supervisors and Senior Management
Other 99 participants 34,300,000 0 15,094,000 19,206,000 Restricted shares of the participants of 12,628,000 restricted shares under
under the 2020 the Equity Incentive Scheme the Equity Incentive Scheme were
Restricted A Share released on 26 July 2022.
Incentive Scheme 2,466,000 restricted shares under the
Equity Incentive Scheme completed
registration for repurchase and
cancellation on 18 October 2022.
Total 84,733,521 0 23,243,684 61,489,837
142
IX Changes in Share Capital and Shareholders
II. Issuance and listing of securities
1. Issuance of securities (excluding preference shares) during the reporting period
Applicable √ Not applicable
2. Changes in the total number of shares and structure of shareholders and the structure of the assets
and liabilities of the Company
√ Applicable Not applicable
On 18 July 2022, the second extraordinary meeting of the tenth session of the Board and the first extraordinary
meeting of the tenth session of the Supervisory Committee considered and approved the Resolution on the
Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and Repurchase and
Cancellation of Certain Restricted Shares. On 18 October 2022, the Company completed the registration of the
repurchase and cancellation of certain restricted shares granted to 15 participants but yet to be released under the
2020 Restricted A Share Incentive Scheme, with a total of 4,466,000 A shares repurchased and cancelled. The total
number of shares of the Company changed from 2,984,208,200 to 2,979,742,200. The controlling shareholder of the
Company remained unchanged. Upon the repurchase and cancellation of 4,466,000 A shares by the Company, there
was no change in net assets, while assets and liabilities decreased by RMB12.7281 million simultaneously.
3. Existing staff shares
Applicable √ Not applicable
2022 ANNUAL REPORT 143
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of ordinary 156,799, of which Total number of 156,371, of which Total number of 0 Total number of 0
shareholders as at the 134,311 were holders ordinary shareholders 133,998 were holders holders of preference holders of preference
end of the reporting of A shares, 22,159 as at the end of the of A shares, 22,044 shares with restored shares with restored
period were holders of B month prior to the were holders of B voting right as at the voting right as at the
shares and 329 were publication date of shares and 329 were end of the reporting end of the month prior
holders of H shares this annual report holders of H shares period to the 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
Number of (increase or
shares held decrease) Number of
Percentage at the end of during the Number of non-restricted
Nature of of the reporting reporting restricted shares
Name of shareholders shareholders shareholding period period shares held held Share pledged or locked-up
Status of
shares Number
CHENMING HOLDINGS COMPANY LIMITED State-owned 15.35% 457,322,919 0 0 457,322,919 Pledged 251,440,000
legal person
HKSCC NOMINEES LIMITED Overseas legal 12.53% 373,388,625 -117,750 0 373,388,625
person
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal 12.22% 364,131,563 0 0 364,131,563
person
Hong Zejun Domestic natural 2.57% 76,700,000 76,700,000 0 76,700,000
person
Chen Hongguo Domestic natural 1.04% 31,080,044 0 23,310,033 7,770,011
person
SHANDONG SUN HOLDINGS GROUP CO., LTD. Domestic non- 0.84% 24,987,117 8,599,300 0 24,987,117
state-owned
legal person
HONG KONG SECURITIES CLEARING COMPANY Overseas legal 0.59% 17,712,081 3,651,110 0 17,712,081
LIMITED person
VANGUARD TOTAL INTERNATIONAL STOCK Overseas legal 0.50% 14,771,945 0 0 14,771,945
INDEX FUND person
VANGUARD EMERGING MARKETS STOCK0 Overseas legal 0.49% 14,688,346 674,700 0 14,688,346
INDEX FUND person
GUOTAI JUNAN SECURITIES (HONG KONG) LIMITED Overseas legal 0.28% 8,434,361 -2,078,802 0 8,434,361
person
Strategic investors or general legal persons who Nil
become the top ten shareholders due to the
placement of new shares
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,
the above shareholders Chenming Holdings Company Limited, which is a state-owned legal person; A shareholder, Chen Hongguo, is the legal representative,
chairman and general manager of Chenming Holdings Company Limited. Save for the above, it is not aware that any other shareholders of
tradable shares are persons acting in concert. It is also not aware that any other shareholders of tradable shares are related to each other.
Explanation of the aforementioned shareholders’ Nil
entrusted/entrusted voting rights and waiver of
voting rights
Special explanation for designated repurchase Nil
accounts among the top ten shareholders
144
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Continued)
1. Total number of shareholders and shareholdings (Continued)
Shareholdings of the top ten non-restricted shareholders
Number of non-
restricted shares
held as at the end
of the reporting
Name of shareholder period Class of shares
Class of shares Number
CHENMING HOLDINGS COMPANY LIMITED 457,322,919 RMB ordinary shares 457,322,919
HKSCC NOMINEES LIMITED 373,388,625 Overseas listed 373,388,625
foreign shares
CHENMING HOLDINGS (HONG KONG) LIMITED 364,131,563 Domestic listed 210,717,563
foreign shares
Overseas listed 153,414,000
foreign shares
Hong Zejun 76,700,000 RMB ordinary shares 76,700,000
SHANDONG SUN HOLDINGS GROUP CO., LTD. 24,987,117 RMB ordinary shares 24,987,117
HONG KONG SECURITIES CLEARING COMPANY 17,712,081 RMB ordinary shares 17,712,081
LIMITED
VANGUARD TOTAL INTERNATIONAL STOCK 14,771,945 Domestic listed 14,771,945
INDEX FUND foreign shares
VANGUARD EMERGING MARKETS STOCK 14,688,346 Domestic listed 14,688,346
INDEX FUND foreign shares
GUOTAI JUNAN SECURITIES (HONG KONG) 8,434,361 Domestic listed 8,434,361
LIMITED foreign shares
Jin Xing 8,370,205 Domestic listed 8,370,205
foreign shares
Related party relationship or acting in concert A shareholder, Chenming Holdings (Hong Kong) Limited, which
among the top ten shareholders of non-restricted is an overseas legal person, is a wholly-owned subsidiary of a
shares, and between the top ten shareholders shareholder, Chenming Holdings Company Limited, which is a
of non-restricted shares and the top ten state-owned legal person. Save for the above, it is not aware that
shareholders any other shareholders of tradable shares are persons acting
in concert. It is also not aware that any other shareholders of
tradable shares are related to each other.
Securities margin trading of top ten ordinary Chenming Holdings Company Limited held 457,322,919 RMB
Shareholders ordinary shares, of which 326,322,919 shares were held through
ordinary account and 131,000,000 shares were held through
credit guarantee security account;
Hong Zejun held 76,700,000 RMB ordinary shares, of which no
share was held through ordinary account and 76,700,000 shares
were held through credit guarantee security account;
Shandong Sun Holdings Group Co., Ltd. held 24,987,117 RMB
ordinary shares, of which no share was held through ordinary
account and 24,987,117 shares were held through credit
guarantee security account.
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10
ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company
Yes √ No
The top 10 ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company did not enter into
any agreed repurchase transaction during the reporting period.
2022 ANNUAL REPORT 145
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Continued)
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Legal representative/Person
Name of controlling shareholders in charge of the unit Date of establishment Enterprise code Principal business
CHENMING HOLDINGS COMPANY LIMITED Chen Hongguo 30 December 2005 91370783783485189Q Investment in paper making, electricity, heat
and arboriculture by its own capital.
Shareholdings of controlling shareholders who have control or hold shares in other Save for the Company, Chenming Holdings Company Limited does not have control over or hold any equity
domestic or overseas listed companies during the reporting period interest of other domestic or overseas listed companies.
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.
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/
Name of beneficial Person in charge Date of
controller of the unit establishment Enterprise code Principal business
State-owned Assets N/A Responsible for the
1 August 1991 N/A
Supervision and management and capital
Administration Bureau of operation of the state-
Shouguang City 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 is also the beneficial controller of Shandong Molong Petroleum
or holds shares in other Machinery Co. Ltd.
domestic or overseas
listed companies during
the reporting period
146
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Continued)
3. Beneficial controller of the Company and persons acting in concert (Continued)
Change of beneficial controller during the reporting period
Applicable √ Not 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 Shouguang City
100%
Shandong Shouguang Jinxin Investment
Development Holdings Group Co., Ltd.
45.21%
Chenming Holdings Company Limited
100%
Chenming Holdings 15.35%
(Hong Kong) Limited
12.22%
Shandong Chenming Paper Holdings Limited
Beneficial controller controlling the Company through trust or other asset management method
Applicable √ Not applicable
4. The number of shares pledged by the controlling shareholder or the largest shareholder of the
Company and persons acting in concert with it reaches 80% of the number of shares held by them in
aggregate
Applicable √ Not applicable
2022 ANNUAL REPORT 147
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Continued)
5. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable √ Not applicable
6. Restrictions on decrease in shareholding by controlling shareholders, beneficial controller,
reorganising party and other undertaking parties
Applicable √ Not applicable
IV. The implementation of share repurchase during the reporting period
Progress of share repurchase
Applicable √ Not applicable
Progress of decrease in the holding of repurchased shares by way of bidding
Applicable √ Not applicable
148
X Preference Shares
Applicable √ Not applicable
The Company had no preference shares during the reporting period.
2022 ANNUAL REPORT 149
XI Bonds
√ Applicable Not applicable
I. Enterprise bonds
Applicable √ Not applicable
The Company had no enterprise bonds during the reporting period.
II. Corporate Bonds
√ Applicable Not applicable
1. Basic information on Corporate Bonds
Unit: RMB
Outstanding
Bond amount of the Interest Payment Trading
Name of bond abbreviation Bond code Issue date Value date Maturity date bonds rate method venue
The public issuance of the Corporate Bonds of 18 Chenming 112641 29 March 2 April 2018 2 April 2023 350,000,000.00 6.50% Interest is Shenzhen
Shandong Chenming Paper Holdings Limited to Bond 01 2018 paid annually. Stock
qualified investors in 2018 (phase I) The principal Exchange
amount and
interest for the
last tranche will
be paid on the
maturity date.
Investor eligibility arrangement (if any) Online subscription: Public investors with A share security account opened under China Securities
Depository and Clearing Co., Ltd.
Offline subscription: Institutional investors with A share security account opened under China Securities
Depository and Clearing Co., Ltd.
Applicable trading mechanism Dual listing and trading on the centralised bidding system and the Integrated Negotiated Trading Platform of
the Shenzhen Stock Exchange
Whether there are delisting risks (if any) and countermeasures No
Overdue and outstanding bonds
Applicable √ Not applicable
150
XI Bonds
II. Corporate Bonds (Continued)
2. Triggering and execution of issuer’s or investor’s option clause or investor protection clause
√ Applicable Not applicable
“18 Chenming Bond 01” is attached with options for the issuer to adjust the coupon rate and for investors to resell.
The issuer of “18 Chenming Bond 01” has the right to determine the adjustment to the coupon rate for the following
3 years at the end of the second year and the adjustment to the coupon rate for the following year as the end of the
fourth year. If the issuer does not exercise the option to adjust the coupon rate, the coupon rate for the subsequent
term will remain unchanged. After issuing the announcement on whether 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 reselling during the
period as announced to resell all or part of the relevant tranche of bonds held to the issuer at par value.
The Company chose to lower the coupon rate of “18 Chenming Bond 01” to 6.50% at the end of the fourth year as
agreed in the Prospectus on the Public Issuance of the Corporate Bonds of Shandong Chenming Paper Holdings
Limited to Qualified Investors in 2018 (phase I). Bondholders of “18 Chenming Bond 01” could declare resale in whole
or in part for “18 Chenming Bond 01” bonds they held on 28 February, 1 March, 2 March, 3 March and 4 March 2022
at a resale price of RMB100 per bond (interests exclusive). According to the data provided by the Shenzhen Branch
of China Securities Depository and Clearing Corporation Limited, the amount of the “18 Chenming Bond 01” for this
resale was 1,955,000.00, and the total amount of the resale was RMB195,500,000.00 (interests exclusive) with a
remaining custodial amount of 1,545,000.00.
From 8 April 2022 to 30 April 2022, the Company handled the resale of bonds to be resold in accordance with relevant
regulations. The number of resale bonds completed was 1,955,000.00 at an average resale price of RMB100 per
bond. Upon the completion of the resale, there were no bonds that had not been resold, and the remaining custodial
amount of “18 Chenming Bond 01” was 3,500,000.00.
For details, please refer to the relevant announcements (announcement no.: 2022-004, 2022-005, 2022-006, 2022-
025, 2022-028 and 2022-031) of the Company published on CNINFO on 25 February, 1 March, 3 March, 31 March, 7
April and 10 May 2022.
2022 ANNUAL REPORT 151
XI Bonds
II. Corporate Bonds (Continued)
3. Particulars of intermediary organisations
Name of the Name of Contact person of
intermediary Signing the intermediary
Bond Name organisation Business address accountant organisation Contact no.
The public issuance of GF Securities 37th Floor, Taikang N/A Jiang Chuan 021-38003800-
the Corporate Bonds of Co., Ltd. Insurance Building, 3705
Shandong Chenming No. 429 Nanquan
Paper Holdings Limited North Road, Pudong
to qualified investors in New Area, Shanghai
2018 (phase I)
China Chengxin Building 6, Yinhe N/A Sun Shu 010-66428877
Securities Soho, No. 2
Rating Co., Nanzhugan Hutong,
Ltd. Chaoyangmennei
Street, Dongcheng
District, Beijing
Beijing 19th Floor, Jintai N/A Yao Zhengwang 010-64402232
Zhonglun Building, No. 1
W&D Law Xibahe South Road,
Firm Chaoyang District,
Beijing
Ruihua China Corporate Square, Wang Wang Zongpei 010-88091190
CPAs (Special 35 Finance Street, Zongpei
General Xicheng District, and Zhao
Partnership) Beijing Yanmei
Change of the above intermediary organisations during the reporting period
Yes √ No
152
XI Bonds
II. Corporate Bonds (Continued)
4. Use of proceeds
Unit: RMB
Is the use
of proceeds
consistent
with the use
of proceeds
guaranteed
under the
Rectification prospectus,
of irregularities proposed use
Operation of special in the use of of proceeds
Total amount Utilised Unutilised account for the proceeds proceeds and other
Bond Name of proceeds amount amount (if any) (if any) agreement?
The public issuance of the Corporate 900,000,000.00 900,000,000.00 0.00 Special account for proceeds Nil Yes
Bonds of Shandong Chenming Paper is used for the deposit of
Holdings Limited to qualified investors special capital from bonds
in 2018 (phase I)
Proceeds to be used for construction projects
Applicable √ Not applicable
Change in the use of proceeds from the above bonds during the reporting period
Applicable √ Not applicable
5. Adjustment of credit rating results during the reporting period
√ Applicable Not applicable
On 26 May 2022, China Chengxin International Credit Rating Co., Ltd. (“China Chengxin International”) issued the
Follow-up Rating Report (2022) with Respect to the Public Issuance of the Corporate Bonds of Shandong Chenming
Paper Holdings Limited to Qualified Investors in 2018 (phase I) (Xin Ping Wei Han Zi [2022] Gen Zong No. 0343). China
Chengxin International adjusted the issuer credit rating of the Company at AA+, the credit rating of “18 Chenming
Bond 01” at AA+, and the negative rating outlook, to: the issuer credit rating of the Company at AA+ and the credit
rating of “18 Chenming Bond 01” at AA+ unchanged, and the issuer and debt credit ratings included in the credit
rating watch list.
For further details, please refer to the Follow-up Rating Report (2022) with Respect to the Public Issuance of the
Corporate Bonds of Shandong Chenming Paper Holdings Limited to Qualified Investors in 2018 (phase I) disclosed on
CNINFO on 26 May 2022.
2022 ANNUAL REPORT 153
XI Bonds
II. Corporate Bonds (Continued)
6. Implementation of and changes in guarantee, debt repayment plan and other repayment guarantee
measures during the reporting period and their impacts on the rights and interests of bond investors
√ Applicable Not applicable
“18 Chenming Bond 01” bonds are unsecured bonds. During the reporting period, the Company was able to strictly
implement the debt repayment plan, and paid the interest on time and in full according to the time stipulated in the
prospectus. Its debt repayment plan and other debt repayment guarantee measures remained changed, and were
consistent with the relevant commitments in the prospectus.
III. Non-financial corporate debt financing instruments
√ Applicable Not applicable
1. Basic information of non-financial corporate debt financing instruments
Unit: RMB
Outstanding
Bond Maturity amount of the Interest
Bond Name abbreviation Bond code Issue date Value date date bonds rate Payment method Trading venue
2017 first tranche of 17 Lu Chenming 101779001 11 July 2017 12 July 2017 N/A 1,000,000,000.00 8.97% Perpetual mid-term Inter-bank bond market
medium-term notes of MTN001 notes. Interest is
Shandong Chenming paid annually and the
Paper Holdings principal is repaid
Limited upon maturity.
Investor eligibility arrangement (if any) Nil
Applicable trading mechanism Inter-bank bond market trading mechanism
Whether there are delisting risks (if any) and countermeasures N/A
Overdue and outstanding bonds
Applicable √ Not applicable
2. Triggering and execution of issuer’s or investor’s option clause or investor protection clause
Applicable √ Not applicable
154
XI Bonds
III. Non-financial corporate debt financing instruments (Continued)
3. Particulars of intermediary organisations
Name of the Contact person of
intermediary Name of signing the intermediary
Bond Name organisation Business address accountant organisation Contact no.
2017 first tranche of medium-term notes of Shandong China Galaxy Securities 11/F, Tower C, Corporate Square 35 N/A Dong Desen 010-66568876
Chenming Paper Holdings Limited Co., Ltd. Finance Street, Xicheng District, Beijing
Hengfeng Bank Co., Ltd. No. 248 South Street, Zhifu District, Yantai, N/A Wang Wanjun 010-83571412
Shandong Province
China Chengxin Building 6, Yinhe Soho, No. 2 Nanzhugan N/A Sun Shu 010-66428877
Securities Rating Hutong, Chaoyangmennei Street,
Co., Ltd. Dongcheng District, Beijing
Beijing Zhonglun W&D 19th Floor, Jintai Building, No. 1 Xibahe N/A Yao Zhengwang 010-64402232
Law Firm South Road, Chaoyang District, Beijing
Ruihua China CPAs Corporate Square, 35 Finance Street, Wang Zongpei and Wang Zongpei 010-88091190
(Special General Xicheng District, Beijing Zhao Yanmei
Partnership)
Change of the above intermediary organisations during the reporting period
Yes √ No
2022 ANNUAL REPORT 155
XI Bonds
III. Non-financial corporate debt financing instruments (Continued)
4. Use of proceeds
Unit: RMB
Is the use
of proceeds
consistent
with the use
of proceeds
guaranteed
Rectification under the
of prospectus,
irregularities proposed use
Operation of special in the use of of proceeds
Total amount of Unutilised account for the proceeds and other
Bond Name proceeds Utilised amount amount proceeds (if any) agreement?
2017 first tranche 1,000,000,000.00 1,000,000,000.00 0.00 Special account for No Yes
of medium-term proceeds is used
notes of Shandong for the deposit
Chenming Paper of special capital
Holdings Limited from bonds
Proceeds to be used for construction projects
Applicable √ Not applicable
Change in the use of proceeds from the above bonds during the reporting period
Applicable √ Not applicable
5. Adjustment of credit rating results during the reporting period
√ Applicable Not applicable
On 26 May 2022, China Chengxin International issued the Follow-up Rating Report of Shandong Chenming Paper
Holdings Limited 2022 (Xin Ping Wei Han Zi [2022] Gen Zong No. 0345). China Chengxin International adjusted
the issuer credit rating of the Company at AA+, the credit ratings of “17 Lu Chenming MTN001”, “18 Lu Chenming
MTN002”, “19 Lu Chenming MTN001” and “19 Lu Chenming MTN002” at AA+, and the negative rating outlook, to:
the issuer credit rating of the Company at AA+ and the credit ratings of “17 Lu Chenming MTN001”, “18 Lu Chenming
MTN002”, “19 Lu Chenming MTN001” and “19 Lu Chenming MTN002” at AA+ unchanged, and the issuer and debt
credit ratings included in the credit rating watch list.
For further details, please refer to the Follow-up Rating Report of Shandong Chenming Paper Holdings Limited 2022
disclosed on Chinamoney on 26 May 2022.
156
XI Bonds
III. Non-financial corporate debt financing instruments (Continued)
6. Implementation of and changes in guarantee, debt repayment plan and other repayment guarantee
measures during the reporting period and their impacts on the rights and interests of bond investors
√ Applicable Not applicable
“17 Lu Chenming MTN001”, is not guaranteed. During the reporting period, the Company was able to strictly
implement the debt repayment plans, and paid the interest on time and in full according to the time stipulated in the
prospectuses. Their debt repayment plans and other debt repayment guarantee measures remained changed, which
were consistent with the relevant commitments in the prospectuses.
IV. Convertible bonds
Applicable √ Not applicable
The Company had no convertible bonds during the reporting period.
V. The loss in the scope of the consolidated financial statements during the reporting period
exceeding 10% of the net assets as at the end of the prior year
Applicable √ Not applicable
VI. Overdue interest-bearing debts other than bonds at the end of the reporting period
Applicable √ Not applicable
VII. Breaches of the regulations during the reporting period
Yes √ No
2022 ANNUAL REPORT 157
XI Bonds
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
Increase/decrease as at
As at the end the end of the reporting
of the reporting As at the end of period as compared to
Item period the prior year the end of the prior year
Current ratio 63.04% 65.05% -2.01%
Gearing ratio 71.85% 72.76% -0.91%
Quick ratio 49.90% 54.59% -4.69%
Increase/decrease of
the reporting period
The corresponding as compared to
The reporting period of the prior corresponding period of
period year the prior year
Net profit after extraordinary gains or losses -36,145.94 174,387.65 -120.73%
Proportion of EBITDA to total debts 8.61% 13.43% -4.82%
Interest coverage ratio 1.09% 2.12 -48.58%
Cash interest coverage ratio 2.74% 4.45 -38.43%
EBITDA interest coverage ratio 2.30% 3.32 -30.72%
Loans payment ratio 100.00% 100.00% 0.00%
Interest payment ratio 100.00% 100.00% 0.00%
Note: EBITDA=Total profit+interest expenses-interest income+depreciation of fixed assets+amortisation of investment property+amortisation of
intangible assets+amortisation of long-term prepaid expenses
158
XII Financial Report
I. Auditors’ Report
Type of auditor’s opinion Standard and unqualified opinions
The date of the audit report signed 30 March 2023
Name of the auditor Grant Thornton (Special General Partnership)
Reference number of the auditor’s report Zhi Tong Shen Zi (2023) No. 371A006018
Name of certified public accountants Liu Jian and Jiang Lei
Text of the auditor’s report
To all shareholders of Shandong Chenming Paper Holdings Limited:
I. Auditor’s opinion
We have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter “Chenming
Paper”), which comprise the consolidated and the Company’s balance sheets as at 31 December 2022, the
consolidated and the Company’s profit and loss statements, the consolidated and the Company’s cash flow
statements and the consolidated and the Company’s statements of changes in shareholders’ equity for 2022 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 the Company’s
financial position of Chenming Paper as at 31 December 2022 and of its consolidated and the Company’s operating
results and cash flows for 2022.
II. Basis of opinions
We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute 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 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.
2022 ANNUAL REPORT 159
XII Financial Report
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) Impairment provision test for inventories of machine-made paper
For detailed disclosures of relevant information, please see note V. 12 and note VII. 7 of the financial statements.
1. Details
The inventory balance of Chenming Paper as at the end of 2022 was RMB6,856,750,700, of which
the balance of raw materials, work in progress and goods in stock related to machine-made paper
business was RMB4,221,963,900, with a provision for impairment of inventories of RMB34,834,500 and
a carrying value of RMB4,187,129,400. As at the balance sheet date, inventories of machine-made paper
are measured at the lower of cost or net realisable value by the management of Chenming Paper (the
“management”), and provision for impairment of inventories is made on the basis of the excess of the cost
of an individual inventory over its net realisable value. The management determines the estimated selling
price based on historical selling prices, contracted selling prices, etc., taking into account the purpose
for which the inventories are held, and the net realisable value of inventories is determined by deducting
the estimated costs to be incurred to completion, estimated selling expenses and related taxes from the
estimated selling price.
We have identified impairment provision test for inventories of machine-made paper as a key audit matter
due to the significant amount of inventories of machine-made paper and the significant management
judgement involved in determining the net realisable value of inventories.
2. Application for auditing
We have carried out the following audit procedures for the impairment provision test for inventories of
machine-made paper:
(1) we identified and evaluated and tested the effectiveness of the design and operation of key internal
controls related to impairment provision for inventories of machine-made paper;
(2) we identified and evaluated whether the accounting policies and accounting estimates of Chenming
Paper for impairment provision for inventories of machine-made paper comply with the Accounting
Standards for Business Enterprises and industry practices;;
(3) we supervised inventory taking and monitored the status of inventories of machine-made paper,
and checked the identification of obsolete and aged inventories;
(4) we obtained an inventory ageing schedule of machine-made paper and performed a review of the
status and turnover of aged inventories; and
(5) we obtained a copy of the inventory impairment table of machine-made paper, assessed the
reasonableness of the significant estimates made by management in determining the net realisable
value by reviewing subsequent selling prices, and performed recalculations.
160
XII Financial Report
(II) Recognition of revenue from machine-made paper
For detailed disclosures of relevant information, please see note V. 29 and note VII. 47 of the financial
statements.
1. Details
For the year 2022, Chenming Paper achieved operating revenue of RMB32,004,367,300, of which
RMB29,442,135,200 was from machine-made paper and pulp, accounting for 91.99% of the operating
revenue. For domestic machine-made paper sales business, Chenming Paper recognised the revenue
after the goods were delivered and signed by the customer for confirmation; for foreign machine-made
paper sales business, Chenming Paper recognised the revenue after the goods were loaded on board and
declared.
As revenue is one of the key performance indicators of Chenming Paper, and the revenue from the sales
of machine-made paper accounts for a relatively huge proportion of the total revenue due to its enormous
sales volume, there may be potential misstatement in relation to whether revenue recognition is accounted
for in the appropriate period of the financial statements, which has a significant impact on the financial
statements. Therefore, we have identified recognition of revenue from machine-made paper as a key audit
matter.
2. Application for auditing
We have carried out the following audit procedures for the recognition of revenue from machine-made
paper:
(1) we identified, evaluated and tested the effectiveness of the design and operation of key internal
controls related to machine-made paper sales business of Chenming Paper;
(2) we conducted sampling inspections on sales contracts, identified contract terms and conditions
related to the transfer of control of the goods, assessed whether the timing of recognition of sales
revenue from Chenming Paper 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) we inspected the occurrence of on-the-spot recognition of sales at the end of the inspection period
and inspected goods returns after the inspection period to determine the accuracy of 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; and
(6) we sought external confirmations for clients with larger sales during the period.
2022 ANNUAL REPORT 161
XII Financial Report
IV. Other information
The management of Chenming Paper is responsible for other information. Other information includes the information
covered in the 2022 annual report of Chenming Paper, 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.
V. Management and management responsibility for financial statements
The management of Chenming Paper 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, disclosing issues related to going concern (if applicable), and applying the going
concern assumption unless the management plans to liquidate Chenming Paper, terminate operations or have no
other realistic options.
The management is responsible for supervising the financial reporting process of Chenming Paper.
VI. Auditor’s responsibility for auditing financial statements
Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from 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 may be caused by fraud or errors, and 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.
162
XII Financial Report
(3) To evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of
accounting estimates and related disclosures.
(4) To conclude on the appropriateness of management’s use of the continuing operation assumption. At the 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 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 conditions may
cause Chenming Paper to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure, and content of the financial statements and evaluate whether the
financial statements fairly reflect the relevant transactions and matters.
