Annual Report 2021
March 2022
2021 ANNUAL REPORT
I Important Notice, Table of Contents and Definitions
The board of directors (the“Board”), the supervisory committee (the“Supervisory Committee”) and the directors (the“Directors”), supervisors (the“Supervisors”) and senior management (the“Senior Management”) of the Company herebywarrant the truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no falserepresentations, misleading statements or material omissions contained in this annual report, and are jointly and severallyresponsible for the liabilities of the Company.Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Zhang Bo, head of the accountingdepartment (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial reportin the annual report.All Directors have attended the board meeting to review this report.The Company is exposed to various risk factors such as macro-economic fluctuation, state policies and regulations andcompetition in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factorslikely to be faced and the measures to be taken to address them as set out in the outlook on the future development of theCompany in Management Discussion and Analysis.The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capitalfrom reserves.
I Important Notice, Table of Contents and Definitions
Table of Contents
I Important Notice, Table of Contents and Definitions ...... 1
II Company Profile and Key Financial Indicators ...... 6III Chairman’s Report ...... 11
IV Management Discussion and Analysis ...... 13V Directors’ Report ...... 44
VI Corporate Governance ...... 53
VII Environment and Social Responsibility ...... 93
VIII Material Matters ...... 101
IX Changes in Share Capital and Shareholders ...... 124
X Preference Shares ...... 133
XI Bonds ...... 138
XII Financial Report ...... 146
2021 ANNUAL REPORT
I Important Notice, Table of Contents and Definitions
Documents Available for InspectionI. The financial statements signed and sealed by the legal representative, financial representative and head of the financialdepartment of the Company;II. The original copy of the auditor’s report which is sealed by the accounting firm and signed and sealed by the certified publicaccountant;III. The original copies of the documents and announcements of the Company disclosed in the designated newspaper and onthe website as approved by the CSRC during the reporting period;IV. The annual report disclosed on the website of The Stock Exchange of Hong Kong Limited;V. Other related information.
I Important Notice, Table of Contents and Definitions
DefinitionsItemDefinitionCompany, Group, Chenming Group or
Chenming Paper
meansShandong Chenming Paper Holdings Limited and its subsidiariesParent Company or Shouguang HeadquartersmeansShandong Chenming Paper Holdings LimitedChenming HoldingsmeansChenming Holdings Company LimitedShenzhen Stock ExchangemeansShenzhen Stock ExchangeStock ExchangemeansThe Stock Exchange of Hong Kong LimitedCSRCmeansChina Securities Regulatory CommissionShandong CSRCmeansShandong branch of China Securities Regulatory CommissionZhanjiang ChenmingmeansZhanjiang Chenming Pulp & Paper Co., Ltd.Jiangxi ChenmingmeansJiangxi Chenming Paper Co., Ltd.Wuhan ChenmingmeansWuhan Chenming Hanyang Paper Holdings Co., Ltd.Shanghai ChenmingmeansShanghai Chenming Industry Co., Ltd.Huanggang ChenmingmeansHuanggang Chenming Pulp & Paper Co., Ltd.Chenming (HK)meansChenming (HK) LimitedJilin ChenmingmeansJilin Chenming Paper Co., Ltd.Shouguang MeilunmeansShouguang Meilun Paper Co., Ltd.Shouguang Art PapermeansShouguang Chenming Art Paper Co., Ltd.Finance CompanymeansShandong Chenming Group Finance Co., Ltd.Chenming LeasingmeansShandong Chenming Financial Leasing Co., Ltd. and its
subsidiariesChenming GDR FundmeansWeifang Chenming Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)Chenrong FundmeansWeifang Chenrong Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)Chenchuang FundmeansWeifang Chenchuang Equity Investment Fund Partnership (Limited
Partnership
2021 ANNUAL REPORT
I Important Notice, Table of Contents and Definitions
ItemDefinitionCorporate Bondsmeans17 Chenming Bond 01 and 18 Chenming Bond 01Preference SharesmeansChenming You 01, Chenming You 02 and Chenming You 03Perpetual Bondsmeans17 Lu Chenming MTN001B-to-H Share ConversionmeansChange of listing venue of the domestic listed foreign shares on
the Main Board of The Stock Exchange of Hong Kong Limited byway of conversionthe reporting period or the yearmeansThe period from 1 January 2021 to 31 December 2021the beginning of the year or the periodmeans1 January 2021the end of the year or the periodmeans31 December 2021the prior yearmeansThe period from 1 January 2020 to 31 December 2020
II Company Profile and Key Financial Indicators
I. Company profileStock abbreviationStock code000488
B200488Stock exchanges on which the shares are listedShenzhen Stock ExchangeStock abbreviationChenming PaperStock code01812Stock exchanges on which the shares are listedThe Stock Exchange of Hong Kong LimitedLegal name in Chinese of the CompanyLegal short name in Chinese of the CompanyLegal name in English of the Company (if any)SHANDONG CHENMING PAPER HOLDINGS LIMITEDLegal short name in English of the Company (if any)SCPHLegal representative of the CompanyChen HongguoRegistered addressNo. 595 Shengcheng Road, Shouguang City, Shandong ProvincePostal code of registered address262700Office addressNo.2199 Nongsheng East Road, Shouguang City, Shandong ProvincePostal code of office address262705Website of the Company http://www.chenmingpaper.comEmail addresschenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the BoardHong Kong Company SecretaryNameYuan XikunChu Hon LeungCorrespondence AddressNo. 2199 Nongsheng East Road,
Shouguang City, Shandong Province
22nd Floor, World Wide House, Central,Hong KongTelephone0536-215800800852-21629600Facsimile0536-215897700852-25010028Email addresschenmmingpaper@163.comliamchu@li-partners.comIII. Information disclosure and places for inspection
Websites of the stock exchanges where the Company discloses its annual report
Domestic: http://www.szse.cn; Overseas: http://www.hkex.com.hkNames and websites of the media where the Company discloses its annual report
China Securities Journal, Shanghai Securities News, Securities
Times, Securities Daily, Hong Kong Commercial Daily and CNINFO
( http://www.cinifo.com.cn)Places for inspection of the Company’s annual reportSecurities investment department of the Company
IV. Change in registration
Organisation registration code913700006135889860Change of principal activities since its listing (if any)NoChange of the controlling shareholder (if any)No
2021 ANNUAL REPORT
II Company Profile and Key Financial Indicators
V. Other relevant informationCPAs engaged by the CompanyName of CPAsGrant Thornton (Special General PartnershipCPAs’Office AddressFloor 11, Building No. 4, HuaChuang GuanLi Center, 219 Shunhai
Road, Lixia District, JinanName of the Signing Certified Public AccountantsLiu Jian and Jiang LeiSponsors engaged by the Company to continuously perform its supervisory function during the reporting period Applicable √ Not applicableFinancial advisors engaged by the Company to continuously perform its supervisory function during the reporting period Applicable √ Not applicableVI. Major accounting data and financial indicatorsRetrospective adjustment to or restatement of the accounting data for prior years by the Company Yes √ No
20212020
Increase/decreasefor the year ascompared to theprior year2019Revenue (RMB)33,019,812,294.1430,736,517,996.907.43%30,395,434,073.35Net profit attributable to shareholders
of the Company (RMB)2,065,513,108.711,712,029,078.5220.65%1,656,566,584.88Net profit after extraordinary gains or lossesattributable to shareholders of the Company (RMB)1,743,876,537.121,119,103,808.7555.83%702,329,086.29Net cash flows from operating activities (RMB)8,581,888,192.6411,259,802,676.28-23.78%12,232,707,222.94Basic earnings per share (RMB per share)0.560.3655.56%0.33Diluted earnings per share (RMB per share)0.560.3655.56%0.33Rate of return on weighted average net assets9.60%5.84%Increased by 3.76
percentage points
5.57%
As at the end of 2021As at the end of 2020
Increase/decreaseas at the end ofthe year compared
to the end of the
prior yearAs at the end of 2019Total assets (RMB)82,841,454,602.2491,575,457,828.62-9.54%97,958,909,935.15Net assets attributable to shareholders of the
Company (RMB)19,089,778,227.6424,276,968,789.00-21.37%25,169,743,863.75
II Company Profile and Key Financial Indicators
Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interestpayment deferred and accumulated to subsequent periods for Perpetual Bonds under other equity instruments and theeffect of the dividends on Preference Shares under other equity instruments that have been considered and approved fordistribution. When calculating financial indicators such as earnings per share and rate of return on weighted average netassets, the interest on Perpetual Bonds of RMB89,700,000.00, the dividends on Preference Shares of RMB323,390,968.66declared to be distributed and the cash dividends of RMB14,202,450.00 attributable to the shareholders of restricted sharesexpected to be unlocked in the future among the dividends distributed during the reporting period are deducted.The lower of the Company’s net profit before or after extraordinary gains or losses in the last three accounting years isnegative, and the audit report for the last year shows that the Company’s ability to continue as a going concern is uncertain Yes √ NoThe lower of net profit before or after extraordinary gains or losses is negative Yes √ NoVII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report Applicable √ Not applicableThere was no difference between the net profit and net assets disclosed in accordance with international accountingstandards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report Applicable √ Not applicableThere was no difference between the net profit and net assets disclosed in accordance with overseas accountingstandards and China accounting standards in the financial report during the reporting period.
VIII. Key Financial Indicators by Quarter
Unit: RMBQ1Q2Q3Q4Revenue10,205,724,007.896,967,092,346.648,588,800,889.567,258,195,050.05Net profit attributable to shareholders of theCompany1,179,076,577.84842,018,839.70161,233,847.41-116,816,156.24Net profit after extraordinary gains or
losses attributable to shareholders of theCompany1,165,076,739.34799,641,441.36-9,419,328.18-211,422,315.40Net cash flows from operating activities3,386,890,222.271,360,295,299.672,479,120,720.531,355,581,950.17Whether the above indicators or their aggregated amounts have any material difference with the respective amounts asdisclosed in the quarterly report or interim report Yes √ No
2021 ANNUAL REPORT
II Company Profile and Key Financial Indicators
IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
Rules
Unit: RMB’0,000For the year ended 31 December20212020201920182017
Before adjustment
After adjustmentRevenue3,301,9813,073,6523,039,5432,887,5762,985,1742,947,245Profit before tax230,618217,227204,848320,632453,648453,648Tax21,65026,60629,51864,15877,75277,752Profit for the current period attributable to shareholders of the
Company206,551171,203165,657250,983376,933376,933Minority interests2,41719,4189,6735,491-1,036-1,036Basic earnings per share (RMB/share)0.560.360.330.511.131.13Rate of return on weighted average net assets (%)9.60%5.84%5.57%8.51%15.80%15.80%
Unit: RMB’0,000For the year ended 31 December20212020201920182017
Before adjustment
After adjustmentTotal assets8,284,1459,157,5469,795,89110,531,87310,562,51010,562,510Total liabilities6,029,4636,577,5197,161,9147,944,7047,535,0927,535,092Minority interests345,705152,329117,00382,296249,565249,565Equity attributable to shareholders of the Company1,908,9782,427,6972,516,9742,504,8732,777,8532,777,853Net current assets (liabilities)-1,766,446-1,516,398-774,633-1,344,718-783,090-783,090Total assets less current liabilities3,230,6504,052,9224,526,0144,390,4054,837,6464,837,646
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable Not applicable
Unit: RMBItemAmount for 2021Amount for 2020Amount for 2019Profit or loss from disposal of non-current assets (includingwrite-off of provision for assets impairment162,163,302.50-51,477,216.37135,669,108.82Government grants (except for the government grantsclosely related to the normal operation of the Companyand granted constantly at a fixed amount or quantity inaccordance with a certain standard in compliance withnational policies and regulations) accounted for in profitor loss for the current period261,974,874.53943,720,129.34623,277,014.49Gain arising from investment costs for acquisition ofsubsidiaries, associates and joint ventures by thecorporation being less than its share of fair value ofidentifiable net assets of the investees on acquisition364,597,001.77Profit or loss from debt restructuring24,593,731.72-14,942,498.74-55,792,548.82Except for effective hedging business conducted in theordinary course of business of the Company, gain orloss arising from the change in fair value of financialassets held for trading and financial liabilities held fortrading, as well as investment gains from disposal offinancial assets held for trading, financial liabilities heldfor trading and financial assets available for sale-54,802,461.2921,166,216.0246,445,653.55Consumable biological assets subsequently measured atfair value-41,899.05-13,329,852.55-19,752,911.94Other non-operating income and expenses other than theabove items-15,461,704.288,582,997.6224,876,982.31Loss on abnormal work stoppage-24,567,901.71Less: Effect of income tax60,135,956.19120,949,832.54131,148,729.27Effect of minority interests (after tax)-3,346,683.65155,276,771.3033,934,072.32Total321,636,571.59592,925,269.77954,237,498.59Details of other gain or loss items that fall within the definition of extraordinary gain or loss:
Applicable √ Not applicableThe Company did not have details of other gain or loss items that fall within the definition of extraordinary gain or loss.Explanation on the extraordinary gain or loss items as illustrated in the Explanatory Announcement on InformationDisclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses defined as itsrecurring gain or loss items Applicable √ Not applicableNo extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for CompaniesOffering Their Securities to the Public No. 1 – Extraordinary Gains or Losses were defined by the Company as its recurringgain or loss items.
2021 ANNUAL REPORT
III Chairman’s Report
Dear shareholders,In 2021, the efficient control of the Chinese government over the COVID-19 epidemic created a stable internal environment for theChinese economy, while for the whole world, the recurring waves of the COVID-19 epidemic still hindered the global economicrecovery with conflicts such as supply chain crises and energy shortages also being magnified during the epidemic. During the2021 financial year, the sharp rise in commodity prices and the significant increase in energy costs brought new challenges tothe development of the manufacturing industry in China, and the paper industry was no exception. Despite all challenges, theCompany still achieved steady growth in its results in 2021, manifesting powerful development resilience.Across the“severe winter” and moving forward tenaciouslyIn 2021, in the face of complex and ever-changing internal and external situations, the Company worked together to face up to thenew problems, solve new difficulties and adapt to the new normal. Under the premise of doing a good job in epidemic preventionand control, the Company strictly controlled product quality, expanded sales channels, tapped potential market demand, reducedoperating costs, optimised industrial layout and improved comprehensive operational efficiency. With the joint efforts of all cadresand employees, in 2021, the Company completed the production of machine-made paper of 5.50 million tonnes and achievedsales of 5.45 million tonnes. The Company achieved revenue of RMB33,020 million, representing a year-on-year increase of
7.43%. Total profit and net profit attributable to equity holders of the Company were RMB2,306 million and RMB2,066 million
respectively, up by 6.16% and 20.65% year on year. The Company has been successively honoured over 20 titles above theprovincial level including the Top 500 Chinese Enterprises, and its paper and paper board production ranks among the top ten inthe world, continuously maintaining its sound and steady development.
Constructing raw material safety net with the integration of pulp and paperThe ever-changing international trade relationship and stricter environmental protection requirements have pushed the importanceof supply chain stability to a new height, and also showed the urgency of an optimised raw material structure for the peers inthe industry. As a result, the Company has taken the lead in the construction of a“pulp-paper integration”base in ZhanjiangChenming as a pilot project, and the“pulp-paper integration strategy”is further implemented successively in Shouguang,Huanggang and other places. Having built machine-made paper capacity of approximately 6.8 million tonnes and self-made woodpulp capacity of approximately 4.3 million tonnes as at the end of 2021 the Company continuously has a leading pulp-paperintegration level in the industry, which builds a safety barrier of raw materials supply for our future sustainable development.
III Chairman’s Report
Seizing the opportunity arising from“dual carbon” with green vitality
In 2021, the PRC government put forward the“dual carbon”goal of“striving to hit peak carbon emissions before 2030 andachieve carbon neutrality before 2060”. Under this background, it is richer and more profound to accelerate the pace ofcarbon reduction, promote green development, lead technological innovation for China’s manufacturing industry and enhanceinternational competitiveness. The Company actively participates in energy structure transformation and low-carbon production.In addition to the existing biomass power generation projects, the Company also introduces new photovoltaic power generationprojects and carbon sink development, gaining new momentum for green development with new vitality into clean production andresource conservation.Under the pandemic, China has attracted worldwide attention for its economic and social stability. With the popularisation ofvaccines and the gradual improvement of pandemic prevention systems in various countries, it is expected that the recovery ofthe global economy, consumption and export will accelerate, which will benefit the development of the paper making industry.The implementation of environmental protection policies such as“dual carbon”and“dual control”will also accelerate resourcesoptimisation and integration, and help the industry pattern continuously improve.Not afraid of challenges, we have great expectation for the future. Under the new pattern of international and domestic doublecirculation, the Company will deepen its principal business and gather momentum, make good use of international and domesticmarkets, comprehensively improve the management level and operation quality of the Company, improve the supply chainconstruction, enhance market recognition, strive to open a new chapter of high-quality development for the Company, and buildan international reputation for China’s paper making industry and even China’s manufacturing industry.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 2022
2021 ANNUAL REPORT
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 industry is one of the basic industries of the national economy that has the typical characteristics of large-scaleindustrial production such as continuous and efficient operation and significant scale benefits, which is closely relatedto social and economic development and people’s lives. Since the reform and opening up, with the sustained and rapiddevelopment of the national economy, China‘s paper making industry has gradually begun to transform from extensivegrowth to intensive growth. At the same time, driven by the upgrade of social demand, the increase of environmentalprotection policies, the continuous progress of technology and the change of resource supply, the reduction of low-endproduction capacity has been accelerated, and the structure of the paper industry has been continuously optimised.During the reporting period, the“waste ban”was fully implemented, which further escalated the importance of thetransformation of the raw material structure, together with the“plastic restriction order”that spawned the demand for“replacement of plastic with paper”, broadening the prospects for the white cardboard market. The successively issued“dual carbon”and“dual control”policies had put forward higher requirements for the environmental protection level of themanufacturing industry, and carbon reduction became an important issue for the sustainable development of enterprises.The global spread of mutant strains had pressed the slowdown button for the operation of the supply chain, and the pricesof bulk commodities, chemical raw materials and basic energy had risen sharply, bringing new challenges to the supplychain management and cost management capabilities of enterprises.As an overview of the paper making industry in 2021, despite the difficulties such as the tightening upstream supply chainand rising prices of various raw materials, the paper making industry still achieved rapid development. According to the datafrom the National Bureau of Statistics, from January to December 2021, the national output of machine-made paper andcardboard reached 135.839 million tonnes, representing a year-on-year increase of 8.833 million tonnes or 6.8%, breakingthe 130 million tonnes mark for the first time and hitting a record high; among the industrial enterprises above designatedsize, enterprises in the paper making and paper product industry realised total profit of RMB88.48 billion, representinga year-on-year increase of 6.9%, which was better than that of the prior year in general. As an overview by stage, fromJanuary to mid-April 2021, the prices of wood pulp-based paper products such as white cardboard and cultural papershowed an upward trend; from mid-to-late April to the end of September, the price of wood pulp-based paper productssignalled a downward trend until bottoming out in October, delineating an“N”-shaped route.
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting PeriodThe Company is a large modern conglomerate principally engaged in pulp production and paper making. Its key indicatorsin respect of business and economic efficiency have been in a leading position in the industry in China for over 20consecutive years. The Company has been on the Fortune 500 China list for 12 years. During the reporting period, themachine-made paper business is the major source of revenue and profit of the Company, and there was no significantchange in the principal activities of the Company.
1. Business overview
Taking“revitalising the Chinese papermaking industry”as its mission, the Company has been adhering to the generalkeynote of green, low-carbon, recycling and sustainable development, and committing itself to implementing a pulpand paper integration strategy. At present, the Company has 6 production bases in Shandong, Guangdong, Hubei,Jiangxi, Jilin and other places, with annual pulp and paper production capacity of more than 11 million tonnes. It is thefirst domestic paper making enterprise that achieves a balance between pulp production and paper making capacity.During the reporting period, in the face of the complex domestic and international market economic environmentand various challenges against the backdrop of normalisation of epidemic prevention and control, all cadres andemployees of the Company pulled together to address the difficulties, improve efficiency, reduce costs, ensure thesteady progress of the Company‘s production and operation, and continuously improve the operating quality andprofitability of the Company. In 2021, the Company completed the production of machine-made paper of 5.50 milliontonnes and achieved sales of 5.45 million tonnes. The Company realised revenue of RMB33,020 million, representinga year-on-year increase of 7.43%. Total profit and net profit attributable to equity holders of the Company wereRMB2,306 million and RMB2,066 million respectively, up by 6.16% and 20.65% year on year.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period(Continued)
2. Products
As a leading player in the papermaking industry of China, the Company adopts the market-oriented approach,attaches great importance to technology research and development and brand benefits, and boasts the largest andmost advanced pulping and papermaking production lines in the world, with machine-made paper products coveringmore than 200 types in seven series, including cultural paper, coated paper, white cardboard, copy paper, industrialpaper, special paper, and household paper. The Company owns“BIYUNTIAN”,“GOLDEN MINGYANG”,“CHENMINGCLOUDY MIRROR”,“CHENMING CLOUDLY LION”,“CHENMING SNOW SHARK”,“CHENMING EAGLE”,“CHENMING GONGHAO”,“XINGZHILIAN”and other famous brands, with each major product ranking among thehighest in terms of market share in China.CategoryMajor brands and typesMajor production companiesRange of applicationCultural paper series1.“BIYUNTIAN”,“CLOUDY MIRROR”,“CLOUDYLEOPARD”and“YUNJIN”all-wood pulp offset paperand electrostatic base paper2.“CLOUDY LION”and“CLOUDY CRANE”original whiteoffset paper3.“CLOUDY PINE”and“GREEN PINE” light weight paper
4. Blueprint paper, colour offset paper, pure texture paper,
non-fluorescent offset paper, PE offset paper
5. Beige and high white book paper
6. Light weight coated paper
Shouguang HeadquartersZhanjiang ChenmingWuhan ChenmingJilin Chenming
Printing publications, textbooks, magazines, covers, illustrations,
notebooks, test papers, teaching materials, reference books, etc.
Coated paper series1.“SNOW SHARK”and“EAGLE” one-sided coated paper2.“SNOW SHARK”,“EAGLE”and“RABBIT”double-sidedcoated paper3.“EAGLE”and“RABBIT” matte coated paper
Shouguang HeadquartersShouguang Meilun
Double-sided coated paper is suitable for high quality printing, such
as high-grade picture albums, picture, magazines and so on,promotional materials such as interior pages of high-end books,wall calendars, posters and so on, and suitable for suitable forhigh-speed sheet printing and high-speed rotary printing;One-sided coated paper is suitable for upscale tobacco package
paper, adhesive sticker, shopping bags, slipcases, envelopes,gift wrapping and so on, and suitable for large format printing andcommercial printing.White cardboard series1. White cardboard of“LIYA”series, white cardboardand ivory cardboard of“LIPIN”and“POPLAR”series,high bulk cardboard and ivory cardboard of“LIZZY”
and“BAIYU”series, and super high bulk cardboard of“LIYING”and“BAIYU” series
2. Food package board of
“LIYA”and“LIZZY” series
3. Coated cattle card and LIYA book card
4. Playcard paper board
5. Chenming cigarette cardboard
Shouguang HeadquartersJiangxi ChenmingZhanjiang Chenming
High-end gift boxes, cosmetics boxes, tags, shopping bags, publicity
pamphlets, high-end postcards; cigarette package printing ofmedium and high quality; milk package, beverage package,disposable paper cups, milk tea cups, and noodle bowls.
Copy paper series“GOLDEN MINGYANG”and“GOLDEN CHENMING”
copy paper,“BOYA”and“BIYUNTIAN”copy paper,“MINGYANG”,“LUCKY CLOUDS”,“BOYANG”and“SHANYIN”copy paper, and“GONGHAO”and“TIANJIAN” copy paper
Shouguang MeilunZhanjiang Chenming
Printing and copying business documents, training materials, andwriting.Industrial paper seriesHigh-grade yellow anti-sticking base paper, ordinary yellow/
white anti-sticking base paper and PE paper
Shouguang HeadquartersWuhan ChenmingJiangxi ChenmingZhanjiang Chenming
Anti-stick base paper is mainly used for producing the paper base of
stripping paper or anti-sticking base paper;Cast coated base paper is suitable for producing adhesive paper or
playcard compound paper after coating.Special paper seriesThermal paper and glassine paperShouguang Art Paper
Wuhan Chenming
High-grade adhesive backing paper for electronics, medicine, food,
washing supplies, supermarket labels, double-sided tapes, etc.Household paper seriesToilet paper, facial tissue, pocket tissue, napkin, paper
towels and“XINGZHILIAN”
Shouguang MeilunWuhan Chenming
Daily toilet supplies; used in restaurants and other catering industries,
and used in public toilets in hotels, guesthouses, and office
buildings, and also suitable for home and other environment.
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period(Continued)
3. Operation model
(1) Purchase model
The Company has established a supply chain management centre which adopts a supply chain managementmodel of“centralised procurement by the Group, source as the first priority, hierarchical separation and one-vote veto”. Through continuous improvement of the procurement information system, the Company hasfully realised machine control management, and optimised the authorisation approval process, effectivelystandardising the procurement management system. Based on the needs of production bases, the Groupintegrates the resources of related parties and implements centralised procurement. The Company seekssources and high-quality suppliers through industry exhibitions, on-site inspections and competitive factoryresearch to strengthen procurement at source and reduce procurement costs; and introduces a suppliercompetition mechanism by establishing a three-level joint review mechanism for suppliers and implementing asystem of eliminating substandard suppliers, so as to improve supply quality. Meanwhile, the Company activelycooperates with financial institutions and third parties in the supply chain financial business, and fully utilises thefunds from contributing parties to lower procurement costs, deepen strategic cooperation and enhance supplychain competitiveness.
(2) Production model
The Company has committed itself to implementing a pulp and paper integration strategy. Adhering to theconcept of“placing green development and environmental protection as its priority”, the Company has activelypromoted clean production and vigorously carried out energy conservation and emission reduction, aiming to bea resource-saving and environmentally friendly model enterprise. It is innovating an integrated use of resourcesand a circular industrial development mode, and an“ecological chain”featuring resources, products andrecycled resources has been established. As for production process, the Company takes planned managementas the focus and implements a hierarchical planned management model for the Group, the Company,factories and workshops. Its production volume is determined based on the sales, its production is arrangedscientifically, and its inventories are under strict control. The Group has set up a production scheduling centreto monitor the operation of the production lines of each subsidiary around the clock on a real-time basis, so asto ensure normal production. It has actively built and promoted the MES management system, and realised thetimely information transfer between the management and the production control unit through bridging the gapbetween the ERP and DCS systems.
(3) Marketing model
The Company has always adhered to the marketing concept of“Good faith, Win-Win and Sharing”whilewholeheartedly serving its customers. The Company has a relatively mature sales network, and has set upspecialised sales companies responsible for the development of domestic and overseas markets, productsales, and formulation of sales policies. The sales companies’management systems are divided into productlines, product companies, management areas, and branches to achieve matrix management. The salescompanies are divided into product companies of cultural paper series, coated paper series, white cardboardseries, electrostatic paper series, special paper series and household paper series according to product line.Each product company has its administrative district. A regional general manager is responsible for his/heradministrative district, under which branch companies are set up. The chief representatives of the branchcompanies have full authority to deal with branch business.The Company has implemented a three-level scheduling mechanism. Branch companies, administrativedistricts, and sales companies schedule task indicators daily to ensure the effective implementation of the plans.It sticks to a“four-level visit mechanism”to gain deep market insights and meet customer needs. Meanwhile,by leveraging its comprehensive information systems, the Company has realised It-based management. It hasalso established and improved the complaint handling system and customer satisfaction system to enhance theCompany’s marketing management level.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period(Continued)
3. Operation model
(Continued)
(4) R&D Mode
The Company is market-oriented, and innovation is it driving force. It highly values technological R&D, and hasformed a variety of R&D modes such as independent R&D, technology introduction, and industry 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 CNASpulp and paper testing centre, Shandong Pulp and Paper Making Engineering Lab and the Guangdong Pulp andPaper Production Technology Research Centre, which have enhanced its independent innovation capabilities.Meanwhile, on the basis of introducing internationally advanced pulp and paper production lines and advancedtechnologies, the Company has made technological improvements and re-innovations, and establishednew standards for processes and product quality, forming distinctive core technologies. The Company alsoworks hard on the following aspects: carrying out academic research with colleges and universities and R&Dinstitutions such as Qilu University of Technology, Qingdao University of Science and Technology, TianjinUniversity of Science and Technology, and Institute of Chemical Industry of Forest Products of the ChineseAcademy of Forestry, introducing, digesting and absorbing scientific research and innovation achievements,accelerating the industrialisation of new and high technologies, optimising product mix, and improving thecompetitiveness of its products in the market.
4. The position of the company in the industry during the reporting period
2021 was the first year for China to build a new development pattern. In the face of multiple challenges such as thecomplicated and severe international environment and sporadic and repeated local pandemic outbreaks, all regionsand departments strictly implemented the decisions and arrangements made by the CPC Central Committee and theState Council, scientifically coordinated pandemic prevention and control and economic and social development.China’s economy experienced sustained and stable recovery, and made new achievements in high-qualitydevelopment, marking a good start for the 14th Five-Year Plan. As an important basic raw material industry closelyrelated to the national economy and social development, the paper making industry, in the first half of 2021, improvedits returns significantly due to the boost of upstream raw material costs, the recovery of downstream demand and thepaper product price rise. Although the overall prosperity of the paper making industry was frustrated and the profitgrowth rate declined since the third quarter, the paper making industry in general maintained steady growth duringthe reporting period. According to the data of the National Bureau of Statistics, the paper making and paper productindustrial enterprises above designated size realised total profit of RMB88.48 billion, representing a year-on-yearincrease of 6.9%.Focusing on the principal business of pulp production and paper making, the Company has made a strategic layoutin the whole industrial chain, and built three major product bases with Shouguang in the north, Huanggang in themiddle and Zhanjiang in the south. It has become the first pulp and paper integration enterprise in China with basicallybalanced pulp and paper production capacity, and is ranked among the top 10 in the world in terms of paper andpaperboard output, commanding a leading position in the industry. The Company attaches great importance totechnology research and development and product service quality, continuously develops high-grade and highvalue-added products, leads the market direction, and becomes the enterprise with the largest and most completeproduct varieties in the paper making industry, with a leading market share for its principal products in China. Duringthe reporting period, the Company continuously promoted high-quality development, winning over 20 awards whichreflected the high recognition of the Company from all walks of life, including Top 500 Chinese Enterprises, Top500 Manufacturers in the PRC, Fortune China 500, Top 10 Enterprises in the PRC Light Industry – Paper Sector,Shandong Province High-end Brand Continuous Cultivation Enterprise, Shandong Province Governor Quality AwardNomination Award, 2021 Shandong Province Science and Technology Leading Enterprise,“Top Ten Enterprises”ofShandong Paper Association.
IV Management Discussion and Analysis
II. Principal activities of the Company during the Reporting Period(Continued)
4. The position of the company in the industry during the reporting period
(Continued)In the future, the Company will remain true to its original aspiration and forge ahead, continue to focus on its principalbusiness and strengthen the industry, and focus on the construction of Huanggang Chenming production base. Itwill give full play to the core advantages of its whole industrial chain layout, comprehensively improve the corporatemanagement level and operation quality, and enhance the enterprise‘s ability to resist risks, so that the Companycan achieve steady progress in economic benefits, have far-reaching development, and strive to build a world-classenterprise group with global competitiveness, making greater contributions to the development of the paper makingindustry
III. Analysis of Core Competitiveness
After innovation and development for more than 60 years, the Company has created a strong brand influence and cultivateda solid comprehensive competitiveness. It promotes product upgrades, enhances R&D strength and improves corecompetitiveness by building a supply chain, details of which are as follows:
1. Advantages of pulp and paper integration
The Company has unwaveringly implemented a pulp and paper integration strategy. At present, its major productionbases located in Shouguang, Zhanjiang, and Huanggang are equipped with chemical pulp production lines, withtotal production capacity of wood pulp reaching 4.30 million tonnes. It is the first modern large-scale paper makingcompany that basically realises wood pulp self-sufficiency in China. A complete supply chain not only creates costadvantage for the Company, but also safeguards the safety, stability and quality of upstream raw materials, andrenders strong support for the Company to maintain its long-term competitiveness.
2. Scale advantages
The paper making industry is a typical capital-intensive and technology-intensive industry that follows the laws ofeconomies of scale. The Company is a leading player in the paper making industry in China. Its large-scale productionbases can be found in the major markets in Southern, Central, Northern, and Northeast China, with annual pulp andpaper production capacity reaching 11 million tonnes, where reasonable production scale creates the marginal costadvantage. Meanwhile, by leveraging the scale advantages, the Company has built an international logistics centreand supporting railway dedicated lines and docks, and constructed a comprehensive logistics service platformcovering unitised transportation, bonded warehousing, transfer and storage at stations and terminals, realising theimprovement of logistics efficiency and the stability of logistics costs.
3. Product advantages
The Company is an enterprise that offers the widest product range in the paper making industry. The product seriesinclude cultural paper, white paper board, coated paper, copy paper, household paper, thermal paper, etc., witheach major product ranking among the best in terms of market share. Over the years, the Company has attachedgreat importance to technology research and development, introduced the most advanced pulping and papermaking technology and equipment, refined its products and promoted dynamic upgrade of products by persistingin technological innovation and work process optimisation, so as to continuously enhance the value of the brand ofChenming and improve brand benefits.
4. Industry layout advantages
Closely centring on the pulp and paper integration strategy, the Company has integrated resources and establishedits production bases in the core target market to promote the coordinated development of all regions. Currently,the Company adopts the market-oriented approach and has six production bases in Shandong, Guangdong,Hubei, Jiangxi, Jilin and other places. With all products sold at close distances, the Company substantially reducestransportation costs while improving service efficiency, achieving a“win-win” between the Company and its users.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
III. Analysis of Core Competitiveness(Continued)
5. Advantages in technical equipment
The Company highly values the introduction and upgrades of technical equipment and boasts the largest and mostadvanced pulping and paper making production line in the world. The Company’s major production equipmenthas been imported from internationally renowned manufacturers, including Metso and Valmet of Finland, Voith ofGermany, Andritz of Austria, etc. and reached the advanced international level. For the moment, the Company hasthree production lines with a paper width of more than 11 metres, which ensures production efficiency and productquality.
6. Advantages in research and innovation
The Company has scientific research institutions including the national enterprise technology centre, the post-doctoralworking station, the state certified CNAS pulp and paper testing centre. At the same time, the Company activelycarries out in-depth industry-university-research cooperation with prestigious domestic universities and researchinstitutes, continuously improves technical innovation capabilities and scientific research and development levels,and develops a series of new products with high technology contents and high added value as well as proprietarytechnologies. The Company and its subsidiaries Zhanjiang Chenming, Shouguang Meilun, Jiangxi Chenming, JilinChenming, Huanggang Chenming and Wuhan Chenming are high and new technology enterprises. As at the endof the reporting period, the Company had obtained over 360 national patents, and took the lead in obtaining theISO9001 quality system certification, the ISO14001 environmental protection system certification and the FSC-COCinternational forest system certification among domestic peers.
7. Team management advantages
With a reasonable and balanced professional structure, the Company possesses a complete and reasonable talentstructure 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 an internalcorporate culture that ties in with the Company’s development, summarised management experience with industrycharacteristics, and formed a team advantage combining management and culture, allowing it to accurately graspthe industry development trend and direction. At the same time, the Company has paid attention to the constructionof a talent reserve cultivation mechanism. With advanced business concepts and enormous development space, theCompany has attracted an array of high-calibre professionals and improved the level of talent pool, providing solidguarantee for the Company’s long-term sustainable development.
8. Advantages in environmental governance capacity
The Company has actively upheld the concept of“lucid waters and lush mountains are invaluable assets”, adheredto the development idea of“placing green development and environmental protection as its priority”, alwaysregarded environmental protection as the“life project”, clung to the green development model of clean productionand resource recycling, and earnestly shouldered the corporate responsibility of environmental protection. In recentyears, 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 treatmentsystem, middle water reuse system, white water recovery system and black liquor comprehensive utilisation system.The environmental indicators of the Company rank high in the country and in the world. At present, the Companyadopts the world’s most advanced“ultrafiltration membrane + reverse osmosis membrane”technology to completethe reclaimed water recycling membrane treatment project, which is the largest middle water reuse project in thedomestic paper industry. The reclaimed water recycle rate reaches more than 75%. The reclaimed water qualitymeets drinking water standards, which can save fresh water of 170,000 cubic metres every day. Meanwhile, inresponse to the“dual carbon”policy, the Company actively introduces photovoltaic power generation and biomasspower generation, continuously optimises the energy structure and improves the level of low-carbon production.