(6) To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities
in Chenming Paper to express opinions on the financial statements. We are responsible for guiding, 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 Thornton Chinese Certified Public Accountant : Liu Jian
(Special General Partnership) (Project Partner)
Chinese Certified Public Accountant: Jiang Lei
Beijing, China 30 March 2023
2022 ANNUAL REPORT 163
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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 2022
Unit: RMB
Item 31 December 2022 31 December 2021
CURRENT ASSETS:
Monetary funds 14,000,434,986.08 14,119,782,939.66
Financial assets held for trading 74,708,444.88 110,886,182.88
Bills receivable
Accounts receivable 3,212,260,445.96 2,656,517,150.46
Accounts receivable financing 924,960,384.16 435,459,341.76
Prepayments 788,191,626.82 891,485,078.46
Other receivables 1,717,445,443.44 2,252,864,083.00
Including: Interest receivable
Dividend receivable
Inventories 6,821,916,159.95 5,282,631,922.12
Non-current assets due within one year 3,998,724,415.85 5,216,934,172.61
Other current assets 1,180,807,801.62 1,903,929,492.85
Total current assets 32,719,449,708.76 32,870,490,363.80
164
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Item 31 December 2022 31 December 2021
NON-CURRENT ASSETS:
Long-term receivables 1,486,807,783.47 1,788,759,975.35
Long-term equity investments 4,277,013,369.56 1,894,794,764.19
Other non-current financial assets 786,750,761.62 519,927,003.25
Investment property 6,256,723,113.15 6,473,538,431.91
Fixed assets 33,797,738,695.30 35,653,492,676.15
Construction in progress 558,866,880.36 197,749,526.05
Bearer biological assets 13,697,336.80
Right-of-use assets 181,614,699.25 197,429,176.44
Intangible assets 1,831,338,830.92 1,592,672,934.54
Goodwill 26,946,905.38 26,946,905.38
Long-term prepaid expenses 44,462,851.45 49,141,773.14
Deferred income tax assets 1,335,700,565.60 1,114,781,456.78
Other non-current assets 983,905,908.00 489,936,694.10
Total non-current assets 51,581,567,700.86 49,999,171,317.28
Total assets 84,301,017,409.62 82,869,661,681.08
2022 ANNUAL REPORT 165
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Item 31 December 2022 31 December 2021
CURRENT LIABILITIES:
Short-term borrowings 36,385,048,295.02 33,523,025,186.22
Bills payable 3,128,595,835.04 3,089,512,327.40
Accounts payable 4,114,966,767.76 3,871,131,345.34
Receipts in advance 14,261,436.67 38,274,028.20
Contract liabilities 1,306,029,389.80 1,382,289,597.54
Employee benefits payable 144,925,887.00 169,899,008.01
Taxes payable 261,011,669.09 321,495,480.67
Other payables 1,870,403,909.17 1,538,013,585.93
Including: Interest payable 15,895,930.51 55,437,777.80
Dividend payable
Non-current liabilities due within one year 4,673,505,241.86 6,601,311,227.98
Total current liabilities 51,898,748,431.41 50,534,951,787.29
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Item 31 December 2022 31 December 2021
NON-CURRENT LIABILITIES:
Long-term borrowings 3,982,236,251.08 5,276,340,154.98
Bonds payable 155,000,000.00
Lease liabilities 53,596,047.46 57,281,205.81
Long-term payables 3,160,771,126.31 2,358,901,022.99
Provisions 325,259,082.28
Deferred income 1,469,230,468.46 1,573,681,684.25
Deferred income tax liabilities 8,181,264.29 13,210,529.74
Total non-current liabilities 8,674,015,157.60 9,759,673,680.05
Total liabilities 60,572,763,589.01 60,294,625,467.34
2022 ANNUAL REPORT 167
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Item 31 December 2022 31 December 2021
OWNERS’ EQUITY:
Share capital 2,979,742,200.00 2,984,208,200.00
Other equity instruments 996,000,000.00 996,000,000.00
Including: Preference shares
Perpetual Bonds 996,000,000.00 996,000,000.00
Capital reserves 5,361,200,522.29 5,227,258,100.41
Less: Treasury shares 128,780,100.00 226,860,000.00
Other comprehensive income -821,940,694.57 -445,582,729.36
Special reserves 15,791,710.95
Surplus reserves 1,212,009,109.97 1,212,009,109.97
General risk provisions 79,900,268.71 76,825,918.60
Retained profit 9,390,642,477.57 9,294,126,706.86
Total equity attributable to owners of the Company 19,084,565,494.92 19,117,985,306.48
Minority interest 4,643,688,325.69 3,457,050,907.26
Total shareholders’ equity 23,728,253,820.61 22,575,036,213.74
Total liabilities and shareholders’ equity 84,301,017,409.62 82,869,661,681.08
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 2022 31 December 2021
CURRENT ASSETS:
Monetary funds 5,661,807,164.72 6,827,656,382.37
Bills receivable 3,482,822,426.80 3,625,270,000.00
Accounts receivable 134,755,527.73 141,601,245.51
Accounts receivable financing 7,923,732.09
Prepayments 375,206,833.58 239,461,509.15
Other receivables 9,337,019,470.13 8,900,179,262.54
Including: Interest receivable
Dividend receivable 126,325,018.50
Inventories 692,338,698.67 639,423,803.30
Non-current assets due within one year 13,434,710.01
Other current assets 86,159,558.49 44,894,366.29
Total current assets 19,783,544,390.13 20,426,410,301.25
168
XII Financial Report
Item 31 December 2022 31 December 2021
NON-CURRENT ASSETS:
Long-term receivables 15,914,404.25 13,612,038.99
Long-term equity investments 18,826,163,036.33 18,806,029,815.18
Other non-current financial assets 123,750,761.62 119,927,003.25
Fixed assets 3,654,340,361.49 3,753,927,591.49
Construction in progress 24,865,009.58 94,436,880.66
Intangible assets 490,533,559.72 520,068,337.11
Deferred income tax assets 518,171,288.92 393,918,032.54
Other non-current assets 986,260.70 7,000,000.00
Total non-current assets 23,654,724,682.61 23,708,919,699.22
Total assets 43,438,269,072.74 44,135,330,000.47
2022 ANNUAL REPORT 169
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Item 31 December 2022 31 December 2021
CURRENT LIABILITIES:
Short-term borrowings 12,885,183,530.81 13,761,223,259.09
Bills payable 9,455,780,407.30 9,725,713,524.15
Accounts payable 1,288,578,359.05 1,129,675,956.85
Contract liabilities 1,503,256,921.15 888,114,906.08
Staff remuneration payables 65,349,838.50 57,487,223.39
Tax payables 11,729,028.39 115,257,929.68
Other payables 1,856,098,294.14 970,585,670.47
Including: Interest payable 15,895,930.51 55,437,777.80
Dividend receivable
Non-current assets due within one year 1,171,869,377.78 2,111,092,964.34
Total current assets 28,237,845,757.12 28,759,151,434.05
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Item 31 December 2022 31 December 2021
NON-CURRENT LIABILITIES:
Long-term borrowings 1,698,253,561.10 1,779,135,700.00
Bonds payable 155,000,000.00
Long-term payables 150,911,348.00 52,376,768.35
Provisions 325,259,082.28
Deferred income 33,251,328.04 35,232,490.83
Total non-current assets 1,882,416,237.14 2,347,004,041.46
Total liabilities 30,120,261,994.26 31,106,155,475.51
2022 ANNUAL REPORT 171
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Item 31 December 2022 31 December 2021
OWNERS’ EQUITY
Share capital 2,979,742,200.00 2,984,208,200.00
Other equity instruments 996,000,000.00 996,000,000.00
Including: Preference shares
Perpetual Bonds 996,000,000.00 996,000,000.00
Capital reserves 5,147,225,041.11 5,154,365,336.31
Less: Treasury shares 128,780,100.00 226,860,000.00
Special reserves 2,066,138.15
Surplus reserves 1,199,819,528.06 1,199,819,528.06
Retained profit 3,121,934,271.16 2,921,641,460.59
Total shareholders’ equity 13,318,007,078.48 13,029,174,524.96
Total liabilities and shareholders’ equity 43,438,269,072.74 44,135,330,000.47
172
XII Financial Report
3. Consolidated Income Statement
Unit: RMB
Item 2022 2021
I. Total revenue 32,004,367,320.91 33,019,812,294.14
Including: Revenue 32,004,367,320.91 33,019,812,294.14
II. Total operating costs 32,046,430,688.65 30,583,840,093.56
Including: Operating costs 27,373,725,707.00 25,222,275,795.28
Taxes and surcharges 243,139,315.06 284,456,212.31
Sales and distribution expenses 242,181,274.09 293,509,692.51
General and administrative expenses 750,546,703.34 942,360,735.54
Research and development expense 1,290,281,540.10 1,453,766,371.46
Finance expenses 2,146,556,149.06 2,387,471,286.46
Including: Interest expenses 2,081,067,895.66 2,348,200,417.05
Interest income 309,987,478.19 287,289,410.33
Plus: Other income 242,223,168.86 220,600,635.49
Investment income (“-” denotes loss) -76,042,787.35 -69,578,338.92
Including: Investment income from associates and
joint ventures 24,116,757.95 31,476,499.83
Gains on derecognition of financial assets
measured at amortised cost (“-” denotes
loss) -137,464,855.58 -258,113,630.19
Gain on change in fair value (“-” denotes loss) -25,253,928.81 -77,073,812.67
Credit impairment loss (“-” denotes loss) -86,076,968.56 -268,735,361.31
Loss on impairment of assets (“-” denotes loss) -17,659,966.20 -11,285,890.45
Gain on disposal of assets (“-” denotes loss) 161,092,513.76 51,559,551.66
2022 ANNUAL REPORT 173
XII Financial Report
Item 2022 2021
III. Operating profit (“-” denotes loss) 156,218,663.96 2,281,458,984.38
Plus: Non-operating income 77,248,685.76 71,694,386.81
Less: Non-operating expenses 51,198,001.72 46,973,061.20
IV. Total profit (“-” denotes total loss) 182,269,348.00 2,306,180,309.99
Less: Income tax expenses -135,093,343.41 216,496,288.54
V. Net profit (“-” denotes net loss) 317,362,691.41 2,089,684,021.45
(I) Classification according to the continuity of operation:
Including: Net profit from continuing operations (“-”
denotes net loss) 317,362,691.41 2,089,684,021.45
Net profit from discontinued operations (“-” denotes
net loss)
(II) Classification according to ownership:
1. Net profit attributable to shareholders of the
Company 189,290,120.82 2,065,513,108.71
2. Profit or loss of minority interest 128,072,570.59 24,170,912.74
VI. Net other comprehensive income after tax -376,357,965.21 116,103,878.30
Net other comprehensive income after tax attributable to
shareholders of the Company -376,357,965.21 116,103,878.30
(1) Other comprehensive income that cannot be
reclassified to profit and loss
(2) Other comprehensive income that will be reclassified
to profit and loss -376,357,965.21 116,103,878.30
1. Exchange differences arising from translation
of financial statements denominated in foreign
currencies -376,954,395.08 114,257,267.36
2. Other comprehensive income that may be
reclassified to profit and loss under the equity
method 596,429.87 1,846,610.94
Other comprehensive income, net of tax attributable to
minority interest
VII. Total comprehensive income -58,995,273.80 2,205,787,899.75
Total comprehensive income attributable to shareholders of
the Company -187,067,844.39 2,181,616,987.01
Total comprehensive income attributable to minority
interest 128,072,570.59 24,170,912.74
VIII. Earnings per share:
(I) Basic earnings per share 0.03 0.56
(II) Diluted earnings per share 0.03 0.56
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
174
XII Financial Report
4. Income statement of the Company
Unit: RMB
Item 2022 2021
I. Revenue 7,520,064,602.48 8,761,491,410.08
Less: Operating costs 7,046,088,687.44 7,357,969,445.55
Taxes and surcharges 33,903,732.08 73,724,285.85
Sales and distribution expenses 8,097,899.53 9,558,862.03
General and administrative expenses 143,936,740.47 225,572,928.07
Research and development expense 269,160,568.77 357,549,848.69
Finance expenses 775,464,172.57 596,154,250.94
Including: Interest expenses 942,221,009.81 1,026,360,435.96
Interest income 426,232,368.25 538,879,542.11
Plus: Other income 40,656,440.23 7,369,035.15
Investment income (“-” denotes loss) 673,446,949.24 2,932,306,416.92
Including: Investment income from associates and
joint ventures -314,623.14 -3,156,467.36
Gains on derecognition of financial assets measured
at amortised cost (“-” denotes loss) -63,403,215.00 -12,601,533.35
Gain on change in fair value (“-” denotes loss) 1,600,000.00
Credit impairment loss (“-” denotes loss) 5,350,000.00 60,361,147.28
Loss on impairment of assets (“-” denotes loss) 10,519,416.80 -1,108,450.71
Gain on disposal of assets (“-” denotes loss) -12,924,176.52 5,690,737.73
II. Operating profit (“-” denotes loss)) 151,386,962.31 3,147,180,675.32
Plus: Non-operating income 111,848,393.68 50,666,803.06
Less: Non-operating expenses 73,996,545.76 4,482,683.25
III. Total profit (“-” denotes total loss) 20,105,385.25 3,193,364,795.13
Less: Income tax expenses 165,739,554.19 24,799,796.59
IV. Net profit (“-” denotes net loss) -124,253,256.38 3,168,564,998.54
(I) Net profit from continuing operations (“-” denotes net
loss) 289,992,810.57 3,168,564,998.54
(II) Net profit from discontinued operations (“-” denotes
net loss) 289,992,810.57
V. Total comprehensive income 289,992,810.57 3,168,564,998.54
2022 ANNUAL REPORT 175
XII Financial Report
5. Consolidated cash flow statement
Unit: RMB
Item 2022 2021
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of
services 34,004,940,977.95 37,026,791,230.42
Tax rebates received 774,636,352.39 59,547,522.63
Cash received relating to other operating activities 1,438,951,565.79 2,219,955,470.38
Subtotal of cash inflows from operating activities 36,218,528,896.13 39,306,294,223.43
Cash paid for goods and services 27,914,460,565.12 25,422,330,671.57
Cash paid to and for employees 1,378,611,065.39 1,467,112,946.72
Payments of taxes and surcharges 1,181,977,144.95 1,426,328,693.53
Cash paid relating to other operating activities 2,293,655,878.30 2,408,633,718.97
Subtotal of cash outflows from operating activities 32,768,704,653.76 30,724,406,030.79
Net cash flows from operating activities 3,449,824,242.37 8,581,888,192.64
176
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Item 2022 2021
II. Cash flows from investing activities:
Cash received from investments 1,526,241.63 222,670,944.63
Cash received from investment income 37,543,374.81 81,429,872.21
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 232,394,062.31 217,787,583.26
Net cash received from disposal of subsidiaries and other
business units – 306,239,547.48
Cash received relating to other investing activities – 493,700,048.10
Subtotal of cash inflows from investing activities 271,463,678.75 1,321,827,995.68
Cash paid for purchase of fixed assets, intangible assets
and other long-term assets 885,436,648.94 632,606,779.05
Cash paid on investments 1,463,000,000.00 396,000,000.00
Net cash paid for acquisition of subsidiaries and other
business units 367,997,918.78 –
Cash paid relating to other investing activities – 127,500,000.00
Subtotal of cash outflows from investing activities 2,716,434,567.72 1,156,106,779.05
Net cash flows from investing activities -2,444,970,888.97 165,721,216.63
III. Cash flows from financing activities:
Cash received from investments 1,400,000,000.00 2,350,000,000.00
Including: Cash received from subsidiaries from minority
investment 1,400,000,000.00 2,350,000,000.00
Cash received from borrowings 32,477,133,959.53 26,078,252,949.16
Cash received relating to other financing activities 3,719,090,394.82 4,808,748,496.67
Subtotal of cash inflows from financing activities 37,596,224,354.35 33,237,001,445.83
Cash repayments of amounts borrowed 31,525,777,100.64 29,423,534,354.33
Cash paid for dividend and profit distribution or interest
payment 2,362,284,448.94 3,327,088,059.92
Including: Dividend and profit paid by subsidiaries to
minority shareholders 200,352,435.08 126,809,125.87
Cash paid relating to other financing activities 5,689,222,885.22 10,426,875,069.68
Subtotal of cash outflows from financing activities 39,577,284,434.80 43,177,497,483.93
Net cash flows from financing activities -1,981,060,080.45 -9,940,496,038.10
IV. Effect of foreign exchange rate changes on cash and cash
equivalents -33,248,970.46 -27,367,487.94
V. Net increase in cash and cash equivalents -1,009,455,697.51 -1,220,254,116.77
Plus: Balance of cash and cash equivalents as at the
beginning of the period 3,168,915,847.02 4,389,169,963.79
VI. Balance of cash and cash equivalents as at the end of the
period 2,159,460,149.51 3,168,915,847.02
2022 ANNUAL REPORT 177
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6. Cash flow statement of the Company
Unit: RMB
Item 2022 2021
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of
services 9,262,082,947.68 9,921,458,290.29
Tax rebates received 9,335,732.78 –
Cash received relating to other operating activities 546,476,129.29 318,480,435.45
Subtotal of cash inflows from operating activities 9,817,894,809.75 10,239,938,725.74
Cash paid for goods and services 7,950,820,408.32 7,949,092,113.55
Cash paid to and for employees 298,994,477.43 324,850,174.01
Payments of taxes and surcharges 200,234,241.01 296,341,765.94
Cash paid relating to other operating activities 876,312,163.51 835,108,368.36
Subtotal of cash outflows from operating activities 9,326,361,290.27 9,405,392,421.86
Net cash flows from operating activities 491,533,519.48 834,546,303.88
II. Cash flows from investing activities:
Cash received from investments 1,526,241.63 3,488,670,944.63
Cash received from investment income 918,541,961.59 3,346,501,947.10
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 175,178,998.35 3,871,823.30
Net cash received from disposal of subsidiaries and other
business units – –
Cash received relating to other investing activities – 493,655,373.48
Subtotal of cash inflows from investing activities 1,095,247,201.57 7,332,700,088.51
Cash paid for purchase of fixed assets, intangible assets
and other long-term assets 30,885,811.90 19,676,071.84
Cash paid on investments – 882,210,000.00
Net cash paid for acquisition of subsidiaries and other
business units – –
Cash paid relating to other investing activities – –
Subtotal of cash outflows used in investing activities 30,885,811.90 901,886,071.84
Net cash flows from investing activities 1,064,361,389.67 6,430,814,016.67
III. Cash flows from financing activities:
Cash received from investments – –
Cash received from borrowings 19,328,476,282.36 22,083,489,278.32
Cash received relating to other financing activities 771,135,279.77 110,000,000.00
Subtotal of cash inflows from financing activities 20,099,611,562.13 22,193,489,278.32
178
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Item 2022 2021
Cash repayments of amounts borrowed 20,169,398,149.54 18,497,803,668.52
Cash paid for dividend and profit distribution or interest
payment 612,303,611.03 996,025,461.24
Cash paid relating to other financing activities 1,533,109,819.21 9,373,355,123.84
Subtotal of cash outflows from financing activities 22,314,811,579.78 28,867,184,253.60
Net cash flows from financing activities -2,215,200,017.65 -6,673,694,975.28
IV. Effect of foreign exchange rate changes on cash and cash
equivalents -177,257.07 504,245.77
V. Net increase in cash and cash equivalents -659,482,365.57 592,169,591.04
Plus: Balance of cash and cash equivalents as at the
beginning of the period 893,454,314.56 301,284,723.52
VI. Balance of cash and cash equivalents as at the end of the
period 233,971,948.99 893,454,314.56
2022 ANNUAL REPORT 179
180
7. Consolidated statement of changes in owners’ equity
Amount for the reporting period
Unit: RMB
2022
Equity attributable to owners of the Company
Other equity instruments Less: Other
Preference Capital Treasury comprehensive Special Surplus General risk Minority Total
Item Share capital shares Perpetual Bonds Others reserves shares income reserves reserves provisions Retained profit Others Subtotal interest owners’ equity
XII Financial Report
I. Balance as at the end of the
prior year 2,984,208,200.00 996,000,000.00 5,227,258,100.41 226,860,000.00 -445,582,729.36 1,212,009,109.97 76,825,918.60 9,294,126,706.86 19,117,985,306.48 3,457,050,907.26 22,575,036,213.74
Others
II. Balance as at the beginning of
the year 2,984,208,200.00 996,000,000.00 5,227,258,100.41 226,860,000.00 -445,582,729.36 1,212,009,109.97 76,825,918.60 9,294,126,706.86 19,117,985,306.48 3,457,050,907.26 22,575,036,213.74
III. Changes in the period
(“-” denotes decrease) -4,466,000.00 133,942,421.88 -98,079,900.00 – 376,357,965.21 15,791,710.95 3,074,350.11 96,515,770.71 -33,419,811.56 1,186,637,418.43 1,153,217,606.87
(I) Total comprehensive income – 376,357,965.21 189,290,120.82 -187,067,844.39 128,072,570.59 – 58,995,273.80
(II) Capital paid in and reduced
by owners -4,466,000.00 133,942,421.88 -98,079,900.00 227,556,321.88 1,258,917,282.92 1,486,473,604.80
1. Ordinary shares paid by
owners -4,466,000.00 -8,262,100.00 -12,728,100.00 1,258,917,282.92 1,246,189,182.92
2. Capital paid by holders of
other equity instruments – –
3. Amount of share-based
payments recognised in
owners’ equity 1,121,804.80 -98,079,900.00 99,201,704.80 99,201,704.80
4. Others 141,082,717.08 141,082,717.08 141,082,717.08
(III) Profit distribution 3,074,350.11 -92,774,350.11 -89,700,000.00 -200,352,435.08 -290,052,435.08
1. Transfer to surplus
reserves – – –
2. Transfer to general risk
provisions 3,074,350.11 -3,074,350.11 –
3. Distribution to owners
(or shareholders) -89,700,000.00 -89,700,000.00 -200,352,435.08 -290,052,435.08
(IV) Special reserves 15,791,710.95 15,791,710.95 15,791,710.95
1. Withdrew in the period 29,147,795.17 29,147,795.17 29,147,795.17
2. Used in the period
(denotes in “-”) -13,356,084.22 -13,356,084.22 -13,356,084.22
IV. Balance as at the end of the
period 2,979,742,200.00 996,000,000.00 5,361,200,522.29 128,780,100.00 -821,940,694.57 15,791,710.95 1,212,009,109.97 79,900,268.71 9,390,642,477.57 19,084,565,494.92 4,643,688,325.69 23,728,253,820.61
Amount for the prior period
Unit: RMB
2021
Equity attributable to owners of the Company
Other
Other equity instruments Less: comprehensive Special General risk Total owners’
Item Share capital Preference shares Perpetual Bonds Others Capital reserves Treasury shares income reserves Surplus reserves provisions Retained profit Others Subtotal Minority interest equity
I. Balance as at the end of the
prior year 2,984,208,200.00 4,477,500,000.00 996,000,000.00 5,321,911,413.75 226,860,000.00 -561,686,607.66 1,212,009,109.97 74,122,644.20 9,999,764,028.74 24,276,968,789.00 1,523,294,926.24 25,800,263,715.24
XII Financial Report
Plus: Others -1,803,277,670.52 -1,803,277,670.52 -1,803,277,670.52
II. Balance as at the beginning
of the year 2,984,208,200.00 4,477,500,000.00 996,000,000.00 5,321,911,413.75 226,860,000.00 -561,686,607.66 1,212,009,109.97 74,122,644.20 8,196,486,358.22 22,473,691,118.48 1,523,294,926.24 23,996,986,044.72
III. Changes in the period
(“-” denotes decrease) -4,477,500,000.00 -94,653,313.34 116,103,878.30 2,703,274.40 1,097,640,348.64 -3,355,705,812.00 1,933,755,981.02 -1,421,949,830.98
(I) Total comprehensive
income 116,103,878.30 2,065,513,108.71 2,181,616,987.01 24,170,912.74 2,205,787,899.75
(II) Capital paid in and
reduced by owners -4,477,500,000.00 -94,653,313.34 -4,572,153,313.34 2,312,271,861.82 -2,259,881,451.52
1. Ordinary shares paid
by owners 2,312,271,861.82 2,312,271,861.82
2. Capital paid by
holders of other equity
instruments -4,477,500,000.00 -22,500,000.00 -4,500,000,000.00 -4,500,000,000.00
3. Amount of share-
based payments
recognised in owners’
equity 52,556,871.89 52,556,871.89 52,556,871.89
4. Others -124,710,185.23 -124,710,185.23 -124,710,185.23
(III) Profit distribution 2,703,274.40 -967,872,760.07 -965,169,485.67 -126,809,125.87 -1,091,978,611.54
1. Transfer to general risk
provisions 2,703,274.40 -2,703,274.40
2. Distribution to owners
(or shareholders) -965,169,485.67 -965,169,485.67 -126,809,125.87 -1,091,978,611.54
(IV) Transfer within owners’
equity -275,877,667.67 -275,877,667.67
1. Others -275,877,667.67 -275,877,667.67
IV. Balance as at the end of the
period 2,984,208,200.00 996,000,000.00 5,227,258,100.41 226,860,000.00 -445,582,729.36 1,212,009,109.97 76,825,918.60 9,294,126,706.86 19,117,985,306.48 3,457,050,907.26 22,575,036,213.74
2022 ANNUAL REPORT
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182
8. Statement of changes in equity of owners of the Company
Amount for the reporting period
Unit: RMB
2022
Other equity instruments Less: Other
Preference Perpetual Capital r Treasury comprehensive Special Surplus Retained Total owners’
Item Share capital shares Bonds Others eserves shares income reserves reserves profit Others equity
XII Financial Report
I. Balance as at the end of the prior
year 2,984,208,200.00 996,000,000.00 5,154,365,336.31 226,860,000.00 1,199,819,528.06 2,921,641,460.59 13,029,174,524.96
II. Balance as at the beginning of
the year 2,984,208,200.00 996,000,000.00 5,154,365,336.31 226,860,000.00 1,199,819,528.06 2,921,641,460.59 13,029,174,524.96
III. Changes in the period
(“-” denotes decrease) -4,466,000.00 -7,140,295.20 -98,079,900.00 2,066,138.15 200,292,810.57 288,832,553.52
(I) Total comprehensive income 289,992,810.57 289,992,810.57
(II) Capital paid in and reduced by
owners -4,466,000.00 -7,140,295.20 -98,079,900.00 86,473,604.80
1. Ordinary shares paid by
owners -4,466,000.00 -8,262,100.00 -12,728,100.00
2. Capital paid by holders of
other equity instruments
3. Amount of share-based
payments recognised in
owners’ equity 1,121,804.80 -98,079,900.00 99,201,704.80
(III) Profit distribution -89,700,000.00 -89,700,000.00
1. Transfer to surplus reserves
2. Distribution to owners (or
shareholders) -89,700,000.00 -89,700,000.00
(V) Special reserves – 2,066,138.15 2,066,138.15
1. Withdrew in the period 2,677,407.09 2,677,407.09
2. Used in the period
(denotes in “-”) -611,268.94 -611,268.94
IV. Balance as at the end of the
period 2,979,742,200.00 996,000,000.00 5,147,225,041.11 128,780,100.00 2,066,138.15 1,199,819,528.06 3,121,934,271.16 13,318,007,078.48
Amount for the prior period
Unit: RMB
2021
Other equity instruments Less: Other
Preference Perpetual Capital Treasury comprehensive Special Surplus Retained Total owners’
Item Share capital shares Bonds Others reserves shares income reserves reserves profit Others equity
I. Balance as at the end of the
XII Financial Report
prior year 2,984,208,200.00 4,477,500,000.00 996,000,000.00 5,124,308,464.42 226,860,000.00 1,199,819,528.06 718,245,947.72 15,273,222,140.20
II. Balance as at the beginning of
the year 2,984,208,200.00 4,477,500,000.00 996,000,000.00 5,124,308,464.42 226,860,000.00 1,199,819,528.06 718,245,947.72 15,273,222,140.20
III. Changes in the period
(“-” denotes decrease) -4,477,500,000.00 30,056,871.89 2,203,395,512.87 -2,244,047,615.24
(I) Total comprehensive income 3,168,564,998.54 3,168,564,998.54
(II) Capital paid in and reduced
by owners -4,477,500,000.00 30,056,871.89 -4,447,443,128.11
1. Ordinary shares paid by
owners
2. Capital paid by holders of
other equity instruments -4,477,500,000.00 -22,500,000.00 -4,500,000,000.00
3. Amount of share-based
payments recognised in
owners’ equity 52,556,871.89 52,556,871.89
(III) Profit distribution -965,169,485.67 -965,169,485.67
1. Transfer to surplus
reserves
2. Distribution to owners (or
shareholders) -965,169,485.67 -965,169,485.67
IV. Balance as at the end of the
period 2,984,208,200.00 996,000,000.00 5,154,365,336.31 226,860,000.00 1,199,819,528.06 2,921,641,460.59 13,029,174,524.96
2022 ANNUAL REPORT
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XII Financial Report
III. General Information of the Company
1. Company overview
The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) 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. 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 additionally issued H shares were listed and traded on Hong Kong
Stock Exchange on 18 June 2008.
As at 31 December 2022, the total share capital of the Company was 2,979,742,200 shares. For details, please 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 (the “Company”) 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 hotel service, and equipment financial and operating
leasing, investment properties and property service etc.
The financial statements and notes thereto were approved at the fourth meeting of the tenth session of the board of
directors of the Company (the “Board”) on 30 March 2023.
2. Scope of consolidation
Subsidiaries of the Company included in the scope of consolidation in 2022 totalled 78. For details, please refer
to Note IX “Interest in other entities”. The scope of consolidation of the Company during the year had four more
companies included and one company less compared to the prior year. For details, please refer to Note VIII “Change
in scope of consolidation”.
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XII Financial Report
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
These financial statements are prepared in accordance with the accounting standards for business enterprises, the
application guidelines thereof, interpretations and other related rules (collectively referred to as “ASBEs”) promulgated
by the Ministry of Finance. In addition, the Company also discloses relevant financial information in accordance with
the “Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 – General
Provisions on Financial Reports” (revised in 2014) of the CSRC.
The financial statements are presented on a going concern.
The Company’s financial statements have been prepared on an accrual basis. Except for certain financial instruments,
the financial statements are prepared under the historical cost convention. In the event that impairment of 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, processing of moulds, 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 ASBEs. 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. 38 “Changes in significant accounting policies and accounting estimates”.
1. Statement of compliance with the Accounting Standards for Business Enterprises
These financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial
position of the consolidated entity and the Company as at 31 December 2022 and relevant information such as the
operating results and cash flows of the consolidated entity and the Company for 2022.
2. Accounting period
The accounting period of the Company is from 1 January to 31 December of each calendar year.
2022 ANNUAL REPORT 185
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V. Significant Accounting Policies and Accounting Estimates (Continued)
3. Operating cycle
The operating cycle of the Company lasts for 12 months.
4. Functional currency
The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas 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 the financial statements in RMB.
5. Accounting treatment of business combinations under common control and not under common
control
(1) Business combination under common control
For the business combination involving entities under common control, the assets and liabilities of the party
being merged that are obtained in the business combination by the absorbing party shall be measured at the
carrying amounts as recorded by the ultimate controlling party in the consolidated financial statements at the
combination date. The difference between the carrying amount of the consideration paid for the combination
(or the aggregate nominal value of shares issued as consideration) and the carrying amount of the net assets
obtained in the combination is charged to the capital reserve (share capital premium/capital premium). If the
capital reserve (share capital premium/capital premium) is not sufficient to absorb the difference, any excess
shall be adjusted against retained earnings.
Business combinations involving entities under common control and achieved in stages
In the separate financial statements, the initial investment cost is calculated based on the shareholding portion
of the assets and liabilities obtained and are measured at the carrying amounts as recorded by the party being
merged at the combination date. The difference between the initial investment cost and the sum of the carrying
amount of the original investment cost prior to the combination and the carrying amount of consideration paid
for the combination is adjusted to the capital reserve (share capital premium/capital premium), if the capital
reserve is not sufficient to absorb the difference, the excess difference shall be adjusted to retained earnings.
In the consolidated financial statements, the assets and liabilities of the party being merged that are obtained
at the combination by the absorbing party shall be measured at the carrying value as recorded by the ultimate
controlling party in the consolidated financial statements at combination date. The difference between the sum
of the carrying value from original shareholding portion and the new investment cost incurred at combination
date and the carrying value of net assets obtained at combination date shall be adjusted to capital reserve (share
capital premium/capital premium), if the balance of capital reserve is not sufficient to absorb the differences,
any excess is adjusted to retained earnings. The long-term investment prior to the absorbing party obtaining
the control of the party being merged, the recognised profit or loss, comprehensive income and other change
of owners’ equity at the closer date of the acquisition date and combination date under common control shall
separately offset the opening balance of retained earnings and profit or loss during comparative statements.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
5. Accounting treatment of business combinations under common control and not under common
control (Continued)
(2) Business combination not under common control
For business combinations involving entities not under common control, the cost for each combination is
measured at the aggregate fair value at acquisition date, of assets given, liabilities incurred or assumed, and
equity securities issued by the acquirer in exchange for control of the acquiree. At acquisition date, the acquired
assets, liabilities or contingent liabilities of acquiree are measured at their fair value.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net
assets, the difference is recognised as goodwill, and subsequently measured on the basis of its cost minus
accumulative impairment provision; Where the cost of combination is less than the acquirer’s interest in the fair
value of the acquiree’s identifiable net assets, the difference is recognised in profit or loss for the current period
after reassessment.
Business combinations involving entities not under common control and achieved in stages
In the separate financial statements, the initial investment cost of the investment is the sum of the carrying
amount of the equity investment held by the entity prior to the acquisition date and the additional investment
cost at the acquisition date. The disposal accounting policy of other comprehensive income related with
equity investment prior to the acquisition date recognised under equity method shall be compliance with the
method when the acquiree disposes the related assets or liabilities. Owners’ equity due to the changes of other
owners’ equity other than the changes of net profit, other comprehensive income and profit distribution shall
be transferred to profit or loss for current period when disposed of. If the equity investment held by the entity
prior to the acquisition date is measured at fair value, the cumulative changes in fair value recognised in other
comprehensive income shall be transferred to retained earnings for current period when accounted for using
cost method.
In the consolidation financial statements, the combination cost is the sum of consideration paid at acquisition
date and fair value of the acquiree’s equity investment held prior to acquisition date. The cost of equity of
the acquiree held prior to acquisition date shall be remeasured at the fair value at acquisition date, and the
difference between the fair value and carrying amount shall be recognised as investment income or loss for the
current period. Other comprehensive income and changes of other owners’ equity related with acquiree’s equity
held prior to acquisition date shall be transferred to investment profit or loss for current period at acquisition
date, except for the other comprehensive income incurred by the changes of net assets or net liabilities due to
the remeasurement of defined benefit plans.
(3) Transaction fees attribution during business combination
The audit, legal, valuation advisory and other intermediary fees and other relevant administrative expenses
arising from business combinations are recognised in profit or loss when incurred. Transaction costs of equity
or debt securities issued as the considerations of business combination are included in the initial recognition
amounts.
2022 ANNUAL REPORT 187
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
6. Preparation of consolidated financial statements
(1) Scope of consolidation
The scope of consolidation of the consolidated financial statements is determined on the basis of control. 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
intracompany 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.
(3) Acquisition of non-controlling interests in subsidiaries
The difference between the long-term equity investments costs acquired by the acquisition of non-controlling
interests and the share of the net assets from subsidiaries from the date of acquisition or the date of
combination based on the new shareholding ratio, as well as the difference between the proceeds from the
partial disposal of the equity investment without losing control over its subsidiary and the disposal of the
long-term equity investment corresponding to the share of the net assets of the subsidiaries from the date of
acquisition or the date of combination, is adjusted to the capital reserve. If the capital reserve is not sufficient,
any excess is adjusted to retained earnings.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
6. Preparation of consolidated financial statements (Continued)
(4) Accounting treatment for loss of control over subsidiaries
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons,
the remaining equity is measured at fair value on the date when the control is lost. The difference arising from
the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest
over the sum 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.
7. Classification of joint arrangements and accounting treatment for joint operations
A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of the
Company comprise joint operations and joint ventures.
(1) Joint operations
Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets and
obligations of this arrangement.
The Company 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 Company accounts for its investments in joint ventures in accordance with the requirements relating to
accounting treatment using equity method for long-term equity investments.
2022 ANNUAL REPORT 189
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
8. Standards for recognising cash and cash equivalents
Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short-
term and highly liquid investments held by the Company which are readily convertible into known amount of cash and
which are subject to insignificant risk of value change.
9. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
The foreign currency operations of the Company are translated into the functional currency at the prevailing
spot exchange rate on the date of exchange.
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 or other comprehensive income for
the period based on the nature of the non-monetary items.
(2) Translation of financial statements denominated in foreign currency
When translating the financial statements denominated in foreign currency of overseas subsidiaries, assets 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 prevailing spot exchange rate on the
transaction date.
All items in the cash flow statements shall be translated at the prevailing spot exchange rate on the date that
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 shareholders’ 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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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equity
instrument of another party.
(1) Recognition and derecognition of financial instruments
Financial asset or financial liability will be recognised when the Company became one of the parties under a
financial instrument contract.
Financial asset that satisfied any of the following criteria shall be derecognised:
the contract right to receive the cash flows of the financial asset has terminated;
the financial asset has been transferred and meets the derecognition criteria for the transfer of 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 Company (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 Company 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
at fair value through profit or loss:
The Company’s business model for managing such financial assets is to collect contractual cash flows;
The contractual terms of the financial asset stipulate that cash flows generated on specific dates are 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.
2022 ANNUAL REPORT 191
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V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(2) Classification and measurement of financial assets (Continued)
Financial assets measured at fair value through other comprehensive 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 at fair value through profit or loss:
The Company’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 Company 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 Company 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 Company manages its financial assets
in order to generate cash flows. That is, the Company’s business model determines whether cash flows will
result from collecting contractual cash flows, selling financial assets or both. The Company 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 Company 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 Company 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.
192
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(2) Classification and measurement of financial assets (Continued)
Financial assets measured at fair value through profit or loss (Continued)
All affected financial assets are reclassified on the first day of the first reporting period following the change in
the business model where the Company changes its business model for managing financial assets; otherwise,
financial assets shall not be reclassified after initial recognition.
Financial assets are measured at fair value upon initial recognition. For financial assets measured at 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 arising from sales of goods or rendering services, without significant financing
component, are initially recognised based on the transaction price expected to be entitled by the Company.
(3) Classification and measurement of financial liabilities
At initial recognition, financial liabilities of the Company are classified as financial liabilities measured at 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 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.
2022 ANNUAL REPORT 193
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(3) Classification and measurement of financial liabilities (Continued)
Classification between financial liabilities and equity instruments
A financial liability is a liability if:
it has a contractual obligation to pay in cash or other financial assets to other parties.
it has a contractual obligation to exchange financial assets or financial liabilities under potential adverse
condition with other parties.
it is a non-derivative instrument contract which will or may be settled with the entity’s own equity
instruments, and the entity will deliver a variable number of its own equity instruments according to such
contract.
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 Company 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 Company’s own equity instruments, the
Company’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 Company; for the latter, it is the Company’s own equity instruments.
(4) Fair value of financial instruments
The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 11.
194
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(5) Impairment of financial assets
The Company makes provision for impairment based on expected credit losses (ECLs) on the following items:
Financial assets measured at amortised cost;
Receivables and debt investments measured at fair value through other comprehensive income;
Contract assets as defined in the Accounting Standards for Business Enterprises No. 14 – Revenue;
Lease receivables;
Financial guarantee contracts (except those measured at fair value through profit or loss or formed by
continuing involvement of transferred financial assets or the transfer does not qualify for derecognition).
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 Company 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 Company 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 Company 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 Company 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 Company
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 Company 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.
2022 ANNUAL REPORT 195
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(5) Impairment of financial assets (Continued)
Measurement of ECLs (Continued)
The maximum period to be considered when estimating ECLs is the maximum contractual period over which
the Company is exposed to credit risk, including renewal options.
For the financial instruments at the first and second stages and with low credit risks, the Company 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.
Bills receivable, accounts receivable and contract assets
For bills receivable, accounts receivable and contract assets, regardless of whether there is a significant
financing component, the Company always makes provision for impairment at an amount equal to lifetime
ECLs.
When the Company is unable to assess the information of ECLs for an individual financial asset at a 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: Due from related party customers
Accounts receivable portfolio 2: Due from non-related party customers
Accounts receivable portfolio 3: Factoring receivables
196
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(5) Impairment of financial assets (Continued)
Bills receivable, accounts receivable and contract assets (Continued)
For bills receivable classified as a portfolio, the Company refers to the historical credit loss experience,
combined with the current situation and the forecast of future economic conditions, to calculate the ECLs based
on default risk exposure and lifetime ECL rate.
For accounts receivable classified as a portfolio, the Company refers to the historical credit loss experience,
combined with the current situation and the forecast of future economic conditions, to prepare a comparison
table of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs.
Other receivables
The Company 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 Company calculates the ECLs based on default risk exposure
and the ECL rate over the next 12 months or the entire lifetime.
Long-term receivables
The Company’s long-term receivables include finance lease receivables and deposits receivable.
2022 ANNUAL REPORT 197
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(5) Impairment of financial assets (Continued)
Long-term receivables (Continued)
The Company classifies the finance lease receivables, deposits receivable and other receivables into 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 receivables for construction projects, the Company 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 Company 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.
198
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(5) Impairment of financial assets (Continued)
Assessment of significant increase in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition,
the Company compares the risk of default of the financial instrument at the balance sheet date with that at 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 Company considers
reasonable and well-founded information, including forward-looking information, which can be obtained without
unnecessary extra costs or efforts. Information considered by the Company includes:
The debtor’s failure to make payments of principal and interest on their contractually due dates;
An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any);
An actual or expected significant deterioration in the operating results of the debtor;
Existing or expected changes in the technological, market, economic or legal environment that have a significant
adverse effect on the debtor’s ability to meet its obligation to the Company.
Depending on the nature of the financial instruments, the Company assesses whether there has been 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 Company 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 Company 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;
2022 ANNUAL REPORT 199
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(5) Impairment of financial assets (Continued)
Credit-impaired financial assets (Continued)
For economic or contractual reasons relating to the debtor’s financial difficulty, the Company having granted 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 Company makes provisions of impairment in other
comprehensive income without reducing the carrying amount of the financial asset.
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 Company 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 Company’s procedures for recovery of amounts due.
If a write-off of financial assets is subsequently recovered, the recovery is credited to profit or loss in the period
in which the recovery occurs.
200
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
10. Financial instruments (Continued)
(6) Transfer of financial assets
Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than the
issuer of such financial assets (the transferee).
If the Company transfers substantially all the risks and rewards of ownership of the financial asset to the
transferee, the financial asset shall be derecognised. If the Company retains substantially all the risks and
rewards of ownership of a financial asset, the financial asset shall not be derecognised.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset, it accounts for the transaction as follows: if the Company 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.
(7) Offset of financial assets and financial liabilities
If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities,
which are enforceable currently, and the Company plans to realise the financial assets or to clear off 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.
11. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The Company measures the relevant asset and liability at fair value, based on the presumption that the orderly
transaction to sell the asset or transfer the liability takes place either in the principal market for the relevant asset or
liability, or in the absence of a principal market, in the most advantageous market for relevant the asset or liability. The
principal or the most advantageous market must be a trading market accessible by the Company at the measurement
date. The Company adopts the presumption that market participants would use when pricing the asset or liability in
their best economic interest.
If there exists an active market for a financial asset or financial liability, the Company uses the quotation on the active
market as its fair value. If the market for a financial instrument is inactive, the Company uses valuation technique to
recognise its fair value.
Fair value measurement of 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 Company adopts valuation techniques that are appropriate in the current circumstance and for which sufficient
data and other information are available, prioritises the use of relevant observable inputs and uses unobservable
inputs only under the circumstances where such relevant observable inputs cannot be obtained or practicably
obtained.
2022 ANNUAL REPORT 201
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
11. Fair value measurement (Continued)
Assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within
the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole.
Level 1: based on quoted prices (unadjusted) in active markets for identical assets or liabilities obtainable at the
measurement date. Level 2: observable inputs for the relevant asset or liability, either directly or indirectly, except for
Level 1 input. Level 3: unobservable inputs for the relevant assets or liability.
At each balance sheet date, the Company reassesses assets and liabilities measured at fair value that are recognised
in the financial statements on a recurring basis to determine whether transfers have occurred between fair value
measurement hierarchy levels.
12. Inventories
(1) Classification of inventories
Inventories of the Company 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 Company 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.
The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying
amount using the stock volume proportion method.
(3) Recognition of net realisable value of inventories and provision for inventory impairment
Net realisable value of inventories refers to the amount of the estimated price of inventories less the 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 Company 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.
202
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
12. Inventories (Continued)
(4) Inventory stock taking system
The Company implements permanent inventory system as its inventory stock taking system.