IV Management Discussion and Analysis
IV. Analysis of principal operations
1. Overview
In 2021, under the dual impacts of repeated COVID-19 outbreaks and global macroeconomic shocks, the papermaking industry also staged a round of“cyclical”fluctuations, and the market price of paper products showedan“N”-shaped trend of“sharp rise – downward oscillation – bottoming out”. In terms of upstream raw materials,the pandemic disrupted the rhythm of the supply chain operations. The prices of bulk commodities such as coaland chemicals rose sharply in 2021, and shipping costs increased significantly, bringing greater cost pressure oncompanies. In terms of the market, the market demand for paper products undergone a phased adjustment afterexperiencing rapid growth in the first half of the year, and bottomed out in the fourth quarter. Nevertheless, the papermaking industry in China maintained a steady development in 2021.During the reporting period, on the premise of ensuring pandemic prevention and control work, the Companystrengthened safety production, had strict control over product quality, orderly tapped the markets, consolidatedscientific research strength, optimised resource deployment, improved its supply chain system, enhanced costmanagement, and improved regional linkage, so that the enterprise synergy effects were further improved, and thecomprehensive capability was continuously reinforced. Although the corporate operation difficulty intensified dueto the impact of upstream commodity supply fluctuation and downstream market demand fluctuation for paperproducts, the Company still presented a comparatively steady growth momentum through the implementation of theabove measures to minimise the adverse effects caused by external fluctuation.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(1) Components of revenue
Unit: RMB20212020Increase/
decreaseAmount% of revenueAmount% of revenueTotal revenue33,019,812,294.14100%30,736,517,996.90100%7.43%By industryMachine-made paper29,071,777,731.5088.04%26,799,197,492.5487.19%8.48%Construction materials349,945,005.511.06%419,138,839.411.36%-16.51%Financial leasing327,001,050.300.99%935,121,026.203.04%-65.03%Electricity and steam303,940,594.690.92%195,367,954.910.64%55.57%Hotel and property rentals148,941,357.800.45%93,370,973.050.30%59.52%Chemicals131,104,964.350.40%144,274,657.390.47%-9.13%Others2,687,101,589.998.14%2,150,047,053.407.00%24.98%By productWhite paper board9,579,581,625.0529.01%7,900,414,595.2225.70%21.25%Duplex press paper7,287,152,353.0722.07%6,880,399,009.2122.39%5.91%Coated paper4,310,744,513.8713.06%4,134,523,188.7613.45%4.26%Electrostatic paper3,857,097,045.4911.68%4,052,403,877.8213.18%-4.82%Anti-sticking raw paper1,168,436,835.303.54%1,118,932,774.913.64%4.42%Thermal paper540,941,351.361.64%519,335,040.601.69%4.16%Other machine-made paper2,327,824,007.367.05%2,193,189,006.027.14%6.14%Construction materials349,945,005.511.06%419,138,839.411.36%-16.51%Financial leasing327,001,050.300.99%935,121,026.203.04%-65.03%Electricity and steam303,940,594.690.92%195,367,954.910.64%55.57%Hotel and property rentals148,941,357.800.45%93,370,973.050.30%59.52%Chemicals131,104,964.350.40%144,274,657.390.47%-9.13%Others2,687,101,589.998.14%2,150,047,053.407.00%24.98%By geographical segmentMainland China28,894,011,653.2087.51%27,683,360,047.7690.07%4.37%Other countries and regions4,125,800,640.9412.49%3,053,157,949.149.93%35.13%By sales modelDistribution21,812,237,365.8166.06%19,689,343,007.5664.06%10.78%Direct sales11,207,574,928.3333.94%11,047,174,989.3435.94%1.45%
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(2) Industries, products, regions and sales model accounting for over 10% of revenue or operating profit of the
Company
√ Applicable Not applicable
Unit: RMB
RevenueOperating costs
Gross profitmargin
Increase/decrease ofrevenue ascompared
to thecorrespondingperiod of the
prior year
Increase/decrease ofoperating costs
as compared
to thecorrespondingperiod of the
prior year
Increase/decrease ofgross profitmargin ascomparedto thecorresponding
period of the
prior yearBy industryMachine-made paper29,071,777,731.5022,238,585,916.6623.50%8.48%4.76%2.71%By productWhite paper board9,579,581,625.056,540,978,628.5131.72%21.25%13.47%4.68%Duplex press paper7,287,152,353.076,004,341,245.6317.60%5.91%6.12%-0.16%Coated paper4,310,744,513.873,130,491,004.1527.38%4.26%-3.78%6.07%Electrostatic paper3,857,097,045.493,140,962,690.6218.57%-4.82%-1.74%-2.56%By geographical segmentMainland China28,894,011,653.2021,524,347,994.3725.51%4.37%2.16%1.62%Other countries and regions4,125,800,640.943,697,927,800.9110.37%35.13%43.57%-5.27%By sales modelDistribution21,812,237,365.8116,685,368,166.1323.50%10.78%6.99%2.71%Direct sales11,207,574,928.338,536,907,629.1523.83%1.45%6.05%-3.30%Under the circumstances that the statistics specification for the Company’s principal operations dataexperienced adjustment in the reporting period, the principal activity data upon adjustment of the statisticsspecification as at the end of the reporting period in the latest year Applicable √ Not applicable
2021 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes No
By industryItemUnit20212020
Increase/decreaseMachine-made paperSales‘0,000 tonnes545561-2.85%Production output‘0,000 tonnes550577-4.68%Inventories‘0,000 tonnes454012.50%Explanation on why the related data varied by more than 30% Applicable √ Not applicable
(4) Performance of material sales contracts and material procurement contracts of the Company during the
reporting period Applicable √ Not applicable
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(5) Composition of operating costs
By industry
Unit: RMB
By industryItem
20212020
Increase/decreaseAmount% ofoperating
costsAmount
% ofoperatingcostsMachine-made paperRaw materials13,347,618,450.0860.02%12,830,708,837.3460.44%4.03%
Chemicals2,762,896,811.8512.42%2,571,910,928.8812.12%7.43%Energy and power2,796,822,991.3412.58%2,278,028,439.7710.73%22.77%Shipping fee986,623,212.894.44%1,108,102,345.785.22%-10.96%Depreciation926,703,946.264.17%1,024,679,469.644.83%-9.56%Labour costs284,597,722.291.28%273,064,171.971.29%4.22%Other production costs1,133,322,781.955.10%1,140,961,560.115.37%-0.67%Subtotal22,238,585,916.66100.00%21,227,455,753.49100.00%4.76%Power and steamRaw materials198,834,959.4076.47%100,417,013.2876.99%98.01%
Depreciation19,199,537.957.38%11,986,604.729.19%60.17%Labour costs6,844,347.792.63%5,042,260.923.87%35.74%Energy and power25,124,584.809.66%5,424,201.154.16%363.19%Chemicals746,078.650.29%197,996.810.15%276.81%Other production costs9,269,615.373.56%7,367,419.475.65%25.82%Subtotal260,019,123.96100.00%130,435,496.35100.00%99.35%Construction materialsRaw materials222,297,889.4570.37%253,136,606.5370.56%-12.18%
Energy and power32,115,179.9410.17%40,584,938.3511.31%-20.87%Labour costs14,568,778.004.61%22,635,978.106.31%-35.64%Depreciation9,626,644.953.05%10,376,987.542.89%-7.23%Shipping fee14,416,949.064.56%9,368,706.782.61%53.88%Other production costs22,887,012.537.24%22,626,450.436.31%1.15%Subtotal315,912,453.93100.00%358,729,667.72100.00%-11.94%
2021 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(6) Change of scope of consolidation during the reporting period
√ Yes No
During the reporting period, 6 companies were added to the scope of consolidation. In particular, 5 companieswere newly established subsidiaries, namely Shanghai Chenyin Trading Co., Ltd., Nanchang ShenghengTrading Co., Ltd., Nanchang Kunheng Trading Co., Ltd., Weifang Chendu Equity Investment Partnership (LimitedPartnership) and Huanggang Chenming Pulp & Fiber Trading Co., Ltd. During the reporting period, a subsidiarywas acquired not within the definition of business, namely Wuhan Junheng Property Management Co., Ltd.During the reporting period, 7 companies were reduced from the scope of consolidation. In order to furtherfocus on the principal business of pulp production and paper making, divest non-principal business assetsand optimise resource allocation, the Company disposed of 100% equity interest in Zhanjiang Chenming New-style Wall Materials Co., Ltd., Chengdu Chenming Culture Communication Co., Ltd., Shandong ChenmingPower Supply Holdings Co., Ltd., Shandong Chenming Panels Co., Ltd., Shouguang Chenming Cement Co.,Limited and Shouguang Chenming Floor Board Co., Ltd. Such companies were excluded from the scope ofconsolidation. A subsidiary, Shandong Chenming Coated Paper Sales Co. Ltd., was absorbed into the Group.
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period Applicable √ Not applicable
(8) Sales to major customers and major suppliers
Sales to major customers of the CompanyTotal sales to top 5 customers (RMB)5,259,350,805.45Total sales to top 5 customers as a percentage of the total sales for the year15.93%Sales to top 5 customers who are related parties as a percentage of
the total sales for the year0.00%Information on top 5 customers of the CompanyNo.Name of customerSales (RMB)
As a percentage of thetotal sales for the year (%)1Customer A1,343,002,399.704.07%2Customer B1,032,917,716.773.13%3Customer C977,311,240.642.96%4Customer D976,565,580.692.96%5Customer E929,553,867.652.82%Total5,259,350,805.4515.93%Other explanation of the major customers Applicable √ Not applicable
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
2. Revenue and cost
(Continued)
(8) Sales to major customers and major suppliers
(Continued)Major suppliers of the CompanyTotal purchases from top 5 suppliers (RMB)4,691,196,028.43Total purchases from top 5 suppliers as a percentage of the total purchases for the year18.60%Total purchases from top 5 suppliers who are related parties as a percentage ofthe total purchases for the year0.00%Information on top 5 suppliers of the CompanyNo.Name of supplierPurchases (RMB)
As a percentage of the totalpurchases for the year (%)1Supplier A2,413,919,229.399.57%2Supplier B815,678,586.653.23%3Supplier C542,935,665.282.15%4Supplier D476,972,812.831.89%5Supplier E441,689,734.271.75%Total4,691,196,028.4318.60%Other explanation of the major suppliers Applicable √ Not applicable
3. Expenses
Unit: RMB20212020
Increase/Decrease (%)
Reasons for materialchangesSelling and distribution expenses293,509,692.51298,246,355.91-1.59%Sales commission decreased year on
year during the reporting period.General and administrative expenses942,360,735.541,025,420,660.39-8.10%Expenses on strengthening the
control over various administrative
expenses during the reporting
period.Finance expenses2,387,471,286.462,562,065,063.22-6.81%Interest expenses of the Company
decreased year on year during the
reporting period.Research and developmentexpenditure
1,453,766,371.461,274,355,241.4914.08%The Company and its subsidiaries
stepped up efforts in research and
development during the reporting
period.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
4. Research and development expenditure
√ Applicable Not applicable
During the reporting period, the Company’s technological R&D centre was always guided by customers’needs.Improving economic benefits was its goal. The Company kept pushing technological innovations, the productionof products with high added value, and technological optimisation, aiming to improve its product quality. In 2021,the Company obtained 59 patents. The“Technological Development of Coated Paper for High-end Books andPeriodicals”was included in the technological innovation project plans of Shandong Province for 2021. The project“Key Technologies and Industrialisation of Green Preparation and High-value Utilisation of High-Performance WoodChemical Pulp”won the second prize of the National Science and Technology Progress Award, which promotedthe green production of the paper industry. The Company will continue adhering to the orientation of technologicalinnovation, and improve its R&D and product quality in a sustained way, aiming to take its core competence indeveloping the enterprise to a higher level.Name of major R&D projectProject purposeProject progress
Objectives to beachieved
Expected impact on the futuredevelopment of the CompanyTechnological development of low-weight
and high-bulk duplex press paper
Enhancing productfunctionality or improvingperformance
Pilot testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Technological development of low-weight
and high-bulk thin paper
Saving raw materialsPilot testing stageTo become
domesticallyleading
Lowering production costs and
improving the Company’seconomic benefits.Technological development of chemical
mechanical pulp prepared by co-processing hydrothermal mixed wideleaves and biologicals
Reducing energy
consumption orimproving energyefficiency
Industrialisation
stage
To become
domesticallyleading
Improving the quality of raw material
products so that they can beapplied in high-end products withhigh added values and increasingthe proportion of the Company’shigh-end products.Technological development of white paper
board with natural colour in the core layer
Enhancing product
functionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.New technology development for AKD sizing
of electrostatic paper
Enhancing productfunctionality or improvingperformance
Pilot testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Technological development of embossedhigh-end napkin
Enhancing product
functionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.Technological development of coated paper
for high-end books and periodicals
Enhancing product
functionality or improvingperformance
Small testing stageTo become
domesticallyleading
Improving customer satisfaction with
products and increasing marketshare.
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
4. Research and development expenditure
(Continued)R&D personnel of the Company
20212020
Percentageof changeR&D headcount1,9001,933-1.71%Ratio of R&D personnel15.45%15.16%0.29%Academic background of R&D personnel–––Bachelor’s degree185198-6.57%Master’s degree11922.22%Age composition of R&D personnel–––Under 30387423-8.51%30~40 years old1,0341,079-4.17%Research and development expenditure of the Company
20212020
Percentageof changeR&D expenditure (RMB)1,453,766,371.461,274,355,241.4914.08%R&D expenditure to revenue4.40%4.15%0.25%Amount of R&D expenditure capitalised (RMB)0.000.000.00%Capitalised R&D expenditure to R&D expenditure0.00%0.00%0.00%Reasons for and effects of significant changes in the composition of the Company’s R&D personnel Applicable √ Not applicableReasons for significant change in total R&D expenditure to revenue Applicable √ Not applicableReasons for and reasonableness of the significant change of the capitalisation rate of R&D expenditure Applicable √ Not applicable
2021 ANNUAL REPORT
IV Management Discussion and Analysis
IV. Analysis of principal operations(Continued)
5. Cash flows
Unit: RMBItem20212020
Increase/decrease (%)Subtotal of cash inflows from operating activities39,306,294,223.4340,142,770,644.64-2.08%Subtotal of cash outflows from operating activities30,724,406,030.7928,882,967,968.366.38%Net cash flows from operating activities8,581,888,192.6411,259,802,676.28-23.78%Subtotal of cash inflows from investing activities1,321,827,995.68800,515,222.1365.12%Subtotal of cash outflows from investing activities1,156,106,779.05981,555,028.9417.78%Net cash flows from investing activities165,721,216.63-181,039,806.81191.54%Subtotal of cash inflows from financing activities33,237,001,445.8331,654,325,203.775.00%Subtotal of cash outflows from financing activities43,177,497,483.9341,248,363,106.564.68%Net cash flows from financing activities-9,940,496,038.10-9,594,037,902.79-3.61%Net increase in cash and cash equivalents-1,220,254,116.771,498,841,936.38-181.41%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 23.78% as compared to the corresponding period of the
prior year mainly because the net cash received during the reporting period decreased year-on-year with thereduction of the scale of the financial leasing business.
(2) Net cash flows from investing activities increased by 191.54% as compared to the corresponding period of
the prior year mainly because Chenming GDR Fund, a subsidiary, recovered its investment of RMB200 millionin Chenrong GDR Fund, and Huanggang Chenming disposed of RMB164 million of land during the reportingperiod, leading to a year-on-year increase in cash inflows from investment activities.Explanation on reasons leading to the material difference between net cash flows from operating activities during thereporting period and net profit for the year Applicable √ Not applicable
V. Analysis of non-principal operations
Applicable √ Not applicable
IV Management Discussion and Analysis
VI. Analysis of assets and liabilities
1. Material changes of asset items
Unit: RMBAs of the end of 2021As of the beginning of 2021
PercentagechangeDescriptionAmountAs a percentage
of total assetsAmount
As a percentage of total assetsMonetary funds14,119,782,939.6617.04%17,759,537,598.9819.39%-2.35%Mainly due to the year-on-year decrease
of the Company’s existing financingdeposits at the end of the reportingperiod.Inventories5,282,631,922.126.38%5,135,293,347.825.61%0.77%Mainly due to the increase in the
Company’s inventory of finishedgoods at the end of the reportingperiod.Non-current assets
due within
one year
5,216,934,172.616.30%4,222,744,207.344.61%1.69%Mainly due to the increase in long-term
receivables due within one year atthe end of the reporting period.Other current assets1,903,929,492.852.30%2,716,918,695.852.97%-0.67%Mainly due to continued reduction of the
scale of the financial leasing businessduring the reporting period.Long-term
receivables
1,788,759,975.352.16%4,658,884,857.955.09%-2.93%Mainly due to the reclassification of
long-term receivables due withinone year at the end of the reportingperiod.Investment
properties
6,473,538,431.917.81%5,943,159,568.006.49%1.32%Mainly due to the merger of Wuhan
Junheng during the reporting period,which resulted in the increase ofinvestment properties.Long-term equity
investments
1,866,587,685.352.25%3,906,158,402.454.27%-2.02%Mainly due to the application of the
new financial instrument standardsby Guangdong Nanyue Bank, aninvestee of the Company, at the endof the reporting period.Fixed assets35,653,492,676.1543.04%37,651,706,658.9741.12%1.92%Mainly due to the Company’s disposalof certain non-principal businessassets during the reporting period.Short-term
borrowings
33,523,025,186.2240.47%32,793,992,957.8635.81%4.66%Mainly due to the increase in the size of
short-term debts at the end of thereporting period.Contract liabilities1,382,289,597.541.67%1,051,147,044.741.15%0.52%Mainly due to the increase in customer
prepayments at the end of thereporting period.Long-term
borrowings
5,276,340,154.986.37%8,077,150,979.158.82%-2.45%Mainly due to the maturity of the
Company’s project loans andproperty loans during the reportingperiod.A higher proportion of overseas assets Applicable √ Not applicable
2021 ANNUAL REPORT
IV Management Discussion and Analysis
VI. Analysis of assets and liabilities(Continued)
2. Assets and liabilities measured at fair value
√ Applicable Not applicable
Unit: RMB
Item
Openingbalance
Profit or lossfrom changein fair valueduring theperiod
Cumulativefair value
changecharged toequity
Impairmentprovidedduring theperiod
Additions/purchasesduring theperiod
Recovery/
disposalduring theperiod
Otherchanges
ClosingbalanceFinancial assets
1. Held-for-trading financial assets
(excluding derivative financial assets)192,907,800.62-82,021,617.74-84,798,634.27110,886,182.88
2. Other non-current financial assets145,910,000.001,600,000.0057,510,000.00396,000,000.0023,582,996.75519,927,003.25
3. Consumable biological assets
measured at fair value1,535,386,865.44-41,899.0520,060,762.9328,750,027.6344,789,143.251,519,305,850.77Total1,874,204,666.06-80,463,516.79-7,227,871.34–424,750,027.6368,372,140.00–2,150,119,036.90Whether there were any material changes on the measurement attributes of major assets of the Company during thereporting period Yes √ No
3. Restriction on asset rights as at the end of the reporting period
Item
Carrying amount as at
the end of the periodReasons for such restrictionMonetary funds10,756,936,714.59As deposits for bank acceptance bills and
letters of credit, deposit reserves, etc.Bills receivable/accounts receivablefinancing
3,778,108.58As collateral for letters of guarantee and letters
of creditAccounts receivable232,200,000.00As collateral for borrowingsHeld-for-trading financial assets55,443,091.44As deposits for borrowings from CMB
International SecuritiesFixed assets12,866,125,795.19As collateral for bank borrowings and
long-term payablesIntangible assets1,210,395,050.42As collateral for bank borrowings and
long-term payablesInvestment properties5,033,765,366.00As collateral for bank borrowingsTotal30,158,644,126.22
IV Management Discussion and Analysis
VII. Investments
1. Overview
√ Applicable Not applicable
Investments during the reporting period (RMB)
Investments during thecorresponding period of
prior year (RMB)Change1,707,210,000.001,940,190,000.00-12.01%
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMBName of investeePrincipal activities
Form ofinvestment
InvestmentamountShareholdingSource of fundPartner(s)Period of investmentProduct type
Progress asat the date ofbalance sheet
EstimatedreturnProfit or lossfrom investmentfor the period
Involvementin lawsuitDate ofdisclosure(if any)
Disclosure index(if any)Weifang Chenming
Growth DriverReplacementEquityInvestment FundPartnership(LimitedPartnership)
Equity investment
and relatedconsultingservices
Capital
increase
627,210,000.0079.00%Self-owned fundsWeifang Hengxin
CapitalManagement Co.,Ltd., WeifangFinancial HoldingGroup Co., Ltd.,etc.
Operating period of
7 years, subjectto extension of2 years aftermaturity
Equity
investment
CompletedN/A14,761,352.08No26 August
2020
26 June2021
http://www.cninfo.
com.cn
Weifang Chendu
EquityInvestmentPartnership(LimitedPartnership)
Engaging in
investmentactivities
Newly
established
255,000,000.0079.69%Self-owned fundsGuodo Venture
Capital Co., Ltd.and Chenming(Qingdao) AssetManagement Co.,Ltd.
Investment
operationperiod of3 years,automaticextension uponmaturity
Equity
investment
CompletedN/A-1,833,424.35No26 June 2021 http://www.cninfo.
com.cn
Nanchang
ShenghengTrading Co., Ltd.
Sales of pulp, non-
residential realestate leasing
Newly
established
10,000,000.00100.00%Self-owned fundsSubsidiaryLong-termTradingCompletedN/A-11,331,824.00NoN/AN/ANanchang KunhengTrading Co., Ltd.
Sales of pulp, non-
residential realestate leasing
Newly
established
10,000,000.00100.00%Self-owned fundsSubsidiaryLong-termTradingCompletedN/A-5,191,218.11NoN/AN/AShanghai ChenyinTrading Co., Ltd.
Sales of pulp,
sales of paperproducts
Newly
established
210,000,000.0051.00%Self-owned fundsShanghai Xuenai
Industrial Co., Ltd.
Long-termSales of pulpCompletedN/A-300.00NoN/AN/AWuhan Junheng
PropertyManagementCo., Ltd.
Leasing of self-
owned houses,propertyservices
Acquisition595,000,000.00100.00%Self-owned fundsSubsidiaryLong-termLeasing and
propertyservices
CompletedN/A0.00NoN/AN/A
2021 ANNUAL REPORT
IV Management Discussion and Analysis
VII. Investments(Continued)
3. Material non-equity investments during the reporting period
Applicable √ Not applicable
4. Financial asset investment
(1) Security investments
√ Applicable Not applicable
Unit: RMB
Type of securityStock code
Abbreviation ofstock name
Initialinvestment cost
Accountingmeasurementmodel
Book value atthe beginningof the reporting
periodProfit or lossfrom changes infair value in thecurrent period
Accumulatedchanges in fairvalue includedin equityPurchasedamount inthe current
period
Soldamount inthe currentperiod
Profit or loss
during thereporting period
Book valueat the end ofthe reportingperiodClassification in accountsSource of fundDomestic and foreign
shares
09668China Bohai Bank195,684,817.15Measured at
fair value192,907,800.62-82,021,617.74-84,798,634.270.000.00-82,021,617.74110,886,182.88Held-for-trading
financial assets
Self-ownedfunds andborrowingsTotal195,684,817.15192,907,800.62-82,021,617.74-84,798,634.270.000.00-82,021,617.74110,886,182.88Disclosure date of announcement in relation to the
consideration and approval of securities investments bythe Board
20 June 2020Disclosure date of announcement in relation to theconsideration and approval of securities investments bythe shareholders’ general meeting (if any)
Not applicable
(2) Derivatives investments
Applicable √ Not applicableThe Company did not have any derivative investments during the reporting period.
5. Use of proceeds
Applicable √ Not applicableThe Company did not use any proceeds during the reporting period.
IV Management Discussion and Analysis
VIII. Disposal of material assets and equity interest
1. Disposal of material assets
Applicable √ Not applicableThe Company did not dispose any material assets during the reporting period.
2. Disposal of material equity interest
√ Applicable Not applicable
Counterparty(ies)
Equity interestdisposed ofDisposal date
Transactionconsideration(RMB’0,000)
Net profitcontribution
to the
Company
from thebeginning of
the period
up to the
disposaldate(RMB’0,000)Effect ofdisposal on theCompany
Net profitcontribution
to the
Company
on equitydisposal asa percentage
of total net
profit (%)Pricing basisof disposal ofequity interest
Relatedpartytransactionor not
Relationship withcounterparty(ies)
Relevantassettitle fullytransferredor not
Carriedout onschedule ornot, if not,the reasonsandmeasurestakenby theCompany
Disclosuredate
DisclosureindexZhanjiang Junchen
Trading Co., Ltd.
Zhanjiang Chenming
New-style WallMaterials Co., Ltd.
1 January
2021
1,258.0067.66Beneficial for
resourcesintegration ofthe Company,asset portfoliooptimisation, andconcentrationof competitiveedges on principlebusinesses toimprove quality andefficiency
0.03%Appraised valueNoNot related partyYesTransfer
completed
Not applicableNot applicableJinan Kunhe Trading
Co., Ltd.
Chengdu Chenming
CultureCommunicationCo., Ltd.
30 September
2021
1,104.00221.530.11%Appraised valueNoNot related partyYesTransfer
completed
Not applicableNot applicableShandongDaienmengTrading Co., Ltd.
Shandong ChenmingPower SupplyHoldings Co., Ltd.
30 September
2021
29,800.0011,026.255.28%Appraised valueNoNot related partyYesTransfer
completed
Not applicableNot applicable
2021 ANNUAL REPORT
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: RMBName of companyType of companyPrincipal activitiesRegistered capitalTotal assetsNet assetsRevenueOperating profitNet profitZhanjiang Chenming
Pulp & Paper Co.,Ltd.
SubsidiaryProduction and sale of duplex
press paper, electrostaticpaper, and white paperboard
5,765,833,333.0024,616,085,934.987,712,328,762.9213,110,229,643.091,250,425,083.791,093,678,580.62Shouguang MeilunPaper Co., Ltd.
SubsidiaryProduction and sale of
coated paper, culturalpaper, household paperand chemical pulp
4,801,045,519.0017,670,520,791.108,308,079,024.358,705,143,361.05260,755,737.63245,313,174.65Huanggang Chenming
Pulp & Paper Co.,Ltd.
SubsidiaryProduction and sale of
chemical pulp
2,850,000,000.007,424,304,841.112,888,611,886.172,534,006,692.38248,006,384.94240,671,319.34
IV Management Discussion and Analysis
IX. Analysis of major subsidiaries and investees(Continued)Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Name of company
Methods to acquire and disposeof subsidiaries during thereporting period
Impact on overall productionand operation and resultsShanghai Chenyin Trading Co., Ltd.Newly establishedNet profit decreased by RMB300.Nanchang Shengheng Trading Co., Ltd.Newly establishedNet profit decreased by RMB11.33
million.Nanchang Kunheng Trading Co., Ltd.Newly establishedNet profit decreased by RMB5.19 million.Weifang Chendu Equity InvestmentPartnership (LLP)
Newly establishedNet profit decreased by RMB1.83 million.Huanggang Chenming Pulp & FiberTrading Co., Ltd.
Newly establishedThere were few business operations and
no impact at the momentWuhan Junheng Property ManagementCo., Ltd.
AcquisitionThere were few business operations and
no impact at the momentShandong Chenming Coated PaperSales Co. Ltd
MergerNet profit increased by RMB0.07 million.Zhanjiang Chenming New-style WallMaterials Co., Ltd.
Transfer of 100% equity interestNet profit increased by RMB0.68 million.Chengdu Chenming CultureCommunication Co., Ltd.
Transfer of 100% equity interestNet profit increased by RMB2.22 million.Shandong Chenming Power SupplyHoldings Co., Ltd.
Transfer of 100% equity interest
Net profit increased by RMB110.26
million.Shandong Chenming Panels Co., Ltd.Transfer of 100% equity interestShouguang Chenming Cement Co.,
Limited
Transfer of 100% equity interestShouguang Chenming Floor Board Co.,
Ltd.
Transfer of 100% equity interestParticulars of major subsidiaries and investees
1. For the integrated forestry, pulp and paper project of Zhanjiang Chenming, the gross profit margin of its main
products, white paper board and cultural paper, reached a high level, showing strong profitability.
2. For the integrated forestry, pulp and paper project of Shouguang Meilun, the gross profit margin of its main products,
coated paper and cultural paper, reached a high level, showing strong profitability.
3. During the reporting period, the 600,000-tonne chemical wood pulp project of Huanggang Chenming gradually
achieved profitability.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
X. Structured entities controlled by the Company Applicable √ Not applicableXI. Outlook on the future development of the Company(i) Overview and trend of the industryThe paper making industry is closely related to national economic security, and the consumption level of paper andpaper board is an important indicator to measure the economy and civilisation of a country. Since the reform andopening up, with the sustained and rapid development of the national economy, China’s paper making industryhas gradually begun to transform from extensive growth to intensive growth. In general, China’s industrial economycontinuously recovered steadily in 2021, and the production and operation of paper making enterprises weresmoothly. During the reporting period, the“waste ban”was fully implemented, which further escalated the importanceof the transformation of the raw material structure. The“plastic restriction order”that spawned the demand for“replacement of plastic with paper”broadened the prospects for the white cardboard market has a broader prospect.The successively issued“dual carbon”and“dual control”policies had put forward higher requirements for theenvironmental protection level of the manufacturing industry, and carbon reduction became an important issue forthe sustainable development of manufacturing enterprises. With the spread of overseas pandemic outbreaks andthe sporadic and repeated local pandemic outbreaks, the prices of commodities, chemical raw materials, and basicenergies rose sharply, and the supply chain management and cost management capabilities of enterprises werefacing new challenges. The price of paper products in the downstream market was further consolidated along theN-shaped trend of“rising-falling-bottoming out”.According to the national strategy of“dual circulation”and the goal that by 2035 China per capita GDP will reach thelevel of moderately developed countries, as well as the experience of developed countries, the future paper marketdemand in China will still increase greatly, and the industry still has a large scope for development. In the contextof the accelerated restructuring of the international economic and political landscape, the only way to the pursuitof sustainable development is to insist on promoting the high-quality development of the industry in an all-roundway, regain the initiative, turn difficulties and challenges into opportunities, and further enhance the comprehensivecompetitiveness of China’s paper making industry. Urgent actions are needed to prevent global warming, resourcebarriers are yet to be broken, supply chain security is in urgent need, and people‘s yearning for a better life should besatisfied. At this particular moment, constant energy conservation and emission reduction, optimising raw materialstructure, securing supply chain security, and improving product and service quality will become the focus and newtrends in the sustainable development in the industry. Driven by the policy focusing on supply-side structural reform,low-end backward production capacity will be eliminated in an accelerated way and the industry structure is expectedto continue its optimisation, and the major enterprises will have a greater say in the market and the returns on high-quality industrial development in the long run.
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 generalkeynote of a green, low-carbon, recycling and sustainable development with scientific development as main theme.Centring on efficiency enhancement, the Company focuses on pulp production and papermaking as major operation.The Company will adhere to the strategic layout of pulp and paper integration, vigorously implement the innovation-driven development strategy, and accelerate the growth driver replacement. With transformation and upgrade guidedby green ecology, the Company will fully exploit its advantages in full industry chain. The Company will commit itselfto implementing the green development strategy. Leveraging technological advancement, advanced equipment andstrict management, it will properly carry out clean production, develop a circular economy, and build a resource-saving and environment-friendly enterprise benchmark, so that it can seek development while protecting theenvironment, and improve the level of environmental protection in scientific development, achieving both economicand environmental benefits. Adhering to the strategy of strengthening the enterprise with talents, the Company willimprove the talent training, introduction, use and incentive mechanism, and actively cultivate high-end, compound,innovative and international talent teams, so as to promote the Company’s high-quality development, consolidateits position as a leading Chinese papermaking enterprise, and develop Chenming as a RMB100 billion enterprisewith sustainable operation for a century, striving to become the most globally competitive world-class papermakingenterprise(iii) Operation plans for 2022In 2022, the Company will continue to adhere to the general keynote of seeking progress while maintaining stability,resolutely and thoroughly implement the new management concept of“people-orientation, refined management,problem-orientation, and practical work”, thus generally demonstrating the spirit of responsibility and accountability,and make every effort with greater determination and practical measures to accelerate the implementation of supplychain management, production management, sales management, financial management and corporate management,so as to comprehensively improve the level of corporate management and operating quality, effectively strengthenteam building, enhance comprehensive management capabilities, solidify basic management, apply a firmer gripon systematic and procedural early warning, and focus on efficiency-oriented management, thereby ensuringcontinuous and stable growth of corporate economic benefits and creating a new landscape of high-quality corporatedevelopment.
1. Adhere to market-oriented operation with higher prices and greater benefits
In 2022, the Company will continuously adopt a market-oriented approach and remain strict adherence tohigher prices and greater benefits. It will strengthen the adjustment to the product structure, and formulatesmeasures to boost the sales volume of high margin products, thus ensuring rapid increase in sales volume andachieving steady delivery. The Company will leverage the advantages of its self-produced pulp to facilitate thedevelopment of its household paper business, so as to realise higher sales volume and efficiency of finishedpaper. It will put more effort in the development of new products overseas, especially high-weight coated paper,coated linerboard, special paper for masks, beige micro-coated paper and other new varieties.
2. Strengthen financial management and optimise financial indicators
Faced with complicated economic situation, the Company will further strengthen the credit management,reasonably plan the short, medium and long term financing and expand the equipment financing channels andrevitalise fixed assets. The Company will proactively introduce strategic investors and promote refinancing andother equity financing projects in due course, continuously reduce the size of its financial leasing business, andreduce the Company’s gearing ratio. The Company will conduct strict fund management, balance revenue andexpenditure, and ensure fund security; make reasonable tax planning and implement preferential tax policies;reduce the scale of liabilities, replace high-cost financing, and lower financial expenses.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)(iii) Operation plans for 2022(Continued)
3. Enhance production management and achieve quality and efficiency improvement
Refined management will be implemented in production systems to generally demonstrate the spirit ofresponsibility and accountability and enable the production management to make greater progress. Theupgrade and transformation of paper making machines of Zhanjiang Chenming, pulp production lines ofHuanggang Chenming and paper making machines of Shouguang headquarters will be implemented to increasethe pulp and paper production capacity, thus providing a new source of growth in benefits. The Companywill step up research and development efforts to develop new products with high added value on a market-oriented basis, and optimise its product structure and the slurry rate to save production costs. It will strengthenequipment management to realise spare parts managed by SAP, thus reducing the funds appropriated by sparepart inventory. The Company will push waste heat power generation powered by chemical pulp in Shouguang,Zhanjiang and Huanggang, and the photovoltaic power generation project of Shouggang Chenming forward.The steam out of mechanical pulp production lines will be recycled for use to increase benefits. The Companywill pay close attention to the safety and environmental protection work, implement the construction of a dualsafety management system of safety risk control and hidden danger inspection under the background of the“dual carbon”and“dual control”policies, and strengthen the management on waste water, exhaust gas andsolid waste to ensure compliance with stable emission standards, strengthen the management and control ofclean water use, increase the amount of white water reuse, stably operate the membrane treatment system, andachieve energy saving and consumption reduction.
4. Optimise supply chain management and reduce procurement costs
The Company will continue to focus on efficiency, pay close attention to market changes, make full use ofmarket conditions to seize the timing of procurement and ensure procurement efficiency. At the same time,it will refine supplier classification management and evaluation to improve cooperation levels. It will realisemechanical control at management points such as inventory funds, contract execution, over-consumptionof chemicals, committed life, provisional valuation and coal acceptance and settlement, improve mechanicalcontrol efficiency and strictly control capital occupation. The Company will strengthen futures market research,actively utilise futures tools to optimise raw material pricing, prevent price risks, and achieve futures pricingbenefits. It will continue to improve the construction of information systems, build information platforms, andrealise resource sharing.
5. Strengthen the internal management and improve the management level
In 2022, the Company will continue to strengthen the system construction and supervision, timely revise andimprove the system process according to the problems arising from the production and operation process.The Company will enhance performance appraisal and timely optimise and improve the appraisal plan in lightof the working priority in various stages. The Company will strengthen the function demonstration of verticalmanagement personnel, improve management efficiency, conduct monthly evaluation, reward and punishmentaccording to the completion of corporate management work of subsidiaries, and organise job rotation accordingto the work situation, so as to achieve multiple capabilities in one post.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)(iv) Future capital requirements and source of fundsFuture capital requirements of the Company will mainly focus on: the continuous investment in existing productionfacilities due to technology upgrade or production expansion; and capital requirement for business expansion anddaily operation. The phase II whole industry chain project of Huanggang Chenming planned and constructed bythe Company will be partly funded by self-owned funds of the Company, as well as government guide funds, policysupport funds and syndicated loans.While focusing on the development of its main business of pulp and paper making and improving its operatingperformance, the Company will expand its financing channels and optimise financing structure through well plannedlong and short-term bond issue, introduction of third-party strategic investors, refinancing and other means, thusproviding stable financial support for the operation and development of the Company.
(v) Risk factors likely to be faced and measures to be taken
1. Macroeconomic and policy risk
Paper making industry is a basic raw materials industry, thus is being supported by national industry policies.Over the years, relevant competent departments issued a series of relevant policies and regulations, includingthe Policy on the Development of Papermaking Industry, aiming to improve industry structure, enhance producttechnology standard, energy saving and emission reduction, as well as eliminate outdated production capacity.With the continuous economic development, the policies on the papermaking industry may further adjust inthe future. In addition, the fiscal and financial policies, bank interest rate, import and export policy and otherpolicies may be adjusted in the future. All the above industrial policies and related policy adjustments will havean impact on the Company’s operation and development.Focusing on its principal operation on pulp production and papermaking, the Company will strive to itsinnovation-driven strategy. Centring on improving quality and efficiency, the Company will comprehensivelyoptimise industrial structure and regional layout, establish coordinated, efficient industry system, and respondto challenges arose by leveraging on its cost advantages, thus realising steady growth in operating results. Atthe same time, the Company will strengthen the financial information system construction, regulate financialmanagement, expand financing channels, lower capital cost and strengthen its macroeconomic and policy riskaversion capability.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)(v) Risk factors likely to be faced and measures to be taken(Continued)
2. Environmental protection risk
In recent years, policies such as the Announcement on Adjusting the Catalogue of Prohibited Commoditiesin Processing Trade, The 14th Five-Year (2021-2025) Plan for National Economic and Social Development ofthe People’s Republic of China and the Outline of Long-term Goals for 2035, the Opinions on Accelerating theHigh-Quality Development of the Manufacturing Services Industry and the Guiding Opinions on Acceleratingthe Establishment and Improvement of a Green, Low-Carbon and Cyclical Economic System have been issuedone after another, with increasingly stringent environmental protection requirements. Such higher nationalenvironmental protection standards will further increase the investment in pollution control by enterprises in theindustry and increase the operating costs of the Company in the short term.The Company always adheres to the development idea of“placing green development and environmentalprotection as its priority”and conducts clean production. The Company widely adopts new technologies forenergy saving and emission reduction and strives to achieve its waste emission target. At present, the Companyadopts the world’s most advanced“ultrafiltration membrane+reverse osmosis membrane”technology tocomplete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reachesmore than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water of170,000 cubic metres every day. At the same time, the Company actively explores the comprehensive utilisationof innovative resources and industrial recycling development models, and built three major circular economyecological chains of“resources-products-renewable resources”.
3. Risk of price fluctuation of raw materials
Wood pulp and wood clips are the major raw materials of the industry. If the prices of wood pulp and woodchips fluctuate sharply in the future, they will bring upward pressure on the production costs of enterprises,which will have a certain impact on the normal production and operation of enterprises in the industry.The Company strives to implement the development strategy of pulp and paper integration. At present,its production capacity of wood pulp has reached 4.3 million tonnes, and it has cultivated a strong self-sufficiency of wood pulp. At the same time, it has established a more comprehensive supply chain managementmechanism, practiced source procurement, carried out long-term cooperation, closely followed the price trendsof the raw materials market, and strived to improve its forecasting ability, in order to minimise the impact offluctuations in raw material prices on the Company.
IV Management Discussion and Analysis
XI. Outlook on the future development of the Company(Continued)
(v) Risk factors likely to be faced and measures to be taken(Continued)
4. Risk of intensifying market competition
As a strategic and fundamental industry closely related to the national economy, the papermaking industryhas made significant progress along with the steady development of the Chinese economy. Although thepapermaking industry has accelerated the elimination of outdated production capacity after several roundsof environmental protection policies, the industry structure has been optimised. However, there remains thephenomena of a large number of enterprises, excess and scattered production capacity, a large number of mid– and low-end products, and product homogeneity. The market competition is fierce.The Company will focus on improving product quality and supporting services, improve process technology,strengthen research and development capabilities, and enhance scientific and technological added value. Beingmarket-oriented, it will produce products that meet market demand and enhance core competitiveness, with aview to ensuring a stable and sustainable improvement in its operating results.