(5) Amortisation of low-value consumables and packaging materials
The low-value consumables of the Company are amortised when issued for use.
Packaging materials for turnover are amortised when issued for use.
13. Long-term equity investments
Long-term equity investments include the equity investments in subsidiaries, joint ventures and associates. Associates
of the Company are those investees that the Company imposes significant influence over.
(1) Determination of initial investment cost
Long-term equity investments acquired through business combinations: for a long-term equity 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.
2022 ANNUAL REPORT 203
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
13. Long-term equity investments (Continued)
(2) Subsequent measurement and method for profit or loss recognition
Investments in subsidiaries shall be accounted for using the cost method. Except for the investments 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 Company.
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. For
investments in non-trading equity instruments that were previously classified as at fair value through other
comprehensive income, the cumulative fair value changes associated with them that were previously included
in other comprehensive income are transferred to retained earnings upon the change to the equity method of
accounting.
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.
204
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
13. Long-term equity investments (Continued)
(2) Subsequent measurement and method for profit or loss recognition (Continued)
In the event of loss of control over investee due to partial disposal of equity investment, the remaining 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 Company 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
Company. Investment gain or loss shall be recognised accordingly. However, any unrealised loss arising from
internal transactions between the Company and an investee is not eliminated to the extent that the loss is
impairment loss of the transferred assets.
(3) Basis for determining the common control and significant influence on the investee
Common control is the contractually agreed sharing of control over an arrangement, which relevant 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.
2022 ANNUAL REPORT 205
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
13. Long-term equity investments (Continued)
(3) Basis for determining the common control and significant influence on the investee (Continued)
When the Company holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the 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 Company 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 can impose significant influence in this situation.
(4) Impairment test method and impairment provision
For the method for making impairment provision for the investment in subsidiaries, associates and joint
ventures, please refer to Note V. 22.
14. Investment property
Investment property refers to real estate held to earn rentals or for capital appreciation, or both. The investment
property of the Company includes leased land use rights, land use rights held for sale after appreciation, and leased
buildings.
The investment property of the Company 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. 22.
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.
15. Fixed assets
(1) Conditions for recognition of fixed assets
Fixed assets represent the tangible assets held by the Company using in the production of goods, rendering of
services and for operation and administrative purposes with useful life over one year.
Fixed assets are recognised when it is probable that the related economic benefits will flow to the Company and
the costs can be reliably measured.
The Company’s fixed assets are initially measured at the actual cost at the time of acquisition.
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable
that the associated economic benefits will flow to the Company and the related cost can be reliably measured.
The cost of routine repairs of fixed assets that do not qualify as capitalised subsequent expenditure is charged
to current profit or loss or included in the cost of the related assets in accordance with the beneficiary object
when incurred. The carrying amount of the replaced part is derecognised.
206
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
15. Fixed assets (Continued)
(2) Depreciation method by category of fixed assets
The Company adopts the straight-line method for depreciation. Provision for depreciation will be 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 Company
determines the annual depreciation rate by category, estimated useful lives and estimated residual value of the
fixed assets as below:
Useful lives of Estimated residual Annual depreciation
Category depreciation (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 impairment provision is made, to determine the depreciation rate, the
accumulated amount of the fixed asset impairment provision that has been made shall be deducted.
(3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 22.
(4) The Company will review the useful lives, estimated net residual value and depreciation method of the fixed
assets at the end of each year.
When there is any difference between the useful lives estimate and the originally estimated value, the 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 shall be adjusted.
(5) Disposal of fixed assets
A fixed asset is derecognised on disposal or when it is expected that there shall be no economic benefit arising
from using or after disposal. Where the fixed assets are sold, transferred, retired or damaged, the income
received after disposal after deducting the carrying amount and related taxes are recognised in profit or loss for
the current period.
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16. Construction in progress
Construction in progress of the Company 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. 22.
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. 22.
The closing balance of materials for project is presented as “construction in progress” item in the balance sheet.
18. Borrowing costs
(1) Recognition principle for the capitalisation of the borrowing costs
The borrowing costs incurred by the Company directly attributable to the acquisition, construction or 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:
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;
The borrowing costs have been incurred;
The acquisition, construction or production activity necessary for the asset to be ready for its intended
use or sale has been started.
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V. Significant Accounting Policies and Accounting Estimates (Continued)
18. Borrowing costs (Continued)
(2) Capitalisation period of borrowing costs
When a qualifying asset acquired, constructed or produced by the Company is ready for its intended use 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 capitalised 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.
19. Biological assets
Bearer biological assets refer to biological assets held for the purpose of producing agricultural products, providing
labour services or renting, including economic forests, firewood forests, productive livestock and draught animals.
The Company’s bearer biological assets are mainly tea trees. The cost of a planted or propagated bearer biological
asset includes the expenses directly attributable to the asset and necessarily incurred before the asset is ready for its
intended production and operation, including the borrowing costs that are eligible for capitalisation.
The management, protection and feeding costs of a biological asset subsequent to crown closure or after the asset is
ready for its intended production and operation are expensed and recognised in profit or loss as incurred.
Depreciation of bearer biological assets is calculated using the straight-line method over the estimated useful life of
each biological asset less its residual value as follows:
Estimated residual Annual depreciation
Type of bearer biological assets Useful life (year) value rate
Tea tree 10 5% 9.50%
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V. Significant Accounting Policies and Accounting Estimates (Continued)
19. Biological assets (Continued)
The Company reviews the useful life and estimated net residual value of a bearer biological asset and the depreciation
method applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixed
asset or the depreciation method used shall be accounted for as a change in accounting estimate.
The difference between the disposal income of the sale, loss, death or damage of a bearer biological asset, net of its
carrying amount and related taxes, is recognised in profit or loss for the current period.
The method for impairment provision of bearer biological assets is set out in Note V. 22.
20. Right-of-use assets
(1) Conditions for recognition of right-of-use assets.
Right-of-use assets are defined as the right of underlying assets in the lease term for the Company as a lessee.
Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes 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 Company 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 Company
as lessee. As a lessee, the Company 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 Company uses the straight-line method for depreciation. Where the Company, 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.
22.
21. Intangible assets
The intangible assets of the Company include land use rights, software, patents and certificates of third party right.
The intangible asset is initially measured at cost, and its useful life is determined upon acquisition. If the useful 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.
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21. Intangible assets (Continued)
The amortisation methods for the intangible assets with finite useful life are as follows:
Method of
Type Useful life amortisation Remark
Land use rights 50-70 Straight-line method
Software 5-10 Straight-line method
Patents 5-20 Straight-line method
Certificates of third party right 3 Straight-line method
The Company 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. 22.
22. Long-term asset impairment
Impairment of long-term equity investments in subsidiaries, associates and joint ventures, asset impairment on
investment property, fixed assets, construction in progress, bearer biological assets measured at cost, right-of-use
assets, intangible assets, goodwill and others (excluding inventories, investment property measured at fair value,
deferred tax assets and financial assets) subsequently measured at cost is determined as follows:
The Company determines if there is any indication of asset impairment as at the balance sheet date. If there is 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 Company estimates the recoverable amount of an
individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company 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 Company.
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V. Significant Accounting Policies and Accounting Estimates (Continued)
22. Long-term asset impairment (Continued)
In the impairment test, if there is any indication that an asset group or a combination of asset groups related to
goodwill may be impaired, the Company 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.
23. Long-term prepaid expenses
The long-term prepaid expenses incurred by the Company 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.
24. Contract liabilities
A contract liability represents the Company’s obligation to transfer goods to a customer for which the Company has
received consideration (or an amount of consideration is due) from the customer. If the customer has already paid
the contract consideration before the Company transfers goods to the customer or the Company has obtained the
unconditional collection right, the Company will recognise such amount received or receivable as contract liabilities
at earlier of the actual payment by the customer or the amount payable becoming due. Contract assets and contract
liabilities under the same contract are presented on a net basis, and contract assets and contract liabilities under
different contracts are not offset.
25. Employee benefits
(1) Scope of employee benefits
Employee benefits are all forms of considerations or compensation given by an entity in exchange 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.
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V. Significant Accounting Policies and Accounting Estimates (Continued)
25. Employee benefits (Continued)
(3) Post-employment benefits
Post-employment benefit plans include defined contribution plans and defined benefit plans. A defined
contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into
a separate fund and the Company has no further obligations for payment. A defined benefit plan is a post-
employment benefit plan other than a defined contribution plan.
Defined contribution 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.
Defined benefit plans
For defined benefit plans, the actuarial valuation is carried out by an independent actuary on the annual
balance sheet date, and the cost of providing benefits is determined by the expected cumulative benefit unit
method. The cost of staff remuneration arising from the Company’s defined benefit plans includes the following
components:
Service cost, including current service cost, past service cost, and settlement gain or loss. In particular,
the current service cost refers to the increase in the present value of obligations of defined benefit plans
arising from the service provided by staff in the current period; the past service cost refers to the increase
or decrease in the present value of obligations of defined benefit plans related to the service of the staff in
the previous period arising from the revision of defined benefit plans.
Net interest on net liabilities or net assets of defined benefit plans, including interest income from the
assets under the plans, interest expense arising from the obligations of defined benefit plans, and interest
affected by asset caps.
Changes arising from the remeasurement of net liabilities or net assets of defined benefit plans.
Unless other accounting standards require or allow costs of staff welfare to be included in costs of assets,
the Company will include the above items and in the current profit and loss; and include item in other
comprehensive income which will not be transferred back to profit or loss in subsequent accounting periods.
When the original defined benefit plan is terminated, all the part originally included in other comprehensive
income shall be transferred to retained profit within the scope of equity.
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25. Employee benefits (Continued)
(4) Termination benefits
When the Company 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 Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labour
relationship plans and employee redundant proposals; the Company 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.
(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 net liabilities or net assets of defined benefit plans” in the relevant employee benefits shall be
included in the current profit and loss or the relevant costs of assets.
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26. Provisions
Obligations pertinent to the contingencies which satisfy the following conditions are recognised by the Company as
provisions:
(1) the obligation is a current obligation borne by the Company;
(2) it is likely that an outflow of economic benefits from the Company will be resulted from the performance of the
obligation;
(3) the amount of the obligation can be reliably measured.
The provisions shall be initially measured based on the best estimate for the expenditure required for the 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 Company 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.
27. Share-based payments and equity instruments
(1) Category of share-based payment
The Company’s share-based payment is either equity-settled or cash-settled.
(2) Determination of fair value of equity instruments
For the existence of an active market for options and other equity instruments granted by the Company, the
fair value is determined at the quoted price in the active market. For options and other equity instruments with
no active market, option pricing model shall be used to estimate the fair value of the equity instruments. The
following factors shall be taken into account using option pricing models: A. the exercise price of the option; B.
the validity period of the option; C. the current market price of the share; D. the expected volatility of the share
price; E. predicted dividend of the share; and F. risk-free rate of the option within the validity period.
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V. Significant Accounting Policies and Accounting Estimates (Continued)
27. Share-based payments and equity instruments (Continued)
(3) Recognition of vesting of equity instruments based on the best estimate
On each balance sheet date within the vesting period, the estimated number of equity instruments expected to
vest is revised based on the best estimate made by the Company according to the latest available subsequent
information as to changes in the number of employees with exercisable rights. On the vesting date, the final
estimated number of equity instruments expected to vest should equal the actual number of equity instruments
expected to vest.
(4) Accounting treatment of implementation, modification and termination of share-based payment
Equity-settled share-based payment shall be measured at the fair value of the equity instruments granted to
employees. For those may immediately vest after the grant, the fair value of equity instrument at the grant date
shall be included in the relevant costs or expenses, and the capital reserve shall be increased accordingly.
If the right may not be exercised until the vesting period comes to an end or until the specified performance
conditions are met, on each balance sheet date within the vesting period, the services obtained in the current
period shall, based on the best estimate of the number of vested equity instruments, be included in the relevant
costs or expenses and the capital reserve at the fair value of the equity instrument at the grant date. After the
vesting period, relevant costs or expenses and total shareholders’ equity which have been recognised will not
be adjusted.
Cash-settled share-based payment shall be measured in accordance with the fair value of liability calculated
and recognised based on the shares or other equity instruments undertaken by the Company. For those may
immediately vest after the grant, the fair value of the liability undertaken by the Company shall, on the date of the
grant, be included in the relevant costs or expenses, and the liabilities shall be increased accordingly. If the right
may not be exercised until the vesting period comes to an end or until the specified performance conditions
are met, on each balance sheet date within the vesting period, the services obtained in the current period shall,
based on the best estimate of the information about the exercisable right, be included in the relevant costs or
expenses and the corresponding liabilities at the fair value of the liability undertaken by the Company. For each
of the balance sheet date and settlement date before the settlement of the relevant liabilities, fair value of the
liabilities shall be remeasured and the changes will be included in the profit or loss for the current period.
When there are changes in Company’s share-based payment plans, if the modification increases the fair value
of the equity instruments granted, corresponding recognition of service increase in accordance with the increase
in the fair value of the equity instruments; if the modification increases the number of equity instruments
granted, the increase in fair value of the equity instruments is recognised as a corresponding increase in service
achieved. An increase in the fair value of equity instruments refers to the difference between the fair values of
the modified date. If the modification reduces the total fair value of shares paid or not conductive to the use of
other employees share-based payment plans to modify the terms and conditions of service, it will continue to
be accounted for in the accounting treatment, as if the change had not occurred, unless the Company cancelled
some or all of the equity instruments granted.
During the vesting period, if the cancelled equity instruments (except for failure to meet the conditions of the
non-market vesting conditions) granted by the Company to cancel the equity instruments granted amount
treated as accelerated vesting of the remaining period should be recognised immediately in profit or loss, while
recognising capital reserves. If employees or other parties can choose to meet non-vesting conditions but they
are not met in the vesting period, the Company will treat them as cancelled equity instruments granted.
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28. Perpetual Bonds
(1) Classification of financial liabilities and equity instruments
Financial instruments issued by the Company are classified into financial assets, financial liabilities or 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.
(2) Accounting treatment of Perpetual Bonds
Financial instruments issued by the Company 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 Company, 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 Company 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.
29. Revenue
(1) General principles
The Company 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 Company 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 Company performs its performance obligation within a certain
period; otherwise, it performs its performance obligation at a point of time:
when the customer simultaneously receives and consumes the benefits provided by the Company when
the Company performs its obligations under the contract;
when the customer is able to control the goods in progress in the course of performance by the Company
under the contract;
when the goods produced by the Company under the contract are irreplaceable and the Company has
the right to payment for performance completed to date during the whole contract term.
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29. Revenue (Continued)
(1) General principles (Continued)
For performance obligations performed within a certain period, the Company 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 Company 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.
For performance obligation performed at a point of time, the Company 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 Company considers the following indications:
The Company has the current right to receive payment for the goods, which is when the customer has the
current payment obligations for the goods.
The Company has transferred the legal title of the goods to the customer, which is when the client
possesses the legal title of the goods.
The Company has transferred the physical possession of goods to the customer, which is when the
customer obtains physical possession of the goods.
The Company has transferred all of the substantial risks and rewards of ownership of the goods to the
customer, which is when the customer obtain all of the substantial risks and rewards of ownership of the
goods to the customer.
The customer has accepted the goods.
Other information indicates that the customer has obtained control of the goods.
The Company’s right to consideration in exchange for goods or services that the Company has transferred 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 (Note V. 10). The Company’s unconditional
right to receive consideration from customers (only depends on passage of time) is accounted for as accounts
receivable. The Company’s obligation to transfer goods or services to customers for which the Company 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 (Continued)
29. Revenue (Continued)
(2) Specific methods
Specific method for revenue recognition of machine-made paper business of the Company: 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 Company: according to the repayment schedule,
the income is recognised by instalments according to the effective interest rate.
Specific method for recognition of revenue from real estate of the Company: revenue is recognised by
amortising the property rental income on a straight-line basis over the lease term.
The specific method for the Company to recognise revenue from electricity and steam: the sales of steam and
electricity by the Company are performance obligations performed at a point of time. For sales of electricity, the
Company recognises revenue from sales of electricity based on the quantity of electricity delivered to customers
every month at a price agreed in the contract. For sales of steam, the Company recognises revenue from sales
of steam based on the amount of steam delivered to customers every month at a price agreed in the contract.
The specific method for the Company to recognise revenue from construction materials, moulds and paper
chemicals: revenue is recognised when goods are delivered to the customers and such deliveries are confirmed.
30. Contract costs
Contract costs are either the incremental costs of obtaining a contract with a customer or the costs to fulfil a contract
with a customer.
Incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with a
customer that it would not have incurred if the contract had not been obtained e.g. sales commission. The Company
recognises the incremental costs of obtaining a contract with a customer as an asset if it expects to recover those
costs. Other costs of obtaining a contract are expensed when incurred.
If the costs to fulfil a contract with a customer are not within the scope of inventories or other ASBEs, the Company
recognises an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:
the costs relate directly to an existing contract or to a specifically identifiable anticipated contract, including
direct labour, direct materials, allocations of overheads (or similar costs), costs that are explicitly chargeable to
the customer and other costs that are incurred only because the Company entered into the contract;
the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to
satisfy) performance obligations in the future;
the costs are expected to be recovered.
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V. Significant Accounting Policies and Accounting Estimates (Continued)
30. Contract costs (Continued)
Assets recognised for the incremental costs of obtaining a contract and assets recognised for the costs to fulfil
a contract (the “assets related to contract costs”) are amortised on a systematic basis that is consistent with the
transfer to the customer of the goods or services to which the assets relate and recognised in profit or loss for the
current period.
The Company recognises an impairment loss in profit or loss to the extent that the carrying amount of an asset related
to contract costs exceeds:
remaining amount of consideration that the Company expects to receive in exchange for the goods or services
to which the asset relates;
the cost estimated to be happened for the transfer of related goods or services.
The costs of contract performance recognised as assets, if the amortisation period is less than one year or a normal
operating cycle upon the initial recognition, are presented as “Inventories” item, and if the amortisation period is more
than one year or a normal operating cycle upon the initial recognition, are presented as “other non-current assets”
item.
The contract obtaining costs recognised as assets, if the amortisation period is less than one year or a normal
operating cycle upon the initial recognition, are presented as “other current assets” item, and if the amortisation
period is more than one year or a normal operating cycle upon the initial recognition, are presented as “other non-
current assets” item.
31. Government grants
A government grant is recognised when the grant will be received and that the Company will comply with the
conditions attaching to the grant.
If a government grant is in the form of a monetary asset, it is measured at the amount received or receivable. If a
government grant is in the form 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.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
31. Government grants (Continued)
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or 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 or used to offset related costs; 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 Company adopts a
consistent approach to the same or similar government grants.
A government grant related to daily activities is recognised in other gains or used to offset related costs relying on the
essence of economic business; otherwise, recognised in non-operating income.
For the repayment of a government grant already recognised, if the carrying amount of relevant assets was written off
at initial recognition, the carrying amount of the assets shall be adjusted; if there is any related deferred income, the
repayment shall be offset 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.
32. Deferred income tax assets/deferred income tax liabilities
Income tax comprises current income tax expense and deferred income tax expense, which are included in profit 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 Company 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 Company 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.
2022 ANNUAL REPORT 221
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
32. Deferred income tax assets/deferred income tax liabilities (Continued)
The Company recognises a deferred income tax asset for the carry forward of deductible temporary differences,
deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable 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.
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 Company 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.
33. Lease
(1) Identification of leases
On the beginning date of the contract, the Company (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 Company identifies such contract is, or contains, a lease.
(2) The Company as lessee
On the beginning date of the lease, the Company recognises right-of-use assets and lease liabilities for 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. 20.
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V. Significant Accounting Policies and Accounting Estimates (Continued)
33. Lease (Continued)
(2) The Company as lessee (Continued)
The lease liability is initially measured at the present value of the lease payments that are not paid at the
beginning date of the lease using the interest rate implicit in the lease. Where the interest rate implicit in the
lease cannot be determined, the incremental borrowing rate is used as the discount 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 recognised in profit or loss for
the period in which they actually arise.
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 Company 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-value 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 RMB40,000 when it is a new
asset.
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.
For a low-value asset lease, the Company chooses the above simplified approach based on the specific
circumstances of each lease.
2022 ANNUAL REPORT 223
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
33. Lease (Continued)
(2) The Company as lessee (Continued)
Lease modification
The Company accounts for a lease modification as a separate lease when the modification occurs and the
following conditions are met: the lease modification expands the scope of lease by adding the right to use
one or more of the leased assets; and the increase in consideration is equivalent to the separate price for the
expanded scope of lease adjusted for that contractual situation.
Where a lease modification is not accounted for as a separate lease, at the effective date of the lease
modification, the Company reallocates the consideration of the modified contract, redetermines the lease term
and remeasures the lease liability based on the present value of the lease payments after the modification and
the revised discount rate.
If a lease modification results in a reduction in the scope of the lease or a shortening of the lease term, the
Company reduces the carrying amount of the right-of-use asset accordingly and includes in the profit or loss for
the period the gain or loss associated with the partial or complete termination of the lease.
Where other lease modifications result in a remeasurement of the lease liability, the Company adjusts the
carrying amount of the right-of-use asset accordingly.
(3) The Company as lessor
When the Company is a lessor, a lease is classified as a finance lease whenever the terms of the lease transfer
substantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases are
classified as operating leases.
Finance leases
Under finance leases, the Company accounts for finance lease receivables at the beginning of the lease term
at the net lease investment, which is the sum of the unsecured residual value and the present value of the
lease receipts outstanding at the commencement date of the lease, discounted at the interest rate implicit in
the lease. The Company as lessor calculates and recognises interest income for each period of the lease term
based on a fixed periodic interest rate. Variable lease payments acquired by the Company as lessor that are not
included in the net measurement of lease investments are included in profit or loss for the period when they are
actually incurred.
Derecognition and impairment of finance lease receivables are accounted for in accordance with the
requirements under the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement
of Financial Instruments and the Accounting Standards for Business Enterprises No. 23 – Transfer of Financial
Assets.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
33. Lease (Continued)
(3) The Company as lessor (Continued)
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.
Lease modification
The Company accounts for a modification in an operating lease as a new lease from the effective date of the
modification and the amount of lease receipts received in advance or receivable in respect of the lease prior to
the modification is treated as a receipt under the new lease.
The Company accounts for a modification in a finance lease as a separate lease when the change occurs and
the following conditions are met: the modification expands the scope of lease by adding the right to use one
or more of the leased assets; and the increase in consideration is equivalent to the separate price for the
expanded scope of lease adjusted for that contractual situation.
Where a finance lease is modified and not accounted for as a separate lease, the Company accounts for the
modified lease in the following circumstances: If the modification takes effect on the lease commencement
date, the lease will be classified as an operating lease, the Company will account for it as a new lease from the
effective date of the lease modification, and use the net lease investment before the effective date of the lease
modification; If the modification takes effect on the lease commencement date, the lease will be classified
as a finance lease, and the Company will conduct accounting treatment in accordance with the Accounting
Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments on
modifying or renegotiating contracts.
(4) Sublease
When the Company is an intermediate lessor, the sublease is classified with reference to the right-of-use assets
arising from the head lease. If the head lease is a short-term lease for which the Company adopts a simplified
approach, then the Company classifies the sublease as an operating lease.
2022 ANNUAL REPORT 225
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
33. Lease (Continued)
(5) Sale and leaseback
The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and 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.
34. Production safety expenses
According to relevant provisions, the Company makes provisions for production safety expenses based on the
revenue of the power plant in the previous year and the prescribed percentages. The specific provisions are as
follows: if the revenue of the previous year did not exceed RMB10 million, provisions would be made at 3%;
if the revenue of the previous year exceeded RMB10 million but did not exceed RMB100 million, provisions would
be made at 1.5%; if the revenue of the previous year exceeded RMB100 million but did not exceed RMB1,000
million, provisions would be made at 1%; if the revenue of the previous year exceeded RMB1,000 million but did
not exceed RMB5,000 million, provisions would be made at 0.8%; if the revenue of the previous year exceeded
RMB5,000 million but did not exceed RMB10,000 million, provisions would be made at 0.6%; if the revenue of the
previous year exceeded RMB10,000 million, provisions would be made at 0.2%.
Provisions for production safety expenses are included in the cost of related products or profit or loss of the current
period and included in “special reserves” correspondingly.
When the provisions for production safety expenses and maintenance costs are utilised within the prescribed scope,
if such production safety expenses are applied and related to revenue expenditures, specific reserve is directly offset.
When fixed assets are incurred, they are included in the “construction in progress” item and transferred to fixed
assets when the status of the assets is ready for intended use. They are then offset against specific reserve based on
the amount included in fixed assets while corresponding amount is recognised in accumulated depreciation. Such
fixed assets are no longer depreciated in subsequent periods.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
35. Repurchase of shares
Prior to cancellation or transfer of shares repurchased, the Company recognises all expenditures arising from share
repurchase as cost of treasury shares in the treasury share account. Considerations and transaction fee incurred from
the repurchase of shares shall lead to the elimination of owners’ equity and does not recognise profit or loss when
shares of the Company are repurchased, transferred or cancelled.
The difference between the actual amount received and the carrying amount of the treasury shares are recognised as
capital reserve when the treasury shares are transferred, if the capital reserve is not sufficient to be offset, the excess
amount shall be recognised to offset surplus reserve and retained profit. When the treasury shares are cancelled,
the capital shall be eliminated according to the number of shares and par value of cancelled shares, the difference
between the actual amount received and the carrying amount of the treasury shares are recognised as capital reserve,
if the capital reserve is not sufficient to be offset, the excess amount shall be recognised to offset surplus reserve and
retained profit.
36. Restricted shares
If the Company grants the restricted shares to incentive participants under an equity incentive plan, the incentive
participants shall subscribe for the shares first. If the unlocking conditions stipulated in the equity incentive plan
cannot be fulfilled subsequently, the Company repurchase the shares at the predetermined price. If the registration
and other capital increase procedures for the restricted shares issued to employees are completed in accordance
with relevant regulations, the Company recognises share capital and capital reserve (or capital premium) based on
the subscription money received from the employees on the grant date; and recognises treasury shares and other
payables for repurchase obligation.
37. Critical accounting judgments and estimates
The Company 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 Company 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 Company 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.
2022 ANNUAL REPORT 227
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
37. Critical accounting judgments and estimates (Continued)
Measurement of the ECLs of accounts receivable
The Company 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 Company 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 Company 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 Company on a regularly basis.
Impairment of goodwill
The Company assesses the impairment of goodwill at least annually, which requires estimates on the use value of
asset groups allocated with goodwill. When estimating use value, the Company is required to estimate the future cash
flow from such asset groups while selecting the appropriate discount rate to calculate the present value of future cash
flow.
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.
Share-based payments
When calculating the liabilities and expenses related to the equity incentive plan, the management of the Company is
required to make judgments and estimates on issues such as the turnover rate and vesting conditions. Differences in
the judgments and estimates will have a material effect on the financial statements.
38. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
Interpretation No. 15 of the Accounting Standards for Business Enterprises
The Ministry of Finance issued Interpretation No. 15 of the Accounting Standards for Business Enterprises (Cai
Kuai [2021] No. 35) (“Interpretation No. 15”) in December 2021.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
38. Changes in significant accounting policies and accounting estimates (Continued)
(1) Changes in significant accounting policies (Continued)
Interpretation No. 15 of the Accounting Standards for Business Enterprises (Continued)
Interpretation No. 15 stipulates that, in case an enterprise conducts external sales of products or by-products
produced before fixed assets reaching their intended use or during the R&D process (collectively, “Trial Sales”),
the revenues and costs related to Trial Sales shall be accounted for separately and included in the current
profit and loss in accordance with the Accounting Standards for Business Enterprises No. 14 – Revenue and
the Accounting Standards for Business Enterprises No. 1 – Inventories. The net amount arising from relevant
revenue for Trial Sales offsetting relevant costs for Trial Sales shall not be written off against the cost of the
fixed assets or R&D expenses. Before the relevant products or by-products under Trial Sales are sold externally,
those products that meet the requirements of the Accounting Standards for Business Enterprises No. 1 –
Inventories shall be recognised as inventories, and those products that meet the recognition criteria for relevant
assets in other relevant accounting standards for business enterprises shall be recognised as those relevant
assets.
From 1 January 2022, the Company has implemented the requirement of “Accounting treatment for external
sales of the fixed assets before reaching their intended use or the products or by-products produced during the
R&D process of a company” under Interpretation No. 15 and made retrospective adjustment.
Interpretation No.15 stipulates that, “costs that will inevitably occur in the performance of contractual
obligations” in an onerous contract should reflect the minimum net cost of rescinding that contract, i.e. the
lower of the cost of performing the contract and the compensation or penalty for failure to perform the contract.
The cost for the enterprise to perform the contract comprises the incremental cost of performing the contract
and the apportioned amount of other costs directly related to the performance of the contract. Among them,
the incremental cost of performing the contract includes direct labour, direct materials, etc.; the apportioned
amount of other costs directly related to the performance of the contract includes the apportioned amount of
depreciation expenses of fixed assets used to perform the contract, etc.
From 1 January 2022, the Company has implemented the requirement of “Determination of onerous contracts”
under Interpretation No.15, retrospectively adjusted the retained earnings as at 1 January 2022, and did not
adjust the comparative financial statements data in the prior period.
The adoption of Interpretation No. 15 had no material impact on the financial position and operating results of
the Company.
Interpretation No. 16 of the Accounting Standards for Business Enterprises
The Ministry of Finance issued Interpretation No. 16 of the Accounting Standards for Business Enterprises (Cai
Kuai [2022] No. 31) (“Interpretation No. 16”) in November 2022.
Interpretation No. 16 stipulates that, for financial instruments such as perpetual bonds classified as equity
instruments, the enterprise shall recognise the income tax effect related to dividends when recognising dividend
receivables. For distributed profits from transactions or events that previously generated profit or loss, the
income tax effect of the dividend shall be included in profit or loss for the period; for distributed profits from
transactions or events that was previously recognised in owner’s equity, the income tax effect of the dividend
shall be included in owner’s equity.
2022 ANNUAL REPORT 229
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Continued)
38. Changes in significant accounting policies and accounting estimates (Continued)
(1) Changes in significant accounting policies (Continued)
Interpretation No. 16 of the Accounting Standards for Business Enterprises (Continued)
If the Company’s recognition of dividend receivable in relation to financial instruments classified as equity
instruments occurs during the year, the income tax effect involved shall be accounted for in accordance with the
aforesaid requirements of Interpretation No. 16. If the recognition occurred before 1 January 2022 and relevant
financial instrument has not been derecognised as at 1 January 2022, the income tax effect shall be adjusted
retrospectively.
Interpretation No. 16 stipulates that, if an enterprise replaces cash-settled share-based payment with equity-
settled share-based payment in accordance with terms and conditions under cash-settled share-based
payment agreement, on the date of change, equity-settled share-based payment shall be measured at the fair
value as at the date of grant of such equity instrument, with services received to be included in capital reserve.
Meanwhile, recognised liability in relation to cash-settled share-based payment as at the date of change shall
be derecognised, with difference thereof to be included in profit or loss for the current period. If the vesting
period is extended or shortened due to the revision, the enterprise shall perform the above accounting treatment
according to the revised vesting period (without considering the relevant accounting treatment provisions of
adverse revisions).
The Company’s cash-settled share-based payment that occurred during the year was changed to an equity-
settled share-based payment, and accounting treatment was performed in accordance with the aforesaid
requirements of Interpretation No. 16. For such transactions that occurred before 1 January 2022, the Company
adjusted the retained earnings and other related financial statement items on 1 January 2022, without adjusting
the information for the comparable period.
The adoption of Interpretation No. 16 had no material impact on the financial position and operating results of
the Company.
(2) Changes in significant accounting estimates
The Company did not have any change in significant accounting estimates during the year.
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XII Financial Report
VI. Taxation
1. Main tax types and tax rates
Tax type Tax base Tax rate (%)
Value added tax (VAT) Taxable income 13/9/6
Property tax Rental income and property price 1.2/12
Urban maintenance and construction tax Turnover tax payable 7
Enterprise income tax (EIT) Taxable income 25
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
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 15
Huanggang Chenming Pulp & Paper Co., Ltd. 15
Kunshan Tuoan Plastic Products Co., Ltd. 15
Shouguang Wei Yuan Logistics Company Limited 20
Shouguang Chenming Papermaking Machine Co., Ltd. 20
Shouguang Xinyuan Coal Co., Ltd. 20
Shouguang Shun Da Customs Declaration Co, Ltd. 20
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 15 December 2021, the Company received a high and new technology enterprise certificate with a
certification number of GR202137005666. 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 2021 to 2023.
Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, received a high and new technology
enterprise certificate with a certification number of GR202137005468 on 15 December 2021. 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 2021 to 2023.
Jilin Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise
certificate with a certification number of GR202222000414 on 29 November 2022. 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 2022 to 2024.
2022 ANNUAL REPORT 231
XII Financial Report
VI. Taxation (Continued)
2. Tax incentives (Continued)
(1) Enterprise income tax (Continued)
Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise
certificate with a certification number of GR202236000018 on 4 November 2022. 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 2022 to 2024.
Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and new technology
enterprise certificate with a certification number of GR202144001212 on 20 December 2021. 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 2021 to 2023.
Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company, received a high and
new technology enterprise certificate with a certification number of GR202042001502 on 1 December 2020.
Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and
the relevant policies, Wuhan Chenming is subject to an enterprise income tax rate of 15% of taxable income,
and is entitled to the preferential treatment from 2020 to 2022.
Huanggang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and new
technology enterprise certificate with a certification number of GR202042001471 on 1 December 2020. Pursuant
to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Huanggang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and is
entitled to the preferential treatment from 2020 to 2022.
Kunshan Tuoan Plastic Products Co., Ltd., a subsidiary of the Company, received a high and new technology
enterprise certificate with a certification number of GR202032004526 on 2 December 2020. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies, Kunshan Tuoan is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to
the preferential treatment from 2020 to 2022.
Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income 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., Yangjiang Chenming Arboriculture
Development Co., Ltd., Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture
Co., Ltd., which are the subsidiaries of the Company, have completed the filings for EIT reduction for exemption
from EIT.
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XII Financial Report
VI. Taxation (Continued)
2. Tax incentives (Continued)
(1) Enterprise income tax (Continued)
Shouguang Xinyuan Coal Co., Ltd., Shouguang Chenming Papermaking Machine Co., Ltd., Shouguang
Wei Yuan Logistics Company Limited and Shouguang Shun Da Customs Declaration Co, Ltd., which are
subsidiaries of the Company, are small and micro enterprises. Pursuant to the Announcement of the Ministry of
Finance and the State Administration of Taxation on the Implementation of Preferential Income Tax Policies for
Small and Micro Enterprises and Individual Industrial and Commercial Business (Cai Shui [2021] No. 12) and the
Announcement of the Ministry of Finance and the State Administration of Taxation on Further Implementation
of Preferential Income Tax Policies for Small and Micro Enterprises (Cai Shui [2022] No. 13), the annual taxable
income of a small low-profit enterprise that is less than RMB1 million shall be included in its taxable income at
a reduced rate of 12.5%, with the applicable enterprise income tax rate of 20%. The annual taxable income of a
small low-profit enterprise that is more than RMB1 million but not exceeding RMB3 million shall be included in
its taxable income at a reduced rate of 25%, with the applicable enterprise income tax rate of 20%.
Guangdong Chenming Panels Co., Ltd., a subsidiary of the Company, meets the requirements of Rule 99 of
the Regulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax
(Decree No. 512 of the State Council of the People’s Republic of China) and the Announcement of the Ministry
of Finance and the State Administration of Taxation on Improvement of the Value-added Tax Policy for the
Comprehensive Utilisation of Resources (Cai Shui [2021] No. 40): For enterprises that derive income from the
products listed in the Catalogue which are in line with related national or industry standards by making use of
the resources listed in the Catalogue as the main raw materials, taxable income will be calculated at a reduced
rate of 90% of the total revenue. To be entitled to the above tax benefits, the ratio of the resources listed in the
Catalogue and the raw materials used for the product shall be consistent with the required technical standards
stated in the Catalogue.
(2) Value-added Tax (“VAT”)
Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax, Zhanjiang
Chenming Arboriculture Development Co., Ltd., Yangjiang Chenming Arboriculture Development Co., Ltd.,
Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture Co., Ltd., which are
subsidiaries of the Company, are exempt from VAT, and have completed the filings for VAT reduction for
exemption from VAT.