5. Risk on financial leasing business
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rentalpayment on time due to any reason and there are abuses on equipment or any other short-term behaviour.Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provisionas required under its accounting policy. If such amounts cannot be recovered on time, the Company may beexposed to risk of bad debts.Chenming Leasing has comprehensive risk prevention and control measures for the financial leasing business,with strong risk resistance and low risk of default. At present, Chenming Leasing continues to implement thebusiness strategy of continuous reduction, with a reduction of the scale of the financial leasing business byRMB2.2 billion in 2021, which effectively put risk exposures under control.
2021 ANNUAL REPORT
IV Management Discussion and Analysis
XII. Reception of research investigations, communications and interviews during the reportingperiod
√ Applicable Not applicable
Date of receptionSite of receptionWay of receptionType of recipientRecipient
Major discussionpoints and informationprovided
Index of the basicparticulars of the survey31 March 2021Meeting room of
the Company andproduction plant
Field researchInstitutions,
individuals andmedia
Guotai Anbao Fund,Northeast Securities,Orient Securities,Dongxing Securities,minority shareholders,Securities Times, etc.
Company’s mainoperating conditions,business conditions,project progress, etc.
For details, pleaserefer to the InvestorRelations ActivityRecord Sheeton www.cninfo.com.cn31 March 2021Panorama ? Interactive
Platform for InvestorsRelationship
OthersIndividuals and
institutions
Investors participating
in the 2020 annualresults briefing of theCompany
Company and industry
overview, theCompany’s 2020operating results andfuture prospects,project progress, etc.
For details, please
refer to the InvestorRelations ActivityRecord Sheeton www.cninfo.com.cn19 April 2021Meeting room of the
Company
Conference callInstitutionsEssence Fund, Bosera
Fund, NortheastSecurities, ChinaAMC, etc.
Company’s mainoperating conditions,business conditions,industry outlook, etc.
For details, please
refer to the InvestorRelations ActivityRecord Sheeton www.cninfo.com.cn20 April 2021Meeting room of the
Company
Conference callInstitutionsZheshang Securities,
Wanjia Fund, HuataiInsurance, CPIC Fund,etc.
Company’s mainoperating conditions,business conditions,project progress,redemption ofPreference Shares,etc.
For details, please
refer to the InvestorRelations ActivityRecord Sheeton www.cninfo.com.cn16 November 2021Panorama ? Roadshow
platform
OthersIndividuals and
institutions
Investors who
participated inthe 2021 InvestorOnline CollectiveReception Day ofListed Companies inShandong
Corporate governance,
development strategy,operating status, etc.
Panorama ? Roadshow http://rs.p5w.net/
V Directors’ Report
The Directors (the“Directors”) of the Company hereby present the annual report and the audited consolidated financial statementsof the Company and the Group for the year ended 31 December 2021.I. Principal activitiesPlease refer to“II. Principal operations of the Company during the Reporting Period”and“IV. Analysis of principaloperations”under section IV“Management Discussion and Analysis” for details of principal activities of the Company.II. Results and profit distributionPlease refer to section XII“Financial Report” for the results of the Group for the year ended 31 December 2021.III. Dividends
Considering factors such as the current macroeconomic environment and the Company’s strategic planning, the Boardproposed not to pay cash dividend, issue bonus shares and increase share capital from reserves for 2021 to further reduceits 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 securing the sustainable andsteady development of the pulp production and paper making business, the principal business of the Company, and bettersafeguarding the long-term interests of all shareholders, subject to approval of shareholders at the forthcoming annualgeneral meeting of the Company held on 11 May 2022 (the“AGM”).
2021 ANNUAL REPORT
V Directors’ Report
IV. Closure of register of membersThe register of members of the Company will be closed from 5 May 2022 (Thursday) to 11 May 2022 (Wednesday) (bothdays inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend andvote at the annual general meeting to be held on 11 May 2022 (Wednesday), all share transfer documents accompaniedby 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 RoadEast, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 4 May 2022 (Wednesday).V. Five-year financial summaryPlease refer to“IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
under section II“Company Profile and Key Financial Indicators”for the financial summary of the Company for the past fivefinancial years.
VI. Donations
During the year, the Company donated RMB1,142,550.00 (2020: RMB8,922,077.88) to non-profit making organisations.VII. SubsidiariesPlease refer to“IX. Analysis of major subsidiaries and investees”under section IV“Management Discussion and Analysis”
and“XVII. Matters of significant of subsidiaries of the Company”under section VIII“Material Matters”for the details of
acquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to“II. Financial Statements 1. Consolidated Balance Sheet”under section XII“Financial Report”for the details
of changes in property, plant and equipment of the Group for the year ended 31 December 2021.
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 2021.
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 Companies Law. As at 31
December 2021, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB9,676,329,673.78 (2020: RMB10,465,721,088.71) as set out in“II. Financial
Statements 1. Consolidated Balance Sheet”under section XII“Financial Report”.
V Directors’ Report
XII. DirectorsAs at 31 December 2021, the Directors of the Company were:
1. Executive Directors
Mr. Chen HongguoMr. Hu ChangqingMr. Li XingchunMr. Li Feng
2. Non-executive Directors
Mr. Han TingdeMr. Li Chuanxuan
3. Independent Non-executive Directors
Ms. Yin MeiqunMr. Yang BiaoMr. Sun JianfeiAccording to the Articles of Association of the Company, all Directors, including non-executive Directors, have beenelected at the general meetings with a term of three years from June 2019 to June 2022. They may be re-elected foranother term upon expiry of tenure.XIII. Directors’ and Supervisors’ service contracts
All Directors and Supervisors have entered into service contracts with the Company for a term from 11 June 2019 to 11June 2022.None of the Directors and Supervisors who have offered themselves for re-election at the forthcoming AGM have enteredinto any service contract with the Company or any of its subsidiaries which cannot be terminated by the Group within oneyear without payment of compensation other than statutory compensation.
2021 ANNUAL REPORT
V Directors’ Report
XIV. Directors and Senior Management’s remuneration and the five highest paid individualsDetails of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/andits subsidiaries are set out in“V. Directors, Supervisors and Senior Management”in section VI“Corporate Governance”and“XII. Related parties and related party transactions”in section XII“Financial Report”.In 2021, the Company had 24 Senior Management members in total, which included Directors, Supervisors and the SeniorManagement. The remuneration of the Senior Management falls within the following ranges:
Range of remuneration (RMB)Number
4.8 million to 5.2 million2
4.0 million to 4.8 million
3.6 million to 4.0 million
3.2 million to 3.6 million1
2.8 million to 3.2 million2
2.4 million to 2.8 million
2.0 million to 2.4 million1
1.6 million to 2.0 million2
1.2 million to 1.6 million
0.8 million to 1.2 million3Below 0.8 million13
XV. Independent Non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for theyear pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors tobe independent during the year.
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives
As at 31 December 2021, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set outas follows:
Associated corporationsNamePosition
Number of shares (A shares)held as at the end of thereporting period (shares)DirectorsChen Hongguo (Note 1)Chairman31,080,044Hu ChangqingExecutive Director and Vice Chairman5,042,857Li XingchunExecutive Director and Vice Chairman5,000,000Li FengExecutive Director3,906,027Han TingdeNon-executive Director–Li ChuanxuanNon-executive Director–Sun JianfeiIndependent non-executive Director–Yin MeiqunIndependent non-executive Director–Yang BiaoIndependent non-executive Director–SupervisorsLi KangSupervisor149,300Pan AilingSupervisor–Zhang HongSupervisor–Sang AilingSupervisor–Qiu LanjuSupervisor–Associated corporations
NamePosition
Name of associatedcorporations
Number ofshares held atthe beginningof the reportingperiod (shares)
Change duringthe period (+/-)
Number ofshares held atthe end of thereporting period
(shares)Chen HongguoChairmanShouguang Henglian
Enterprise Investment Co.Ltd. (Note 2)
231,000,000–231,000,000Note 1: Save for the 31,080,044 A shares held personally, Chen Hongguo is deemed to be interested in the 3,861,322 A shares held by his spouse,
Li Xueqin.Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 76.79% equity interests in Shouguang Henglian Enterprise Investment Co.
Ltd., (hereinafter referred to as“Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo.
As a result, the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by
Shouguang Henglian is also deemed to be held by Chen Hongguo.
2021 ANNUAL REPORT
V Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives(Continued)
Save as disclosed above, as at 31 December 2021, none of the Directors, Supervisors or chief executives of the Companyhad any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associatedcorporations which were required to be filed in the register of the Company required to be maintained pursuant to section352 of the SFO or which were required to be notified to the Company and Hong Kong Stock Exchange pursuant to theModel Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governingthe Listing of Securities on Hong Kong Stock Exchange (hereinafter referred to as the“Hong Kong Listing Rules”).As at 31 December 2021, none of the Directors, Supervisors or chief executives or their respective spouses or childrenunder the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or itsassociated corporations.XVII. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2021, the following shareholders (other than the Directors, Supervisors or chief executives of theCompany) had interests or short positions in the Company’s shares and underlying shares as shown in the share registermaintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Name
Number of shares
held (shares)
Approximate shareholding as
a percentage ofTotal sharecapital (%)
Class ofshares (%)Chenming Holdings Co., Ltd.457,322,919 A shares (L)15.3226.14Chenming Holdings (Hong Kong) Limited210,717,563 B shares (L)7.0629.83Chenming Holdings (Hong Kong) Limited153,414,000 H shares (L)5.1429.04(L) – Long position (S) – Short position (P) – Lending poolSave as disclosed above, as at 31 December 2021, no other person had interests or short positions in the Company’sshares or underlying shares as recorded in the register maintained under section 336 of the SFO.
XVIII. Relationship with employees, customers and suppliers
Please refer to“IX. Personnel of the Company”under section VI“Corporate Governance”, and“
2. (8) Sales to major
customers and major suppliers”of“IV. Analysis of principal operations”under section IV“Management Discussion andAnalysis” for details of the relationship between the Company and its employees, customers and suppliers.
XIX. Directors’ interests in material contracts and indemnity provisionNone of the Company or any of its subsidiaries entered into any material contracts, in which Directors or Supervisors hadsignificant interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during thereporting period. The Company did not have any indemnity provision in favour of any Director and Supervisor.
V Directors’ Report
XX. Interests in competing businessNone of the Directors or controlling shareholders of the Company was interested in any business which competes or islikely to compete with the businesses of the Company and any of its subsidiaries.
XXI. Directors’ rights to purchase shares or debenturesAs considered and approved at the 2020 second extraordinary general meeting, the 2020 first class meeting for holdersof domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company held on15 May 2020, the Company implemented the 2020 restricted A share incentive scheme. As considered and approved atthe tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session ofthe Supervisory Committee of the Company held on 29 May 2020, an aggregate of 79.6 million restricted A shares weregranted to 111 participants. In particular, Mr. Chen Hongguo, Mr. Hu Changqing, Mr. Li Xingchun and Mr. Li Feng, all beingDirectors, were granted 20 million shares, 5 million shares, 5 million shares and 3 million shares, respectively.Save for the above, neither was the Company nor any of its subsidiaries a party to any arrangements to enable any Directorto acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.XXII. Preference sharesPlease refer to section X“Preference Shares” for details of the issue of Preference Shares of the Company.XXIII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of theCompany were entered into or existed in 2021.XXIV. 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 developmentof the Company”under section IV“Management Discussion and Analysis” for details of major risk factors of the Company.
XXV. Material matters
Please refer to section VIII“Material Matters” for details of material matters of the Company.
XXVI. Future development
Please refer to“(I) Overview and trends of the industry”,“(II) Development strategy of the Company”,“(III) Operating planfor 2022”and“(IV) Future capital requirements and source of funds”of“XI. Outlook on the future development of theCompany”under section IV“Management Discussion and Analysis” for details of future development of the Company.
XXVII. Environment, social and governance report and social responsibility
Please refer to section VII“Environment and social responsibility”for details of fulfilment of social responsibility. Pleaserefer to the environment, social and governance report as required by the Hong Kong Listing Rules, which will be issuedseparately by the Company before 31 May 2022.
2021 ANNUAL REPORT
V Directors’ Report
XXVIII. Purchase, sale and redemption of shares
During the reporting period, the Company redeemed 45 million Preference Shares. Please refer to relevant content ofsection X“Preference Shares”.Save for the above, the Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Companyduring the reporting period.XXIX. Sufficiency of public floatDuring the reporting period, based on the information that is publicly available to the Company and within the knowledge ofthe Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong KongListing Rules.
XXX. Review of the Audit CommitteeThe audited consolidated financial statements of the Company for the year ended 31 December 2021 has been reviewed bythe Audit Committee of the Company.XXXI. Gearing ratioAs at 31 December 2021, the Company’s gearing ratio (including minority interest) was 61.57%, representing an increase of
0.70 percentage point from 60.87% for 2020.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within oneyear, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXII.Going Concern BasisEstablished in 1958, the Company is a leading paper making enterprise in China and one of the top 500 Chineseenterprises. It is also a modern large-scale comprehensive conglomerate mainly engaged in pulp production and papermaking. It has six production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and others, which deliver annual pulpand paper production capacity of over 11,000,000 tonnes. As a large integrated pulp and paper enterprise in China thatachieves a complete balance of pulp production and paper making, the Company have maintained a leading positionamong its industry peers for over 20 consecutive years in terms of its main indicators of corporate economic efficiency.The Company has good sustainable profitability. In 2021, the Company realised revenue of RMB33,020 million, net profit ofRMB2,090 million and net cash inflows from operating activities of RMB39,306 million.In compiling the accounts for the year ended 31 December 2021, the Directors have chosen and thoroughly applied theappropriate accounting policies with due and reasonable judgement and estimates having been made, and prepared theaccounts on a going concern basis. The auditor of the Company has prepared the 2021 annual financial report on a goingconcern basis, and has issued a standard unqualified audit opinion (see Financial Report section).Therefore, the Board believes the Company has the ability to continue as a going concern.
XXXIII. Connected Transactions
As of the years ended 31 December 2021, the Group did not enter into any connected transaction required under the ListingRules of the Stock Exchange.
V Directors’ Report
XXXIV. Major Investment, Acquisition and DisposalDuring the year ended 31 December 2021, the Group entered into the following major transaction agreements.
1. Entering into capital contribution agreement for introducing investors to contribute capital to
Shouguang MeilunOn 25 June 2021, the Company, Weifang Chenrong New and Old Kinetic Energy Conversion Equity Investment FundPartnership (Limited Partnership), Dongxing Securities Investment Co., Ltd., Weifang Chenchuang Equity InvestmentFund Partnership (Limited Partnership, CCB Financial Asset Investment Co., Ltd., SWSC Innovation Investment Co.,Ltd. and Shouguang Meilun entered into the Capital Contribution Agreement., pursuant to which CCB Investmentand SWSC Innovation Investment Co., Ltd. agreed to contribute capital to Shouguang Meilun in accordance with theterms and conditions of the Capital Contribution Agreement in aggregate amount of RMB1,600,000,000. Please referto the announcement of the Company dated 25 June 2021.
2021 ANNUAL REPORT
VI Corporate Governance
I. Corporate governance in practiceTaking the actual situation of the Company into account, the Company continuously improved its legal person governancestructure, strengthened its internal control system, proactively organised Directors, Supervisors and the Senior Managementof the Company to attend the special training sessions of the regulatory departments to enhance their competence, andcontinuously strengthened its information disclosure in strict compliance with the requirement of Companies Law (),Securities Law (), Code of Corporate Governance for Listed Companies (), Rules GoverningListing of Stocks on Shenzhen Stock Exchange (), the Listing Rules of Hong Kong StockExchange and the related requirements as required by CSRC, thereby further enhancing the standardised operation level ofthe CompanyAs of the end of the reporting period, the actual practice of corporate governance complied with the requirements of theregulatory documents issued by the CSRC regarding the governance of listed companies.(I) Shareholders and general meeting
The Company regulates the convening, holding and proceedings of shareholder meetings in strict compliance with therequirements of the Rules Governing Shareholders’General Meetings of Listed Companies, the Articles of Associationand the Company’s Rules of Procedure of the General Meeting of Shareholders, and both on-site voting and onlinevoting are provided as channels to participate in such meetings. Where material matters which affect the interests ofminority shareholders are considered, the votes by minority shareholders are counted separately to ensure that theminority shareholders enjoy equal status and all shareholders can exercise their rights in full. During the reportingperiod, the general meetings convened by the Company were witnessed by lawyers with issue of their legal opinionsto effectively safeguard the legitimate rights and interests of the listed company and all shareholders.
(II) Controlling shareholder and the listed companyDuring the reporting period, the Company remained independent of its controlling shareholder, beneficial controllersand related parties in terms of its business, assets, finance, personnel and organisations, and the Board, theSupervisory Committee and internal departments of the Company operated independently, which complied with therelevant provisions of the China Securities Regulatory Commission on the independence of listed companies. Thecontrolling shareholder and beneficial controllers strictly regulated their behaviour, and exercised their rights andperformed their obligations in accordance with the laws, and there was no appropriation of capital and assets of theCompany by the controlling shareholder, beneficial controllers and their related parties.(III) Directors and the Board
The Board of the Company has a total of 9 Directors, of which 3 are independent Directors. They are professionalswith professional knowledge in finance, law, management, etc., ensuring the quality and level of decision-makingby the Board. During the reporting period, the Board held a total of 11 meetings, and the convening and holdingof Board meetings were in strict compliance with the Articles of Association and the Rules of Procedure of BoardMeetings and other relevant provisions. Directors of the Company were able to diligently perform their duties. Theyattended meetings on time and reviewed each proposal earnestly, which had pivotal impact on decision in corporategovernance. Independent Directors performed their duties independently and expressed their independent opinionson material matters, which solidly safeguarded the interests of the Company and the investing public.The four special committees under the Board of the Company, namely the Strategic Committee, the Audit Committee,the Nomination Committee and the Remuneration and Assessment Committee, performed their duties normally andprovided scientific and professional opinions for the decision-making of the Board during the reporting period.
VI Corporate Governance
I. Corporate governance in practice(Continued)(IV) Supervisors and the Supervisory CommitteeThe supervisors of the Supervisory Committee of the Company has a total of 5 supervisors, including 3 shareholdersupervisors and 2 employee supervisors. During the reporting period, the Supervisory Committee of the Companyheld a total of 4 meetings. The Supervisory Committee strictly followed the requirement of relevant laws andregulations including the Companies Law, the Articles of Associations and the Rules of Procedure of the SupervisoryCommittee in fulfilling its duties. In the spirit of being accountable to the shareholders and the Company, theSupervisory Committee independently and effectively exercised its supervision and inspection functions to supervisethe Company’s operation and management, decision-making procedures, financial position and the duty of careand diligence of the Company‘s Directors and Senior Management, so as to safeguard the legitimate interests of theCompany and the shareholders.
(V) Information disclosure and transparency
The Company earnestly fulfils its information disclosure obligation, and makes true, accurate, timely, complete andfair disclosure in respect of the Company’s information without false information, misleading statement or materialomission in accordance with the requirements of the Articles of Association, Rules Governing the Listing of Stockson Shenzhen Stock Exchange, the Listing Rules of Hong Kong Stock Exchange and relevant laws and regulationsof the CSRC. During the reporting period, the Company issued a total of more than 150 periodic reports, interimannouncements, and related documents through the designated information disclosure media, and a total of morethan 180 periodic reports, interim announcements, and related documents through the website of Hong Kong StockExchange, 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 Systemof Personnel with Insider Information”to strengthen the confidentiality of insider information and improve theregistration and management of personnel with insider information. The Directors, Supervisors, Senior Managementand other related personnel of the Company were able to strictly observe their confidentiality obligations throughoutthe preparation of periodic reports, temporary announcements and the planning of major events. There was no casewhere insiders use inside information to buy and sell company shares before the disclosure of material and sensitiveinformation that affects the stock price of the Company, and there is no case where they are investigated by theregulatory authorities.
(VII) Relevant stakeholders
During the reporting period, the Company always insisted on honest operation and was able to fully respect andsafeguard the legitimate rights and interests of stakeholders such as bankers and other creditors, employees,suppliers and consumers, strengthened communication and exchange with all parties, and actively cooperate tojointly promote the sustainable, stable and healthy development of the Company.Any material non-compliance of the laws, administrative regulations and the regulatory documents on the governanceof listed companies issued by the CSRC in respect of actual governance of the Company Yes √ NoThere was no material non-compliance of the laws, administrative regulations and the regulatory documents on thegovernance of listed companies issued by the CSRC in respect of the actual governance of the Company.
2021 ANNUAL REPORT
VI Corporate Governance
II. Particulars about the independence in terms of assets, personnel, finance, organisations,and business from the controlling shareholder and beneficial controllersThe Company was completely separated from the controlling shareholder in terms of business, personnel, assets,organisations and finance. The Company had a comprehensive internal structure, independent and complete businesses aswell as the capability of self-operation.
1. In terms of business: the Company had its own R&D, production, procurement and sales system, and was completely
independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiarieswere not competitors of the Company in the same industry.
2. In terms of personnel: the Company had an independent workforce, and had established independent departments
including the research and development department, production department, administration department, financedepartment, procurement department and sales department. The Company had also established a comprehensivemanagement system with respect to labour, personnel and salary. Personnel of the Company were independent ofthe controlling shareholder. The Company’s Chairman was elected at the general meeting, while the general manager,deputy general manager, secretary to the Board, chief financial officer and other Senior Management members allworked at and received remuneration from the Company. They did not receive remuneration from related companiesof the controlling shareholder, nor did they serve at any position therein other than a director or supervisor. Theappointment of the Company’s Directors, Supervisors and Senior Management was conducted through legalprocedures and in strict compliance with the relevant requirements of Companies Law and the Articles of Association.None of the controlling shareholders interfered with the Company’s Board, or the appointment and dismissaldecisions at general meetings.
3. In terms of assets: the title relationship between the Company and the controlling shareholder was clear, and the
Company’s funds, assets and other resources were not illegally occupied or dominated by the controlling shareholder.The Company’s assets were complete, and possessed production equipment, auxiliary production equipment,patents and other assets that were in line with its production and operation scope. The Company had completecontrol and dominance over all assets.
4. In terms of organisations: the Board, Supervisory Committee, management and other internal organisations of the
Company operated independently. Each functional department was completely separated from the controllingshareholder in terms of authority, personnel, etc. There was no subordinate relationship between the controllingshareholder and its functional departments, and the Company and its functional departments. The Company’sindependence in terms of its production, operation and management was not affected by the controlling shareholder.
5. In terms of finance: the Company had its own finance department, accounting and auditing system and financial
management system, and was able to make independent financial decisions, with a standardised financial accountingsystem and financial management system for subsidiaries. None of the controlling shareholders interfered with theCompany’s finance and accounting activities. The Company had a separate account in a commercial bank and therewas no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled itstax obligations independently in accordance with the law.
III. Competition in the industry
Applicable √ Not applicable
VI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reportingperiod
1. General meetings during the reporting period
MeetingType of meeting
Attendance rateof investorsConvening dateDisclosure dateMeeting Resolution2021 first extraordinary
general meeting
Extraordinary general
meeting
24.42%9 March 202110 March 2021 http://www.cninfo.com.cn
(announcement no.:
2021-018)2021 first class meetingfor holders ofdomestic-listed shares
Class meeting25.11%9 March 202110 March 20212021 first class meeting
for holders ofoverseas-listed shares
Class meeting21.43%9 March 202110 March 20212020 annual generalmeeting
Annual generalmeeting
23.09%18 June 202119 June 2021 http://www.cninfo.com.cn
(announcement no.:
2021-044)2021 second
extraordinary generalmeeting
Extraordinary generalmeeting
20.45%13 December
2021
14 December2021
http://www.cninfo.com.cn
(announcement no.:
2021-099)
2. Extraordinary general meeting requested by holders of the Preference Shares with voting right
restored Applicable √ Not applicable
2021 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management
1. General information
NamePosition
Status ofOfficeGenderAge
Date ofthe beginningof the term
Date of theend of the term
Shareholding
at thebeginning of
the period
(shares)Share Option
Restrictedshares tobe granted
(shares)
Increase inthe number
of sharesheld duringthe period(shares)
Decrease inthe numberof sharesheld duringthe period(shares)Other changes(shares)Shareholdingat the end ofthe period(shares)Reason forchangesChen HongguoChairmanIn officeM576 September 200111 June 202231,080,0440000031,080,044N/AHu ChangqingVice ChairmanIn officeM5623 June 201811 June 20225,042,857000005,042,857N/ALi XingchunVice ChairmanIn officeM5611 June 201911 June 20225,000,000000005,000,000N/ALi FengDirectorIn officeM4819 June 202011 June 20223,906,027000003,906,027N/A
Generalmanager
Dismissed9 November 20198 August 202100000N/AHan TingdeDirectorIn officeM5311 June 201911 June 20220000000N/ALi ChuanxuanDirectorIn officeM4411 June 201911 June 20220000000N/ASun JianfeiIndependent
Director
In officeM4911 June 201911 June 20220000000N/AYin MeiqunIndependent
Director
In officeF5111 June 201911 June 20220000000N/AYang BiaoIndependent
Director
In officeM4211 June 201911 June 20220000000N/ALi KangSupervisorIn officeF4027 July 202011 June 2022149,30000000149,300N/APan AilingSupervisorIn officeF5711 June 201911 June 20220000000N/AZhang HongSupervisorIn officeF5711 June 201911 June 20220000000N/AQiu LanjuSupervisorIn officeF4811 June 201911 June 20220000000N/ASang AilingSupervisorIn officeF4319 April 202111 June 20220000000N/AChen GangGeneral
manager
In officeM498 August 202111 June 20221,139,700000001,139,700N/ALi XueqinDeputy general
manager
In officeF5618 March 200311 June 20223,861,322000003,861,322N/ALi WeixianDeputy general
manager
In officeM406 November 201911 June 20222,240,200000002,240,200N/ALi ZhenzhongDeputy general
manager
In officeM4820 March 201111 June 20222,113,000000002,113,000N/ADong LianmingFinancial
controller
In officeM4712 October 201811 June 20221,069,600000001,069,600N/AYuan XikunSecretary to the
Board
In officeM3616 May 201811 June 2022344,70000000344,700N/AChu Hon LeungHong Kong
company
secretary
In officeM3911 June 201911 June 20220000000N/ALi XingguiSupervisorResignedM5711 June 201919 April 20210000000N/AZhao XuegangDeputy general
manager
DismissedM4911 June 201925 March 20210000000N/AGeng GuanglinDeputy general
manager
DismissedM4811 June 20199 July 20212,716,950000002,716,950N/ATotal58,663,7000000058,663,700During the reporting period, did any directors and supervisors resign and was any members of the SeniorManagement dismissed during their term of office
√ Yes No
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
1. General information
(Continued)During the reporting period, Mr. Li Xinggui, the staff representative Supervisor of the Company, resigned from theposition of staff supervisor due to work adjustment, and continued to serve in the Company after his resignation. Mr.Li Feng, a Director and the general manager of the Company, resigned from the position of the general manager dueto the expiry of the term of rotation, and continued to serve as a Director of the Company after his resignation. Mr.Zhao Xuegang and Mr. Geng Guanglin, deputy general managers of the Company, resigned from their position asdeputy general managers of the Company due to personal reasons, and no longer held any position in the Companyafter their resignation.Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable Not applicable
NamePositionTypeDateReasonLi XingguiSupervisorResigned19 April 2021Resignation from the office of Supervisor of the
Company due to work adjustment.Li FengGeneral
manager
Dismissed8 August 2021Expiry of the term of rotation.Zhao XuegangDeputy general
manager
Dismissed25 March 2021Resignation from the position of deputy general
manager of the Company for personal reasons.Geng GuanglinDeputy general
manager
Dismissed9 July 2021Resignation from the position of deputy general
manager of the Company for personal reasons.Sang AilingSupervisorElected19 April 2021Elected as a Supervisor of the ninth session of
the Supervisory Committee of the Company at
the twelfth meeting of the ninth session of the
staff representative meeting.Chen GangGeneral
manager
Engaged8 August 2021Elected as the general manager of the Company
at the twenty-first extraordinary meeting of the
ninth session of the Board.
2021 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisorsand the Senior Management
1. Brief biographies of Directors
(1) Brief biographies of executive Directors
Mr. Chen Hongguo is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He isa senior economist and holds the titles including Nationwide Light Industry Top Ten Youth Experts (
), Labour Medal on Enriching Shandong Province (), Excellent Entrepreneur of Shandong Province (), Nationwide May 1st LaborMedal (), Nationwide Excellent Entrepreneur () and USA RISICEO of the Year (“CEO”). He is vice chairman of the China National Light IndustryCouncil. He joined the Company in 1987 and had held positions including chief officer of manufacturingsection, chief officer of branch factory, deputy general manager, Director of the Company and thechairman of Wuhan Chenming. He is currently the chairman and general manager of Chenming Holdings,the chairman of the Company and a Party Committee Secretary. Mr. Chen Hongguo is the spouse of Ms.Li Xueqin, a deputy general manager of the Company.Mr. Hu Changqing is a member of the Communist Party of the PRC. He holds a bachelor’s degree. Hejoined the Company in 1988. He had held various positions in the Company such as the chief of thetechnological reform department, the chief officer of branch factory, the deputy general manager and theDirector. 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 NanjingUniversity and is a visiting professor of Shanghai Finance University. He has successively worked inCtrip.com, Fuyou Securities Co., Ltd. () and Western Development Holdings Co.,Ltd., accumulating more than 30 years of experience in industry, securities, trust and other fields. He iscurrently the chairman of Leadbank Technology Ltd., director of Western Leadbank Fund ManagementCo., Ltd., independent director of Huadian International Power Co., Ltd., executive director and vicechairman of Shanghai branch of China Mergers and Acquisitions Association, chairman of Kunpeng AssetManagement Co., Ltd., vice chairman of its Shanghai branch, and 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 theCompany in 1992 and had held different positions including the chief officer of manufacturing section andassistant to the general manager of the Company, chairman, marketing director, deputy general managerand general manager of Wuhan Chenming. He is currently a director of Chenming Holdings and anexecutive Director and the chairman of the financial division of the Company. Mr. Li Feng is the youngerbrother of Ms. Li Xueqin, a deputy general manager of the Company.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
1. Brief biographies of Directors
(Continued)
(2) Brief biographies of non-executive Directors
Mr. Han Tingde graduated with a bachelor’s degree. He was the deputy general manager and the generalmanager of operational department of Jinan, Liaocheng and Linyi offices of Shandong Securities Co.,Ltd., the deputy general manager and the general manager of operational department of Zibo and Jinanoffices of Tiantong Securities Co., Ltd. in China, the general management of each of the customer servicedepartment, the brokerage headquarters and the legal affairs department, as well as a deputy generalmanager of the retail headquarters of Zhongtai Securities Co., Ltd., etc. He is currently the manager of thebond business department of Hengtai Changcai Securities Co., Ltd. and a non-executive Director of theCompany.Mr. Li Chuanxuan holds a doctorate in law. He is a professor at Fudan University, Shanghai. From 2008to 2012, he was a lecturer in the Law School of Fudan University. From 2012 to 2013, he was a visitingscholar of the Law School of Columbia University in the United States, focusing on the research ongreen finance laws and policies. He is currently the secretary general of the Association of ShanghaiEnvironmental Resources Law (), the director of the Association of ChinaEnvironmental Resources Law (), the director of the Association of ShanghaiEconomic Law (), as well as the evaluation expert of the National Judicial Verificationof Environmental Damages (). He has been selected into Shanghai Pujiang TalentProgram. He has been in charge of and undertook over 10 national and provincial scientific researchprojects. Moreover, he has participated in the drafting of several laws and regulations of differentlegislatures including the Standing Committee of the National People’s Congress, the Ministry of Ecologyand Environment and Shanghai National People’s Congress. He concurrently serves as a director ofJiangsu Guanlian New Material Technology Co., Ltd., and is currently a non-executive Director of thecompany.
(3) Brief biographies of independent non-executive Directors
Mr. Sun Jianfei holds a doctorate in finance. He was a lecturer at University of Nevada, Reno, andconcurrently served as the consultant of hedge funds such as Eagle Peak Fund LP. From August 2010 toFebruary 2017, he was an assistant professor at Antai College of Economics & Management, ShanghaiJiao Tong University. He was selected in the National Academic Leadership Talent Programme inAccounting (Standby List) (()) organised by the Ministry of Finance, aswell as the Shanghai Pujiang Talent Programme (). From February 2017 to August2020, he was a professor at the Institute for Social and Economic Research of Nanjing Audit University,and a part-time professor at Antai College of Economics & Management and Advanced Institute ofFinance, Shanghai Jiao Tong University. He is currently an Associate professor of Shanghai AdvancedInstitute of Finance of Shanghai Jiao Tong University, supervisor of Boyang (Shanghai) Energy TechnologyCo., Ltd., supervisor of Shanghai Xuyang New Energy Technology Co., Ltd., supervisor of ShanghaiTingwei Business Consultation Co., Ltd., independent director of Zhejiang Yueling Co., Ltd., independentdirector of Nanya New Material Technology Co., Ltd., independent director of Suzhou Tianwo TechnologyCo., Ltd., independent director of Cubic Digital Technology Co., Ltd. and an independent Director of theCompany.
2021 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
1. Brief biographies of Directors
(Continued)
(3) Brief biographies of independent non-executive Directors
(Continued)Mr. Yang Biao holds a doctorate in law, and is currently a professor and doctoral tutor in the Schoolof Law of Sun Yat-sen University. He is, among others, one of the“Guangzhou Top Ten Young andMiddle-aged Jurists”, an outstanding young talent in the“Guangdong Special Support Program”,a selected member in the“Double Thousand Plan ()”of the Ministry of Education and theCentral 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 ProsecutionProfessional Committee of the Procuratorial Research Association of the China Law Society, a memberof the Expert Advisory Committee to Guangdong People’s Procuratorate, a supervisory member andjudicial advisory expert of the Standing Committee of Guangzhou People’s Congress, an expert certifiedin Major Administrative Decision-Making and Argumentation in Guangzhou and a member of the ExpertCommittee of the Department of Emergency Management of Guangdong Province. He has servedin Guangdong High People’s Court and People’s Court of Guangzhou Huangpu District. He has alsoserved as independent director of Guangdong Guangzhou Daily Media Co., Ltd., independent directorof Guangdong Tianhe Agricultural Resources Co., Ltd., independent director of Guangdong Yuehai FeedGroup Co., Ltd., independent director of Qiaoyi Logistics Co., Ltd., an external director of Science City(Guangzhou) Investment Group Co., Ltd., a director of Guangzhou Sun Yat-sen University Science ParkCo., Ltd., a director of Guangzhou Zhongda Nansha Technology Innovation Industrial Park Co., Ltd., adirector of Guangzhou Zhongda Intellectual Property Service Co., Ltd., a supervisor of Dongguan RuralCommercial Bank Co., Ltd., a supervisor of Guangzhou Chuanwen Education Consulting Co., Ltd.,. He iscurrently an independent Director of the Company.Ms. Yin Meiqun is a university professor, an advisor to doctoral students, and a certified public accountantin China. She holds a doctorate in accounting degree. She paid academic visits to Sweden, Finland,Denmark and the Iowa State University in the United States. From July 1993 to June 2007, she was aprofessor in the department of accounting at Harbin University of Science and Technology. From July2007 to August 2021, she was a professor of Beijing International Studies University. She is currently aprofessor of China University of Political Science and Law, a representative of the 15th Beijing MunicipalPeople’s Congress, a member of the Accounting Education Committee of the Accounting Society ofChina, a council member of the Accounting Society of China, a member of the IMA China ManagementAccounting Expert Committee, an independent director of Beijing Life Insurance Co., Ltd, and anindependent director of China Best Group Holding Limited. She is currently an independent Director ofthe Company.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
2. Brief biographies of Supervisors
Ms. Li Kang is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She joined theCompany in 2001. She has successively served as the section chief, deputy minister, minister, assistant tothe general manager of the management section of purchasing department, and deputy financial controllerof the Company. She is currently the assistant to the general manager of the Company, responsible for themanagement of the audit department.Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She iscurrently a level-2 professor of the School of Management, an advisor to doctoral students, and the chief ofthe Investment and Financing Research Centre () in Shandong University and a non-practisingmember of CICPA (Chinese Institute of Certified Public Accountants). She is also the vice chairperson of theAccounting Institute, Shandong Province (), a council member of Shandong ComparativeManagement Association, a visiting scholar at University of Connecticut in the United States and a state-levelcandidate for the New Century Ten Million Talents Project (“”). She is a specialist entitledto the State Council Special Allowance (), and a special expert of the Taishan Scholar. Sheis the chief expert of the Major Tender Projects of National Social and Science Fund (
). She has finished various research projects at national and provincial level. She is also an independentdirector of Shandong Xinhua Medical Equipment Co., Ltd., independent director of Lutai Textile Co., Ltd.,independent director of Shandong Denghai Seed Industry Co., Ltd., and independent director of ShandongSunway 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 doctoralstudents at Shandong University, head of a multinational corporation research institute, a non-practisingmember of the Chinese Institute of Certified Public Accountants, a director of China Association of InternationalTrade, a director of Shandong Province External Trade Association, an independent director of Shandong Hi-speed Road & Bridge Group Co., Ltd., an independent director of Shandong Zhangqiu Blower Co., Ltd., anindependent director of Vosges Group Co., Ltd., an independent director of China National Heavy Duty TruckGroup Jinan Truck Co., Ltd. and an independent director of Cisen Pharmaceutical Co., Ltd. She is currently aSupervisor of the Company.Ms. Qiu Lanju graduated with a diploma. She joined the Company in 1995 and served as the deputy chief ofthe price audit section of the Company’s inspection department, the chief of the implementation section of theprocurement department, the chief of the general management section of the procurement department, and thedirector of the procurement department. She is currently the assistant to the general manager 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 theCompany in 2000 and served as the chief of the personnel management section of the marketing department ofa sales company, the deputy director and director of the marketing department of a sales company, etc. She iscurrently an employee supervisor of the Company.
2021 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
Mr. Chen Gang is a member of the Communist Party of the PRC. He joined the Company in 1996 and servedas the director of the Company‘s branch factory, the general manager of Zhanjiang Chenming, the generalmanager of Jilin Chenming, the leader in charge of Jiangxi Chenming, the assistant to the Company‘sproduction director, the general manager of Huanggang Chenming, the Company‘s deputy production directorand an executive director and a deputy general manager of the Company. He is currently the general managerof the Company.Ms. Li Xueqin is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She wassuccessively awarded titles including“Model Worker in Shandong Province (), Model Workerin the Country () and Nationwide May 1st Labour Medal ()”and a deputy ofthe Tenth, Eleventh, Twelfth and Thirteenth National People’s Congress. She joined the Company in 1987 andhad held the positions of the chief of audit department and deputy general manager of the Company. She hasbeen a deputy general manager of the Company since March 2003. Ms. Li Xueqin is the spouse of Mr. ChenHongguo, chairman of the Company.Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as the deputymanager of a Shenzhen coated paper subsidiary of the Company, manager of Shandong Chenming Paper SalesCompany Limited, vice chairman of a household paper company, deputy marketing director and marketingdirector of a sales company, the general manager of the Group, and chairman of the financial division of agroup. He is currently a deputy general manager and marketing director of the Company.Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joinedthe Company in 1995 and had served as principal representative of the Shanghai management region of asales company, sales manager of light weight coated cultural paper products, general manager of the SalesCompany. 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’sdegree. He joined the Company in 1997 and had held positions as the chief of accounting and auditing sectionunder the financial department of the Company, the deputy chief and chief of the financial department, chiefaccountant of Jiangxi Chenming, chief accountant of Shandong Chenming Panels and financial controller anddeputy general manager of Zhanjiang Chenming. He is currently the financial controller of the Company.