Pursuant to the Announcement of the Ministry of Finance and the State Administration of Taxation on
Improvement of the Value-added Tax Policy for the Comprehensive Utilisation of Resources (Cai Shui [2021] No.
40), taxpayers who sell self-produced products and services applying integrated use of resources may enjoy the
immediate VAT refund policy. Guangdong Chenming Panels Co., Ltd., a subsidiary of the Company, produces
products applying integrated use of resources, and is therefore subject to the immediate VAT refund policy in
2022.
2022 ANNUAL REPORT 233
XII Financial Report
VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMB
Item Closing balance Opening balance
Treasury cash 3,491,219.08 2,926,080.68
Bank deposit 2,155,968,930.43 3,166,431,843.70
Other monetary funds 11,840,974,836.57 10,950,425,015.28
Total 14,000,434,986.08 14,119,782,939.66
Of which: Total deposits in overseas banks 593,378,097.70 462,952,909.20
Total restricted amount due to mortgages, pledges or freezes 11,756,140,645.56 10,756,936,714.59
Other explanations:
Other monetary funds of RMB9,038,936,192.70 were the guarantee deposit for the application for bank
acceptance with the banks by the Company;
Other monetary funds of RMB2,164,908,904.28 were the guarantee deposit for the application for letter of credit
with the banks by the Company;
Other monetary funds of RMB135,702,304.71 were the guarantee deposit for the application for guarantees with
the banks by the Company;
Other monetary funds of RMB298,872,520.00 were the guarantee deposit for the application for loans with the
banks by the Company;
Other monetary funds of RMB117,550,110.51 were the Company’s statutory reserve deposits at the People’s
Bank of China;
Other monetary funds of RMB170,613.36 were locked-up due to reasons such as litigations or being unused for
a long time, resulting in restriction on the use of that account’s balance;
Other monetary funds included accrued interest of RMB84,834,191.01.
2. Financial assets held for trading
Unit: RMB
Item Closing balance Opening balance
Financial assets measured at fair value through profit or loss 74,708,444.88 110,886,182.88
Of which:
Investment in equity instruments 74,708,444.88 110,886,182.88
Total 74,708,444.88 110,886,182.88
Explanation: Financial assets held for trading were shares of Bohai Bank subscribed by the Company.
234
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Carrying Book balance Bad debt provision Carrying
Category Amount Percentage Amount Percentage amount Amount Percentage Amount Percentage amount
Accounts receivable
assessed individually for
bad debt provision 226,667,597.47 6.13% 226,667,597.47 100.00 % 224,831,742.24 7.24% 224,831,742.24 100.00%
Accounts receivable
assessed collectively for
bad debt provision 3,473,893,247.32 93.87% 261,632,801.36 7.53 % 3,212,260,445.96 2,880,986,860.24 92.76% 224,469,709.78 7.79% 2,656,517,150.46
Of which:
Due from related party
customers 8,639,295.98 0.23% 1,775,510.01 20.55 % 6,863,785.97 109,385.42 0.004% 109,385.42
Due from non-related party
customers 2,081,296,530.28 56.24% 52,357,160.25 2.52% 2,028,939,370.03 1,855,021,764.82 59.73% 84,870,622.11 4.58% 1,770,151,142.71
Factoring receivables 1,383,957,421.06 37.40% 207,500,131.10 14.99% 1,176,457,289.96 1,025,855,710.00 33.03% 139,599,087.67 13.61% 886,256,622.33
Total 3,700,560,844.79 100.00 % 488,300,398.83 13.20% 3,212,260,445.96 3,105,818,602.48 100.00% 449,301,452.02 14.47% 2,656,517,150.46
2022 ANNUAL REPORT 235
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
3. Accounts receivable (Continued)
(1) Disclosure of accounts receivable by category (Continued)
Items assessed individually for bad debt provision:
Unit: RMB
Closing balance
Bad debts Provision
Name Book balance provision percentage Provision reason
Hengfeng Hongyuan Real Estate
Holdings Co., Ltd. 45,493,811.40 45,493,811.40 100.00% Long outstanding
Ningxia Lingwu Baota Dagu
Storage and Transportation
Co., Ltd. 27,600,000.00 27,600,000.00 100.00% Long outstanding
Foshan Shunde Xingchen Paper
Co., Ltd. 26,236,528.70 26,236,528.70 100.00% Long outstanding
Zhengzhou Hongyang Paper
Products Co., Ltd. 15,113,432.93 15,113,432.93 100.00% Long outstanding
Shandong Bisheng Printing
Materials Co., Ltd. 14,813,369.27 14,813,369.27 100.00% Long outstanding
Henan Yibang Technology
Trading Co., Ltd. 13,396,601.22 13,396,601.22 100.00% Long outstanding
91 companies including
Shandong Yiming New Material
Technology Corp Co., Ltd. 84,013,853.95 84,013,853.95 100.00% Long outstanding
Total 226,667,597.47 226,667,597.47 100.00%
Items assessed collectively for bad debt provision: Due from related party customers
Unit: RMB
Closing balance
Name Book balance Bad debts provision Provision percentage
Within 1 year 3,578,801.50 13,445.83 0.38%
1 to 2 years 5,060,494.48 1,762,064.18 34.82%
Total 8,639,295.98 1,775,510.01 20.55 %
236
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
3. Accounts receivable (Continued)
(1) Disclosure of accounts receivable by category (Continued)
Items assessed collectively for bad debt provision: Receivables from non-related party customer
Unit: RMB
Closing balance
Name Book balance Bad debts provision Provision percentage
Within 1 year 2,018,983,850.89 11,339,235.33 0.56%
1 to 2 years 4,167,887.95 979,453.67 23.50%
2 to 3 years 2,316,203.17 1,036,515.87 44.75%
Over 3 years 55,828,588.27 39,001,955.38 69.86%
Total 2,081,296,530.28 52,357,160.25 2.52%
Items assessed collectively for bad debt provision: Factoring receivables
Unit: RMB
Closing balance
Name Book balance Bad debts provision ECL rate
Within 1 year 458,101,711.06 30,899,634.33 6.75%
1 to 2 years 720,016,666.64 104,101,666.65 14.46%
2 to 3 years 11,785,852.50 2,892,926.25 24.55%
Over 3 years 194,053,190.86 69,605,903.87 35.87%
Total 1,383,957,421.06 207,500,131.10 14.99%
2022 ANNUAL REPORT 237
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
3. Accounts receivable (Continued)
(1) Disclosure of accounts receivable by category (Continued)
If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, please
disclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 2,555,600,334.26 2,570,865,124.93
1 to 2 years 729,245,049.07 128,884,575.48
2 to 3 years 84,102,055.67 196,893,864.00
Over 3 years 331,613,405.79 209,175,038.07
Total 3,700,560,844.79 3,105,818,602.48
The basis used by the ageing analysis of the accounts receivable of the Company: the ageing of accounts
receivable is the length of time of the Company’s outstanding accounts receivable based on invoice date. The
closing balance is recognised one by one from the end of the period onwards until the amounts add up to the
balance. It is also broken up by intervals of within 1 year, 1-2 years, 2-3 years, 3-4 years, 4-5 years and over 5
years.
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Recovery or Closing
Category balance Provision reversal Written-off Others balance
Bad debt provision 449,301,452.02 90,714,695.75 51,857,429.84 225,000.00 366,680.90 488,300,398.83
Total 449,301,452.02 90,714,695.75 51,857,429.84 225,000.00 366,680.90 488,300,398.83
Explanation: Others represent exchange losses.
238
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
3. Accounts receivable (Continued)
(3) Top five accounts receivable based on closing balance of debtors
The total amount of top five accounts receivable based on closing balance of debtors for the period amounted
to RMB1,126,114,844.49 in total, accounting for 30.43% of the total closing balance of accounts receivable.
The closing balance of the corresponding bad debt provision amounted to RMB112,684,936.03 in total.
Unit: RMB
As a percentage of
the closing balance of
Closing balance of the total accounts Closing balance of
Name of entity accounts receivable receivable bad debt provision
Customer 1 479,821,566.65 12.97% 46,022,645.00
Customer 2 222,656,666.64 6.02% 24,596,930.88
Customer 3 198,805,660.00 5.37% 27,024,669.68
Customer 4 121,908,333.33 3.29% 14,629,000.00
Customer 5 102,922,617.87 2.78% 411,690.47
Total 1,126,114,844.49 30.43% 112,684,936.03
4. Accounts receivable financing
Unit: RMB
Item Closing balance Opening balance
Bills receivable 924,960,384.16 435,459,341.76
Total 924,960,384.16 435,459,341.76
Changes (increase or decrease) during the period and change in fair value of accounts receivable financing
Applicable √ Not applicable
If the provision for impairment of accounts receivable financing is made in accordance with the general model of
ECLs, please disclose the information about provision for impairment with reference to the way of disclosure of other
receivables:
Applicable √ Not applicable
2022 ANNUAL REPORT 239
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
5. Prepayments
(1) Presentation of prepayments according to ageing analysis
Unit: RMB
Closing balance Opening balance
Ageing Amount Percentage Amount Percentage
Within 1 year 749,904,460.45 95.14% 803,771,958.81 90.16%
1 to 2 years 38,287,166.37 4.86% 87,713,119.65 9.84%
Total 788,191,626.82 100.00% 891,485,078.46 100.00%
(2) Top five prepayments based on closing balance of prepaid parties
The total amount of top five prepayments based on closing balance of prepaid parties for the period amounted
to RMB350,644,860.35, accounting for 44.49% of the closing balance of the total prepayments.
As a percentage of the
Closing balance closing balance of the
Name of entity of prepayments total prepayments
Customer 1 95,016,586.53 12.06%
Customer 2 78,986,431.42 10.02%
Customer 3 71,063,593.98 9.02%
Customer 4 54,496,248.42 6.91%
Customer 5 51,082,000.00 6.48%
Total 350,644,860.35 44.49%
240
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
6. Other receivables
Unit: RMB
Item Closing balance Opening balance
Other receivables 1,717,445,443.44 2,252,864,083.00
Total 1,717,445,443.44 2,252,864,083.00
1) Other receivables by nature
Unit: RMB
Nature Closing balance Opening balance
Open credit 2,108,991,172.35 2,692,253,554.58
Reserve and borrowings 26,270,269.00 11,980,522.29
Guarantee deposit and deposit 12,230,367.80 5,125,826.96
Others 52,332,819.95 80,560,739.46
Total 2,199,824,629.10 2,789,920,643.29
2022 ANNUAL REPORT 241
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
6. Other receivables (Continued)
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMB
ECL rate (%)
for the next Bad debt Carrying
Category Book balance 12 months provision amount Reason
Bad debt provision assessed
individually
Interests receivable
Dividend receivable
Bad debt provision assessed
collectively 610,966,970.79 12.04% 73,559,281.09 537,407,689.70
Amount due from government
agencies 18,592,937.45 92.49% 17,196,725.50 1,396,211.95
Amount due from related parties 90,340,892.53 6.13% 5,541,541.63 84,799,350.90
Other receivables 502,033,140.81 10.12% 50,821,013.96 451,212,126.85
Total 610,966,970.79 12.04% 73,559,281.09 537,407,689.70
As at the end of the period, the Group 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:
Unit: RMB
ECL rate (%)
over the Bad debt Carrying
Category Book balance entire life provision amount Reason
Bad debt provision assessed
individually 1,588,857,658.31 25.73% 408,819,904.57 1,180,037,753.74
Total 1,588,857,658.31 25.73% 408,819,904.57 1,180,037,753.74
242
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
6. Other receivables (Continued)
2) Particulars of bad debt provision (Continued)
Changes in book balance with significant changes in loss provision for the year
Applicable √ Not applicable
Disclosure by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 617,314,987.00 797,531,460.41
1 to 2 years 257,038,289.93 1,344,225,352.93
2 to 3 years 702,427,199.71 484,647,394.76
Over 3 years 623,044,152.46 163,516,435.19
Total 2,199,824,629.10 2,789,920,643.29
3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Recovery or
Category Opening balance Provision reversal Written-off Others Closing balance
Bad debt provision 537,056,560.29 59,369,839.74 114,047,214.37 482,379,185.66
Total 537,056,560.29 59,369,839.74 114,047,214.37 482,379,185.66
2022 ANNUAL REPORT 243
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
6. Other receivables (Continued)
4) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five other receivables based on closing balance of debtors for the year
was RMB1,409,037,406.04, which accounted for 64.05% of the closing balance of the total other receivables.
The closing balance of corresponding bad debt provision amounted to RMB283,949,858.78.
Unit: RMB
As a
percentage of
the closing
balance of Closing balance
total other of bad debt
Name of entity Nature Closing balance Ageing receivables provision
Customer 1 Consideration for equity 493,800,000.00 2 to 3 years 22.45% 54,318,000.00
transfer
Customer 2 Consideration for equity 457,402,316.85 3 to 4 years 20.79% 137,220,695.06
transfer
Customer 3 Consideration for equity 199,054,783.56 2 to 3 years 9.05% 21,896,026.19
transfer
Customer 4 Consideration for equity 143,940,305.63 Within 1 year; 6.54% 64,773,137.53
transfer 1 to 2 years
Customer 5 Consideration for equity 114,840,000.00 Within 1 year 5.22% 5,742,000.00
transfer
Total 1,409,037,406.04 64.05% 283,949,858.78
244
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
7. Inventories
Whether the Company needs to comply with the disclosure requirements for real estate industries
No
(1) Categories of inventories
Unit: RMB
Closing balance Opening balance
Impairment Impairment
provision for provision for
inventories or inventories or
Item Book balance performance costs Carrying amount Book balance performance costs Carrying amount
Raw materials 2,488,652,200.15 18,096,641.64 2,470,555,558.51 1,734,387,984.21 24,660,967.32 1,709,727,016.89
Work-in-process products 111,248,779.69 111,248,779.69 148,489,098.95 148,489,098.95
Goods in stock 1,622,062,893.55 16,737,849.96 1,605,325,043.59 1,910,051,642.16 4,941,686.65 1,905,109,955.51
Developing costs 1,138,178,959.32 1,138,178,959.32
Consumable biological assets 1,496,607,818.84 1,496,607,818.84 1,519,305,850.77 1,519,305,850.77
Total 6,856,750,651.55 34,834,491.60 6,821,916,159.95 5,312,234,576.09 29,602,653.97 5,282,631,922.12
Note: Consumable biological assets are forestry assets.
(2) Impairment provision for inventories or performance costs
Unit: RMB
Increase during the period Decrease during the period
Reversal or Closing
Item Opening balance Provision Others transfer Others balance
Raw materials 24,660,967.32 922,116.24 7,486,441.92 18,096,641.64
Goods in stock 4,941,686.65 16,737,849.96 4,941,686.65 16,737,849.96
Total 29,602,653.97 17,659,966.20 12,428,128.57 34,834,491.60
Basis for recognition of net Reason for reversal or written-off of
realisable value/residual consideration impairment provision for inventories/
Item with future cost performance costs during the period
Raw materials The cost of raw materials is higher Written-off of impairment provision
than their net realisable value for inventories due to sales of impaired
spare parts during the period
Goods in stock The cost of goods in stock is higher Written-off of impairment provision for
than their net realisable value inventories due to sales of impaired goods
in stock during the period
2022 ANNUAL REPORT 245
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
8. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 3,998,724,415.85 5,216,934,172.61
Total 3,998,724,415.85 5,216,934,172.61
Explanations:
Long-term receivables due within one year amounting to RMB3,920,915,510.01 (amount for the beginning of the period:
RMB5,188,103,553.61) were financial lease receivables;
Long-term receivables due within one year amounting to RMB77,808,905.84 (amount for the beginning of the period:
RMB28,830,619.00) were deposits receivable.
9. Other current assets
Unit: RMB
Item Closing balance Opening balance
Input tax amount to be deducted 141,038,575.79 807,004,437.68
Prepaid tax 92,806,690.76 132,297,740.90
Receivables under financial lease due within one year 340,546,803.50 388,156,667.35
Factoring receivables due within one year 298,446,276.63 303,281,361.74
Prepaid expenses 241,313,507.50 195,453,994.69
Other payments 66,655,947.44 77,735,290.49
Total 1,180,807,801.62 1,903,929,492.85
246
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
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 6,739,718,184.27 1,302,116,713.90 5,437,601,470.37 8,344,107,765.88 1,211,551,549.72 7,132,556,216.16 4%-12%
Less: Unrealised
financing income 271,455,622.37 271,455,622.37 366,945,292.53 366,945,292.53
Equipment lease
financing 351,446,696.64 351,446,696.64 272,996,696.64 272,996,696.64
Less: Unrealised
financing income 32,060,345.32 32,060,345.32 32,913,472.31 32,913,472.31
Subtotal 6,787,648,913.22 1,302,116,713.90 5,485,532,199.32 8,217,245,697.68 1,211,551,549.72 7,005,694,147.96
Less: Long-term
receivables due within
one year 5,075,152,713.36 1,076,428,297.51 3,998,724,415.85 6,244,230,790.74 1,027,296,618.13 5,216,934,172.61
Total 1,712,496,199.86 225,688,416.39 1,486,807,783.47 1,973,014,906.94 184,254,931.59 1,788,759,975.35
Particulars of bad debt provision impairment
Unit: RMB
Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
ECL Carrying ECL rate Carrying
Category Amount Percentage Amount rate (%) amount Amount Percentage Amount (%) amount
Accounts receivable
assessed individually
for impairment 1,147,177,668.74 66.99% 222,451,005.54 19.39% 924,726,663.20 1,716,394,801.61 86.99% 183,801,256.59 10.71% 1,532,593,545.02
Of which:
Financial lease
payments 1,147,177,668.74 66.99% 222,451,005.54 19.39% 924,726,663.20 1,716,394,801.61 86.99% 183,801,256.59 10.71% 1,532,593,545.02
Accounts receivable
assessed collectively
for impairment 565,318,531.12 33.01% 3,237,410.85 0.57% 562,081,120.27 256,620,105.33 13.01% 453,675.00 0.18% 256,166,430.33
Of which:
Receivables not past
due 323,741,085.64 18.90% 3,237,410.85 1.00% 320,503,674.79 45,367,500.00 2.30% 453,675.00 1.00% 44,913,825.00
Deposits receivable 241,577,445.48 14.11% 241,577,445.48 211,252,605.33 10.71% 211,252,605.33
Total 1,712,496,199.86 100.00% 225,688,416.39 13.18% 1,486,807,783.47 1,973,014,906.94 100.00% 184,254,931.59 9.34% 1,788,759,975.35
2022 ANNUAL REPORT 247
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
10. Long-term receivables (Continued)
(1) Particulars of long-term receivables (Continued)
Accounts receivable assessed collectively for bad debt provision:
Collectively assessed item: receivables not past due
Closing balance
Book balance Bad debt provision ECL rate (%)
Within 1 year
1 to 2 years 183,235,530.08 1,832,355.30 1.00%
2 to 3 years 140,505,555.56 1,405,055.55 1.00%
Total 323,741,085.64 3,237,410.85 1.00%
Collectively assessed item: Deposits receivable
Closing balance
Book balance Bad debt provision ECL rate (%)
Within 1 year
1 to 2 years 108,284,310.81
2 to 3 years 113,937,377.76
Over 3 years 19,355,756.91
Total 241,577,445.48
Changes in book balance with significant changes in loss provision for the year
Applicable √ Not applicable
(2) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Recovery or Closing
Category balance Provision reversal Write-off Others balance
Bad debt provision 184,254,931.59 239,636,712.56 180,258,987.57 17,944,240.19 225,688,416.39
Total 184,254,931.59 239,636,712.56 180,258,987.57 17,944,240.19 225,688,416.39
248
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
11. Long-term equity investments
Unit: RMB
Change for the period
Investment Distribution
Opening gain or loss Adjustment Other of cash Closing Closing
balance recognised of other change in dividend balance balance of
(carrying Additional Withdrawn under equity comprehensive equity or profit Impairment (carrying impairment
Investee amount) contribution contribution method income interest declared provision Others amount) provision
I. Joint ventures
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd. 6,902,869.87 1,989,789.55 1,000,000.00 7,892,659.42
Weifang Sime Darby West Port
Co., Ltd. 77,370,998.75 -2,522,428.02 74,848,570.73
Shouguang Meite
Environmental Technology
Co., Ltd. 14,616,124.71 -5,694,280.83 8,921,843.88
Shouguang Jintou Industrial
Investment Partnership
(Limited Partnership) 2,360,000,000.00 -1,338.33 2,359,998,661.67
Weifang Xingxing United
Chemical Co., Ltd. 84,623,787.74 7,250,597.38 91,874,385.12
Subtotal 183,513,781.07 2,360,000,000.00 1,022,339.75 1,000,000.00 2,543,536,120.82
II. Associates
Zhuhai Dechen New Third
Board Equity Investment
Fund Company (Limited
Partnership) 36,967,896.31 -191,185.40 36,776,710.91
Ningbo Kaichen Huamei
Equity Investment Fund
Partnership (Limited
Partnership) 197,297,485.59 -79,166.82 197,218,318.77
Jiangxi Chenming Port Co.,
Ltd. 554,582.45 554,582.45
Goldtrust Futures Co., Ltd. 185,452,462.50 -7,063,279.67 178,389,182.83
Chenming (Qingdao) Asset
Management Co., Ltd. 6,933,668.14 488,367.55 940,000.00 6,482,035.69
Guangdong Nanyue Bank Co.,
Ltd. 1,284,074,888.13 29,939,682.54 596,429.87 1,314,611,000.54
Subtotal 1,711,280,983.12 554,582.45 23,094,418.20 596,429.87 940,000.00 1,733,477,248.74
Total 1,894,794,764.19 2,360,000,000.00 554,582.45 24,116,757.95 596,429.87 – 1,940,000.00 4,277,013,369.56
Other explanation: For the reason for the change of the opening balance of Guangdong Nanyue Bank Co., Ltd., please refer to Note VII. 40 and
46.
2022 ANNUAL REPORT 249
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
12. Other non-current financial assets
Unit: RMB
Item Closing balance Opening balance
Investment in debt instruments 663,000,000.00 400,000,000.00
Investment in equity instruments 123,750,761.62 119,927,003.25
Total 786,750,761.62 519,927,003.25
250
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
13. Investment property
(1) Investment property under the cost method
√ Applicable Not applicable
Unit: RMB
Housing and Construction
Item building structure Land use rights in progress Total
I. Original carrying amount
1. Opening balance 7,196,809,856.62 7,196,809,856.62
2. Increase during the period
3. Decrease during the period 36,595,287.79 36,595,287.79
(1) Disposal 36,595,287.79 36,595,287.79
4. Closing balance 7,160,214,568.83 7,160,214,568.83
II. Accumulated depreciation and
accumulated amortisation
1. Opening balance 723,271,424.71 723,271,424.71
2. Increase during the period 196,967,552.86 196,967,552.86
(1) Provision or amortisation 196,967,552.86 196,967,552.86
3. Decrease during the period 16,747,521.89 16,747,521.89
(1) Disposal 16,747,521.89 16,747,521.89
4. Closing balance 903,491,455.68 903,491,455.68
III. Impairment provision
IV. Carrying amount
1. Closing carrying amount 6,256,723,113.15 6,256,723,113.15
2. Opening carrying amount 6,473,538,431.91 6,473,538,431.91
2022 ANNUAL REPORT 251
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
13. Investment property (Continued)
(1) Investment property under the cost method (Continued)
Note: Investment properties under the Company primarily include:
Pujiang International Finance Plaze, located at No. 1098, Dongdaming Road, Hongkou District, Shanghai, is a long-term
held office property of Shanghai Hongtai Real Estate Co., Ltd., a subsidiary of the Company, mainly used for external
rental or office purposes;
Jinan Chenming Finance Building ( ), located in No. 7 Zone, Hanyu Financial Business Center, No. 7000,
Jingshi Road, Jinan Innovation Zone, is a long-term held office property of Shandong Chenming Investment Limited, a
subsidiary of the Company, mainly used for external rental or office purposes;
Fatum Apartment ( ), located at No. 463, Anbo Road, No. 22, Lane 467, Anbo Road, Yangpu District, Shanghai,
is a long-term held apartment property of Shanghai Herui Investment Co., Ltd., a subsidiary of the Company, mainly used
for external rental purposes;
Guangzhou Zhengjia Plaza ( ), located at Room 3901-3926, No. 372, Huanshi East Road, Yuexiu District,
Guangzhou, is a long-term held office property of Guangzhou Chenming Financial Leasing Co., Ltd., a subsidiary of the
Company, mainly used for external rental purposes;
Shenzhen Zhuoyue Baozhong Times Square ( ), located at Room 3201-3210, Building C, Zhuoyue
Baozhong Times Square (Phase 2), Xin’an Sub-district, Bao’an District, Shenzhen, is a long-term held office property of
Guangzhou Chenming Financial Leasing Co., Ltd., a subsidiary of the Company, mainly used for external rental purposes.
Shanghai Xizang South Road shop, located at No. 518-528 Xizang South Road, Shanghai, is a long-term store held by
Wuhan Junheng Property Management Co. Ltd., a subsidiary, mainly for external rental purposes.
14. Fixed assets
Unit: RMB
Item Closing balance Opening balance
Fixed assets 33,527,978,754.73 35,653,492,676.15
Disposal of fixed assets 269,759,940.57
Total 33,797,738,695.30 35,653,492,676.15
252
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
14. Fixed assets (Continued)
(1) Particulars of fixed assets
Unit: RMB
Electronic
Housing and Machinery and equipment and
Item building structure equipment Vehicles others Total
I. Original carrying amount:
1. Opening balance 10,673,297,551.11 43,798,170,683.63 296,201,440.65 457,044,021.47 55,224,713,696.86
2. Increase during the period 108,552,460.21 641,571,341.54 9,576,094.44 4,362,101.96 764,061,998.15
(1) Acquisition 25,384,908.65 115,296,460.56 9,366,494.44 4,319,542.49 154,367,406.14
(2) Transferred from
construction in progress 83,167,551.56 526,274,880.98 609,442,432.54
(3) Not arising from business
combinations 209,600.00 42,559.47 252,159.47
3. Decrease during the period 495,040,886.43 1,333,560,015.57 16,975,869.77 60,940,651.68 1,906,517,423.45
(1) Disposal or retirement 495,040,886.43 442,810,515.10 16,975,869.77 60,940,651.68 1,015,767,922.98
(2) Transferred to construction
in progress 890,749,500.47 890,749,500.47
4. Closing balance 10,286,809,124.89 43,106,182,009.60 288,801,665.32 400,465,471.75 54,082,258,271.56
II. Accumulated amortisation
1. Opening balance 2,302,130,749.09 16,572,843,548.56 190,913,517.71 300,377,759.61 19,366,265,574.97
2. Increase during the period 272,469,044.65 1,750,539,361.40 23,612,986.05 11,990,544.47 2,058,611,936.57
(1) Provision 272,469,044.65 1,750,539,361.40 23,570,236.08 11,959,197.36 2,058,537,839.49
(2) Business combinations 42,749.97 31,347.11 74,097.08
3. Decrease during the period 244,847,454.17 762,222,715.98 14,052,395.99 53,518,891.88 1,074,641,458.02
(1) Disposal or retirement 244,847,454.17 335,197,976.64 14,052,395.99 53,518,891.88 647,616,718.68
(2) Transferred to construction
in progress 427,024,739.34 427,024,739.34
4. Closing balance 2,329,752,339.57 17,561,160,193.98 200,474,107.77 258,849,412.20 20,350,236,053.52
III. Provision for impairment
1. Opening balance 27,808,852.79 169,697,469.90 13,889.13 7,435,233.92 204,955,445.74
2. Increase during the period
(1) Provision
(2) Other increases
3. Decrease during the period 911,982.43 911,982.43
(1) Disposal or retirement 911,982.43 911,982.43
(3) Other deductions
4. Closing balance 27,808,852.79 168,785,487.47 13,889.13 7,435,233.92 204,043,463.31
IV.Carrying amount
1. Closing carrying amount 7,929,247,932.53 25,376,236,328.15 88,313,668.42 134,180,825.63 33,527,978,754.73
2. Opening carrying amount 8,343,357,949.23 27,055,629,665.17 105,274,033.81 149,231,027.94 35,653,492,676.15
2022 ANNUAL REPORT 253
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
14. Fixed assets (Continued)
(2) Particulars of temporarily idle fixed assets
Unit: RMB
Original Accumulated Provision for Carrying
Item carrying amount depreciation impairment amount Remark
Housing and building
structure 72,585,434.37 23,605,530.66 3,093,008.64 45,886,895.07
Machinery and
equipment 894,040,081.30 541,801,642.98 148,006,512.04 204,231,926.28
Electronic equipment 478,399.18 429,965.75 7,187.27 41,246.16
Total 967,103,914.85 565,837,139.39 151,106,707.95 250,160,067.51
(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.) 1,016,649,687.58 Under application
Housing and building structure
(Huanggang Chenming Pulp & Paper Co., Ltd.) 604,754,973.18 Under application
Housing and building structure
(Shouguang Meilun Paper Co., Ltd.) 538,467,123.04 Under application
Housing and building structure
(Jilin Chenming Paper Co., Ltd.) 374,746,177.49 Under application
Housing and building structure
(Jiangxi Chenming Paper Co., Ltd.) 199,871,987.70 Under application
Housing and building structure
(Shandong Chenming Paper Holdings Limited) 106,804,376.97 Under application
254
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
14. Fixed assets (Continued)
(4) Disposal of fixed assets
Unit: RMB
Item Closing balance Opening balance
Machinery equipment, electronic and other equipment in
production workshop of Wuhan Chenming 3,457,743.88
Housing and office equipment of Wuhan Chenming
management integrated office 168,170,645.13
Generator machinery equipment of Qianneng Electric
Power factory area 59,225,154.99
Boiler room and other structures of Qianneng Electric
Power factory area 38,801,269.05
Transportation and others of Qianneng Electric Power
factory area 105,127.52
Total 269,759,940.57
15. Construction in progress
Unit: RMB
Item Closing balance Opening balance
Construction in progress 551,020,785.44 189,818,292.48
Materials for project 7,846,094.92 7,931,233.57
Total 558,866,880.36 197,749,526.05
2022 ANNUAL REPORT 255
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
15. Construction in progress (Continued)
(1) Particulars of construction in progress
Unit: RMB
Closing balance Opening balance
Impairment Carrying Impairment Carrying
Item Book balance provision amount Book balance provision amount
Relocation of Wuhan 4800 papermaking
machine project (Zhanjiang) 303,942,703.51 303,942,703.51
Technological transformation project 121,193,391.56 121,193,391.56 47,469,755.74 47,469,755.74
Integrated forestry, pulp and paper
project (Huanggang Pulp & Paper) 45,538,442.78 45,538,442.78 16,687,683.29 16,687,683.29
Fly ash cement ceramsite production
project (Shandong Chenming) 54,246,139.19 54,246,139.19
Relocation of Wuhan household paper
project (Phase II) (Meilun) 28,705,483.25 28,705,483.25
Original OCC technological
transformation (Meilun) 3,064,340.30 3,064,340.30
Others 101,484,919.35 21,138,671.76 80,346,247.59 60,783,562.47 21,138,671.76 39,644,890.71
Total 572,159,457.20 21,138,671.76 551,020,785.44 210,956,964.24 21,138,671.76 189,818,292.48
256
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
15. Construction in progress (Continued)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Of which:
Capitalised Capitalisation
Transfer Other interest rate of the
Increase to fixed deductions Accumulated Accumulated amount interest
Opening during asset during during Closing investment Construction capitalised during amount for Source
Project name Budget balance the period the period the period balance to budget in progress interest the period the period of fund
Relocation of Wuhan 4800
papermaking machine Self-owned
project (Zhanjiang) 800,000,000.00 303,942,703.51 303,942,703.51 37.99% 37.99% funds
Integrated forestry, pulp and
paper project (Huanggang Self-owned
Pulp & Paper) 320,000,000.00 16,687,683.29 28,850,759.49 45,538,442.78 28.10% 25.00% funds
Fly ash cement ceramsite
production project Self-owned
(Shandong Chenming) 57,000,000.00 54,246,139.19 54,246,139.19 95.17% 100.00% funds
Relocation of Wuhan
household paper project Self-owned
(Phase II) (Meilun) 270,000,000.00 28,705,483.25 240,716,977.99 269,422,461.24 99.79% 100.00% funds
Original OCC technological Self-owned
transformation (Meilun) 110,000,000.00 3,064,340.30 111,649,106.79 114,713,447.09 104.28% 100.00% funds
Total 1,557,000,000.00 102,703,646.03 685,159,547.78 438,382,047.52 349,481,146.29
(3) Materials for project
Unit: RMB
Closing balance Opening balance
Impairment Carrying Impairment Carrying
Project name Book balance provision amount Book balance provision amount
Special materials 7,846,094.92 7,846,094.92 7,931,233.57 7,931,233.57
Total 7,846,094.92 7,846,094.92 7,931,233.57 7,931,233.57
2022 ANNUAL REPORT 257
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
16. Bearer biological assets
Unit: RMB
Item Tea trees Total
I. Original carrying amount:
1. Opening balance
2. Increase during the period 13,697,336.80 13,697,336.80
(1) Purchase 13,697,336.80 13,697,336.80
3. Decrease during the period
4. Closing balance 13,697,336.80 13,697,336.80
II. Accumulated amortisation
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
III. Impairment provision
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 13,697,336.80 13,697,336.80
2. Opening carrying amount
258
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
17. Right-of-use assets
Unit: RMB
Housing and
Item Land use rights building structure Total
I. Original carrying amount:
1. Opening balance 218,097,859.06 5,571,378.54 223,669,237.60
2. Increase during the period
3. Decrease during the period 12,277,636.65 24,770.64 12,302,407.29
(1) Transfer or held for sale 12,029,930.24 12,029,930.24
(2) Other decreases 247,706.41 24,770.64 272,477.05
4. Closing balance 205,820,222.41 5,546,607.90 211,366,830.31
II. Accumulated amortisation
1. Opening balance 25,467,932.29 772,128.87 26,240,061.16
2. Increase during the period 7,459,891.32 277,392.88 7,737,284.20
(1) Provision 7,459,891.32 277,392.88 7,737,284.20
3. Decrease during the period 4,225,214.30 4,225,214.30
(1) Transfer or held for sale 4,225,214.30 4,225,214.30
4. Closing balance 28,702,609.31 1,049,521.75 29,752,131.06
III. Impairment provision
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 177,117,613.10 4,497,086.15 181,614,699.25
2. Opening carrying amount 192,629,926.77 4,799,249.67 197,429,176.44
Explanation: The reason for other deductions for the period is that the original recognised amount was tax-included, and as the invoices for
leasing have been received, the input tax amount offset the original carrying amount of the right-of-use assets.
2022 ANNUAL REPORT 259
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
18. Intangible assets
(1) Particulars of intangible assets
Unit: RMB
Certificates of
Item Land use rights Software Patents third party right Total
I. Original carrying
amount:
1. Opening balance 2,040,126,983.35 21,946,825.64 27,358,613.05 15,908,674.87 2,105,341,096.91
2. Increase during
the period 307,340,370.39 107,606.09 135,000.00 307,582,976.48
(1) Purchase 307,340,370.39 107,606.09 135,000.00 307,582,976.48
3. Decrease during
the period 30,181,176.17 30,181,176.17
(1) Disposal 30,181,176.17 30,181,176.17
4. Closing balance 2,317,286,177.57 22,054,431.73 27,493,613.05 15,908,674.87 2,382,742,897.22
II. Accumulated
amortisation
1. Opening balance 474,004,742.76 21,814,590.97 940,153.77 15,908,674.87 512,668,162.37
2. Increase during
the period 54,343,146.07 239,840.76 115,991.67 54,698,978.50
(1) Provision 54,343,146.07 239,840.76 115,991.67 54,698,978.50
(2) Other increases
3. Decrease during
the period 15,963,074.57 15,963,074.57
(1) Disposal 15,963,074.57 15,963,074.57
4. Closing balance 512,384,814.26 22,054,431.73 1,056,145.44 15,908,674.87 551,404,066.30
III. Impairment provision
1. Opening balance
2. Increase during
the period
3. Decrease during
the period
4. Closing balance
IV. Carrying amount
1. Closing carrying
amount 1,804,901,363.31 26,437,467.61 1,831,338,830.92
2. Opening carrying
amount 1,566,122,240.59 132,234.67 26,418,459.28 1,592,672,934.54
Explanation:
For details of restricted ownership, please refer to note VII. 65.