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
(Continued)
Mr. Yuan Xikun is a member of the Communist Party of the PRC. He holds a bachelor’s degree in management.He joined the Company in 2010 and had held positions as the accountant for consolidated financial statementsin the financial department of the Company, manager of disclosure department, security affairs specialist andchief of the security investment section. He is currently the secretary to the Board of the Company.Mr. Chu Hon Leung is a lawyer. He obtained a bachelor’s degree in business from Macquarie University,Sydney, Australia, and a postgraduate diploma in law from The College of Law, London, England. He graduatedfrom the City University of Hong Kong and obtained a diploma in Hong Kong law. He had been a lawyer inlocal and international law firms in Hong Kong and served and an internal consultant for leading Chinese assetmanagement companies. He has been a practicing lawyer in Hong Kong since 2009 and currently works for Li &Partners.Employment at the shareholder of the Company
√ Applicable Not applicable
Name of employee
Name of shareholderof the Company
Position at theshareholder of theCompany
Date of thebeginning of theterm
Date of the end ofthe term
Whetherreceiving anyremunerationor allowancefrom theshareholder ofthe CompanyChen HongguoChenming Holdings
Company Limited
Chairman and general manger
22 September 201629 December 2023NoHu ChangqingChenming Holdings
Company Limited
Director22 September 201629 December 2023NoLi XueqinChenming Holdings
Company Limited
Director22 September 201629 December 2023NoLi FengChenming Holdings
Company Limited
Director13 August 202129 December 2023NoExplanation of the
employment at theshareholder of theCompany
Nil
2021 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
2. Employment
(Continued)
3. Brief biographies of Senior Management
(Continued)Employment at other units
√ Applicable Not applicable
Name ofemployeeName of other unitsPosition at other units
Date of thebeginning of the term
Date of theend of the term
Whether receivingany remuneration orallowance from theshareholder of theCompanyYang BiaoGuangdong Guangzhou Daily Media Co., Ltd.Independent director19 August 201919 August 2022YesYang BiaoGuangdong Tianhe Agricultural Means of
Production Co., Ltd.
Independent director17 May 201816 May 2024YesYang BiaoQiaoyi Logistics Co., Ltd.Independent director2 February 201830 March 2024YesYang BiaoDongguan Rural Commercial Bank Co., Ltd.External supervisor1 October 20191 October 2022YesSun JianfeiNanya New Material Technology Co., Ltd.Independent director1 August 20178 October 2023YesSun JianfeiSuzhou Thvow Technology Co., Ltd.Independent director8 May 20206 November 2022YesSun JianfeiCubic Digital Technology Co., Ltd.Independent director18 May 202118 May 2024YesSun JianfeiZhejiang Yueling Co., Ltd.Independent director1 November 2016Until a new independent
director is elected at ageneral meeting
YesYin MeiqunShangqiu Dingfeng Wood Co., Ltd.Independent director13 May 202112 May 2024YesYin MeiqunChina Best Group Holding LimitedIndependent director1 December 202130 November 2024YesLi XingchunHuadian International Power Co., Ltd.Independent director30 June 202029 June 2023YesPan AilingShinva Medical Instrument Co., Ltd.Independent director27 July 202027 July 2023YesPan AilingLu Thai Textile Co., Ltd.Independent director6 June 201610 June 2022YesPan AilingShandong Denghai Seed Industry Co., Ltd.,Independent director12 April 201912 April 2022YesPan AilingShandong Sunway Chemical Group Co., Ltd.Independent director15 May 202015 May 2023YesZhang HongShandong Zhangqiu Blower Co., Ltd.Independent director27 March 201926 March 2022YesZhang HongSunvim Group Co., Ltd.Independent director15 July 201927 May 2023YesZhang HongSinotruck Jinan Truck Co., Ltd.Independent director28 April 202028 April 2023YesZhang HongCisen Pharmaceutical Co., Ltd.Independent director28 November 20178 December 2023YesZhang HongShandong Hi-speed Road & Bridge Group Co., Ltd.Independent director23 April 201922 June 2023YesSanctions against current Directors, Supervisors and Senior Management of the Company and those whoresigned during the reporting period by securities regulatory authorities in the past three years Applicable √ Not applicable
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
3. Remuneration of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors,Supervisors and the Senior Management
(1) Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual
remuneration of each of the executive Directors and the Senior Management of the Company was in the band ofRMB0.20 million to 5.00 million and the specific amount for each of them was determined by the remunerationcommittee based on the main financial indicators and operation target completed by the Company, thescope of work and main responsibilities of the Directors and Senior Management of the Company, the targetcompletion of the Directors and Senior Management as assessed by the duty and performance appraisalsystem, as well as business innovation capability and profit generation ability of the Directors and the SeniorManagement. The annual remuneration of Supervisors assuming specific managerial duties in the Companywere determined by the general manager office of the Company based on specific managerial duties assumedby them. Fixed annual remuneration policy was adopted on external Supervisors who did not hold actualmanagement positions in the Company. As approved by the first extraordinary meeting of the ninth session ofthe Board and the 2019 first extraordinary general meeting, the Company paid each of the independent non-executive Directors and non-executive Directors of the Company allowance of RMB200,000 (before tax). Theremuneration of external Supervisors amounted to RMB100,000 (before tax). The travel expenses for attendingboard meetings, supervisory meetings and general meetings of the Company and fees reasonably incurred inthe 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 AssessmentCommittee Under The Board, any remuneration plan for the Company’s executive Directors proposed by theremuneration and assessment committee shall be agreed on by the Board and then submitted to the generalmeeting for consideration and approval prior to implementation. Any proposal of remuneration distributionplan for the Senior Management officers of the Company shall be submitted to the Board for approval. Theremuneration of independent non-executive Directors, non-executive Directors and external Supervisors of theCompany shall be agreed on by the Board and then submitted to the general meeting for consideration andapproval prior to implementation.
(3) The remuneration and assessment committee, which was set up by the Board according to the resolution of the
general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-independent Directors and Senior Management of the Company; formulate and examine the remuneration policyand scheme of the non-independent Directors and Senior Management of the Company, and accountable tothe Board.
2021 ANNUAL REPORT
VI Corporate Governance
V. Directors, Supervisors and Senior Management(Continued)
3. Remuneration of Directors, Supervisors and Senior Management
(Continued)
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors,Supervisors and the Senior Management(Continued)Remuneration of Directors, Supervisors and Senior Management
Unit: RMB’0,000
NamePositionGenderAgeStatus
Totalremunerationbefore taxreceived fromthe Company
Receivedremunerationfrom relatedparties of theCompanyChen HongguoChairmanM57In office499.00NoHu ChangqingVice ChairmanM56In office350.00NoLi XingchunVice ChairmanM56In office480.00YesLi FengDirectorM48In office295.98NoHan TingdeDirectorM53In office20.00NoLi ChuanxuanDirectorM44In office20.00NoSun JianfeiIndependent DirectorM49In office20.00NoYin MeiqunIndependent DirectorF51In office20.00NoYang BiaoIndependent DirectorM42In office20.00NoLi KangSupervisorF40In office100.57NoPan AilingSupervisorF57In office10.00NoZhang HongSupervisorF57In office10.00NoQiu LanjuSupervisorF48In office59.98NoSang AilingSupervisorF43In office24.87NoChen GangGeneral managerM49In office102.47NoLi XueqinDeputy general managerF56In office232.13NoLi WeixianDeputy general managerM40In office310.50NoLi ZhenzhongDeputy general managerM48In office169.01NoDong LianmingFinancial controllerM47In office175.92NoYuan XikunSecretary to the BoardM36In office80.82NoChu Hon LeungHong Kong company secretaryM39In office0.00NoLi XingguiSupervisorM57Resigned3.41NoZhao XuegangDeputy general managerM49Dismissed0.00NoGeng GuanglinDeputy general managerM48Dismissed46.93NoTotal3,051.59
VI Corporate Governance
VI. Performance of Directors during the reporting period
1. Board meetings during the reporting period
MeetingConvening dateDisclosure dateResolutions of meetingThe seventeenth extraordinarymeeting of the ninth session ofthe Board
29 January 202130 January 2021 http://www.cninfo.com.cn
(announcement no.: 2021-003)The eighteenth extraordinarymeeting of the ninth session ofthe Board
18 February 202119 February 2021 http://www.cninfo.com.cn
(announcement no.: 2021-013)The eighth meeting of the ninth
session of the Board
25 March 202126 March 2021 http://www.cninfo.com.cn
(announcement no.: 2021-024)The ninth meeting of the ninthsession of the Board
19 April 2021Not applicableThe Full Text and Content of the
Company‘s 2021 First Quarterly
Report was reviewed and
approved. It was exempted
from disclosure by resolution
announcements.The nineteenth extraordinarymeeting of the ninth session ofthe Board
25 June 202126 June 2021 http://www.cninfo.com.cn
(announcement no.: 2021-046)The twentieth extraordinary
meeting of the ninth session ofthe Board
15 July 202116 July 2021 http://www.cninfo.com.cn
(announcement no.: 2021-060)The twenty-first extraordinary
meeting of the ninth session ofthe Board
8 August 20219 August 2021 http://www.cninfo.com.cn
(announcement no.: 2021-068)The tenth meeting of the ninth
session of the Board
26 August 2021Not applicableThe Full Text and Summary of the
Company‘s 2021 Interim Report
was reviewed and approved. It
was exempted from disclosure by
resolution announcements.The twenty-second extraordinary
meeting of the ninth session ofthe Board
23 September 202124 September 2021 http://www.cninfo.com.cn
(announcement no.:2021-082)The eleventh meeting of the ninth
session of the Board
29 October 2021Not applicableThe Company’s 2021 Third
Quarterly Report was reviewed
and approved. It was exempted
from disclosure by resolution
announcements.The twenty-third extraordinary
meeting of the ninth session ofthe Board
15 November 202116 November 2021 http://www.cninfo.com.cn
(announcement no.: 2021-090)
2021 ANNUAL REPORT
VI Corporate Governance
VI. Performance of Directors during the reporting period(Continued)
2. Attendance of Directors at Board meetings and general meetings
Attendance of Directors at Board meetings and general meetings
Name of Directors
Number ofattendance
requiredfor Boardmeetingsduring thereportingperiod
Attendanceat Boardmeetings inperson
Attendance
at Boardmeetings bycommunication
Attendanceat Boardmeetings by
proxy
Absencefrom Boardmeetings
Absentfrom Boardmeetings twicein a row (inperson)
Attendanceat generalmeetingsChen Hongguo1101100No0Hu Changqing1101100No5Li Xingchun1101100No0Li Feng1101100No2Han Tingde1101100No1Li Chuanxuan1101100No5Sun Jianfei1101100No5Yin Meiqun1101100No5Yang Biao1101100No5Explanation for absent from Board meetings twice in a row (in person)During the reporting period, none of the Directors was absent from Board meetings twice in a row (in person).
3. Objections from Directors on related issues of the Company
Were there any objections on related issues of the Company from Directors Yes √ NoThere was no objection on related issues of the Company from Directors during the reporting period.
VI Corporate Governance
VI. Performance of Directors during the reporting period(Continued)
4. Other details about the performance of duties by Directors
Were there any suggestions from Directors adopted by the Company
√ Yes No
Explanation on the adoption or non-adoption with related suggestions from the DirectorsDuring the reporting period, Directors of the Company performed their duties with integrity, diligence, responsibilityand faithfulness, actively participated in corporate governance and decision-making activities, carefully reviewedvarious proposals that need to be reviewed at Board meetings, and made resolutions in accordance with theregulations and requirement of the Companies Law, the Rules Governing Listing of Stocks on Shenzhen StockExchange, the Guidelines of the Shenzhen Stock Exchange for Standardised Operation of Listed Companies and theArticles of Association and other relevant laws, regulations and regulatory documents. In accordance with the GuidingAdvice on Establishing an Independent Director System in Listed Companies, Work System of Independent Directorsand other regulations, independent Directors of the Company performed their duties independently and learnedabout the financial assistance provided by the Company to its investees through communication diligently andresponsibly. They also issued independent and impartial opinions for related party transactions, external guaranteesand the appointment of audit institutions of the Company and other matters requiring independent Directors’opinionsthat occurred during the reporting period, which better safeguarded the overall interests of the Company and thelegitimate rights and interests of all shareholders, especially minority shareholders, and played a positive role in theCompany’s standardised, stable and healthy development.
2021 ANNUAL REPORT
VI Corporate Governance
VII. Special committees under the Board during the reporting periodName of thecommitteeMember
Number ofmeetingconvenedConvening dateDetails of the meeting
Important opinionand adviceOther performance of duty
Details ofobjection(if any)Audit
Committee
Yin Meiqun, LiChuanxuan andSun Jianfei
425 March 2021Reviewed the Company’s2020 Financial FinalAccounts Report, FullText and Summaryof the Company’s2020 Annual Report,Proposal on theAppointment ofAuditor for 2021 andProposal on Provisionfor Impairment ofAssets in 2020
Agreed to submit to theBoard for review
Communication with external
auditing institution engagedby the Company and thefinancial department of theCompany in respect of the2020 financial report auditing,review of the 2020 auditor’sreport and financial report;review of the independence,professional competence,investor protection ability,and practice qualifications ofGrant Thornton.
Nil
19 April 2021Reviewed the Full
Text and Contentof the 2021 FirstQuarter Report of theCompany
Agreed to submit to the
Board for review
Review of the 2021 first quarter
report of the Company as of31 March 2021.
Nil
26 August 2021Reviewed the Full Text
and Summary of the2021 Interim Report ofthe Company
Agreed to submit to the
Board for review
Review of the 2021 interim
financial statements as of 30June 2021.
Nil29 October 2021Reviewed the 2021 Third
Quarter Report of theCompany
Agreed to submit to the
Board for review
Review of the 2021 third quarter
report of the Company as of30 September 2021.
NilRemuneration
andAssessmentCommittee
Yang Biao, Li
Xingchun and SunJianfei
125 March 2021Reviewed the Proposal
on Determinationof Remuneration ofDirectors, Supervisorsand SeniorManagement for 2020
Agreed to submit to the
Board for review
The Remuneration and
Assessment Committee underthe Board of the Companydetermined the remunerationof Directors, Supervisorsand the senior management,which was arrived at based onthe operations in 2020.
Nil
Strategy
Committee
Chen Hongguo, Hu
Changqing andYang Biao
125 June 2021Reviewed the Proposal
on the Capital Increaseof Shanghai Chenmingby Jiangxi Chenming
Agreed to submit to the
Board for review
The Strategy Committee
communicated and discussedthe capital increase ofShanghai Chenming based onits operations.
Nil
Nomination
Committee
Sun Jianfei, Chen
Hongguo and YinMeiqun
18 August 2021Reviewed the Proposal
on Changing theRotating GeneralManager
Agreed to submit to the
Board for review
The Nomination Committee
conducted a review of thecandidate
Nil
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 dutiesduring the reporting period Yes √ NoNone of those issues under the supervision was objected by the Supervisory Committee during the reporting period.IX. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) as at the end of the reporting period3,144Number of staff at major subsidiaries (person) as at the end of the reporting period8,384Total number of staff (person) as at the end of the reporting period12,296Total number of staff receiving remuneration during the period (person)12,296Number of retired/resigned staff the Company and its major subsidiaries are required to
compensate (person)0
Specialty compositionCategory of specialty composition
Number ofpeople (person)Production staff8,276Sales staff564Technical staff573Financial staff183Administrative staff1,419Other staff1,281Total12,296
Education levelCategory of education level
Number ofpeople (person)Postgraduate and above25Undergraduate997Post-secondary2,504Technical secondary and below8,770Total12,296
2021 ANNUAL REPORT
VI Corporate Governance
IX. Personnel of the Company(Continued)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subjectto the relevant laws and regulations, the Company adopts different standards of remuneration for different employees,which are determined based on their position, skill variety, performance etc. with reference to the remuneration levelin the labour market, the average level of salary in the society and the corporate reference line set by the government.The Company provides various benefits to the employees, including social insurance, housing allowance and paidleaves etc.
3. Training programmes
In 2022, the Company will strictly implement the“people-oriented”management concept, focus on talent training,further strengthen training, set up a professional training team, formulate concise and effective training measures,and carry out employee skill improvement training, cadre training, and reserve talent team building. At the same time,the Company will design three career development channels of management, profession and skill to broaden thecareer development paths of employees. The Company will continue to strengthen cooperation with professionaltraining institutions to innovate learning forms and carry out talent training with the help of external training resourcesand teachers. The Company will cultivate internal trainers, establish a team of lecturers, develop high-quality trainingmaterials at different levels and professions, carry out internal training, and improve employees’ business skills.
4. Labour outsourcing
Applicable √ Not applicable
X. Profit distribution of the Company and conversion of capital reserves into share capital
Formulation, implementation or adjustment of profit distribution policy, especially the cash dividend during the reportingperiod
√ Applicable Not applicable
The Company implemented its profit distribution policy in compliance with the Articles of Association. Its cash dividendpolicy was formulated and implemented in compliance with the requirements of the Articles of Association and theresolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interestsof the small shareholders were fully protected as the related decision-making process and mechanism were in place,the duties of independent Directors were well-defined so that they played a role, and the small shareholders were givenopportunities to sufficiently voice their opinion and make requests.
VI Corporate Governance
X. Profit distribution of the Company and conversion of capital reserves into share capital
(Continued)Implementation of the Company’s profit distribution plan in 2020: Based on the total number of ordinary shares of theCompany as at the end of 2020 of 2,984,208,200 shares and the 589,005,236 simulated ordinary shares converted from thesecond and third tranches of Preference Shares using a conversion ratio of 1 share valued at RMB3.82, a cash dividend ofRMB1.85 (tax inclusive) was to be distributed to ordinary shareholders for every 10 shares held; a cash dividend of RMB1.85(tax inclusive) per 10 simulated ordinary shares converted from the second and third tranches of Preference Shares was tobe distributed to holders of Preference Shares. No bonus shares would be issued and there was no increase of share capitalfrom reserves. The cash dividend distributed to ordinary shareholders amounted to RMB552,078,517.00 and a variable cashdividend distributed to holders of the second and third tranches of Preference Shares amounted to RMB108,965,968.66.That is, the holders of the second and third tranches of Preference Shares would receive a cash dividend of RMB4.84 (taxincluded) per Preference Share (par value of RMB100 per share). The dividend distribution was implemented and completedon 18 August 2021. For details, please refer to the Payment of Final Dividend and Withholding and Payment of EnterpriseIncome Tax for Non-resident Enterprise Shareholders published on Hong Kong Stock Exchange on 5 August 2021, andthe Announcement on the Implementation of the 2020 Dividend Distribution Plan for A Shares and B Shares and theAnnouncement on the Implementation of the Distribution of Residual Profits of 2020 to Preference Shareholders publishedon CNINFO on 6 August 2021.