Certificates of third party right refer to enterprise emission rights.
260
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
19. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Decrease
Increase during during
the period the period
Arising from
Name of investee or event Opening business Closing
generating goodwill balance combinations Disposal balance
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Kunshan Tuoan Plastic Products Co., Ltd. 26,946,905.38 26,946,905.38
Total 41,261,065.98 41,261,065.98
(2) Provision for impairment of goodwill
Unit: RMB
Decrease
Increase during during
the period the period
Arising from
Name of investee or event Opening business Closing
generating goodwill balance combinations Disposal balance
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 assessed the recoverable amount of goodwill and determined that the goodwill related to the Company’s plastic
business was not impaired. With the category of the principal activities as the basis for determining the reporting segments, the
Company regarded Kunshan Tuoan Plastic Products Co., Ltd. as an asset group. The recoverable amount was determined based on
the present value of the estimated future cash flows. Future cash flows were determined based on the financial budget for 2023 to 2027
as approved by the management, and adopted 7.28% as the discount rate which was the interest rate of the 5-year bonds issued by
the Company in 2018. The cash flows for more than 5 years are calculated based on the growth rate of 5%. Other key assumptions
used in estimating future cash flows included 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 believed that any reasonable change in
the above assumptions will not result in the total book value of the asset group Kunshan Tuoan Plastic Products Co., Ltd. exceeding its
recoverable amount.
2022 ANNUAL REPORT 261
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
20. Long-term prepaid expenses
Unit: RMB
Increase during Amortisation
Item Opening balance the period during the period Other deductions Closing balance
Woodland expenses 8,387,048.73 1,153,220.98 7,233,827.75
Others 40,754,724.41 3,525,700.71 37,229,023.70
Total 49,141,773.14 4,678,921.69 44,462,851.45
21. 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 tax temporary income tax
Item difference assets difference assets
Provision for impairment of assets 2,344,419,524.10 549,431,097.40 2,323,311,804.03 544,452,793.22
Unrealised profit arising from
intra-group transactions 47,231,691.32 11,807,922.83 110,621,031.60 27,655,257.90
Outstanding payables 169,723,942.88 26,380,462.69 646,596,211.53 97,758,308.63
Deferred income 193,822,821.65 29,673,699.36 202,273,476.76 30,341,021.50
Deductible loss 4,578,592,243.20 716,030,918.97 2,508,683,883.40 409,890,367.80
Debt reconstructing 30,831.05 7,707.76 18,734,830.91 4,683,707.73
Special reserves 15,791,710.95 2,368,756.59
Subtotal 7,349,612,765.15 1,335,700,565.60 5,810,221,238.23 1,114,781,456.78
(2) Deferred income tax liabilities before offsetting
Unit: RMB
Closing balance Opening balance
Taxable Deferred Taxable Deferred
temporary income tax temporary income tax
Item differences liabilities differences liabilities
Asset valuation increment from business
combinations involving entities not
under common control 19,104,051.04 4,776,012.76 22,697,097.44 5,674,274.36
Debt reconstructing 13,621,006.12 3,405,251.53 30,145,021.52 7,536,255.38
Subtotal 32,725,057.16 8,181,264.29 52,842,118.96 13,210,529.74
262
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
21. Deferred income tax assets/deferred income tax liabilities (Continued)
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary difference 10,365,962.12 1,671,856.52
Deductible loss 808,569,643.83 871,738,259.31
Total 818,935,605.95 873,410,115.83
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMB
Year Closing balance Opening balance Remark
2022 172,477,313.31
2023 189,187,446.57 193,244,812.35
2024 178,453,991.84 177,526,329.96
2025 251,671,920.26 234,127,550.55
2026 119,959,990.04 94,362,253.14
2027 69,296,295.12
Total 808,569,643.83 871,738,259.31
22. Other non-current assets
Unit: RMB
Closing balance Opening balance
Impairment Carrying Impairment Carrying
Item Book balance provision amount Book balance provision amount
Payments for certificates of third party right 2,612,250.68 2,612,250.68
Payments for engineering and equipment 981,293,657.32 981,293,657.32 64,364,443.42 64,364,443.42
Land transfer fees 298,072,250.68 298,072,250.68
Consideration for acquisition of companies 127,500,000.00 127,500,000.00
Total 983,905,908.00 983,905,908.00 489,936,694.10 489,936,694.10
2022 ANNUAL REPORT 263
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
23. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Discounted borrowings 16,207,640,000.00 16,194,790,000.00
Guaranteed borrowings 9,757,184,167.65 7,734,756,765.41
Credit borrowings 9,613,884,197.48 8,847,850,884.15
Pledged borrowings 741,339,929.89 675,627,536.66
Mortgage borrowings 65,000,000.00 70,000,000.00
Total 36,385,048,295.02 33,523,025,186.22
Explanation of the classification of short-term borrowings:
For classification and amount of mortgage borrowings and mortgage assets, please see 1. Monetary funds and 65. Assets with
restricted ownerships or right to use in Note VII.
For classification and amount of mortgage borrowings and mortgage assets, please see 1. Monetary funds and 65. Assets with
restricted ownerships or right to use in Note VII.
Overdue outstanding short-term borrowings: total outstanding short-term borrowings overdue as at the end of the period
amounted to RMB0.00.
Short-term borrowings included accrued interest of RMB32,723,667.40.
24. Bills payable
Unit: RMB
Item Closing balance Opening balance
Bank acceptance bills 1,922,361,633.83 1,690,589,691.19
Commercial acceptance bills 1,206,234,201.21 1,398,922,636.21
Total 3,128,595,835.04 3,089,512,327.40
Total outstanding bills payable due as at the end of the period amounted to RMB0.00.
264
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
25. Accounts payable
(1) Particulars of accounts payable
Unit: RMB
Item Closing balance Opening balance
Payment for goods 3,619,549,023.04 3,074,700,464.48
Payment for engineering 146,144,102.25 307,195,168.83
Payment for equipment 100,493,461.51 249,371,719.69
Others 248,780,180.96 239,863,992.34
Total 4,114,966,767.76 3,871,131,345.34
(2) Disclosure by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 3,746,315,716.20 3,282,236,529.52
1 to 2 years 98,287,651.12 229,465,372.73
2 to 3 years 52,080,919.33 164,915,158.41
Over 3 years 218,282,481.11 194,514,284.68
Total 4,114,966,767.76 3,871,131,345.34
The basis used by the ageing analysis of the accounts payable of the Company: the ageing of accounts payable
is the length of time of the Company’s outstanding accounts payable based on invoice date. The closing
balance is recognised one by one from the end of the period onwards until the amounts add up to the balance.
It is also broken up by intervals of within 1 year, 1-2 years, 2-3 years, 3-4 years, 4-5 years and over 5 years.
(3) Significant accounts payable aged over 1 year
Unit: RMB
Item Closing balance Reasons
WEIFANG XINGXING UNITED CHEMICAL CO., LTD. 26,905,494.34 Not due for payment
OMYA HAIMING (NANCHANG) CHEMICAL CO. LTD. 16,000,000.00 Not due for payment
ZHEJIANG JNDIA PIPELINE INDUSTRY CO., LTD. 11,477,155.91 Not due for payment
VOITH GERMANY 5,307,499.40 Not due for payment
CSSC 704TH RESEARCH INSTITUTE 4,867,627.54 Not due for payment
Total 64,557,777.19
2022 ANNUAL REPORT 265
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
26. Receipts in advance
(1) Particulars of receipts in advance
Unit: RMB
Item Closing balance Opening balance
Prepaid property rents 14,261,436.67 38,274,028.20
Total 14,261,436.67 38,274,028.20
27. Contract liabilities
Unit: RMB
Item Closing balance Opening balance
Payment for goods in advance 1,306,029,389.80 1,382,289,597.54
Total 1,306,029,389.80 1,382,289,597.54
28. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
I. Short-term remuneration 169,854,249.70 1,154,738,836.43 1,225,239,542.72 99,353,543.41
II. Retirement benefit plan-defined
contribution scheme 44,758.31 214,495,684.26 168,968,098.98 45,572,343.59
III. Termination benefits 26,403,423.69 26,403,423.69
Total 169,899,008.01 1,395,637,944.38 1,420,611,065.39 144,925,887.00
266
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
28. Staff remuneration payables (Continued)
(2) Particulars of short-term remuneration
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
1. Salaries, bonuses, allowance and
subsidies 160,186,039.82 923,106,793.77 998,917,968.82 84,374,864.77
2. Staff welfare 50,934,315.92 50,934,315.92
3. Social insurance premium 346,948.68 97,568,137.62 93,842,395.80 4,072,690.50
Of which: Medical insurance
premium 344,352.16 86,730,174.85 86,404,928.46 669,598.55
Work-related injury
insurance premium 98.44 6,797,772.73 4,283,667.71 2,514,203.46
Maternity insurance
premium 2,498.08 4,040,190.04 3,153,799.63 888,888.49
4. Housing provident funds 5,094,807.67 56,134,004.61 53,727,874.48 7,500,937.80
5. Union funds and workers’
education 1,488,335.51 14,216,192.07 15,241,510.11 463,017.47
6. Other short-term remuneration 2,738,118.02 12,779,392.44 12,575,477.59 2,942,032.87
Total 169,854,249.70 1,154,738,836.43 1,225,239,542.72 99,353,543.41
(3) Defined contribution
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
1. Basic pension insurance premiums 43,609.94 203,857,697.22 160,286,177.74 43,615,129.42
2. Unemployment insurance
premiums 1,148.37 10,637,987.04 8,681,921.24 1,957,214.17
Total 44,758.31 214,495,684.26 168,968,098.98 45,572,343.59
2022 ANNUAL REPORT 267
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
29. Tax payables
Unit: RMB
Item Closing balance Opening balance
Value added tax 128,305,607.36 125,522,336.03
Enterprise income tax 51,538,384.55 89,597,918.41
Property tax 34,531,806.76 13,083,934.41
Stamp duty 12,987,679.08 3,456,472.38
Land use tax 10,659,878.19 9,240,921.98
Urban maintenance and construction tax 5,069,014.46 3,748,576.77
Educational surcharges and others 3,955,412.99 2,931,140.78
Individual income tax 4,765,040.27 61,378,163.24
Environmental Protection Tax 3,674,817.23 3,959,856.45
Resource tax 3,500,000.00 4,500,000.00
Land appreciation tax 2,024,028.20 4,076,160.22
Total 261,011,669.09 321,495,480.67
30. Other payables
Unit: RMB
Item Closing balance Opening balance
Other payables 1,854,507,978.66 1,482,575,808.13
Interest payable 15,895,930.51 55,437,777.80
Total 1,870,403,909.17 1,538,013,585.93
(1) Interest payable
Unit: RMB
Item Closing balance Opening balance
Interest on corporate bonds 15,895,930.51 21,132,222.24
Interest on medium-term notes 34,305,555.56
Total 15,895,930.51 55,437,777.80
268
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
30. Other payables (Continued)
(2) Other payables
1) Other payables by nature
Unit: RMB
Item Closing balance Opening balance
Deposit 788,792,126.26 261,990,665.03
Open credit 490,279,690.52 550,223,956.81
Accrued expenses 355,492,234.45 341,923,505.85
The obligation to repurchase shares under the share
incentive scheme 129,112,395.74 226,860,000.00
Others 90,831,531.69 101,577,680.44
Total 1,854,507,978.66 1,482,575,808.13
2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
ZHANJIANG RUNBAO TRADING CO., LTD. 160,000,000.00 Not due for payment
SHANGHAI SHUILAN PROPERTY MANAGEMENT
CO., LTD. 136,000,000.00 Not due for payment
NINE DRAGONS DAWEI HOLDINGS CO., LTD. 30,000,000.00 Not due for payment
WEIFANG XINGXING UNITED CHEMICAL CO., LTD. 16,860,000.00 Not due for payment
WUHAN TIANRUI PAPER CO., LTD. 7,941,708.00 Not due for payment
Total 350,801,708.00
2022 ANNUAL REPORT 269
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
31. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 2,398,150,298.72 1,543,620,543.60
Long-term borrowings due within one year 1,920,748,225.56 2,583,730,366.67
Bonds payable due within one year 350,000,000.00 1,270,636,933.46
Lease liabilities due within one year 4,606,717.58 4,606,717.58
Other non-current liabilities due within one year 1,198,716,666.67
Total 4,673,505,241.86 6,601,311,227.98
32. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Mortgage borrowings 3,118,508,092.17 3,921,048,883.74
Credit borrowings 1,405,855,117.94 1,910,041,837.91
Guaranteed borrowings 1,378,621,266.53 2,028,979,800.00
Less: Long-term borrowings due within one year 1,920,748,225.56 2,583,730,366.67
Total 3,982,236,251.08 5,276,340,154.98
Explanation of the classification of long-term borrowings:
For classification and amount of pledged assets of pledged borrowings, please see 1. Monetary funds and 65. Assets with
restricted ownerships or right to use in Note VII;
Long-term borrowings included accrued interest of RMB11,874,827.63.
270
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
33. Bonds payable
(1) Bonds payable
Unit: RMB
Item Closing balance Opening balance
18 Chenming Bond 01 – Chenming Group 155,000,000.00
Total 155,000,000.00
(2) Increase/decrease in bonds payable (excluding other financial instruments such as preference shares and
Perpetual Bonds classified as financial liabilities)
Unit: RMB
Changes
Issue in foreign
during Amortisation Redemption exchange
Name of Date of Opening the Interest of premium/ during the gains and Closing
commercial paper Par value issue Term Amount balance period at par value discount period losses balance
18 Chenming Bond
01 – Chenming
Group 350,000,000.00 2018-4-2 5 years 350,000,000.00 350,000,000.00 20,255,374.96 20,255,374.96 350,000,000.00
Chenming USD
Bonds 1,137,120,600.00 2019-8-6 2.6 years 1,125,276,863.46 1,075,636,933.46 30,847,102.56 1,019,717.03 1,111,571,636.62 4,067,883.57
Less: Bonds
payable due
within one year 1,270,636,933.46 350,000,000.00
Total 1,475,276,863.46 155,000,000.00 51,102,477.52 1,019,717.03 1,131,827,011.58 4,067,883.57
34. Lease liabilities
Unit: RMB
Item Closing balance Opening balance
Lease payments payable 76,929,509.38 81,362,458.45
Less: Unrecognised financing expenses 18,726,744.34 19,474,535.06
Less: Lease liabilities due within one year 4,606,717.58 4,606,717.58
Total 53,596,047.46 57,281,205.81
2022 ANNUAL REPORT 271
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
35. Long-term payables
Unit: RMB
Item Closing balance Opening balance
Long-term payables 3,160,771,126.31 2,358,901,022.99
Total 3,160,771,126.31 2,358,901,022.99
(1) By nature
Unit: RMB
Item Closing balance Opening balance
Financial leasing 4,928,891,190.81 3,188,521,566.59
China Development Bank Special Fund 412,500,000.00 488,000,000.00
Contributions by other partners 211,530,234.22 225,000,000.00
Retention for the financial leasing operations 6,000,000.00 1,000,000.00
Less: Long-term payables due within one year 2,398,150,298.72 1,543,620,543.60
Total 3,160,771,126.31 2,358,901,022.99
Other explanation:
Contributions by other partners refer to the contributions made by other partners to Weifang Chenming Growth Driver Replacement
Equity Investment Fund Partnership (Limited Partnership) and Weifang Chendu Equity Investment Partnership (Limited Partnership), and
such contributions are reclassified as financial liabilities on a consolidation basis.
36. Provisions
Unit: RMB
Item Closing balance Opening balance Reason
Losses from
Pending litigation 325,259,082.28 Arjo’s lawsuit
Total 325,259,082.28
Other explanations including relevant important assumptions and estimates of important provision:
In February 2017, Arjowiggins HKK2 Limited (“HKK2 Company”) submitted a H share winding-up petition against the Company to Hong 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 RMB320 million
for such pending litigation in 2017. On 5 August 2020, the Court of Appeal of the High Court of the HKSAR made the judgment to dismiss the
appeal of the Company. On 21 January 2022, Hong Kong Court of Final Appeal accepted the Company’s appeal. On 14 June 2022, Hong Kong
Court of Final Appeal rejected the Company’s appeal, and directed that the sum of HK$389,112,432.44, together with interest accrued thereon,
previously deposited with the Court as a stay of the conditions of the winding up petition filed by HKK2 against the Company pursuant to the
order of the Judge of the Court of First Instance, Mr. HARRIS Jonathan Russell, shall be paid to HKK2. The Company fulfilled the judgement of
the litigation during the reporting period.
272
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
37. Deferred income
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance Reason
Government grants 1,573,681,684.25 104,451,215.79 1,469,230,468.46 Financial provision
Total 1,573,681,684.25 104,451,215.79 1,469,230,468.46
Items in respect of government grants:
Unit: RMB
Include in Amount
New grants non-operating Include in charged
Opening during the income for other income against Asset-related/
Liability item balance period the period for the period cost expenses Other changes Closing balance income-related
Project fund for National Key
Technology Research and Asset-related
Development Program 1,123,125.00 164,700.00 958,425.00 government grants
Infrastructure and environmental Asset-related
protection engineering 220,099,227.08 11,778,260.39 208,320,966.69 government grants
Huanggang forestry-pulp paper Asset-related
project 496,020,740.85 25,026,217.80 470,994,523.05 government grants
Zhanjiang forestry-pulp paper project Asset-related
50,806,597.19 4,094,632.92 46,711,964.27 government grants
Financial subsidies for technological Asset-related
transformation project 144,150,333.36 11,535,807.72 132,614,525.64 government grants
Funding for environmental protection Asset-related
627,047,425.68 50,592,141.88 576,455,283.80 government grants
Others Asset-related
34,434,235.09 1,259,455.08 33,174,780.01 government grants
Total 1,573,681,684.25 104,451,215.79 1,469,230,468.46
2022 ANNUAL REPORT 273
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
38. Share capital
Unit: RMB
Increase/decrease during the year (+/-)
Repurchase Shares
of restricted converted
Opening balance shares Bonus shares from reserves Others Subtotal Closing balance
Total number of shares 2,984,208,200.00 -4,466,000.00 -4,466,000.00 2,979,742,200.00
Explanation: Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2022) No. 371C000576) for the
repurchase of restricted shares during the period. On 18 July 2022, the second extraordinary meeting of the tenth session of the Board and
the first extraordinary meeting of the tenth session of the Supervisory Committee considered and approved the Resolution on the Adjustment
to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares.
On 18 October 2022, the Company completed the registration of the repurchase and cancellation of certain restricted shares granted to 15
participants but yet to be released under the 2020 Restricted A Share Incentive Scheme, with a total of 4,466,000 A shares repurchased and
cancelled. The total number of shares of the Company changed from 2,984,208,200 to 2,979,742,200.
39. Other equity instruments
(1) Perpetual Bonds outstanding at the end of the period
Maturity
Outstanding financial Year of Accounting Dividend or date or Condition for
instruments issuance classification interest rate Issue price Issue size Amount (RMB) renewal status conversion Conversion
No defined
17 Lu Chenming MTN001 2017 Equity instrument 8.97% 100.00 10,000,000.00 1,000,000,000.00 maturity date No Non-convertible
Total 10,000,000.00 1,000,000,000.00
274
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
39. Other equity instruments (Continued)
(2) Changes in preference shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period
Unit: RMB
Outstanding financial Beginning of the period Increase during the period Decrease during the period End of the period
instruments Number Carrying amount Number Carrying amount Number Carrying amount Number Carrying amount
17 Lu Chenming MTN001 10,000,000.00 996,000,000.00 10,000,000.00 996,000,000.00
Total 10,000,000.00 996,000,000.00 10,000,000.00 996,000,000.00
Changes (increase or decrease) in other equity instruments during the period, the reasons for such changes, and the basis for relevant
accounting treatment:
The Company issued medium-term notes amounting to RMB1,000 million on 12 July 2017 at a coupon rate of 6.80%. The
proceeds net of issue costs amounted to RMB996.00 million.
The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of redemption 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 – Perpetual Bonds.
2022 ANNUAL REPORT 275
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
40. Capital reserves
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
Share premium 4,471,891,796.08 141,082,717.08 8,262,100.00 4,604,712,413.16
Other capital reserves 755,366,304.33 1,121,804.80 756,488,109.13
Total 5,227,258,100.41 142,204,521.88 8,262,100.00 5,361,200,522.29
Explanation:
the Company recognised the management fees during the vesting period for the share-based payments with an increase of capital
reserves of RMB1,121,804.80;
a capital increase of Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, was contributed on the part of
other investors, causing a decrease in the Company’s shareholding without loss of control, and an increase of capital reserves of
RMB141,082,717.08;
due to the failure to fulfil the unlocking conditions, certain restricted shares were repurchased during the year with a decrease in capital
reserves of RMB8,262,100.00;
Guangdong Nanyue Bank Co., Ltd. (“Nanyue Bank”), an associate of the Company, implemented the new financial instrument standard
since 2021. The Company made retrospective adjustment based on the change of the accounting policy of Nanyue Bank due to the
implementation of the new financial instrument standard. In accordance with the fifth batch of Q&As on the 2021 ASBEs issued by the
Accounting Department of the Ministry of Finance (I) Q&As on the Long-term Equity Investment Standard, the Company adjusted the
opening retained earnings for 2021 in its 2021 financial statements using the retrospective adjustment method. The Company restated
the prior year comparative information in these financial statements due to the differences between the data in the audited financial
statements of Nanyue Bank and the unaudited financial information cited by the Company in preparing the 2021 financial statements. In
particular, the effect on the opening balance of the capital reserves was a decrease of RMB55,547,014.21.
41. Treasury shares
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
Share incentive 226,860,000.00 98,079,900.00 128,780,100.00
Total 226,860,000.00 98,079,900.00 128,780,100.00
Explanation: The first batch of the equity incentives implemented by the Company in 2020 were unlocked during the reporting period, with a
reduction of RMB85,351,800.00 in treasury shares that fulfilled unlocking conditions and a reduction of RMB12,728,100.00 in treasury shares
that did not fulfil unlocking conditions and subject to repurchase.
276
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
42. Other comprehensive income
Other comprehensive income attributable to the Company in the balance sheet is as follows:
Unit: RMB
During the period
Less: Transferred
from other
comprehensive
Attributable to income in
the parent prior periods to
Opening company retained earnings Closing
Item balance after tax during the period balance
I. Other comprehensive income that cannot be
reclassified to profit or loss in subsequent
periods
II. Other comprehensive income that will be
reclassified to profit and loss in subsequent
periods -445,582,729.36 -376,357,965.21 -821,940,694.57
1. Other comprehensive income that may be
reclassified to profit and loss under the equity
method -10,512,532.56 596,429.87 -9,916,102.69
2. Translation differences of financial statements
denominated in foreign currency -435,070,196.80 -376,954,395.08 -812,024,591.88
Total other comprehensive income -445,582,729.36 -376,357,965.21 -821,940,694.57
2022 ANNUAL REPORT 277
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
42. Other comprehensive income (Continued)
Other comprehensive income attributable to the parent company in the income statement:
Unit: RMB
During the period
Less: Transferred
from other
comprehensive
income in prior Less: Attributable
Incurred before periods to profit to minority Attributable to
income tax for or loss during Less: Income shareholders parent company
Item the period the period tax expenses after tax after tax
I. Other comprehensive income that
cannot be reclassified to profit or loss in
subsequent periods
II. Other comprehensive income that will
be reclassified to profit and loss in
subsequent periods -376,357,965.21 -376,357,965.21
1. Other comprehensive income that may be
reclassified to profit and loss under the
equity method 596,429.87 596,429.87
2. Translation differences of financial
statements denominated in foreign
currency -376,954,395.08 -376,954,395.08
Total other comprehensive income -376,357,965.21 -376,357,965.21
43. Special reserves
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
Production safety expenses 29,147,795.17 13,356,084.22 15,791,710.95
Total 29,147,795.17 13,356,084.22 15,791,710.95
44. Surplus reserves
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance
Statutory surplus reserves 1,212,009,109.97 1,212,009,109.97
Total 1,212,009,109.97 1,212,009,109.97
278
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
45. General risk provisions
Unit: RMB
Opening Increase during Decrease during
Item balance the period the period Closing balance
General risk provisions 76,825,918.60 3,074,350.11 79,900,268.71
Total 76,825,918.60 3,074,350.11 79,900,268.71
46. Retained profit
Unit: RMB
Item The period The prior period
Retained profit as at the end of the prior year before adjustment 9,294,126,706.86 9,999,764,028.74
Adjustment to opening balance of retained earnings (increase +,
decrease -) -1,803,277,670.52
Opening balance of retained profit after adjustment 9,294,126,706.86 8,196,486,358.22
Plus: Net profit for the period attributable to shareholders of the
parent company 189,290,120.82 2,065,513,108.71
Less: Transfer of statutory surplus reserves
Transfer of discretionary surplus reserves
Transfer of general risk provisions 3,074,350.11 2,703,274.40
Ordinary dividend payable 552,078,517.01
Perpetual Bonds interest payable 89,700,000.00 89,700,000.00
Preference shares interest payable 323,390,968.66
Retained profit as at the end of the period 9,390,642,477.57 9,294,126,706.86
Note: The reason for a decrease in the opening retained earnings of RMB1,803,277,670.52 for the prior period is: Guangdong Nanyue Bank
Co., Ltd. (“Nanyue Bank”), an associate of the Company, implemented the new financial instrument standard since 2021. The Company
made retrospective adjustment based on the change of the accounting policy of Nanyue Bank due to the implementation of the new
financial instrument standard. In accordance with the fifth batch of Q&As on the 2021 ASBEs issued by the Accounting Department of
the Ministry of Finance (I) Q&As on the Long-term Equity Investment Standard, the Company adjusted the opening retained earnings
for 2021 in its 2021 financial statements using the retrospective adjustment method. The Company restated the prior year comparative
information in these financial statements due to the differences between the data in the audited financial statements of Nanyue Bank
and the unaudited financial information cited by the Company in preparing the 2021 financial statements.
2022 ANNUAL REPORT 279
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
47. Revenue and operating costs
Unit: RMB
Amount for the period Amount for the prior period
Item Revenue Operating costs Revenue Operating costs
Principal activities 31,425,116,857.83 26,878,943,649.28 31,933,583,202.54 24,460,067,257.53
Other activities 579,250,463.08 494,782,057.72 1,086,229,091.60 762,208,537.75
Total 32,004,367,320.91 27,373,725,707.00 33,019,812,294.14 25,222,275,795.28
Whether the lower of the audited net profit before or after deducting extraordinary gains or losses is a negative
number
√ Yes No
Unit: RMB
Item Current year Specific deductions Prior year Specific deductions
Revenue 32,004,367,320.91 Revenue from sales of materials of 33,019,812,294.14 Revenue from sales of materials of
RMB903,160,256.93 and other RMB1,649,930,017.77 and other
revenue of RMB127,610,203.33 revenue of RMB553,971,864.43.
Total deductions from revenue 1,030,770,460.26 2,203,901,882.20
Proportion of total deductions from revenue to 3.22% 6.67%
revenue
I. Revenue from operations not related to principal
operations
1. Revenue from operations other than normal 1,030,770,460.26 Revenue from sales of materials of 2,203,901,882.20 Revenue from sales of materials of
operation, such as revenue realised from RMB903,160,256.93 and other RMB1,649,930,017.77 and other
leasing fixed assets, intangible assets, revenue of RMB127,610,203.33. revenue of RMB553,971,864.43.
packaging materials, sales of materials,
exchanges for non-monetary assets
with materials, engaging in entrusted
management business, and revenue
included in revenue from principal operations
but generated from operations other than
normal operation of the Company.
Subtotal of revenue from operations not related to 1,030,770,460.26 Revenue from sales of materials of 2,203,901,882.20 Revenue from sales of materials of
principal operations RMB903,160,256.93 and other RMB1,649,930,017.77 and other
revenue of RMB127,610,203.33. revenue of RMB553,971,864.43.
II. Commercially non-substantial revenue
III. Sub-total of other revenue from operations not
related to principal operations and commercially
non-substantial revenue
Revenue after deductions 30,973,596,860.65 Revenue from sales of materials of 30,815,910,411.94 Revenue from sales of materials of
RMB903,160,256.93 and other RMB1,649,930,017.77 and other
revenue of RMB127,610,203.33. revenue of RMB553,971,864.43.
280
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
47. Revenue and operating costs (Continued)
Information related to revenue:
Unit: RMB
Machine-made Hotel and property
Category of contract paper segment Financial services rentals Others Total
Type of goods 30,831,898,263.47 209,378,132.90 252,786,565.21 710,304,359.33 32,004,367,320.91
Including:
Machine-made paper 28,398,850,766.51 28,398,850,766.51
Chemical pulp 1,043,284,411.27 1,043,284,411.27
Processing of moulds 308,596,084.40 308,596,084.40
Electricity and steam 288,447,315.51 288,447,315.51
Construction materials 265,496,913.56 265,496,913.56
Hotel and property rentals 238,020,274.82 238,020,274.82
Paper chemicals 169,232,476.00 169,232,476.00
Others 932,083,294.18 209,378,132.90 14,766,290.39 136,211,361.37 1,292,439,078.84
By geographical area 30,831,898,263.47 209,378,132.90 252,786,565.21 710,304,359.33 32,004,367,320.91
Including:
Mainland China 22,687,782,292.47 209,378,132.90 252,786,565.21 710,304,359.33 23,860,251,349.91
Other countries and regions 8,144,115,971.00 8,144,115,971.00
By the timing of delivery 30,831,898,263.47 209,378,132.90 252,786,565.21 710,304,359.33 32,004,367,320.91
Including:
Goods (at a point in time) 30,535,615,186.37 2,924,528.29 14,656,198.65 710,177,248.91 31,263,373,162.22
Services (within a certain
period) 296,283,077.10 206,453,604.61 238,130,366.56 127,110.42 740,994,158.69
Breakdown of revenue from principal activities
By industry
Unit: RMB
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
Machine-made paper 28,398,850,766.51 24,448,024,979.32 28,822,796,809.32 22,046,779,363.89
Chemical pulp 1,043,284,411.27 816,562,733.50 248,980,922.18 191,806,552.77
Processing of moulds 308,596,084.40 277,645,763.64 429,452,007.72 357,366,098.62
Electricity and steam 288,447,315.51 270,073,907.31 303,940,594.69 260,019,123.96
Construction materials 265,496,913.56 228,492,849.08 349,945,005.51 315,912,453.93
Hotel and property rentals 238,020,274.82 213,632,078.62 148,941,357.80 124,619,857.81
Paper chemicals 169,232,476.00 146,042,699.79 131,104,964.35 117,040,239.12
Others 713,188,615.76 478,468,638.02 1,498,421,540.97 1,046,523,567.43
Total 31,425,116,857.83 26,878,943,649.28 31,933,583,202.54 24,460,067,257.53
2022 ANNUAL REPORT 281
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
47. Revenue and operating costs (Continued)
Machine-made paper, by main product type
Unit: RMB
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
White paper board 9,061,724,789.41 7,826,962,810.39 9,579,581,625.05 6,540,978,628.51
Duplex press paper 8,449,759,248.92 7,407,821,676.66 7,287,152,353.07 6,004,341,245.63
Coated paper 4,149,820,827.47 3,457,680,224.04 4,310,744,513.87 3,130,491,004.15
Electrostatic paper 4,077,351,284.38 3,497,341,216.24 3,857,097,045.49 3,140,962,690.62
Anti-sticking raw paper 973,542,096.46 791,528,667.30 1,168,436,835.30 872,987,808.22
Thermal paper 582,687,847.45 489,261,009.24 540,941,351.36 475,188,142.15
Others 1,103,964,672.42 977,429,375.45 2,078,843,085.18 1,881,829,844.61
Total 28,398,850,766.51 24,448,024,979.32 28,822,796,809.32 22,046,779,363.89
Machine-made paper, by geographical segment
Unit: RMB
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
Mainland China 20,254,734,795.51 17,354,744,592.14 24,696,996,168.38 18,348,851,562.98
Other countries and regions 8,144,115,971.00 7,093,280,387.18 4,125,800,640.94 3,697,927,800.91
Total 28,398,850,766.51 24,448,024,979.32 28,822,796,809.32 22,046,779,363.89
Revenue from top 5 customers
Unit: RMB
Percentage of the
Total revenue from total revenue in the
Period top 5 customers same period (%)
2022 6,798,742,733.13 21.24%
2021 5,259,350,805.45 15.93%
Information related to the transaction price allocated to residual performance obligations:
At the end of the reporting period, the amount of revenue with signed contracts but unfulfilled or uncompleted
performance obligation was RMB656,446,008.11, which was expected to be recognised in 2023.
282
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
48. Taxes and surcharges
Unit: RMB
Amount for Amount for
Item the period the prior period
Property tax 84,937,624.08 77,555,756.03
Stamp duty 50,855,100.84 35,545,109.19
Urban maintenance and construction tax 30,844,441.65 46,766,679.96
Land use tax 21,896,525.68 40,855,126.39
Educational surcharges 13,065,472.17 20,195,996.39
Resource tax 12,151,246.70 22,892,129.80
Local education surcharges 9,672,799.88 13,463,933.81
Water conservation funds 941,851.21 697,713.50
Vehicle and vessel tax 100,147.53 142,969.16
Land appreciation tax 27,432.00 9,175,506.88
Others 18,646,673.32 17,165,291.20
Total 243,139,315.06 284,456,212.31
49. Sales and distribution expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Wages and surcharges 120,855,156.29 140,614,560.41
Business hospitality expenses 55,312,453.05 59,259,329.16
Travel expenses 21,514,621.65 21,203,755.03
Selling commissions 11,571,414.61 11,490,724.59
Depreciation expenses 6,524,594.65 11,299,358.22
Rental expenses 6,048,188.50 8,941,037.14
Office expenses 2,465,867.66 2,318,832.06
Warehouse expenses 669,554.18 555,915.72
Others 17,219,423.50 37,826,180.18
Total 242,181,274.09 293,509,692.51
2022 ANNUAL REPORT 283
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
50. General and administrative expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Wages and surcharges 230,961,622.37 287,370,208.75
Depreciation expenses 92,141,979.66 104,079,387.00
Business hospitality expenses 90,219,924.17 75,588,054.15
Welfare expenses 60,931,519.54 67,401,266.74
Amortisation of intangible assets and long-term expenses 50,808,836.96 47,623,471.69
Termination benefits expenses 26,059,173.11 47,005.00
Repair cost and consumption of materials 24,983,894.65 29,577,039.42
Legal costs 24,306,211.03 14,331,466.88
Intermediary service expenses 21,436,369.47 9,822,504.05
Insurance premium 17,343,722.19 21,399,854.79
Travel expenses 10,066,215.41 14,082,788.42
Office expenses 6,827,412.53 6,016,174.24
Audit fees 5,628,798.62 5,211,323.99
Production interruption loss 153,841,164.26
Others 88,831,023.63 105,969,026.16
Total 750,546,703.34 942,360,735.54
Note: Audit fees include audit fees for annual financial statements and internal control reports of the Company, and other fees for audit
matters of the Company occurring during the reporting period.
51. Research and development expense
Unit: RMB
Amount for Amount for
Item the period the prior period
Consumption of materials 872,932,892.44 1,008,124,599.58
Utilities 181,428,197.66 194,161,253.86
Wages and surcharges 146,671,151.98 155,808,154.72
Depreciation expenses 45,016,402.19 53,538,054.01
Insurance premium 28,028,216.33 29,407,238.86
Housing provident funds 4,848,051.84 5,375,717.76
Welfare expenses 4,448,785.76 2,838,027.33
Union funds 1,159,873.86 1,601,052.82
Installation expenses 940,252.78 1,423,823.71
Travel expenses 27,693.31 17,449.73
Other expenses 4,780,021.95 1,470,999.08
Total 1,290,281,540.10 1,453,766,371.46
284
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
52. Finance expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Interest expenses 2,081,067,895.66 2,348,200,417.05
Less: Capitalised interest amount
Interest income 309,987,478.19 287,289,410.33
Foreign exchange gains and losses 46,654,427.89 -9,455,468.81
Less: Capitalisation of foreign exchange gains and losses
Bank charges and others 328,821,303.70 336,015,748.55
Total 2,146,556,149.06 2,387,471,286.46
53. Other income
Unit: RMB
Amount for Amount for
Source of other income the period the prior period
Government grants – directly included in profit or loss 136,741,599.83 115,896,575.43
Government grants – amortised deferred income included in
profit or loss 104,451,215.79 104,704,060.06
Gain on debt restructuring 1,030,353.24
Total 242,223,168.86 220,600,635.49
54. Investment income
Unit: RMB
Amount for Amount for
Item the period the prior period
Dividend on financial assets held for trading and other non-
current financial assets 38,224,826.21 19,557,976.67
Income from long-term equity investments accounted for using
the equity method 24,116,757.95 31,476,499.83
Investment gain on debt restructuring -62,888.33 24,593,731.72
Investment gain on disposal of long-term equity investments -856,627.60 112,907,083.05
Investment gain on derecognition of financial assets -137,464,855.58 -258,113,630.19
Total -76,042,787.35 -69,578,338.92
2022 ANNUAL REPORT 285
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
55. Gain on change in fair value
Unit: RMB
Amount for Amount for
Source of gain on change in fair value the period the prior period
Gain on change in fair value of consumable biological assets
measured at fair value 9,924,233.72 -41,899.05
Other non-current financial assets 5,350,000.00 1,600,000.00
Financial assets held for trading -40,528,162.53 -78,631,913.62
Total -25,253,928.81 -77,073,812.67
56. Credit impairment loss
Unit: RMB
Amount for Amount for
Item the period the prior period
Bad debt loss of other receivables 54,677,374.62 -33,623,255.14
Bad debt loss of accounts receivable -38,857,265.91 20,880,443.83
Bad debt loss of financial lease payments -101,897,077.27 -239,469,507.89
Others -16,523,042.11
Total -86,076,968.56 -268,735,361.31
57. Loss on impairment of assets
Unit: RMB
Amount for the prior
Item Amount for the period period
Loss on inventory impairment -17,659,966.20 -11,285,890.45
Total -17,659,966.20 -11,285,890.45
286
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
58. Asset disposal income
Unit: RMB
Amount for the prior
Source of asset disposal income Amount for the period period
Gain on disposal of intangible assets (“-” denotes loss) 106,837,281.47 42,184,387.73
Gain on disposal of fixed assets (“-” denotes loss) 54,255,232.29 9,375,163.93
Total 161,092,513.76 51,559,551.66
59. Non-operating income
Unit: RMB
Amount included in
extraordinary gains
Amount for Amount for or losses for
Item the period the prior period the period
Government grants 73,741,500.00 42,486,362.10 73,741,500.00
Fine income 2,334,679.24 5,723,762.72 2,334,679.24
Exempted debts 94,894.96 12,729,703.07 94,894.96
Gain on damage and retirement of non-current
assets 82,413.79 1,035,196.66 82,413.79
Others 995,197.77 9,719,362.26 995,197.77
Total 77,248,685.76 71,694,386.81 77,248,685.76
Government grants included in profit or loss for the period:
Unit: RMB
Amount for Amount for Asset-related/
Item the period the prior period income-related
Grant income 73,741,500.00 42,486,362.10 Income-related
Total 73,741,500.00 42,486,362.10
(1) For details of government grant, please see Note VII. 67.
(2) For the specific reason for government grants as recurring profit or loss, please refer to Note XVIII.1.
2022 ANNUAL REPORT 287
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
60. Non-operating expenses
Unit: RMB
Included in
non-recurring
Amount for Amount for profit or loss in
Item the period the prior period the period
Trading of carbon emission quota 23,662,741.81 42,396,793.42 23,662,741.81
Litigation 16,348,160.25 16,348,160.25
Loss on damage and retirement of non-current
assets 10,382,099.66 3,338,528.87 10,382,099.66
Donation 805,000.00 1,142,550.00 805,000.00
Others 95,188.91
Total 51,198,001.72 46,973,061.20 51,198,001.72
61. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Current income tax calculated according to tax law and
related regulations 90,855,030.56 185,879,510.90
Deferred income tax expenses -225,948,373.97 30,616,777.64
Total -135,093,343.41 216,496,288.54
288
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
61. Income tax expenses (Continued)
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMB
Amount for
Item the period
Total profit 182,269,348.00
Income tax expenses calculated at statutory (or applicable) tax rates 27,340,402.20
Effect of different tax rates applicable to certain subsidiaries 127,578,481.49
Adjustments to income tax for prior periods 22,095,145.12
Profit and loss of joint ventures and associates accounted for using the equity method -739,743.25
Income not subject to tax (listed with “-”) -99,806,424.77
Non-deductible costs, expenses and losses 16,981,499.31
Tax effect of utilisation of unrecognised deductible losses and deductible temporary
differences in the previous year (listed with “-”) -45,056,645.61
Tax effect of utilisation of unrecognised deductible losses and deductible temporary
differences 60,076,736.82
Tax effect of R&D fee deduction (listed with“-”) -129,166,798.89
The pre-tax deduction of the interest on Perpetual Bonds accounted as equity -13,455,000.00
Tax incentives such as equipment credits -100,940,995.83
Income tax expense -135,093,343.41
62. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB
Amount for Amount for
Item the period the prior period
Open credit and other income 745,295,349.96 579,416,906.77
Finance expenses – Interest income 305,772,280.83 276,274,390.31
Government grants actually received 202,165,244.17 199,176,622.64
Net proceedings from the financial leasing business 184,749,056.18 1,153,242,827.87
Default penalty and fine 969,634.65 11,844,722.79
Total 1,438,951,565.79 2,219,955,470.38
2022 ANNUAL REPORT 289
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
62. Items on statements of cash flow (Continued)
(2) Cash paid relating to other operating activities
Unit: RMB
Amount for Amount for
Item the period the prior period
Transportation expenses 944,022,266.88 961,442,438.95
Litigation 368,296,784.84 0.00
Net investment in factoring business 250,000,000.00 737,000,000.00
Financial institutions charge 241,125,513.70 210,288,974.16
Business hospitality expenses 117,853,387.22 106,007,628.02
Intermediary service expenses 54,437,645.94 39,555,241.62
Travel expenses 32,480,740.17 35,150,617.24
Repair expenses 23,053,205.98 33,427,722.45
Cargo handling charges 21,869,006.27 30,088,978.09
Waste disposal expenses 15,891,052.20 20,081,650.19
Insurance premium 15,288,347.78 22,171,792.20
Leasing expenses 12,038,349.86 17,039,644.42
Office expenses 10,681,717.81 28,618,557.15
Others 186,617,859.65 167,760,474.48
Total 2,293,655,878.30 2,408,633,718.97
(3) Cash received relating to other investing activities
Unit: RMB
Amount for Amount for
Item the period the prior period
Recovery of consideration for equity transfer 493,655,373.48
Net cash received from subsidiaries 44,674.62
Total 493,700,048.10
(4) Cash paid relating to other investing activities
Unit: RMB
Amount for Amount for
Item the period the prior period
Payment for acquisition of companies 127,500,000.00
Total 127,500,000.00
290
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
62. Items on statements of cash flow (Continued)
(5) Cash received relating to other financing activities
Unit: RMB
Amount for Amount for
Item the period the prior period
Equipment leaseback 3,684,590,394.82 2,071,358,708.00
Deposit for finance lease 34,500,000.00 60,000,000.00
Short-term commercial paper and others 200,000,000.00
Net recovery of guarantee deposit 2,286,599,788.67
Contributions by other partners 190,790,000.00
Total 3,719,090,394.82 4,808,748,496.67
(6) Cash paid relating to other financing activities
Unit: RMB
Amount for Amount for
Item the period the prior period
Repayment of equipment leaseback 2,237,763,312.31 2,252,587,404.38
Repayment of short-term commercial paper and MTN 1,200,000,000.00 2,745,000,000.00
Repayment of bonds 1,078,685,100.00 90,000,000.00
Net expense of guarantee deposit 919,816,742.13
Payment of Perpetual Bonds interest 89,700,000.00 89,700,000.00
Security deposit for financial leasing 76,000,000.00 96,696,696.64
Payment for equity in China Development Bank funds 75,500,000.00 29,500,000.00
Share repurchase under the share incentive scheme 11,757,730.78
Redemption of preference shares 4,500,000,000.00
Payment of preference shares dividend 323,390,968.66
Acquisition of non-controlling interests 300,000,000.00
Total 5,689,222,885.22 10,426,875,069.68
2022 ANNUAL REPORT 291
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
63. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB
Amount for Amount for
Supplementary information the period the prior period
1. Reconciliation of net profit as cash flows from operating
activities:
Net profit 317,362,691.41 2,089,684,021.45
Plus: Provision for impairment of assets 103,736,934.76 280,021,251.76
Depreciation of fixed assets, depletion of oil and gas
assets, and depreciation of bearer biological assets 2,255,505,392.35 2,366,091,653.76
Depreciation of right-of-use assets 7,737,284.20 7,972,781.72
Amortisation of intangible assets 54,698,978.50 51,351,628.42
Amortisation of long-term prepaid expenses 4,678,921.69 3,964,046.48
Loss on disposal of fixed assets, intangible assets and
other long-term assets (“-” denotes gain) -161,092,513.76 -51,559,551.66
Loss on scrapped fixed assets (“-” denotes gain) 10,299,685.87 2,303,332.21
Loss on changes in fair value (“-” denotes gain) 25,253,928.81 77,073,812.67
Investment loss (“-” denotes gain) 2,081,067,895.66 2,348,200,417.05
Investment loss (“-” denotes gain) 76,042,787.35 69,578,338.92
Decrease in deferred income tax assets (“-” denotes
increase) -220,919,108.82 -30,616,777.64
Increase in deferred income tax liabilities (“-” denotes
decrease) -5,029,265.45 6,637,993.77
Decrease in inventories (“-” denotes increase) -406,337,116.14 -156,406,209.61
Decrease in operating receivables (“-” denotes increase) 332,267,872.35 3,208,289,966.45
Increase in operating payables (“-” denotes decrease) -1,025,450,126.41 -1,690,698,513.11
Others
Net cash flows from operating activities 3,449,824,242.37 8,581,888,192.64
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 2,159,460,149.51 3,168,915,847.02
Less: Opening balance of cash 3,168,915,847.02 4,389,169,963.79
Plus: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents -1,009,455,697.51 -1,220,254,116.77
292
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
63. Supplementary information on cash flow statement (Continued)
(2) Net Cash of Acquisition Subsidiaries Paid in Current Period
Unit: RMB
Amount
Cash or cash equivalents paid in the current period for business combinations that
occurred during the period: 368,000,000.00
Of which: Shanxi Fuyin Industrial Trading Co., Ltd. 368,000,000.00
Less: Cash and cash equivalents held by the subsidiary on the acquisition date 2,081.22
Of which: Shanxi Fuyin Industrial Trading Co., Ltd. 223.60
Chongmin Culture Development (Shanghai) Co., Ltd. 1,857.62
Plus: Cash or cash equivalents paid in the current period for business combinations
that occurred during previous periods
Of which:
Net cash paid for acquisition of subsidiaries 367,997,918.78
(3) Cash and cash equivalents composition
Unit: RMB
Item Closing balance Opening balance
I. Cash 2,159,460,149.51 3,168,915,847.02
Of which: Treasury cash 3,491,219.08 2,926,080.68
Bank deposit that can be used for payment at any time 2,155,968,930.43 3,165,989,766.34
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 2,159,460,149.51 3,168,915,847.02
Of which: Restricted cash and cash equivalents used by
the Company or subsidiaries within the Group
2022 ANNUAL REPORT 293
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
64. Notes to items of statements of changes in owners’ equity
For the nature of the adjustment to the opening balance for the prior year under the item “Others” and the reason for
the adjusted amount, please refer to Note VII. 40 and 46.
65. Assets with restricted ownerships or right to use
Unit: RMB
Item Closing carrying amount Reason for such restrictions
Monetary funds 11,840,974,836.57 As bank acceptance bills, deposits for letters
of credit, deposits for letters of guarantee, loan
deposits, deposit reserves, and interests receivable,
etc. (Note VII. 1)
Fixed assets 10,063,641,052.69 As collateral for bank borrowings and long-term
payables (Note VII. 14)
Investment property 4,895,514,630.65 As collateral for bank borrowings (Note VII. 13)
Intangible assets 1,033,897,418.27 As collateral for bank borrowings and long-term
payables (Note VII. 18)
Accounts receivable 100,000,000.00 As deposits to obtain loans (Note VII. 3)
Accounts receivable financing/bills 8,497,931.30 As collateral for letters of credit (Note VII. 4)
receivable
Total 27,942,525,869.48
Other explanation:
As at 31 December 2022, housing, building structure and equipment with the carrying amount of RMB10,063,641,052.69 (31 December 2021:
carrying amount of RMB12,866,125,795.19), investment properties with the carrying amount of RMB4,895,514,630.65 (31 December 2021:
carrying amount of RMB5,033,765,366.00) and intangible assets with the carrying amount of RMB1,033,897,418.27 (31 December 2021:
carrying amount of RMB1,210,395,050.42) were pledged as collateral for long-term borrowings of RMB3,118,508,092.17 (31 December 2021:
RMB3,921,048,883.74) and short-term borrowings of RMB65,000,000.00 (31 December 2021: RMB70,000,000.00).
294
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
66. 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 94,101,812.26 6.9646 655,381,481.67
EUR 10,574,902.80 7.4229 78,496,445.99
HKD 1,127,396.51 0.8933 1,007,103.30
GBP 1,631.58 8.3941 13,695.65
JPY 1,197.00 0.0524 62.72
Accounts receivable
Of which: USD 32,658,569.02 6.9646 227,453,869.80
EUR 9,289,176.64 7.4229 68,952,629.28
JPY 146,734,998.00 0.0524 7,688,913.90
Other receivables
Of which: USD 8,727.39 6.9646 60,782.78
Accounts payable
Of which: USD 133,923,367.50 6.9646 932,722,685.29
EUR 1,954,737.99 7.4229 14,509,824.63
Other payables
Of which: USD 801,010.52 6.9646 5,578,717.87
EUR 1,487,870.92 7.4229 11,044,317.05
Short-term borrowings
Of which: USD 51,212,401.04 6.9646 356,673,888.28
EUR 23,546,000.00 7.4229 174,779,603.40
Long-term borrowings
Of which: USD 1,589,708.50 6.9646 11,071,683.82
2022 ANNUAL REPORT 295
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
66. Foreign currency items (Continued)
(2) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose
their overseas principal places of business, functional currency and basis. Reasons shall be disclosed if
there is any change in the functional currency.
√ Applicable Not applicable
Principal place of
No. Name of subsidiary business Place of incorporation Functional 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
6 Chenming (Overseas) Limited Hong Kong, China Hong Kong, China USD
7 Chenming (Singapore) Limited Singapore Singapore USD
8 Chenming (HK) Limited Hong Kong, China Hong Kong, China USD
296
XII Financial Report
VII. Notes to items of the consolidated financial statements (Continued)
67. Government grants
General information of government grants
Unit: RMB
Amount included in
the current profit and
Type Amount Reporting item loss
Special subsidy from the Bureau of Finance 73,730,000.00 Non-operating income 73,730,000.00
Enterprise reform and development subsidies 66,394,161.00 Other income 66,394,161.00
Financial subsidies for technological
transformation project 52,395,702.39 Other income 52,395,702.39
Funding for environmental protection 50,592,141.88 Other income 50,592,141.88
Huanggang forestry-pulp-paper project 25,026,217.80 Other income 25,026,217.80
Sewage treatment and water conservation
transformation project 11,778,260.39 Other income 11,778,260.39
Immediate VAT refund 8,346,328.57 Other income 8,346,328.57
Government rewards 4,704,600.00 Other income 4,704,600.00
Zhanjiang forestry-pulp-paper project 4,094,632.92 Other income 4,094,632.92
Refund of tax 4,052,553.33 Other income 4,052,553.33
Employment stabilisation subsidies 3,012,954.63 Other income 3,012,954.63
Afforestation subsidy 2,695,823.49 Other income 2,695,823.49
One-time job retention subsidies 2,125,800.00 Other income 2,125,800.00
Subsidies for foreign trade projects 1,000,000.00 Other income 1,000,000.00
R&D subsidy 500,000.00 Other income 500,000.00
Project Funding for National Key Technology
Research and Development Program 164,700.00 Other income 164,700.00
Subsidies for social insurance 116,915.50 Other income 116,915.50
Other income and non-
Others 4,203,523.72 operating income 4,203,523.72
Total 314,934,315.62 314,934,315.62
2022 ANNUAL REPORT 297
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VIII. Change in scope of consolidation
During the year, 2 subsidiaries were newly established, namely Jiangxi Chenming Tea Co., Ltd. and Shouguang Meichen
Energy Technology Co., Ltd., and 1 subsidiary was deregistered, namely Qingdao Chenming Pulp & Paper Electronic
Commodity Spot Trading Co., Ltd. 2 subsidiaries were acquired not within the definition of business, namely Shanxi Fuyin
Industrial Trading Co., Ltd. and Chongmin Culture Development (Shanghai) Co., Ltd.
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Principle Issued Issued
place of Place of Nature of Shareholding debt share
Name of subsidiary business incorporation business Type of legal person Direct Indirect Acquisition securities capital
Zhanjiang Chenming Pulp & Paper Zhanjiang Zhanjiang Paper making For-profit corporation 82.67% Establishment 0 0
Co., Ltd.
Shouguang Meilun Paper Co., Ltd. Shouguang Shouguang Paper making For-profit corporation 62.4864% Establishment 0 0
Jilin Chenming Paper Co., Ltd. Jilin Jilin Paper making For-profit corporation 100% Acquisition 0 0
Huanggang Chenming Pulp & Paper Huanggang Huanggang Pulp production For-profit corporation 70.15% 29.85% Establishment 0 0
Co., Ltd.
Shandong Chenming Paper Sales Shouguang Shouguang Sales of paper For-profit corporation 100% Establishment 0 0
Co., Ltd. product
Shouguang Chenming Import and Shouguang Shouguang Trading For-profit corporation 100% Establishment 0 0
Export Trade Co., Ltd.
Jiangxi Chenming Supply Chain Jiangxi Jiangxi Trading For-profit corporation 70% Establishment 0 0
Management Co., Ltd.
Chenming GmbH Germany Germany Paper product For-profit corporation 100% Establishment 0 0
trading
Shouguang Chenming Papermaking Shouguang Shouguang Machinery For-profit corporation 100% Establishment 0 0
Machine Co., Ltd. manufacturing
Shouguang Hongxiang Printing and Shouguang Shouguang Printing and For-profit corporation 100% Acquisition 0 0
Packaging Co., Ltd. packaging
Shouguang Chenming Modern Logistic Shouguang Shouguang Transportation For-profit corporation 100% Establishment 0 0
Co., Ltd.
Jinan Chenming Paper Sales Co., Ltd. Jinan Jinan Investment For-profit corporation 100% Establishment 0 0
management/
Paper product
trading
Huanggang Chenming Arboriculture Huanggang Huanggang Arboriculture For-profit corporation 100% Establishment 0 0
Development Co., Ltd.
Chenming Arboriculture Co., Ltd. Wuhan Wuhan Arboriculture For-profit corporation 100% Establishment 0 0
Chenming Paper Korea Co., Ltd. Korea Korea Paper product For-profit corporation 100% Establishment 0 0
trading
298
XII Financial Report
IX. Interest in other entities (Continued)
1. Interest in subsidiaries (Continued)
(1) Constitution of the Group (Continued)
Principle Issued Issued
place of Place of Nature of Shareholding debt share
Name of subsidiary business incorporation business Type of legal person Direct Indirect Acquisition securities capital
Shouguang Shun Da Customs Shouguang Shouguang Customs For-profit corporation 100% Establishment 0 0
Declaration Co, Ltd. declaration
Shanghai Chenming Industry Co., Ltd. Shanghai Shanghai Property For-profit corporation 100% Establishment 0 0
investment and
management
Shanghai Chenyin Trading Co., Ltd. Shanghai Shanghai Trading For-profit corporation 51% Establishment 0 0
Shandong Chenming Group Finance Jinan Jinan Finance For-profit corporation 80% 20% Establishment 0 0
Co., Ltd.
Jiangxi Chenming Paper Co., Ltd. Nanchang Nanchang Paper making For-profit corporation 100% Establishment 0 0
Nanchang Shengheng Trading Co., Ltd. Nanchang Nanchang Trading For-profit corporation 100% Establishment 0 0
Nanchang Kunheng Trading Co., Ltd. Nanchang Nanchang Trading For-profit corporation 100% Establishment 0 0
Shouguang Chenming Art Paper Shouguang Shouguang Paper making For-profit corporation 75% Establishment 0 0
Co., Ltd.
Hailaer Chenming Paper Co., Ltd. Hailaer Hailaer Paper making For-profit corporation 75% Establishment 0 0
Shandong Grand View Hotel Co., Ltd. Shouguang Shouguang Catering For-profit corporation 70% Establishment 0 0
Wuhan Chenming Hanyang Paper Wuhan Wuhan Paper making For-profit corporation 65.205% 34.64% Establishment 0 0
Holdings Co., Ltd
Shandong Chenming Financial Leasing Jinan Jinan Financial leasing For-profit corporation 100% Establishment 0 0
Co., Ltd.
Qingdao Chenming Nonghai Financial Qingdao Qingdao Financial leasing For-profit corporation 100% Establishment 0 0
Leasing Co., Ltd
Chenming (HK) Limited Hong Kong Hong Kong Paper product For-profit corporation 100% Establishment 0 0
trading
Shouguang Hongyi Decorative Shouguang Shouguang Packaging For-profit corporation 100% Merger and 0 0
Packaging Co., Ltd. acquisition
Shouguang Xinyuan Coal Co., Ltd. Shouguang Shouguang Coal For-profit corporation 100% Merger and 0 0
acquisition
Shouguang City Run Sheng Wasted Shouguang Shouguang Purchase and For-profit corporation 100% Merger and 0 0
Paper Recycle Co., Ltd. sale of waste acquisition
Shouguang Wei Yuan Logistics Shouguang Shouguang Logistics For-profit corporation 100% Merger and 0 0
Company Limited acquisition
2022 ANNUAL REPORT 299
XII Financial Report
IX. Interest in other entities (Continued)
1. Interest in subsidiaries (Continued)
(1) Constitution of the Group (Continued)
Principle Issued Issued
place of Place of Nature of Shareholding debt share
Name of subsidiary business incorporation business Type of legal person Direct Indirect Acquisition securities capital
Wuhan Chenming Qianneng Electric Wuhan Wuhan Thermal power For-profit corporation 51% Establishment 0 0
Power Co., Ltd.
Shandong Chenming Investment Jinan Jinan Investment For-profit corporation 100% Establishment 0 0
Chenming Paper Japan Co., Ltd. Japan Japan Paper product For-profit corporation 100% Establishment 0 0
trading
Chenming International Co., Ltd. the United the United States Paper product For-profit corporation 100% Establishment 0 0
States trading
Zhanjiang Chenming Arboriculture Zhanjiang Zhanjiang Arboriculture For-profit corporation 100% Establishment 0 0
Development Co., Ltd.
Yangjiang Chenming Arboriculture Yangjiang Yangjiang Arboriculture For-profit corporation 100% Establishment 0 0
Development Co., Ltd.
Nanchang Chenming Arboriculture Nanchang Nanchang Arboriculture For-profit corporation 100% Establishment 0 0
Development Co., Ltd.
Guangdong Huirui Investment Co., Ltd. Zhanjiang Zhanjiang Investment For-profit corporation 100% Establishment 0 0
Jilin Chenming New-style Wall Materials Jilin Jilin Wall materials For-profit corporation 100% Establishment 0 0
Co., Ltd
Jilin Chenming Logistics Co., Ltd. Jilin Jilin Logistics For-profit corporation 100% Establishment 0 0
Jiangxi Chenming Logistics Co., Ltd. Nanchang Nanchang Logistics For-profit corporation 100% Establishment 0 0
Fuyu Chenming Paper Co., Ltd. Fuyu Fuyu Paper making For-profit corporation 100% Establishment 0 0
Zhanjiang Meilun Pulp & Paper Co., Ltd. Zhanjiang Zhanjiang Paper making For-profit corporation 100% Establishment 0 0
Shanghai Chenming Financial Leasing Shanghai Shanghai Financial For-profit corporation 100% Establishment 0 0
Co., Ltd. leasing
Wuhan Junheng Property Management Wuhan Wuhan Property For-profit corporation 100% Merger and 0 0
Co. Ltd. acquisition
Guangzhou Chenming Financial Leasing Guangzhou Guangzhou Financial For-profit corporation 100% Establishment 0 0
Co., Ltd. leasing
Shanghai Hongtai Real Estate Co., Ltd. Shanghai Shanghai Real estate For-profit corporation 100% Merger and 0 0
acquisition
Shanghai Hongtai Property Shanghai Shanghai Property For-profit corporation 100% Merger and 0 0
Management Co., Ltd. acquisition
300
XII Financial Report
IX. Interest in other entities (Continued)
1. Interest in subsidiaries (Continued)
(1) Constitution of the Group (Continued)
Principle Issued Issued
place of Place of Nature of Shareholding debt share
Name of subsidiary business incorporation business Type of legal person Direct Indirect Acquisition securities capital
Shandong Chenming Commercial Jinan Jinan Business For-profit corporation 100% Establishment 0 0
Factoring Co., Ltd factoring
Guangzhou Chenming Commercial Guangzhou Guangzhou Business For-profit corporation 51% Establishment 0 0
Factoring Co., Ltd. factoring
Jiangxi Chenming Tea Co., Ltd. Jiangxi Jiangxi Tea business For-profit corporation 100% Establishment 0 0
Zhanjiang Chenming Port Co., Ltd. Zhanjiang Zhanjiang Port services For-profit corporation 100% Establishment 0 0
Beijing Chenming Financial Leasing Beijing Beijing Financial For-profit corporation 100% Establishment 0 0
Co., Ltd. leasing
Chenming Paper United States Co., Ltd. the United the United Paper product For-profit corporation 100% Establishment 0 0
States States trading
Guangdong Chenming Panels Co., Ltd. Guangdong Guangdong Panels For-profit corporation 100% Establishment 0 0
Shanghai Chenming Pulp & Paper Sales Shanghai Shanghai Paper product For-profit corporation 100% Establishment 0 0
Co., Ltd. trading
Meilun (BVI) Limited Cayman Cayman Commerce For-profit corporation 100% Establishment 0 0
Weifang Chenming Growth Driver Weifang Weifang Fund For-profit corporation 79% Establishment 0 0
Replacement Equity Investment Fund
Partnership (Limited Partnership)
Nanjing Chenming Culture Nanjing Nanjing Marketing For-profit corporation 100% Establishment 0 0
Communication Co., Ltd.
Chenming (Overseas) Limited Hong Kong Hong Kong Paper product For-profit corporation 100% Establishment 0 0
trading
Chenming (Singapore) Limited Singapore Singapore Paper product For-profit corporation 100% Establishment 0 0
trading
Kunshan Tuoan Plastic Products Kunshan Kunshan Rubber and For-profit corporation 100% Merger and 0 0
Co., Ltd. plastic acquisition
Hubei Changjiang Chenming Huanggang Huanggang Huanggang Fund For-profit corporation 59.97% Establishment 0 0
Equity Investment Fund Partnership
(Limited Partnership)
Hainan Chenming Technology Co., Ltd. Haikou Haikou Wholesale For-profit corporation 100% Establishment 0 0
and retail
2022 ANNUAL REPORT 301
XII Financial Report
IX. Interest in other entities (Continued)
1. Interest in subsidiaries (Continued)
(1) Constitution of the Group (Continued)
Principle Issued Issued
place of Place of Nature of Shareholding debt share
Name of subsidiary business incorporation business Type of legal person Direct Indirect Acquisition securities capital
Foshan Chenming Import and Export Foshan Foshan Trading For-profit corporation 100% Establishment 0 0
Trade Co., Ltd.
Shanghai Herui Investment Co., Ltd. Shanghai Shanghai Business For-profit corporation 100% Merger and 0 0
services acquisition
Hubei Huanggang Chenming Equity Huanggang Huanggang Capital market For-profit corporation 60% Establishment 0 0
Investment Fund Management services
Co., Ltd.
Shandong Dingkun Asset Management Shouguang Shouguang Business services For-profit corporation 100% Establishment 0 0
Partnership (Limited Partnership)
Huanggang Chenming Paper Technology Huanggang Huanggang Paper making For-profit corporation 100% Establishment 0 0
Co., Ltd.
Huanggang Chenming Port Co., Ltd. Huanggang Huanggang Port services For-profit corporation 51% Establishment 0 0
Huanggang Chenming Pulp & Fiber Huanggang Huanggang Trading For-profit corporation 100% Establishment 0 0
Trading Co., Ltd.
Weifang Chendu Equity Investment Shouguang Shouguang Capital market For-profit corporation 79.75% Establishment 0 0
Partnership (Limited Partnership) services
Shanxi Fuyin Industrial Trading Co., Ltd. Taiyuan Taiyuan Wholesale and For-profit corporation 100% Acquisition 0 0
retail
Chongmin Culture Development Shanghai Shanghai Leasing and For-profit corporation 100% Acquisition 0 0
(Shanghai) Co., Ltd. business
services
Shouguang Meichen Energy Technology Shouguang Shouguang Electricity For-profit corporation 100% Establishment 0 0
Co., Ltd.
(2) Major non-wholly owned subsidiaries
Unit: RMB
Gain or loss Dividend to
attributable to minority interest
minority interest declared during Closing balance
Name of subsidiary Minority interest during the period the period of minority interest
Shouguang Chenming Art
Paper Co., Ltd. 25.00% 2,558,964.73 97,853,155.20
Shouguang Meilun Paper
Co., Ltd. 37.5136% 144,054,427.69 207,029,589.03 2,496,523,309.62
Zhanjiang Chenming Pulp &
Paper Co., Ltd. 17.33% 3,406,584.20 31,895,890.42 1,514,063,354.36
302
XII Financial Report
IX. Interest in other entities (Continued)
1. Interest in subsidiaries (Continued)
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Closing balance Opening balance
Non-current Current Non-current Non-current Current Non-current
Name of subsidiary Current assets assets Total assets liabilities liabilities Total liabilities Current assets assets Total assets liabilities liabilities Total liabilities
Shouguang Chenming Art
Paper Co., Ltd. 592,821,595.68 455,020,296.41 1,047,841,892.09 656,429,271.34 656,429,271.34 664,927,705.80 499,632,230.38 1,164,559,936.18 783,383,174.36 783,383,174.36
Shouguang Meilun Paper
Co., Ltd. 5,271,560,197.74 10,517,781,981.22 15,789,342,178.96 5,706,873,517.18 1,592,276,073.16 7,299,149,590.34 7,009,260,465.11 10,720,374,440.36 17,729,634,905.47 7,685,982,114.28 1,735,946,459.15 9,421,928,573.43
Zhanjiang Chenming Pulp &
Paper Co., Ltd. 12,177,003,083.15 13,209,726,474.81 25,386,729,557.96 14,522,121,479.88 1,696,026,289.09 16,218,147,768.97 11,650,935,934.57 12,965,150,000.41 24,616,085,934.98 14,550,859,440.02 1,994,649,794.03 16,545,509,234.05
Unit: RMB
Amount for the period Amount for the prior period
Total Total
comprehensive Cash flows from comprehensive Cash flows from
Name of subsidiary Revenue Net profit income operating activities Revenue Net profit income operating activities
Shouguang Chenming Art
Paper Co., Ltd. 695,350,440.98 10,235,858.93 10,235,858.93 140,865,909.67 689,339,213.30 -13,823,985.26 -13,823,985.26 -437,908,937.70
Shouguang Meilun Paper
Co., Ltd. 8,877,750,999.39 384,015,682.06 384,015,682.06 1,662,815,139.80 8,705,143,361.05 244,940,482.34 244,940,482.34 1,502,100,611.93
Zhanjiang Chenming Pulp
& Paper Co., Ltd. 12,333,411,837.39 162,214,497.02 162,810,926.89 1,863,903,466.34 13,110,229,643.09 1,093,678,580.62 1,095,525,191.56 2,993,663,137.46
2022 ANNUAL REPORT 303
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IX. Interest in other entities (Continued)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(1) Changing in shareholding in subsidiaries
The Company previously held 96.26% equity interest in Zhanjiang Chenming Pulp & Paper Co., Ltd. In
June 2022, Xiamen International Trade Industry Development Equity Investment Fund Partnership (Limited
Partnership) (“Xiamen International Trade “) made a unilateral capital contribution of RMB400 million to
Zhanjiang Chenming Pulp & Paper Co., Ltd. (“Zhanjiang Chenming”). Upon completion of the capital increase,
its equity interest in Zhanjiang Chenming was 4.40%, and the transaction did not result in the loss of control
over Zhanjiang Chenming by the Company. The transaction resulted in an increase in capital reserves of
RMB29.6768 million. In July 2022, BOCOM Financial Assets Investment Co., Ltd. and Jiaohui Chenming Zhuli
(Suzhou) Emerging Industry Development Fund Partnership (Limited Partnership) (“BOCOM Investment and
Jiaohui Chenming Fund”) made a unilateral capital contribution of RMB1,000 million to Zhanjiang Chenming.
Upon completion of the capital increase, its equity interest in Zhanjiang Chenming was 9.92%, and the
transaction did not result in the loss of control over Zhanjiang Chenming by the Company. The transaction
resulted in an increase in capital reserves of RMB111.4059 million.
(2) Effect of the transactions on minority interest and equity attributable to the owners of the parent company
Unit: RMB
Capital contribution
Capital contribution into Zhanjiang
into Zhanjiang Chenming by
Chenming by BOCOM Investment
Xiamen International and Jiaohui
Trade Chenming Fund
Amount of capital increase 400,000,000.00 1,000,000,000.00
Share of net assets of the Company after the capital
increase 7,262,988,678.16 7,323,064,813.76
Share of net assets of the Company before the capital
increase 7,233,311,863.47 7,211,658,911.37
Difference 29,676,814.69 111,405,902.39
Of which: Capital reserve adjustment 29,676,814.69 111,405,902.39
304
XII Financial Report
IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Accounting method
Principle place Place of Shareholding for investment in joint
Name of joint venture and associate of business incorporation Nature of business Direct Indirect ventures or associates
I. Joint venture
Weifang Sime Darby West Port Co.,
Ltd. Weifang Weifang Port construction 50.00% Equity method
Shouguang Jintou Industrial
Investment Partnership (Limited
Partnership) Shouguang Shouguang Investment 49.57% Equity method
II. Associate
Ningbo Kaichen Huamei Equity
Investment Fund Partnership
(Limited Partnership) Ningbo Ningbo Investment 40.00% Equity method
Zhuhai Dechen New Third Board
Equity Investment Fund Company
(Limited Partnership) Zhuhai Zhuhai Investment 50.00% Equity method
Goldtrust Futures Co., Ltd. Changsha Changsha Futures 35.43% Equity method
Guangdong Nanyue Bank Co., Ltd. Guangdong Guangdong Bank 6.76% Equity method
2022 ANNUAL REPORT 305
XII Financial Report
IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(2) Key financial information of major joint ventures
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Weifang Sime Darby Weifang Sime Darby
West Port Co., Ltd. West Port Co., Ltd.
Current assets 27,197,876.06 21,774,345.85
Of which: Cash and cash equivalents 4,280,737.42 7,054,019.11
Non-current assets 489,392,605.54 507,959,459.20
Total assets 516,590,481.60 529,733,805.05
Current liabilities 24,865,100.48 12,094,403.33
Non-current liabilities 357,300,969.89 377,812,252.49
Total liabilities 382,166,070.37 389,906,655.82
Net assets 134,424,411.23 139,827,149.23
Of which: Minority interest
Equity interest attributable to owners of the
parent company 134,424,411.23 139,827,149.23
Share of net assets based on shareholding 67,212,205.62 69,913,574.62
Adjustments
Of which: Others
Unrealised gain or loss arising from
intra-group transactions 7,636,365.12 7,457,424.13
Carrying amount of equity investment in joint
ventures 74,848,570.73 77,370,998.75
Revenue 64,379,368.80 62,902,209.91
Finance expenses 21,287,196.67 21,543,430.57
Income tax expenses
Net profit -5,044,856.04 -9,145,016.34
Total comprehensive income -5,044,856.04 -9,145,016.34
Dividends received from joint ventures during
the period
306
XII Financial Report
IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(2) Key financial information of major joint ventures (Continued)
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Shouguang Jintou Shouguang Jintou
Industrial Investment Industrial Investment
Partnership (Limited Partnership (Limited
Partnership) Partnership)
Current assets 1,373,114,822.27 []
Of which: Cash and cash equivalents 98,300.08 []
Non-current assets 992,000,000.00 []
Total assets 2,365,114,822.27 []
Current liabilities 1,000.00 []
Non-current liabilities
Total liabilities 1,000.00 []
Net assets 2,365,113,822.27 []
Of which: Minority interest
Equity interest attributable to owners of the parent
company 2,365,113,822.27 []
Share of net assets based on shareholding 1,172,372,731.02 []
Adjustments
Of which: Others 1,187,625,930.65 []
Unrealised gain or loss arising from
intra-group transactions
Carrying amount of equity investment in joint
ventures 2,359,998,661.67 []
Revenue
Finance expenses 2,699.92 []
Income tax expenses
Net profit -2,699.92 []
Total comprehensive income -2,699.92 []
Dividends received from joint ventures during the
period
2022 ANNUAL REPORT 307
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IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(3) Key financial information of major associates
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Ningbo Kaichen Huamei Ningbo Kaichen Huamei
Equity Investment Fund Equity Investment
Partnership (Limited Fund Partnership
Partnership) (Limited Partnership)
Current assets 4,330,644.90 4,378,938.81
Non-current assets 189,276,814.94 189,276,706.00
Total assets 193,607,459.84 193,655,644.81
Current liabilities 149,740.00
Non-current liabilities
Total liabilities 149,740.00
Net assets 193,457,719.84 193,655,644.81
Of which: Minority interest
Equity interest attributable to owners of the parent
company 193,457,719.84 193,655,644.81
Share of net assets based on shareholding 77,379,992.61 77,459,159.43
Adjustments
Of which: Goodwill
Others 119,838,326.16 119,838,326.16
Carrying amount of equity investment in associates 197,218,318.77 197,297,485.59
Fair value of equity investment where publicly
quoted prices exist
Revenue
Net profit -197,924.97 -3,131,226.94
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income -197,924.97 -3,131,226.94
Dividends received from associates during the
period
308
XII Financial Report
IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(3) Key financial information of major associates (Continued)
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Zhuhai Dechen New Third Zhuhai Dechen New Third
Board Equity Investment Board Equity Investment
Fund Company (Limited Fund Company (Limited
Partnership) Partnership)
Current assets 42,352,069.89 7,991,295.94
Non-current assets 31,213,708.00 65,956,891.00
Total assets 73,565,777.89 73,948,186.94
Current liabilities 5,000.00 5,000.00
Non-current liabilities
Total liabilities 5,000.00 5,000.00
Net assets 73,560,777.89 73,943,186.94
Of which: Minority interest
Equity interest attributable to owners of the parent
company 73,560,777.89 73,943,186.94
Share of net assets based on shareholding 36,776,710.91 36,967,896.31
Adjustments
Of which: Goodwill
Others
Carrying amount of equity investment in associates 36,776,710.91 36,967,896.31
Fair value of equity investment where publicly
quoted prices exist
Revenue
Net profit -382,409.05 -857,132.26
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income -382,409.05 -857,132.26
Dividends received from associates during the
period 15,000,000.00
2022 ANNUAL REPORT 309
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IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(3) Key financial information of major associates (Continued)
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Goldtrust Futures Goldtrust Futures
Co., Ltd. Co., Ltd.
Current assets 577,035,187.04 537,410,385.00
Non-current assets 297,668,426.77 248,262,317.12
Total assets 874,703,613.81 785,672,702.12
Current liabilities 665,847,237.87 556,373,303.71
Non-current liabilities 33,761,891.27 34,269,041.10
Total liabilities 699,609,129.14 590,642,344.81
Net assets 175,094,484.67 195,030,357.31
Of which: Minority interest
Equity interest attributable to owners of the parent company 175,094,484.67 195,030,357.31
Share of net assets based on shareholding 62,035,975.92 69,099,255.59
Adjustments
Of which: Goodwill 104,073,292.25 104,073,292.25
Others 12,279,914.66 12,279,914.66
Carrying amount of equity investment in associates 178,389,182.83 185,452,462.50
Fair value of equity investment where publicly quoted prices
exist
Revenue 47,154,604.43 103,690,500.67
Net profit -19,368,875.41 -9,202,201.83
Other comprehensive income
Total comprehensive income -19,368,875.41 -9,202,201.83
Dividends received from associates during the period
310
XII Financial Report
IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(3) Key financial information of major associates (Continued)
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Guangdong Nanyue Guangdong Nanyue
Bank Co., Ltd. Bank Co., Ltd.
Current assets 153,109,778,598.66 134,934,115,453.54
Non-current assets 74,753,438,649.12 72,204,594,882.39
Total assets 227,863,217,247.78 207,138,710,335.93
Current liabilities 181,929,537,932.08 164,397,178,593.78
Non-current liabilities 26,407,317,751.35 23,586,782,719.67
Total liabilities 208,336,855,683.43 187,983,961,313.45
Net assets 19,526,361,564.35 19,154,749,022.48
Of which: Minority interest 65,058,817.68 68,522,745.46
Equity interest attributable to owners of the parent
company 19,461,302,746.67 19,086,226,277.02
Share of net assets based on shareholding 1,314,611,000.54 1,289,274,585.01
Adjustments
Of which: Goodwill
Others -5,199,696.88
Carrying amount of equity investment in associates 1,314,611,000.54 1,284,074,888.13
Fair value of equity investment where publicly
quoted prices exist
Revenue 2,704,071,331.52 3,263,061,517.88
Net profit 383,800,672.37 367,289,477.13
Other comprehensive income 9,399,591.65 91,344,112.09
Total comprehensive income 393,200,264.02 458,633,589.22
Dividends received from associates during the
period 28,000,000.00
2022 ANNUAL REPORT 311
XII Financial Report
IX. Interest in other entities (Continued)
3. Interest in joint arrangements or associates (Continued)
(4) Summary financial information of non-major joint ventures and associates
Unit: RMB
Closing balance/ Opening balance/
amount for the period amount for the prior period
Joint ventures:
Total carrying amount of investment 108,688,888.42 21,518,994.58
Total amount of the following items based on
shareholding 3,546,106.10 486,060.11
– Net profit 3,546,106.10 486,060.11
– Other comprehensive income
– Total comprehensive income 3,546,106.10 486,060.11
Associates:
Total carrying amount of investment 6,482,035.69 7,488,250.59
Total amount of the following items based on
shareholding 488,367.55 -610,886.24
– Net profit 488,367.55 -610,886.24
– Other comprehensive income
– Total comprehensive income 488,367.55 -610,886.24
X. Risk relating to financial instruments
Main financial instruments of the Group include monetary funds, accounts receivable, accounts receivable financing, other
receivables, non-current assets due within one year, other current assets, long-term receivables, bills payable, accounts
payable, other payables, short-term borrowings, non-current liabilities due within one year, long-term borrowings, bonds
payable, lease liabilities 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 Company aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverse
effects on the Company’s financial performance from financial risk. Based on such objectives, the Company’s risk
management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk
limits and devise corresponding internal control procedures, and to monitor risks faced by the Company. Such risk
management policies and internal control systems are reviewed regularly to adapt to changes in market conditions
and the Company’s activities. The internal audit department of the Company undertakes both regular and ad-hoc
reviews of risk management controls and procedures.
312
XII Financial Report
X. Risk relating to financial instruments (Continued)
1. Risk management goals and policies (Continued)
Risks associated with the financial instrument of the Company mainly include credit risk, liquidity risk, market risk
(including exchange rate risk, interest rate risk and commodity price risk).
The board of directors is responsible to plan and establish the Company’s risk management structure, make risk
management policies and related guidelines, and supervise the implementation of risk management. The Company
has already made risk management risks to identify and analyse risks that the Company face. These policies
mentioned specific risks, covering market, credit risk and liquidity risk etc. The Company regularly assesses market
environment and the operation of the Company changes to determine if to make alteration to risk management policy
and systems. The Company’s risk management is implemented by Risk Management Committee according to the
approval of the board of directors. The Risk Management Committee works closely with other business department of
the Company to identify, evaluating and avoiding certain risks. The Company’s internal audit department will audit the
risk management control and procedures regularly and report the result to audit committee of the Company.
The Company spreads risks through diverse investment and business lines, and through making risk management
policy to reduce risks of single industry, specific area and counterpart.
(1) Credit risk
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty resulting
in financial losses to the Company.
The Company manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable,
accounts receivable, other receivables and long-term receivables etc.
The Company’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listed
banks. The Company anticipated that the bank deposit does not have significant credit risk.
For accounts receivables, other receivables and long-term receivables, the Company set related policies to
control exposure of credit risks. The Company evaluates 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
Company keeps monitor the client’s credit record and for client with deteriorate credit records, the Company
will ensure the credit risk is under control in whole by means of written notice of payment collection, shorten or
cancel credit period.
The Company’s debtor spread over different industry and area. The Company continued to assess the credit
evaluation to receivables and purchase credit guarantee insurance if necessary.
The biggest credit risk exposure of the Company is the carrying amount of each financial asset in the balance
sheet. The Company did not provide financial guarantee which resulted in credit risks.
The amount of top 5 accounts receivable of the Company accounted for 30.43% (2021: 24.95%) of the
Company’s total accounts receivables. The amount of top 5 other receivable of the Company accounted for
64.05% (2021: 72.71%) of the Company’s total other receivables.
2022 ANNUAL REPORT 313
XII Financial Report
X. Risk relating to financial instruments (Continued)
1. Risk management goals and policies (Continued)
(2) Liquidity risk
Liquidity risk refers to the risks that the Company will not be able to meet its obligations associated with its
financial liabilities that are settled by delivering cash or other financial assets.
To manage the liquidity risk, the Company monitors and maintains a level of cash and cash equivalents to
finance the Company’s operations and mitigate the effects of fluctuations in cash flows. The management of
the Company monitors the usage of bank borrowings and ensures compliance with the borrowing agreements.
In the meantime, we obtain commitments from major financial institutions to provide sufficient standby funds to
meet short-term and long-term funding needs.
Operating cash of the Company was generated from capital and bank and other borrowings. As at 31
December 2022, the Company’s unused bank loan credit was RMB42,790.5456 million (31 December 2021:
RMB42,832.188 million).
As at the end of the period, the financial assets, financial liabilities and off balance sheet guarantee held by the
Company are analysed by their maturity date as below at their remaining undiscounted contractual cash flows (in
RMB’0,000):
Closing balance
Item Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Financial assets:
Monetary funds 1,400,043.50 1,400,043.50
Accounts receivable 370,056.08 370,056.08
Accounts receivable financing 92,496.04 92,496.04
Other receivables 219,982.47 219,982.47
Long-term receivables 139,749.85 34,634.23 174,384.08
Other current assets 79,590.39 79,590.39
Non-current assets due within one year 492,071.00 492,071.00
Total financial assets 2,654,239.48 139,749.85 34,634.23 2,828,623.56
Financial liabilities:
Short-term borrowings 3,638,504.83 3,638,504.83
Bills payable 312,859.58 312,859.58
Accounts payable 411,496.68 411,496.68
Other payables 185,450.80 185,450.80
Non-current assets due within one year 487,609.74 487,609.74
Long-term borrowings 102,329.00 181,247.82 114,646.81 398,223.63
Lease liabilities 408.73 1,338.55 5,485.00 7,232.28
Long-term payables 169,345.00 105,959.87 59,653.02 334,957.89
Total financial liabilities and contingent
liabilities 5,035,921.63 272,082.73 288,546.24 179,784.83 5,776,335.43
314
XII Financial Report
X. Risk relating to financial instruments (Continued)
1. Risk management goals and policies (Continued)
(2) Liquidity risk (Continued)
As at the end of the prior year, the financial assets, financial liabilities and off-balance sheet guarantee held by
the Company are analysed by their maturity date as below at their remaining undiscounted contractual cash
flows (in RMB’0,000):
Balance as at the end of the prior year
Item Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Financial assets:
Monetary funds 1,411,978.29 1,411,978.29
Accounts receivable 310,581.86 310,581.86
Accounts receivable financing 43,545.93 43,545.93
Other receivables 278,992.06 278,992.06
Long-term receivables 201,047.51 13,929.67 214,977.18
Other current assets 124,691.54 124,691.54
Non-current assets due within one year 684,643.44 684,643.44
Total financial assets 2,854,433.12 201,047.51 13,929.67 3,069,410.30
Financial liabilities:
Short-term borrowings 3,352,302.52 3,352,302.52
Bills payable 308,951.23 308,951.23
Accounts payable 387,113.13 387,113.13
Other payables 148,257.58 148,257.58
Non-current assets due within one year 694,976.96 694,976.96
Bonds payable 15,500.00 15,500.00
Long-term borrowings 124,525.02 217,524.54 185,584.46 527,634.02
Long-term payables 119,406.55 107,518.10 22,500.00 249,424.65
Lease liabilities 472.83 1,942.75 5,277.36 7,692.94
Total financial liabilities and contingent
liabilities 4,891,601.42 259,904.40 326,985.39 213,361.82 5,691,853.03
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.
Maximum guarantee amount for signed guarantee contracts does not represent the amount to be paid.
2022 ANNUAL REPORT 315
XII Financial Report
X. Risk relating to financial instruments (Continued)
1. Risk management goals and policies (Continued)
(3) Market risk
Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow of
a financial instrument will be fluctuated due to the changes in market price.
Interest rate 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 Company’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 Company to cash flow interest rate
risk. Financial liabilities issued at fixed rate expose the Company to fair value interest rate risk. The Company
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 Company continuously monitors the interest rate position of the Company. The Company 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 Company’s outstanding floating rate interest-
bearing borrowings, and therefore could have a material adverse effect on the Company’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 Company are as follows (in ten thousand RMB):
Balance for Balance for
Item the year the prior year
Financial instrument with fixed interest rate
Financial liabilities
Of which: Short-term borrowings 3,638,504.83 3,352,302.52
Long-term borrowings 398,223.63 527,634.02
Bonds payable 15,500.00
Long-term borrowings due within one year 192,074.82 258,373.04
Bonds payable due within one year 35,000.00 127,063.69
Total 4,263,803.28 4,280,873.27
Financial instrument with float interest rate
Financial assets
Of which: Monetary funds 215,596.89 316,598.98
Total 215,596.89 316,598.98
316
XII Financial Report
X. Risk relating to financial instruments (Continued)
1. Risk management goals and policies (Continued)
(3) Market risk (Continued)
Interest rate risk (Continued)
As at 31 December 2022, if the interest rates of borrowings at floating interest rates increase or decrease by
25 basis points with all other factors remain unchanged, the Company’s net profit and shareholders’ equity will
increase or decrease by RMB105,720,100 (31 December 2021: RMB103,457,700).
The financial instruments held by the Company at the reporting date expose the Company to fair value 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 Company at the reporting
date expose the Company 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.
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 Company is situated within the PRC and is denominated in RMB. However,
foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currency
transactions as recognised by the Company (assets and liabilities in foreign currencies and foreign currency
transactions are mainly denominated in US dollar, Japanese yen, South Korean Won, Euro, Hong Kong dollar
and British pound).
The following table details the financial assets and liabilities held by the Company which denominated in foreign
currencies and amounted to RMB as at 31 December 2022 are as follows (in RMB ten thousands):
Liabilities denominated Asset denominated
in foreign currency in foreign currency
As at the As at the As at the As at the
end of the beginning of end of beginning of
Item period the period the period the period
USD 130,604.70 361,192.84 88,289.61 67,590.57
EUR 20,033.37 1,910.41 14,744.91 3,929.49
HKD 4,055.52 100.71 69.89
KRW 7.04
JPY 768.90 812.91
GBP 1.37
Total 150,638.07 367,158.77 103,905.50 72,409.90
The Group continuously monitors the size of the Group’s foreign currency transactions and foreign currency
assets and liabilities to minimise the foreign exchange risks it faces, and for this reason the Group may aim to
avoid foreign exchange risk by signing forward foreign exchange contracts or currency swap contracts.
2022 ANNUAL REPORT 317
XII Financial Report
X. Risk relating to financial instruments (Continued)
1. Risk management goals and policies (Continued)
(3) Market risk (Continued)
Exchange rate risk (Continued)
With other variables unchanged, the after-tax effect of the possible reasonable changes in the exchange rate of
foreign currency to RMB on the current profit and loss of the Company is as follows (in RMB ten thousands):
Increase (decrease) in after-tax profits Balance for the period Balance for the prior period
Increase in exchange rate of USD 5% -2,115.75 5% -14,680.11
Decrease in exchange rate of USD -5% 2,115.75 -5% 14,680.11
Increase in exchange rate of Euro 5% -264.42 5% 100.95
Decrease in exchange rate of Euro -5% 264.42 -5% -100.95
Other price risks
Other price risks refer to the risk of fluctuations caused by changes in market prices other than exchange rate
risks and interest rate risks, whether arising from factors related to a single financial instrument or its issuer, or
from factors related to all similar financial instruments traded on the market. Other price risks can stem from
changes in commodity prices, stock market indexes, equity instrument prices, and other risk variables.
Listed equity instrument investments held by the Company classified as financial assets held for trading, other
non-current financial assets and other equity instrument investments are measured at fair value on the balance
sheet date. Therefore, the Company is subject to the risk of changes in the securities market.
The Company monitors closely the impact of price changes on the price risk of the Company’s investment
in equity securities. The Company has not taken any measures to avoid other price risks. However, the
management is responsible for monitoring other price risks, and will consider holding multiple equity securities
portfolios to reduce the price risk of equity securities investment when necessary.
With other variables unchanged, the after-tax effect of the change of -32.63% (last year: -42.52%) in equity
securities investment prices on the Company’s current profit and loss and other comprehensive income is as
follows (unit: RMB ten thousand):
Increase (decrease) in Increase (decrease) in other
after-tax profits comprehensive income
Balance for Balance for
Balance for the prior Balance for the prior
Item the period period the period period
Due to the rise in the price of equity securities
investment
Due to the decline in the price of equity securities
investment -3,617.77 -8,202.16
318
XII Financial Report
X. Risk relating to financial instruments (Continued)
2. Capital management
The objective of the Company’s capital risk management is to safeguard the Company’s ability to continue as a 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 Company may adjust its financing methods, adjust the number
of dividends paid to shareholders, return capital to shareholders, issue new shares or disposes assets to reduce its
liabilities.
The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by
total capital. As at 31 December 2022, the Company’s gearing ratio is 71.85% (31 December 2021: 72.76%).
XI. Fair value disclosure
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Based on the inputs of the lowest level that are of great significance to the measurement as a whole in the fair value
measurement, the fair value can be categorised as:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Observable inputs other than the quoted market price of assets or liabilities in Level 1, either directly (the
prices) or indirectly (derived from prices).
Level 3: Any input that is not based on observable market data (unobservable inputs) is used for assets or liabilities.
(1) Items and amounts measured at fair value
As at the end of the period, assets and liabilities measured at fair value are listed as follows based on the three
hierarchies as set out above:
Unit: RMB
Fair value measurements categorised into
Item Level 1 Level 2 Level 3 Total
I. Continuous measurement of fair value
(i) Financial assets held for trading 74,708,444.88 74,708,444.88
1. Debt instruments investments
2. Equity instrument investments 74,708,444.88 74,708,444.88
(ii) Accounts receivable financing 924,960,384.16 924,960,384.16
(iii) Other non-current financial assets 786,750,761.62 786,750,761.62
(iv)Biological assets 1,496,607,818.84 1,496,607,818.84
1. Consumable biological assets 1,496,607,818.84 1,496,607,818.84
Total assets continuously measured at fair
value 74,708,444.88 3,208,318,964.62 3,283,027,409.50
2022 ANNUAL REPORT 319
XII Financial Report
XI. Fair value disclosure (Continued)
2. Quantitative information about significant unobservable inputs used in the level 3 fair value
measurement that are significant
Unit: RMB
Fair value as at the
Item end of the period Valuation techniques Unobservable inputs Range
Equity instrument investments:
Shandong Hongqiao Venture Capital Co., Ltd. 77,860,000.00 Cost method
Consumable biological assets:
Forestry 1,496,607,818.84 Replacement cost Cost per mu for the first year of 854.36(RMB/tonne)
method Eucalyptus
Cost per mu for the first year of 627.52(RMB/tonne)
Pines
Roll back method of Unit price per tonne of Eucalyptus 575.00(RMB/tonne)
market price wood
Unit price per tonne of wet pine 585.00(RMB/tonne)
Unit price per tonne of fir wood 695.00(RMB/tonne)
XII. Related parties and related party transactions
1. Parent company of the Company
Shareholding of the Voting right of the
Place of parent company parent company
Name of parent company incorporation Business Business nature Registered capital in the Company in the Company
Chenming Holdings Co., Ltd. Shouguang Investment in manufacture of paper, electricity, 1,238,787,700 27.57% 27.57%
steam, and arboriculture
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office.
2. Subsidiaries of the Company
For details of the Company’s subsidiaries, please refer to Note IX. 1.
320
XII Financial Report
XII. Related parties and related party transactions (Continued)
3. Joint ventures and associates of the Company
For details of material joint ventures and associates of the Company, please refer to Note IX. 3.
Balance of related party transaction between the Company and its joint ventures or associates during the period or
prior periods are as follows:
Name of joint ventures or associates Relation
Weifang Sime Darby West Port Co., Ltd. A joint venture of the Company
Shouguang Meite Environmental Technology Co., Ltd. A joint venture of the Company
Weifang Xingxing United Chemical Co., Ltd. A joint venture of the Company
Shouguang Chenming Huisen New-style Construction A joint venture of the Company
Materials Co., Ltd.
Chenming (Qingdao) Asset Management Co., Ltd. An associate of the Company
Guangdong Nanyue Bank Co., Ltd. An associate of the Company
Xuchang Chenming Paper Co., Ltd. An associate of the Company
4. Other related parties
Name of other related parties Relation
Shouguang Huixin Construction Materials Co., Ltd. A subsidiary of a company invested by the Directors
and Senior Management of the Company
Lide Technology Co., Ltd. A subsidiary of a company invested by the Directors
and Senior Management of the Company
Anhui Time Source Corporation Other investee of the Company
Chen Hongguo, Hu Changqing, Li Xingchun, Li Weixian, Key management personnel of the Company
Li Xueqin, Li Feng, Dong Lianming, Yuan Xikun,
Li Zhenzhong, Li Mingtang, Ge Guangming, Li Kang,
Qiu Lanju and Sang Ailing
2022 ANNUAL REPORT 321
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods/receiving of services
Unit: RMB
Whether the
transaction
Details of related Amount for Transaction facility is Amount for
Related party party transaction the period facility approved exceeded the prior period
Weifang Sime Darby West Port miscellaneous
Port Co., Ltd. expenses 63,328,942.04 100,000,000.00 No 64,351,915.96
Table on sales of goods/providing of services
Unit: RMB
Details of related party Amount for Amount for
Related party transaction the period the prior period
Shouguang Chenming Huisen
New-style Construction Materials
Co., Ltd. Sales of electricity and steam 18,254,341.50 9,729,537.52
Shouguang Huixin Construction
Materials Co., Ltd. Sales of cement, coal, oil, etc. 190,846.21 2,686,019.84
Related party transactions regarding purchase and sale of goods and provision and receipt of services.
(2) Related party leaasing
The Company as lessor:
Unit: RMB
Lease income Lease income
recognised recognised
for the current for the previous
Name of lessee Type of leased asset period period
Shouguang Meite Environmental
Technology Co., Ltd. Housing 1,467,889.91 1,467,889.91
Chenming (Qingdao) Asset Management
Co., Ltd. Housing 769,053.72 297,247.72
Lide Technology Co., Ltd. Housing 1,795,618.08 1,239,653.23
Shouguang Chenming Huisen New-style
Construction Materials Co., Ltd. Land 220,183.49 220,183.49
Shouguang Huixin Construction
Materials Co., Ltd. Land 123,853.21 135,000.00
322
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(3) Related party guarantee
The Company as guarantor
Unit: RMB
Whether
performance
Amount under Commencement Expiry date of guarantee
Party being guaranteed guarantee date of guarantee of guarantee is completed
Chenming (HK) Limited 28,181,785.95 2022-9-26 2023-3-17 No
Chenming (HK) Limited 28,722,558.44 2022-9-26 2023-3-17 No
Chenming (HK) Limited 25,525,790.82 2022-9-26 2023-3-17 No
Chenming (HK) Limited 11,960,788.56 2022-9-26 2023-3-17 No
Chenming (HK) Limited 10,479,767.45 2022-9-28 2023-3-17 No
Chenming (HK) Limited 15,123,876.51 2022-9-29 2023-3-17 No
Chenming (HK) Limited 7,644,387.86 2022-9-29 2023-3-17 No
Chenming (HK) Limited 26,514,474.71 2022-10-10 2023-3-17 No
Chenming (HK) Limited 19,961,569.69 2022-10-14 2023-3-17 No
Chenming (HK) Limited 63,935,028.00 2022-3-17 2023-3-7 No
Hainan Chenming Technology Co., Ltd. 50,000,000.00 2022-5-16 2023-5-16 No
Hainan Chenming Technology Co., Ltd. 30,000,000.00 2022-9-20 2023-9-20 No
Huanggang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2022-5-19 2023-5-18 No
Huanggang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 2022-4-22 2023-4-21 No
Huanggang Chenming Pulp & Paper Co., Ltd. 30,000,000.00 2022-7-27 2023-7-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 45,000,000.00 2022-8-19 2023-8-18 No
Huanggang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2022-8-24 2023-8-23 No
Huanggang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2022-12-23 2023-12-22 No
Huanggang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 2022-8-17 2023-8-17 No
Huanggang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-9-27 2023-9-26 No
Huanggang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-10-13 2023-10-13 No
Jilin Chenming Paper Co., Ltd. 98,580,000.00 2022-11-14 2023-5-10 No
Jilin Chenming Paper Co., Ltd. 18,000,000.00 2022-5-23 2023-5-8 No
Jiangxi Chenming Paper Co., Ltd. 2,000,000.00 2022-1-19 2023-1-18 No
Jiangxi Chenming Paper Co., Ltd. 28,000,000.00 2022-2-14 2023-1-18 No
Jiangxi Chenming Paper Co., Ltd. 150,000,000.00 2022-2-22 2023-2-21 No
Jiangxi Chenming Paper Co., Ltd. 94,450,000.00 2022-3-16 2023-3-15 No
Jiangxi Chenming Paper Co., Ltd. 99,000,000.00 2022-3-19 2023-3-18 No
Jiangxi Chenming Paper Co., Ltd. 10,000,000.00 2022-3-31 2023-3-31 No
Jiangxi Chenming Paper Co., Ltd. 70,000,000.00 2022-4-25 2023-4-24 No
Jiangxi Chenming Paper Co., Ltd. 49,000,000.00 2022-4-25 2023-4-24 No
Jiangxi Chenming Paper Co., Ltd. 270,000,000.00 2022-5-19 2023-5-17 No
2022 ANNUAL REPORT 323
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(3) Related party guarantee (Continued)
Whether
performance
Amount under Commencement Expiry date of guarantee
Party being guaranteed guarantee date of guarantee of guarantee is completed
Jiangxi Chenming Paper Co., Ltd. 73,000,000.00 2022-5-27 2023-5-26 No
Jiangxi Chenming Paper Co., Ltd. 80,000,000.00 2022-6-17 2023-6-16 No
Jiangxi Chenming Paper Co., Ltd. 10,000,000.00 2022-6-14 2023-6-12 No
Jiangxi Chenming Paper Co., Ltd. 20,000,000.00 2022-6-21 2023-6-16 No
Jiangxi Chenming Paper Co., Ltd. 28,317,695.39 2022-6-24 2023-6-20 No
Jiangxi Chenming Paper Co., Ltd. 250,000,000.00 2022-6-27 2023-6-24 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 2022-6-30 2023-6-30 No
Jiangxi Chenming Paper Co., Ltd. 300,000,000.00 2022-7-1 2023-6-19 No
Jiangxi Chenming Paper Co., Ltd. 1,682,304.61 2022-8-9 2023-6-20 No
Jiangxi Chenming Paper Co., Ltd. 10,000,000.00 2022-8-10 2023-8-7 No
Jiangxi Chenming Paper Co., Ltd. 10,000,000.00 2022-8-29 2023-8-28 No
Jiangxi Chenming Paper Co., Ltd. 10,000,000.00 2022-8-30 2023-8-28 No
Jiangxi Chenming Paper Co., Ltd. 12,100,000.00 2022-9-29 2023-3-28 No
Jiangxi Chenming Paper Co., Ltd. 10,000,000.00 2022-9-9 2023-9-4 No
Jiangxi Chenming Paper Co., Ltd. 20,893,800.00 2022-7-18 2023-1-18 No
Jiangxi Chenming Paper Co., Ltd. 15,400,000.00 2022-12-20 2023-6-18 No
Jiangxi Chenming Paper Co., Ltd. 20,000,000.00 2022-12-29 2023-6-28 No
Jiangxi Chenming Paper Co., Ltd. 1,500,000.00 2022-12-29 2023-6-28 No
Shandong Chenming Paper Sales Co., Ltd. 459,968,037.61 2022-4-7 2023-4-3 No
Shandong Chenming Paper Sales Co., Ltd. 290,687,996.31 2022-8-16 2023-2-13 No
Shandong Chenming Paper Sales Co., Ltd. 150,000,000.00 2022-8-19 2023-8-22 No
Shandong Chenming Paper Sales Co., Ltd. 100,000,000.00 2022-9-16 2023-9-19 No
Shandong Chenming Paper Sales Co., Ltd. 80,000,000.00 2022-9-16 2023-9-19 No
Shandong Chenming Paper Sales Co., Ltd. 165,854,444.58 2022-10-9 2023-10-8 No
Shandong Chenming Paper Sales Co., Ltd. 379,780,113.16 2022-10-9 2023-10-8 No
Shandong Chenming Paper Sales Co., Ltd. 160,000,000.00 2022-12-23 2023-12-18 No
Shandong Chenming Paper Sales Co., Ltd. 260,000,000.00 2022-12-23 2023-12-18 No
Shanghai Chenming Pulp & Paper Sales Co., Ltd. 10,000,000.00 2022-5-31 2023-5-31 No
Shanghai Chenming Pulp & Paper Sales Co., Ltd. 80,000,000.00 2022-6-1 2023-5-22 No
Shanghai Chenming Pulp & Paper Sales Co., Ltd. 10,000,000.00 2022-6-2 2023-5-22 No
Shanghai Chenming Pulp & Paper Sales Co., Ltd. 30,000,000.00 2022-7-27 2023-1-27 No
Shanghai Chenming Pulp & Paper Sales Co., Ltd. 5,000,000.00 2022-10-26 2023-10-25 No
Shouguang Chenming Import and Export Trade Co., Ltd. 100,000,000.00 2022-1-14 2023-1-13 No
Shouguang Meilun Paper Co., Ltd. 49,000,000.00 2022-4-30 2023-4-18 No
Shouguang Meilun Paper Co., Ltd. 79,759,923.64 2022-7-6 2023-7-3 No
Shouguang Meilun Paper Co., Ltd. 197,973,928.22 2022-7-8 2023-1-4 No
Shouguang Meilun Paper Co., Ltd. 72,196,664.05 2022-7-21 2023-1-17 No
324
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(3) Related party guarantee (Continued)
Whether
performance
Amount under Commencement Expiry date of guarantee
Party being guaranteed guarantee date of guarantee of guarantee is completed
Shouguang Meilun Paper Co., Ltd. 44,000,000.00 2022-7-31 2023-7-30 No
Shouguang Meilun Paper Co., Ltd. 285,000,000.00 2022-7-22 2023-1-18 No
Shouguang Meilun Paper Co., Ltd. 125,627,758.08 2022-7-27 2023-1-28 No
Shouguang Meilun Paper Co., Ltd. 100,164,057.08 2022-7-29 2023-7-24 No
Shouguang Meilun Paper Co., Ltd. 162,657,651.11 2022-12-16 2023-6-16 No
Shouguang Meilun Paper Co., Ltd. 131,457,656.70 2022-12-8 2023-6-7 No
Shouguang Meilun Paper Co., Ltd. 20,000,000.00 2022-8-31 2023-8-31 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 80,000,000.00 2022-1-13 2023-1-12 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 63,000,000.00 2022-1-20 2023-1-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 125,000,000.00 2022-1-21 2023-1-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 5,000,000.00 2022-1-27 2023-1-26 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 40,000,000.00 2022-1-30 2023-1-26 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2022-2-15 2023-2-14 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2022-2-22 2023-2-21 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 2022-3-3 2023-3-2 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,040,000.00 2022-3-22 2023-3-10 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-3-16 2023-3-15 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-3-7 2023-3-2 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 2022-4-21 2023-4-11 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 43,000,000.00 2022-4-27 2023-4-21 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-5-7 2023-4-28 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 26,000,000.00 2022-5-13 2023-5-10 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 167,000,000.00 2022-5-12 2023-5-12 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2022-6-24 2023-6-23 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 48,500,000.00 2022-6-28 2023-6-10 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-7-22 2023-7-14 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 81,200,000.00 2022-7-26 2023-6-14 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 65,000,000.00 2022-7-21 2023-7-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2022-8-9 2023-8-8 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2022-8-12 2023-8-11 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-8-19 2023-2-10 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2022-8-12 2023-2-8 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2022-8-17 2023-8-16 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 67,000,000.00 2022-8-18 2023-8-17 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 59,000,000.00 2022-8-19 2023-8-18 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-9-14 2023-9-13 No
2022 ANNUAL REPORT 325
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(3) Related party guarantee (Continued)
Whether
performance
Amount under Commencement Expiry date of guarantee
Party being guaranteed guarantee date of guarantee of guarantee is completed
Zhanjiang Chenming Pulp & Paper Co., Ltd. 45,000,000.00 2022-9-22 2023-3-15 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2022-10-9 2023-10-8 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 47,000,000.00 2022-10-25 2024-10-19 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 60,000,000.00 2022-10-18 2023-10-17 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,000,000.00 2022-11-7 2023-11-6 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2022-11-10 2023-5-9 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-11-16 2023-11-15 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 80,000,000.00 2022-11-18 2023-5-19 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-11-29 2023-11-28 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 230,000,000.00 2022-12-9 2023-6-7 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 40,000,000.00 2022-12-6 2023-6-3 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 41,500,000.00 2022-12-14 2023-6-12 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 67,000,000.00 2022-12-22 2023-6-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 40,200,000.00 2022-12-22 2023-6-20 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 47,382,000.00 2022-12-21 2023-12-8 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 80,002,452.97 2022-10-12 2023-3-26 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 12,035,031.47 2022-11-30 2023-2-28 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 78,000,000.00 2020-10-16 2023-10-15 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 113,000,000.00 2020-11-11 2023-11-10 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 98,000,000.00 2020-12-10 2023-12-9 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 99,000,000.00 2021-1-5 2024-1-4 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 140,000,000.00 2021-12-23 2023-12-23 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 95,000,000.00 2022-6-17 2025-6-16 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 95,000,000.00 2022-6-17 2025-6-16 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 95,000,000.00 2022-5-31 2024-5-30 No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2022-1-26 2023-12-22 No
Shouguang Meilun Paper Co., Ltd. 304,000,000.00 2020-12-4 2023-10-30 No
Wuhan Chenming Hanyang Paper Holdings Co., Ltd 6,000,000.00 2020-12-4 2023-10-30 No
Huanggang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2020-12-4 2023-10-30 No
Weifang Sime Darby West Port Co., Ltd. 114,800,000.00 2017-12-20 2027-12-20 No
Total 11,221,761,542.97
326
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(4) Related party lending and borrowing
Unit: RMB
Commencement
Related party Borrowing amount date Expiry date Description
Borrowing
Chenming Holdings Co., Ltd. 235,000,000.00 2022-1-1 2022-12-31 Controlling
shareholder
Guangdong Nanyue Bank Co., Ltd. 1,909,100,000.00 2022-1-1 2022-12-31 Associate
(5) Remuneration of key management staff
The Company has 24 key management staff for the period and 24 for the prior period. The remuneration
payment is as follows:
Unit: RMB’0,000
Amount during Amount during
Item the period the prior period
Remuneration of key management staff 2,752.06 3,051.59
(6) Other related party transactions
Distribution band of remuneration of key management staff
Amount during Amount during
the year the prior year
Band of annual remuneration (RMB’0,000) (RMB’0,000)
Total 2,752.06 3,051.59
Of which: (number of staff in each band of amount)
RMB4.80-5.20 million 1 2
RMB4.00-4.80 million
RMB3.60-4.00 million
RMB3.20-3.60 million 1 1
RMB2.80-3.20 million 2
RMB2.40-2.80 million 1
RMB2.00-2.40 million 1 1
RMB1.60-2.00 million 5 2
RMB1.20-1.60 million 1
RMB0.80-1.20 million 3
Below RMB0.80 million 14 13
2022 ANNUAL REPORT 327
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(6) Other related party transactions (Continued)
Breakdown of remuneration of key management staff
Amount during the year (RMB’0,000)
Social welfare contribution
Salaries, Of which:
allowances Social Pension Housing Total
Key management staff Fees and benefits Bonuses insurance insurance fund (RMB’0,000)
Yin Meiqun 20.00 20.00
Yang Biao 20.00 20.00
Sun Jianfei 20.00 20.00
Li Zhihui 10.00 10.00
Subtotal of independent
non-executive Directors 70.00 70.00
Li Chuanxuan 20.00 20.00
Han Tingde 20.00 20.00
Subtotal of non-executive
Directors 40.00 40.00
Chen Hongguo 352.24 6.22 3.95 1.53 359.99
Hu Changqing 216.85 6.22 3.95 1.58 224.65
Li Xingchun 480.00 480.00
Li Feng 187.28 6.22 3.95 1.53 195.03
Li Weixian 240.81 10.54 6.26 4.69 256.04
Subtotal of executive Directors 1,477.18 29.20 18.11 9.33 1,515.71
Li Kang 59.20 6.23 3.95 1.53 66.96
Pan Ailing 10.00 10.00
Zhang Hong 10.00 10.00
Qiu Lanju 54.86 6.16 3.82 1.53 62.55
Sang Ailing 18.00 3.65 2.28 0.85 22.50
Total of Supervisors 152.06 16.04 10.05 3.91 172.01
Subtotal of other Senior
Management members 904.93 39.61 24.88 9.80 954.34
Total 2,644.17 84.85 53.04 23.04 2,752.06
328
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(6) Other related party transactions (Continued)
Breakdown of remuneration of key management staff (Continued)
Amount during the prior year (RMB’0,000)
Social insurance
Salaries, Of which:
allowances Social Pension Housing Total
Key management staff Fees and benefits Bonuses insurance insurance fund (RMB’0,000)
Yin Meiqun 20.00 20.00
Yang Biao 20.00 20.00
Sun Jianfei 20.00 20.00
Subtotal of independent
non-executive Directors 60.00 60.00
Li Chuanxuan 20.00 20.00
Han Tingde 20.00 20.00
Subtotal of non-executive Directors 40.00 40.00
Chen Hongguo 491.92 5.66 3.57 1.42 499.00
Hu Changqing 340.98 7.06 4.47 1.96 350.00
Li Xingchun 480.00 480.00
Li Feng 288.90 5.66 3.57 1.42 295.98
Subtotal of executive Directors 1,601.80 18.38 11.61 4.80 1,624.98
Li Kang 93.42 5.73 3.60 1.42 100.57
Pan Ailing 10.00 10.00
Zhang Hong 10.00 10.00
Qiu Lanju 53.25 5.76 3.60 0.97 59.98
Sang Ailing 20.71 3.53 2.24 0.63 24.87
Li Xinggui 2.43 0.76 0.48 0.22 3.41
Total of Supervisors 189.81 15.78 9.92 3.24 208.83
Subtotal of other Senior
Management
members 1,071.25 38.32 24.46 8.21 1,117.78
Total 2,962.86 72.48 45.99 16.25 3,051.59
Note: Social welfare contribution includes basic pension insurance, medical insurance, work-related injury insurance, maternity
insurance, and unemployment insurance.
2022 ANNUAL REPORT 329
XII Financial Report
XII. Related parties and related party transactions (Continued)
5. Related party transactions (Continued)
(6) Other related party transactions (Continued)
The 5 highest paid individuals of the Company during the year comprised of 5 Directors.
A. Remuneration of the five highest paid individuals
Amounts during Amounts during
the period the prior year
Item (RMB’0,000) (RMB’0,000)
Salaries, allowances and benefits 1,477.18 1,904.07
Housing provident fund 9.33 5.48
Social welfare contribution 29.20 25.93
Of which: Pension insurance 18.11 16.37
Total 1,515.71 1,935.48
B. Distribution band of remuneration of the five highest paid individuals
Number of individuals Number of individuals
Band of annual remuneration during the year during the prior year
RMB4.80-5.20 million 1 2
RMB3.20-3.60 million 1 1
RMB2.80-3.20 million 2
RMB2.40-2.80 million 1
RMB2.00-2.40 million 1
RMB1.60-2.00 million 1
RMB1.20-1.60 million
For the financial year ended 31 December 2022, no other bonuses, which are discretionary or are based
on the Company’s, the Company’s or any member of the Company’s performance, were paid to or
receivable by the 5 highest paid individuals, and 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.
330
XII Financial Report
XII. Related parties and related party transactions (Continued)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB
Closing balance Opening balance
Bad debt Bad debt
Item Related party Book balance provision Book balance provision
Accounts receivable Shouguang Chenming Huisen Newstyle 1,856,833.50 1,392.06
Construction Materials Co., Ltd.
Accounts receivable Shouguang Meite Environmental 6,782,462.48 1,774,117.95
Technology Co., Ltd.
Accounts receivable Jiangxi Chenming Port Co., Ltd. 109,385.42 –
Other receivables Weifang Sime Darby West Port Co., Ltd. 71,722,249.85 3,755,227.15 80,667,961.32 7,423,984.26
Other receivables Shouguang Meite Environmental 18,291,242.68 1,779,523.20 22,740,159.32 21,348.76
Technology Co., Ltd.
Other receivables Xuchang Chenming Paper Co., Ltd. 327,400.00 6,791.28
Payments in advance Shouguang Meite Environmental 6,370,726.99
Technology Co., Ltd.
(2) Accounts payable
Unit: RMB
Item Related party Closing balance Opening balance
Accounts payable Weifang Sime Darby West Port Co., Ltd. 19,479,518.82 7,609,782.51
Accounts payable Weifang Xingxing United Chemical 26,905,494.34 26,905,494.34
Co., Ltd.
Other payables Weifang Xingxing United Chemical 16,860,000.00 16,860,000.00
Co., Ltd.
Other payables Lide Technology Co., Ltd. 508,619.46 508,619.46
Other payables Chenming (Qingdao) Asset Management 116,656.55 115,633.42
Co., Ltd.
Contract liabilities Anhui Time Source Corporation 1,570.10
Contract liabilities Shouguang Huixin Construction 20,000.00
Materials Co., Ltd.
Payments in advance Chenming (Qingdao) Asset Management 2,000.00 49,539.63
Co., Ltd.
2022 ANNUAL REPORT 331
XII Financial Report
XII. Related parties and related party transactions (Continued)
6. Related party accounts receivable and accounts payable (Continued)
(3) Deposits with related parties
Unit: RMB
Item Related party Closing balance Opening balance
Bank deposit Guangdong Nanyue Bank Co., Ltd. 10,069,515.51 42,791.18
Other monetary funds Guangdong Nanyue Bank Co., Ltd. 927,400,000.00 1,219,300,000.00
(4) Loans from related parties
Unit: RMB
Item Related party Closing balance Opening balance
Short-term borrowings Guangdong Nanyue Bank Co., Ltd. 1,909,100,000.00 2,201,000,000.00
332
XII Financial Report
XIII. Share-based payment
1. General information of share-based payment
√ Applicable Not applicable
Unit: RMB
Total equity instruments of the Company granted during the period 0
Total exercised equity instruments of the Company during the period 0
Total invalid equity instruments of the Company during the period 24,176,200.00
Range of exercise prices and contractual remaining period for share options issued See explanation
by the Company at the end of the period for details
Range of exercise prices and remaining contractual maturity of other equity instruments
issued by the Company at the end of the period
Other explanation:
Other explanation: On 29 May 2020, the Resolution on the Matters Relating to Adjustments to the 2020 Restricted
A Share Incentive Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the
Participants were considered and approved at the tenth extraordinary meeting of ninth session of the Board and the
fifth extraordinary meeting of the ninth session of the Supervisory Committee of the Company, by which 79.60 million
restricted shares were granted. The grant date was 29 May 2020, and the fair value of the restricted shares was the
ex-rights price of the shares on the grant date. The Restricted Shares to be granted under the Incentive Scheme were
“granted once and unlocked in batches”. For the period commencing from the first trading day after expiry of the
24-month period from the date on which the registration of the grant of the Restricted Shares is completed and ending
on the last trading day of the 36-month period from the date on which the registration of the grant of the Restricted
Shares is completed, 40% of the Restricted Shares will be unlocked; for the period commencing from the first trading
day after expiry of the 36-month period from the date on which the registration of the grant of the Restricted Shares
is completed and ending on the last trading day of the 48-month period from the date on which the registration
of the grant of the Restricted Shares is completed, 30% of the Restricted Shares will be unlocked; for the period
commencing from the first trading day after expiry of the 48-month period from the date on which the registration
of the grant of the Restricted Shares is completed and ending on the last trading day of the 60-month period from
the date on which the registration of the grant of the Restricted Shares is completed, 30% of the Restricted Shares
will be unlocked. Meanwhile, during the three accounting years from 2021 to 2023, the Restricted Shares granted
under the Incentive Scheme shall be subject to annual performance appraisal for unlocking (for details of specific
performance evaluation conditions, please refer to the announcement of the Company). The Company estimated that
the performance indicators for 2022 cannot be fulfilled, and the corresponding second batch of the 30% Restricted
Shares cannot be unlocked. In addition, 27,006,200 shares lapsed due to the resignation of some Senior Management
members. 4,460,000 shares were actually repurchased and completed for cancellation during the period.
2022 ANNUAL REPORT 333
XII Financial Report
XIII. Share-based payment (Continued)
2. Equity-settled share-based payment
√ Applicable Not applicable
Unit: RMB
The method of determining the fair value of equity instrument on the grant date Ex-right price of
grant of share
Basis for determining the quantity of exercisable equity instruments See explanation
for details
Reasons for significant difference between the current estimate and previous estimate None
Accumulated amount of equity-settled share-based payment included in the capital reserve 86,165,601.92
Total amount of equity-settled share-based payment recognised in the current period 1,121,804.80
Other explanation: At each balance sheet date during the vesting period, the Company, based on the latest
information such as the latest update on the change in the number of entitled employees, will make best estimates
to adjust the expected number of equity instruments that can be vested. As at the exercise date, the final estimated
number of exercisable equity instruments should equal the actual number of exercisable equity instruments.
XIV. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
Unit: RMB
Capital commitments contracted for but not yet necessary
to be recognised on the balance sheet Closing balance Opening balance
Commitments in relation to acquisition and construction of
long-term assets 184,833,000.27 181,254,971.61
334
XII Financial Report
XIV. Undertaking and contingency (Continued)
2. Other commitments
In 2022, the Company entered into a restructuring agreement with Chongqing International Trust Inc. (“Chongqing
Trust”), Dongxing Securities Investment Co., Ltd. (“Dongxing Investment”) and Chenming (Qingdao) Asset
Management Co. Ltd. (“Chenming Asset Management”) for the issuance of shares and payment of cash for the
acquisition of assets. Pursuant to the relevant agreement, the Company intended to acquire 1.19% equity interest in
Shouguang Meilun Paper Co., Ltd. held by Dongxing Investment and 44.44% limited partnership interest and 0.22%
general partnership interest in Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership
(Limited Partnership) (“Chenrong Fund“) by means of issuance of shares and payment of cash. For the details of the
transaction price, the issuance size and the lock-up period arrangement for the issue of shares, please refer to the
Company’s disclosure on CNINFO on 28 February 2023.
Whether the transaction can obtain approval or authorisation from the Shenzhen Stock Exchange or the CSRC is
uncertain. There is also uncertainty as to the time when the final approval or authorisation will be obtained.
3. Contingency
As at 31 December 2022, the Company had no contingent items such as outstanding litigation and external
guarantees that should be disclosed.
XV. Post-balance sheet event
As of 30 March 2023, the Company has no undisclosed event that should be disclosed after the balance sheet date.
XVI. Other material matters
1. Segment information
(1) Basis for determination and accounting policies
According to the Company’s internal organisational structure, management requirements and internal reporting
system, the Company’s operating business is divided into 4 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 Company’s reporting segments include:
(1) Machine paper segment, which is responsible for production and sales of machine paper;
(2) Financial services segment, which provides financial services;
(3) Hotels and property rentals segment, which is responsible for hotel services and property rental;
(4) Other segments, which is responsible for the above segments otherwise.
The transfer prices of the transfer transactions between the Company’s segments are based on market prices.
Segment report information is disclosed in accordance with the accounting policies and measurement 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.
2022 ANNUAL REPORT 335
XII Financial Report
XVI. Other material matters (Continued)
1. Segment information (Continued)
(2) Financial Information of Reporting Segment
Unit: RMB’0,000
Machine-made Financial Hotels and
Current period or end of current period paper services property rentals Others Offset Total
Revenue 3,106,090.21 51,373.75 40,770.86 107,842.57 105,640.66 3,200,436.73
Of which: Revenue from external transactions 3,083,189.82 20,937.81 25,278.66 71,030.44 3,200,436.73
Revenue from inter-segment transactions 22,900.39 30,435.94 15,492.20 36,812.13 105,640.66
Of which: Revenue from principal activities 3,035,133.50 51,081.29 39,294.23 104,059.90 87,057.23 3,142,511.69
Operating costs 2,651,930.40 2,412.76 24,576.75 98,165.98 39,713.32 2,737,372.57
Of which: Costs of principal activities 2,614,167.20 2,412.76 24,357.88 92,829.94 45,873.42 2,687,894.36
Operating expenses 33,086.20 202.78 2,078.13 737.81 11,886.79 24,218.13
Of which: Wages 11,195.94 108.40 501.10 280.08 12,085.52
Depreciation expenses 276.22 2.11 372.69 1.44 652.46
Office expenses 245.75 0.01 0.80 0.03 246.59
Travel expenses 2,073.96 29.35 2.24 45.91 2,151.46
Selling commissions 518.62 571.93 66.59 1,157.14
Rental expenses 596.32 8.50 604.82
Hospitality expenses 5,390.90 62.92 4.55 72.88 5,531.25
Warehouse expenses 11.07 55.89 66.96
Others 12,777.43 624.81 206.50 11,886.79 1,721.94
Operating profit/(loss) 18,503.01 17,705.95 -5,076.03 -845.54 14,665.52 15,621.87
Total assets 9,338,157.45 1,983,640.56 769,184.87 991,804.79 4,652,685.93 8,430,101.74
Total liabilities 6,828,271.88 649,202.13 371,242.44 344,249.22 2,135,689.31 6,057,276.36
Total cost of construction in progress incurred
for the current period 77,372.58 49.96 77,422.54
Fixed assets purchased 15,050.77 9.67 17.30 358.99 15,436.74
Intangible assets purchased 30,700.49 57.81 30,758.30
336
XII Financial Report
XVI. Other material matters (Continued)
1. Segment information (Continued)
(2) Financial Information of Reporting Segment (Continued)
Unit: RMB’0,000
Machine-made Financial Hotels and
Prior period or end of prior period paper services property rentals Others Offset Total
Revenue 3,174,975.00 65,440.39 40,526.16 133,313.93 112,274.25 3,301,981.23
Of which: Revenue from external transactions 3,168,198.65 35,210.22 16,635.55 81,936.81 0.00 3,301,981.23
Revenue from inter-segment transactions 6,776.35 30,230.18 23,890.60 51,377.12 112,274.25 0.00
Of which: Revenue from principal activities 3,084,442.22 65,195.11 23,111.51 127,829.53 107,220.05 3,193,358.32
Operating costs 2,566,477.14 24,602.34 12,939.43 123,637.48 205,428.81 2,522,227.58
Of which: Costs of principal activities 2,414,343.74 24,602.34 7,362.71 118,084.03 118,386.09 2,446,006.73
Operating expenses 49,085.83 339.02 2,345.00 903.40 23,322.28 29,350.97
Of which: Wages 12,743.31 163.80 670.56 483.78 14,061.46
Depreciation expenses 745.65 4.64 369.29 10.34 1,129.94
Office expenses 231.42 0.09 0.47 -0.11 231.88
Travel expenses 2,021.42 43.32 2.54 53.10 2,120.38
Selling commissions 440.61 708.47 1,149.07
Rental expenses 808.45 85.66 894.10
Hospitality expenses 5,673.35 106.64 13.92 132.02 5,925.93
Warehouse expenses 44.57 11.02 55.59
Others 26,377.05 20.52 579.74 127.59 23,322.28 3,782.62
Operating profit/(loss) 330,978.21 11,821.37 468.23 -8,164.59 106,957.32 228,145.90
Total assets 9,072,803.27 2,039,544.30 794,932.41 969,230.15 4,589,543.96 8,286,966.17
Total liabilities 6,622,082.54 791,449.37 411,845.72 297,958.83 2,093,873.91 6,029,462.55
Total cost of construction in progress incurred
for the current period 10,567.13 10,567.13
Fixed assets purchased 21,099.63 102.64 164.84 443.54 21,810.65
Intangible assets purchased 40.09 2.91 43.00
2022 ANNUAL REPORT 337
XII Financial Report
XVI. Other material matters (Continued)
2. Government grants
(1) Government subsidies included in deferred income will be subsequently measured using the gross method
Unit: RMB
Presentable
Amount items
New subsidy transferred to transferred to
Opening amount for profit or loss Other Closing profit or loss Asset-related/
Item of subsidies Type balance the period for the period movements balance for the period income-related
Project Funding for National Financial 1,123,125.00 164,700.00 958,425.00 Other income Asset-related
Key Technology Research appropriation government grants
and Development Program
Infrastructure and Financial 220,099,227.08 11,778,260.39 208,320,966.69 Other income Asset-related
environmental protection appropriation government grants
engineering transformation
project
Huanggang pulp-forestry-paper Financial 496,020,740.85 25,026,217.80 470,994,523.05 Other income Asset-related
project appropriation government grants
Zhanjiang forestry-pulp-paper Financial 50,806,597.19 4,094,632.92 46,711,964.27 Other income Asset-related
project appropriation government grants
Financial subsidies for technical Financial 144,150,333.36 11,535,807.72 132,614,525.64 Other income Asset-related
transformation project appropriation government grants
Funding for environmental Financial 627,047,425.68 50,592,141.88 576,455,283.80 Other income Asset-related
protection appropriation government grants
Others Financial 34,434,235.09 1,259,455.08 33,174,780.01 Other income Asset-related
appropriation government grants
Total 1,573,681,684.25 104,451,215.79 1,469,230,468.46
338
XII Financial Report
XVI. Other material matters (Continued)
2. Government grants (Continued)
(2) Government subsidies calculated into the current profit and loss using the total method
Unit: RMB
Amount credited Amount credited Presentable items
to profit or loss to profit or loss included in Asset-related/
Subsidy Item Type for the prior period for the period profit or loss income-related
Special subsidy from the Bureau of Finance Financial appropriation 40,640,000.00 73,730,000.00 Non-operating income Income-related
Enterprise reform and development subsidies Financial appropriation 33,657,897.20 66,394,161.00 Other income Income-related
Financial subsidies for technical transformation Financial appropriation 38,603,317.72 52,395,702.39 Other income Asset-related and
project revenue related
Funding for environmental protection Financial appropriation 50,794,311.52 50,592,141.88 Other income Asset-related and
revenue related
Huanggang pulp-forestry-paper project Financial appropriation 24,200,216.24 25,026,217.80 Other income Asset-related
Sewage treatment and water conservation Financial appropriation 12,835,606.22 11,778,260.39 Other income Asset-related
transformation project
Zhanjiang forestry-pulp-paper project Financial appropriation 4,094,632.92 4,094,632.92 Other income Asset-related
Immediate VAT refund 768,780.56 8,346,328.57 Other income Income-related
Financial appropriation
Government awards Financial appropriation 6,821,907.00 4,704,600.00 Other income Income-related
Refund of tax Financial appropriation 8,149,743.76 4,052,553.33 Other income Income-related
Employment stabilisation subsidy Financial appropriation 1,626,174.63 3,012,954.63 Other income Income-related
Afforestation subsidy Financial appropriation 1,404,769.00 2,695,823.49 Other income Income-related
One-time job retention subsidies Financial appropriation 2,125,800.00 Other income Income-related
Subsidies for foreign trade projects Financial appropriation 1,000,000.00 Other income Income-related
R&D subsidy Financial appropriation 2,476,800.00 500,000.00 Other income Income-related
Project Funding for National Key Technology Financial appropriation 164,700.00 164,700.00 Other income Asset-related
Research and Development Program
Subsidies for social insurance Financial appropriation 345,163.82 116,915.50 Other income Income-related
Financing subsidy Financial appropriation 576,300.00 Other income Income-related
Investment promotion subsidy Financial appropriation 22,921,843.36 Other income Income-related
Leading talent subsidy Financial appropriation 660,000.00 Other income Income-related
economic environment subsidy Financial appropriation 200,000.00 Non-operating income Income-related
Others Financial appropriation 12,144,833.64 4,203,523.72 Other income and Asset-related and
non-operating revenue related
income
Total 263,086,997.59 314,934,315.62
2022 ANNUAL REPORT 339
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements
1. Bills receivable
Unit: RMB
Closing balance Opening balance
Type Book balance Bad debt provision Carrying value Book balance Bad debt provision Carrying value
Bank acceptance bills 3,343,052,426.80 3,343,052,426.80 3,091,000,000.00 3,091,000,000.00
Commercial acceptance bills 139,770,000.00 139,770,000.00 534,270,000.00 534,270,000.00
Total 3,482,822,426.80 3,482,822,426.80 3,625,270,000.00 3,625,270,000.00
(1) Bills receivable pledged by the Company as at the end of the period
Unit: RMB
Amount pledged
as at the end
Type of the period
Bank acceptance bills 8,497,931.30
Total
(2) Bills receivable endorsed or discounted but not yet due as at the end of the period
Unit: RMB
Amount
Amount not yet
derecognised derecognised
as at the end of as at the end of
Type the period the period
Bank acceptance bills 5,474,558,821.06 3,176,190,000.00
Commercial acceptance bills 139,770,000.00
Total 5,474,558,821.06 3,315,960,000.00
340
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements
2. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Provision Provision
Type Amount Percentage Amount proportion Carrying value Amount Percentage Amount proportion Carrying value
Accounts receivable
assessed individually for
bad debt provision
Accounts receivable
assessed collectively for
bad debt provision 139,392,924.13 100.00% 4,637,396.40 3.33% 134,755,527.73 146,213,282.74 100.00% 4,612,037.23 3.15% 141,601,245.51
Of which:
Accounts receivable from
related party customers 101,246,295.74 72.63% 101,246,295.74 126,108,166.75 86.25% 126,108,166.75
Accounts receivable
from non-related party
customers 38,146,628.39 27.37% 4,637,396.40 12.16% 33,509,231.99 20,105,115.99 13.75% 4,612,037.23 22.94% 15,493,078.76
Total 139,392,924.13 100.00% 4,637,396.40 3.33% 134,755,527.73 146,213,282.74 100.00% 4,612,037.23 3.15% 141,601,245.51
Accounts receivable assessed collectively for bad debt provision: Accounts receivable from related party
customers
Unit: RMB
Closing balance
Ageing Book balance Bad debt provision Provision proportion
Within 1 year 101,246,295.74
1 to 2 years
Total 101,246,295.74
2022 ANNUAL REPORT 341
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
2. Accounts receivable Continued
(1) Disclosure of accounts receivable by category Continued
Accounts receivable assessed collectively for bad debt provision: Accounts receivable from non-related party
customers
Unit: RMB
Closing balance
Ageing Book balance Bad debt provision Provision proportion
Within 1 year 35,143,807.22 1,634,575.23 4.65%
1 to 2 years
2 to 3 years
Over 3 years 3,002,821.17 3,002,821.17 100.00%
Total 38,146,628.39 4,637,396.40 12.16%
If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, please
disclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 136,390,102.96 143,210,461.57
1 to 2 years
2 to 3 years
Over 3 years 3,002,821.17 3,002,821.17
Total 139,392,924.13 146,213,282.74
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Recovery or Closing
Category balance Provision reversal Write-off Others balance
Bad debt provision 4,612,037.23 25,359.17 4,637,396.40
Total 4,612,037.23 25,359.17 4,637,396.40
342
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
2. Accounts receivable Continued
(3) Top five account receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for the
period was RMB139,312,702.96, which accounted for 99.95% of the closing balance of the total accounts
receivable. The closing balance of corresponding bad debt provision amounted to RMB4,557,175.23.
Unit: RMB
As a percentage of the
Closing balance of closing balance of Closing balance of
Name accounts receivable accounts receivable bad debt provision
Customer 1 87,524,781.93 62.79%
Customer 2 33,643,807.22 24.14% 134,575.23
Customer 3 8,721,513.81 6.26%
Customer 4 5,000,000.00 3.59%
Customer 5 4,422,600.00 3.17% 4,422,600.00
Total 139,312,702.96 99.95% 4,557,175.23
3. Other receivables
Unit: RMB
Item Closing balance Opening balance
Interest receivable
Dividend receivable 126,325,018.50
Other receivables 9,337,019,470.13 8,773,854,244.04
Total 9,337,019,470.13 8,900,179,262.54
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMB
Item (or investee) Closing balance Opening balance
Jiangxi Chenming Paper Co., Ltd. 72,896,218.50
Zhanjiang Chenming Pulp & Paper Co., Ltd. 53,428,800.00
Total 126,325,018.50
2022 ANNUAL REPORT 343
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables (Continued)
(2) Other receivables
1) Classification of other receivables by nature
Unit: RMB
Nature Closing book balance Opening book balance
Open credit 9,391,199,670.38 8,849,264,265.13
Guarantee deposit and deposit 850,000.00 240,000.00
Reserve and borrowings 15,112,113.60 6,103,279.46
Others 13,027,863.16 11,961,652.43
Total 9,420,189,647.14 8,867,569,197.02
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMB
ECL rate (%)
for the next Bad debt
Category Book balance 12 months provision Carrying amount Reason
Bad debt provision assessed
collectively 9,371,228,215.86 0.37% 34,208,745.73 9,337,019,470.13
Amount due from government
agencies 16,006,345.47 99.18% 15,875,454.32 130,891.15
Amount due from related parties 9,299,308,929.52 0.04% 3,755,227.15 9,295,553,702.37
Other receivables 55,912,940.87 26.07% 14,578,064.26 41,334,876.61
Total 9,371,228,215.86 0.37% 34,208,745.73 9,337,019,470.13
Closing bad debt provision at phase 2:
As at the end of the period, the Company had no interest receivable, dividend receivable and other
receivables at phase 2.
344
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables (Continued)
(2) Other receivables (Continued)
2) Particulars of bad debt provision (Continued)
Closing bad debt provision at phase 3:
Unit: RMB
Lifetime ECL Bad debt
Category Book balance rate (%) provision Carrying amount Reason
Bad debt provision assessed
individually 48,961,431.28 100.00% 48,961,431.28 0.00
Total 48,961,431.28 100.00% 48,961,431.28 0.00
Bad debt provision assessed individually
Unit: RMB
Lifetime ECL Bad debt
Category Book balance rate (%) provision Carrying amount Reason
Valtra Inc. of Finland 5,526,048.24 100.00% 5,526,048.24 0.00 Overdue for a
prolonged
period and
unlikely to be
recovered
Metso Paper Machinery (China) 4,725,039.89 100.00% 4,725,039.89 0.00 Overdue for a
Co., Ltd. prolonged
period and
unlikely to be
recovered
71 entities including Andritz 38,710,343.15 100.00% 38,710,343.15 0.00 Overdue for a
prolonged
period and
unlikely to be
recovered
Total 48,961,431.28 100.00% 48,961,431.28 0.00
2022 ANNUAL REPORT 345
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables (Continued)
(2) Other receivables (Continued)
2) Particulars of bad debt provision (Continued)
Changes in carrying book balances with significant changes in loss provision for the period
Applicable √ Not applicable
Disclosed by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year 9,332,813,880.83 7,121,706,162.10
1 to 2 years 7,536,768.10 1,468,300,735.77
2 to 3 years 4,626,771.34 190,900,767.76
Over 3 years 75,212,226.87 86,661,531.39
Total 9,420,189,647.14 8,867,569,197.02
3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Opening Recovery or Closing
Category balance Provision reversal Write-off Others balance
Bad debt provision 93,714,952.98 10,544,775.97 83,170,177.01
Total 93,714,952.98 10,544,775.97 83,170,177.01
346
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
3. Other receivables (Continued)
(2) Other receivables (Continued)
4) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five other receivables based on closing balance of debtors for the
period was RMB5,839,760,811.51, which accounted for 61.99% of the closing balance of the total other
receivables. The closing balance of corresponding bad debt provision amounted to RMB0.00.
Unit: RMB
As a percentage of the
closing balance Closing balance of
Name of entity Nature Closing balance Maturity of other receivables bad debt provision
Customer 1 Open credit 1,282,383,356.23 Within 1 year 13.61%
Customer 2 Open credit 1,248,900,000.00 Within 1 year 13.26%
Customer 3 Open credit 1,172,617,380.28 Within 1 year 12.45%
Customer 4 Open credit 1,141,900,000.00 Within 1 year 12.12%
Customer 5 Open credit 993,960,075.00 Within 1 year 10.55%
Total 5,839,760,811.51 61.99%
4. Long-term equity investments
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value
Investment in subsidiaries 18,502,944,740.81 18,502,944,740.81 18,480,556,896.52 18,480,556,896.52
Investment in joint ventures 82,741,230.15 82,741,230.15 84,273,868.62 84,273,868.62
Investment in associates 246,471,611.33 5,994,545.96 240,477,065.37 247,193,596.00 5,994,545.96 241,199,050.04
Total 18,832,157,582.29 5,994,545.96 18,826,163,036.33 18,812,024,361.14 5,994,545.96 18,806,029,815.18
2022 ANNUAL REPORT 347
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
4. Long-term equity investments (Continued)
(1) Investment in subsidiaries
Unit: RMB
Change for the period Closing balance
Opening balance Additional Withdrawn Impairment Closing balance of impairment
Investee (Book value) contribution contribution provision Others (Book value) provision
Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00
Chenming GmbH 4,083,235.00 4,083,235.00
Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00
Huanggang Chenming Pulp & Paper Co., Ltd. 2,302,000,000.00 48,000,000.00 2,350,000,000.00
Huanggang Chenming Arboriculture
Development Co., Ltd. 70,000,000.00 70,000,000.00
Jinan Chenming Investment and Management
Co., Ltd. 100,000,000.00 100,000,000.00
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. 5,110,000,000.00 27,500,000.00 5,137,500,000.00
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. 762,641,208.20 762,641,208.20
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 Hongxiang 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
Chenming Paper United States Co., Ltd. 6,407,800.00 6,407,800.00
Weifang Chenming Growth Driver Replacement
Equity Investment Fund Partnership
(Limited Partnership) 632,000,000.00 39,499,659.47 592,500,340.53
Weifang Chendu Equity Investment Partnership
(Limited Partnership) 255,000,000.00 13,612,496.24 241,387,503.76
Total 18,480,556,896.52 75,500,000.00 53,112,155.71 18,502,944,740.81
348
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
4. Long-term equity investments (Continued)
(2) Investment in associates and joint ventures
Unit: RMB
Change for the period
Investment
gain or loss Adjustment Other Distribution of Closing
Opening recognised of other change cash dividend Closing balance of
balance Additional Withdrawn under equity comprehensive in equity or profit Impairment balance impairment
Investee (book value) contribution contribution method income interest declared provision Others (book value) provision
I. Associates
Zhuhai Dechen New Third
Board Equity Investment
Fund Company (Limited
Partnership) 36,967,896.31 -191,185.40 36,776,710.91
Ningbo Kaichen Huamei
Equity Investment Fund
Partnership (Limited
Partnership) 197,297,485.59 -79,166.82 197,218,318.77
Chenming (Qingdao) Asset
Management Co., Ltd. 6,933,668.14 488,367.55 940,000.00 6,482,035.69
Xuchang Chenming Paper
Co., Ltd. 5,994,545.96
Subtotal 241,199,050.04 218,015.33 940,000.00 240,477,065.37 5,994,545.96
II. Joint ventures
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd. 6,902,869.87 1,989,789.55 1,000,000.00 7,892,659.42
Weifang Sime Darby West
Port Co., Ltd. 77,370,998.75 -2,522,428.02 74,848,570.73
Subtotal 84,273,868.62 -532,638.47 1,000,000.00 82,741,230.15
Total 325,472,918.66 -314,623.14 1,940,000.00 323,218,295.52 5,994,545.96
2022 ANNUAL REPORT 349
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements Continued
5. Revenue and operating costs
Unit: RMB
Amount for the period Amount for the prior period
Item Revenue Operating costs Revenue Operating costs
Principal activities 6,270,637,334.30 6,040,121,665.12 7,457,655,880.74 6,282,245,216.89
Other activities 1,249,427,268.18 1,005,967,022.32 1,303,835,529.34 1,075,724,228.66
Total 7,520,064,602.48 7,046,088,687.44 8,761,491,410.08 7,357,969,445.55
Information related to the transaction price allocated to the remaining performance obligations:
As at the end of the reporting period, the amount of income corresponding to the agreements that have been entered
into but have not yet fulfilled or not fully fulfilled their performance obligations amounted to RMB1,503,256,921.15,
which is expected to be recognised in 2023.
6. Investment income
Unit: RMB
Amount for Amount for the
Item the period prior period
Income from long-term equity investments accounted for
using the cost method 731,666,286.45 2,552,823,636.61
Income from long-term equity investments accounted for
using the equity method -314,623.14 -3,156,467.36
Investment gain on disposal of long-term equity investments 751,679.56 379,035,504.15
Investment gain on derecognition of financial assets -63,403,215.00 -13,074,419.85
Investment gain on debt restructuring 472,886.50
Investment gain on holding other non-current financial assets 4,746,821.37 16,205,276.87
Total 673,446,949.24 2,932,306,416.92
350
XII Financial Report
XVIII. 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 (including write-off of
provision for assets impairment) 161,509,859.17
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 314,934,315.62
Profit or loss from debt restructuring 967,464.91
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 and financial liabilities held for
trading, as well as investment gains from disposal of financial assets
held for trading, financial liabilities held for trading and financial assets
available for sale -35,178,162.53
Reversal of provision for impairment of receivables individually tested for
impairment 275,585,463.86
Gain or loss arising from fair value change of consumable biological
assets subsequently measured at fair value 9,924,233.72
Other gain or loss items within the definition of extraordinary gain or loss -37,391,130.09
Total extraordinary gains or losses 690,352,044.66
Less: Effect of income tax of extraordinary gains or losses 137,333,913.66
Net extraordinary gains or losses 553,018,131.00
Less: Net effect of extraordinary gains or losses attributable to minority
interest (after tax) 2,268,633.02
Extraordinary gains or losses attributable to ordinary shareholders of the
Company 550,749,497.98
Other profit or loss items consistent with the definition of extraordinary items:
Applicable √ Not applicable
The Company does not have other profit or loss items consistent with the definition of extraordinary items.
Explanation on classification of non-recurring profit and loss listed in Explanatory Announcement No. 1 on Information
Disclosure of Companies Offering Their Securities to the Public – Non-recurring Profit and Loss as non-recurring profit
and loss
Applicable √ Not applicable
2022 ANNUAL REPORT 351
XII Financial Report
XVIII. Supplementary information (Continued)
2. Return on net assets and earnings per share
Earnings per share
Rate of return on net assets Basic Diluted
Profit for the reporting period on weighted average basis (RMB per share) (RMB per share)
Net profit attributable to ordinary shareholders of the
Company 0.55% 0.03 0.03
Net profit after extraordinary gains or losses attributable to
ordinary shareholders of the Company -2.51% -0.15 -0.15
3. Accounting data difference under accounting standard at home and abroad
(1) Differences of net profit and net assets disclosed in financial reports prepared under IAS and Chinese
accounting standards
Applicable √ Not applicable
(2) Differences of net profit and net assets disclosed in financial reports prepared under oversea and Chinese
accounting standards
Applicable √ Not applicable
The Board of Shandong Chenming Paper Holdings Limited
30 March 2023
352