Particulars of Cash Dividend PolicyWas it in compliance with the requirements of the Articles of Association and the resolutions of the general
meeting:YesWere the dividend distribution criteria and proportion well-defined and clear:YesWere the related decision-making process and mechanism in place:YesDid independent Directors fulfil their duties and play their role:YesWere the minority shareholders given opportunities to sufficiently voice their opinion
and make requests and were the legal interests of the minority shareholders fully protected:YesWere conditions and procedures legal and transparent in respect of cash
dividend policy with adjustments and changes:YesThe Company was profitable during the reporting period and the Parent Company’s profit available for distribution toshareholders was positive, but no cash dividend distribution plan was proposed
√ Applicable Not applicable
Explanation on why it was profitable during the reporting period
and the Parent Company’s profit available for distribution to
shareholders was positive but no cash dividend distribution
plan was proposed
Use and plan of use of the Company’s undistributed profitsConsidering factors such as the current macroeconomic
environment and the Company’s strategic planning, in order
to further optimise its capital structure, reduce its scale of
debt, lower its gearing ratio, 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 securing the sustainable and steady
development of the pulp production and paper making
business, the principal operation of the Company, and better
safeguarding the long-term interests of all shareholders.
The retained undistributed profits of the Company are
accumulated and carried forward to the next year,which will be mainly used for day-to-day operation anddevelopment, repayment of interest-bearing liabilitiesand project construction of the Company to ensure thenormal production, operation and business expansion ofthe Company, and to provide a reliable guarantee for theimplementation of the Company’s medium and long-termdevelopment strategy, thus effectively safeguarding theinterests of the Company and all shareholders, especiallysmall and medium shareholders.
2021 ANNUAL REPORT
VI Corporate Governance
X. Profit distribution of the Company and conversion of capital reserves into share capital(Continued)Profit distribution and conversion of capital reserves into share capital during the reporting period Applicable √ Not applicableThe Company does not propose distribution of cash dividends or bonus shares for the year, and there will be no increase ofshare capital from reserves.XI. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measures of the Company
√ Applicable Not applicable
1. On 30 March 2020, the ninth extraordinary meeting of the ninth session of the Board of the Company considered and
approved the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming PaperHoldings Limited (Draft) and Its Summary and other resolutions. On the same date, the fourth extraordinary meetingof the ninth session of the Supervisory Committee of the Company considered and approved the above resolutionsand verified the list of proposed participants of the incentive scheme. Independent Directors of the Company issuedindependent 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 periodfrom 3 April 2020 to 12 April 2020. During the period, the Supervisory Committee of the Company and relevantdepartments did not receive any objection against the proposed participants. The Supervisory Committee verified thelist of participants under the grant of the incentive scheme.
3. On 15 May 2020, the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming
Paper Holdings Limited (Draft) and Its Summary and other resolutions were considered and approved at the 2020second extraordinary general meeting, the 2020 first class meeting for holders of domestic-listed shares and the 2020first class meeting for holders of overseas-listed shares of the Company. On 16 May 2020, the Company disclosedthe Self-Examination Report for the Trading of Shares of the Company by Insiders and Participants of the 2020Restricted A Share Incentive Scheme.
4. 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 wereconsidered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinarymeeting of the ninth session of the Supervisory Committee of the Company, approving the issue of 79,600,000restricted 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.
VI Corporate Governance
XI. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measures of the Company(Continued)Share options granted to Directors and the Senior Management of the Company as incentives
√ Applicable Not applicable
Unit: share
NamePosition
Numberof sharesexercisableduring thereportingperiod
Numberof sharesexercisedduring thereportingperiod
Exerciseprice ofthe sharesexercisedduring thereportingperiod(RMB/share)
Marketprice at the
end of thereporting
period
(RMB/
share)
Number ofrestrictedsharesheld at thebeginningof theperiod
Number of
unlocked
sharesduring thecurrentperiod
Numberof newlygrantedrestrictedsharesduring thereporting
period
Grantprice ofrestricted
shares
(RMB/
share)
Number ofrestricted
sharesheld at theend of the
periodChen HongguoChairman0007.2420,000,000002.8520,000,000Hu ChangqingVice Chairman0007.245,000,000002.855,000,000Li XingchunVice Chairman0007.245,000,000002.855,000,000Li FengDirector0007.243,000,000002.853,000,000Chen GangGeneral manager0007.241,000,000002.851,000,000Li Xueqin
Deputy general
manager0007.243,000,000002.853,000,000Li Weixian
Deputy general
manager0007.242,000,000002.852,000,000Li Zhenzhong
Deputy general
manager0007.242,000,000002.852,000,000Dong LianmingFinancial controller0007.241,000,000002.851,000,000Yuan XikunSecretary to the Board0007.24300,000002.85300,000Total0042,300,0000042,300,000Assessment and incentive mechanism for the Senior ManagementThe Senior Management of the Company is assessed on monthly and annually basis. Monthly assessments were conductedin line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators, namely thecompletion status of each month and the evaluation on important performance indicators. It was carried out monthly byway of cross assessment and supervision among the related departments. The annual assessments were carried out by theRemuneration and Assessment Committee with reference to the results of monthly assessments and overall performancesduring the year, including the integrated quality of Senior Management and internal training of talents.
2021 ANNUAL REPORT
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, the Company strictly complied with various laws and regulations and the Company’sinternal control system to standardise operations, optimise governance, and manage and control risks. Takinginternal and external environment, internal organisation and management requirements into account, the Companyupdated and improved its internal control system in a timely manner. The daily work flow and related systems ofeach department and business segment of the company were comprehensively reviewed. The relevant content of theInternal Control Management Manual was revised and improved. A scientific, applicable and effective internal controlsystem had been established to effectively prevent and timely discover and correct deviations in the Company’soperation and management process, thus reasonably protecting the safety and integrity of the Company’s assets, andreasonably ensuring the authenticity, accuracy and integrity of accounting information.The internal control system was able to cover the main aspects of the Company’s operation and management, andthere were no major omissions. The units, businesses and events included in the evaluation scope and high-risk areascovered the main aspects of the Company’s operation and management, and there were no major omissions. Thedesign of the internal control system was sound and reasonable. The implementation specifications were effectiveand there were no major omissions. Through the operation, analysis and evaluation of the internal control system, theCompany effectively prevented risks in operation and management and promoted the realisation of internal controlobjectives.
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
Name of the companyIntegration plan
Integration
progress
Issueencountered
duringintegration
Implemented
solution
Solutionprogress
Follow-up
solutionWuhan Junheng
PropertyManagement Co.,Ltd.
In December 2021, the leasing
company acquired 100% equityinterest in Wuhan Junheng PropertyManagement Co., Ltd. to offset theamount due to it. The company’smajor assets were the shops on SouthXizang Road, Shanghai, which weremainly used for leasing purpose. Uponcompletion of the merger, the financedepartments of the leasing companyshall be responsible for auditing.
CompletedNilNot
applicable
Notapplicable
Notapplicable
VI Corporate Governance
XIV. Self-assessment report on internal control or auditor’s report on internal control
1. Self-assessment Report on Internal Controls
Date of Disclosure of Assessment Report on Internal Controls31 March 2022Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cnPercentage of Total Assets Included in Assessment to Total Assets in Consolidated FinancialStatements of the Company
99.80%
Percentage of Revenue Included in Assessment to Revenue in Consolidated Financial
Statements of the Company
99.00%
Basis for identifying deficienciesTypeFinancial reportingNon-financial reportingQualitative criteria Indicators of material deficiencies in the internal control of financial
reporting include: ineffective control environment, material loss toand adverse impact on the Company as a result of misconductby Directors, Supervisors and Senior Management; materialmisstatement of non-exceptional incidents; ineffectiveness insupervision of internal control of the Company by the Board, or itsdelegated authorities, and the internal audit department.Indicators of major deficiencies in internal control of financialreporting include: failure in selecting and applying accountingpolicies in accordance with generally accepted accountingprinciples; failure to establish procedures and control measures toprevent corrupt practices; failure to establish corresponding controlmechanism for the accounting of unusual or special transactionsor failure to implement or set up the corresponding compensationcontrol; failure to reasonably ensure the truthfulness and accuracyin the preparation of financial statement, as a result of one or moredeficiencies in the control of financial reporting as of the end of theperiod.General deficiencies: other deficiencies in internal control that do notconstitute material or major deficiencies.
Indicators of material deficiencies in the internal control of non-financial
reporting include: major failure as a result of the decision makingprocess; lack of control system or occurrence of systematic failurein principal activities and lack of effective compensation control,high turnover rate of mid to senior level management and seniortechnical staff; failure to address the findings of internal controlassessment, in particular material deficiencies; and other factorswhich impose material adverse impact on the Company.Indicators of major deficiencies in internal control of nonfinancial
reporting include: general failure as a result of the decision-makingprocess; deficiencies in major business procedure or system; highturnover rate of key staff; failure to address the findings of internalcontrol assessment, in particular major deficiencies; and otherfactors which impose great adverse impact to the Company.Indicators of general deficiencies in internal control of non-financial
reporting include: low efficiency of decision making process;deficiencies in general business procedure or system; high turnoverrate of employees; and failure to rectify general deficiencies.Quantitative criteriaGeneral deficiencies: deviation of less than or equal to 0.1% from the
target of accounting error/the total revenue; Major deficiencies:
deviation of 0.1% – 0.5% from the target of accounting error/thetotal revenue; material deficiencies: deviation greater than 0.5%from the target of accounting error/the total revenue.
General deficiencies: quantitative criterion (financial loss) less
than RMB5,000,000; major deficiencies: quantitative criterion(financial loss) between RMB5,000,000 and RMB20,000,000;material deficiencies: quantitative criterion (financial loss) overRMB20,000,000.Number of material deficiencies in financial reporting: (number)0Number of material deficiencies in non-financial reporting: (number)0Number of major deficiencies in financial reporting: (number)0Number of major deficiencies in non-financial reporting: (number)0
2021 ANNUAL REPORT
VI Corporate Governance
XIV. Self-assessment report on internal control or auditor’s report on internal control(Continued)
2. Auditor
’s report on internal control
√ Applicable Not applicable
Auditor’s opinion contained in the Auditor’s report on internal controlWe are of the opinion that Shandong Paper Company had in all material aspects maintained effective internal controlover the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31 December2021.Disclosure of Auditor’s Report on Internal ControlDisclosedDate of Disclosure of Auditor’s report on internal control31 March 2022Index of Auditor’s Report on Internal Control Disclosure http://www.cninfo.com.cnType of Opinion in Auditor’s Report on Internal ControlStandard and unqualified opinionMaterial deficiencies in non-financial reportingNoAny opinions of non-standardisation set out in the Auditor’s Report on Internal Control issued by accountants Yes √ NoAuditor’s Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment Report
√ Yes No
XV. Rectification of problems found in self-inspection under the special initiative on corporategovernance of the listed companyNot applicable
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(i) Compliance with the Code on Corporate GovernanceThe Company maintained high standards of corporate governance through various internal controls. The Boardreviewed the corporate governance practices of the Company from time to time to enhance the corporate governancestandards of the Company.Save for the details set out in III Board, IV Chairman and General Manager and XVII Communications withshareholders in this section, the Company had fully complied with all the principles and code provisions of the Codeon Corporate Governance as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.(ii) Securities transactions by DirectorsThe Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactionsby Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequateenquiries with all Directors and Supervisors of the Company, the Company was not aware of any information thatreasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in thiscode during the reporting period.
(iii) BoardThe members of the Board of the Company are elected at the general meeting and held accountable to the generalmeeting, and shall exercise the following functions and powers: (1) to be responsible for convening the generalmeeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annualfinancial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the planmaking up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of theCompany and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for materialacquisition and repurchase of the Company’s own shares; (8) to draft plans for the merger, division or dissolution orthe 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’sinternal 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 chargeof financial affairs, as proposed by the general manager; and to decide on their remuneration and rewards andpunishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals foramending the Articles of Association; (14) to administrate matter related to information disclosure of the Company;
(15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the
Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercisethe functions and powers as conferred upon by the Articles of Association or the general meeting.The Board comprised four executive Directors: Chen Hongguo (Chairman), Hu Changqing, Li Xingchun and Li Feng;two non-executive Directors: Han Tingde and Li Chuanxuan; and three independent non-executive Directors: SunJianfei, Yin Meiqun and Yang Biao. Please refer to part V of this section for their brief biographies.
2021 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited(Continued)(iii) Board(Continued)The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration andsupervision of the Company’s businesses to facilitate its success. The Executive Director or the Senior Managementis authorised to be responsible for the various divisions and functions and management of the processing. Directorsof the Company shall act objectively and make decisions in the interests of the Company. The management andthe Senior Management of the Company held regular meetings with the Board to discuss the ordinary businessoperations and performance of the Company, and carried out the relevant decisions of the Board. The Company willarrange independent legal advice upon the request from the Directors or any committees of the Board, if the Board orany committees of the Board consider it necessary to seek for independent professional advice.Pursuant to Code A.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respectof legal action against its Directors. As at the date of this report, the Company has not reached an agreement withthe original insurance company, and therefore has not arranged relevant insurance cover for Directors. However, theCompany is currently under negotiation with another insurance Company with respect to director liability insurance in2022.During the reporting period, the Board held 11 meetings, 4 of which were regular meetings and 7 were extraordinarymeetings. None of the Directors were absent from any Board meetings.
NamePosition
Attendance at the relevant meetings (attention required/attended)Boardmeetings
AuditCommitteemeetings
NominationCommitteemeetings
Remuneration
andAssessmentCommitteemeetings
StrategicCommitteemeetings
GeneralmeetingsI. Executive Directors
Chen HongguoChairman11/11N/A1/1N/A1/15/0Hu ChangqingVice Chairman11/11N/AN/AN/A1/15/5Li XingchunVice Chairman11/11N/AN/A1/1N/A5/0Li FengExecutive Director11/11N/AN/AN/AN/A5/2II. Non-executive Directors
Li ChuanxuanDirector11/114/4N/AN/AN/A5/5Han TingdeDirector11/11N/AN/AN/AN/A5/1III. Independent non-executive
DirectorsSun JianfeiIndependent Director11/114/41/11/1N/A5/5Yin MeiqunIndependent Director11/114/41/1N/AN/A5/5Yang BiaoIndependent Director11/11N/AN/A1/11/15/5Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of theBoard had any financial, business, family relations or material connections with each other.The Board held 4 regular meetings during the year, each by giving a 10-day notice in advance to ensure that allDirectors could participate in discussions of matters in the agenda. Reasonable prior notification was given for theother meetings of the Board to ensure all Directors could take time to attend.All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governingthe Board and all applicable regulations and rules were complied with.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited (Continued)(iii) Board (Continued)Directors’ training and professional developmentAll newly appointed Directors are provided with necessary orientation information, with an aim to ensure that they willhave a better understanding of operations and business of the Company as well as relevant laws and regulations andobligations under the Listing Rules.Directors and Supervisors of the Company were arranged by the Company to attend training courses 2021 fordirectors and supervisors held by China Securities Regulatory Commission, Shandong; and, briefing paper in respectof amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of the Company was distributedto all Directors and Supervisors, the above of which were to ensure all Directors and Supervisors to comply withrelevant laws and sound corporate governance practice, and enhance their awareness of sound corporate governancepractice.(iv) Chairman and General ManagerThe chairman of the Company is Mr. Chen Hongguo, and the general manager of the Company is Mr. Chen Gang.Please refer to part V of this section for their brief biographies.According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1)presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and inspectingthe implementation of the resolutions of the Board; (3) signing the shares, the securities and bonds issued by theCompany; (4) signing important documents of the Board and other documents which are required to be signed bylegal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidatesfor general manager for the Board; (7) exercising the special right to operate the Company in accordance with thelaws and acting for the benefits of the Company in the event of emergency situation as a result of act of God ornatural disaster, and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powersauthorised by the Board.
2021 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(iv) Chairman and General Manager(Continued)The general manager shall exercise the following powers: (1) in charge of the operation and management of theCompany, and organising the implementation of the resolutions of the Board; (2) organising the implementation ofthe Company’s annual business plans and investment plans; (3) drafting plans for the establishment of the internalorganisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulatingspecific rules and regulations for the Company; (6) proposing the appointment or dismissal of the deputy generalmanager and chief financial officer; (7) appointing or dismissing management personnel other than those requiredto be appointed or dismissed by the Board; (8) proposing the wages, welfare, rewards, and penalties of staff and todecide the appointment or dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting ofthe Board; and (10) exercising other powers conferred by the Articles of Association of the Company and the Board
(v) Independent Non-executive DirectorsThere are three independent non-executive Directors in the Board, which is in compliance with the minimumrequirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Yin Meiqunand Sun Jianfe, the independent non-executive Directors of the Company, have appropriate accounting or relatedfinancial management expertise, which is compliance with the requirement of Rule 3.10 of the Hong Kong ListingRules. Please refer to part V of this section for their brief biographies. The Company has received from each of theindependent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the HongKong Listing Rules and considered all of the independent non-executive Directors to be independent during the year.(vi) Terms of Directors
According to the Articles of Association of the Company, all Directors, including non-executive Directors, are electedat general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for another termupon expiry of tenure.(vii) Directors’ Responsibility for the Financial Statements
The Directors acknowledged their responsibility to prepare financial statements for each financial year which givea true and fair view of the state of affairs of the Company. The Directors believed that the Company had adoptedand applied consistently appropriate accounting policies in preparing the financial statements in compliance with allrelated accounting standards.
(viii) Board CommitteesPursuant to Code on Corporate Governance, the Board has established four committees, namely, Audit Committee,Remuneration and Assessment Committee, Strategic Committee and Nomination Committee, for overseeing particularaspects of the Company’s affairs. Each Board Committee has its own defined written terms of reference. The writtenterms of reference of each Board Committee are published on websites of stock exchange and the Company.Save for requirements of Code on Corporate Governance, the Company also set up Strategic Committee, foroverseeing and studying long-term strategic development plan of the Company and making recommendations.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)
(ix) Audit CommitteeThe Audit Committee of the Company comprises three members, including Yin Meiqun (as the chairman), LiChuanxuan and Sun Jianfei. Two of them, including the chairman, are independent non-executive Directors. Theprimary duties of the Audit Committee are serving as a communication media between internal and external auditand the related review and supervision. Yin Meiqun and Sun Jianfei have appropriate professional qualifications orappropriate accounting or related financial management expertise, which is in compliance with the requirement of theHong Kong Listing Rules.The primary duties of the Audit Committee of the Company are: (1) proposing the appointment or dismissal of theexternal auditor; (2) supervising the internal control system of the Company and its implementation; (3) serving asa communication media between internal and external audit; (4) auditing the financial information of the Companyand its disclosures; (5) reviewing the financial control, risk control and internal control system of the Company andaudit the significant connected transactions; (6) discussing the risk management and internal control system withthe management to ensure the management has performed its duties to establish effective systems. The discussionshould include the adequacy of resources, staff qualifications and experience, training programs and budget of theaccounting and financial reporting functions of the Company; (7) studying the major investigation findings on riskmanagement and internal control matters on its own initiative or as delegated by the Board and the management’sresponse to these findings; (8) where the annual report includes statements in relation to the risk management andinternal control system of the Company, reviewing such statements prior to submission to the Board for approval; and
(9) dealing with other matters as delegated by the Board.
The Audit Committee discussed with the management of the Company the accounting standards and practicesadopted by the Group and discussed and reviewed this report, including the review of the financial statements of theGroup for the year ended 31 December 2021 prepared in accordance with China Accounting Standards for BusinessEnterprises.Particulars of the meetings held by the Audit Committee during the reporting period were detailed in part VII of thissection.Risk Management and Internal ControlThe Board is responsible for the risk management and internal control systems and reviewing their effectiveness.Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and canonly provide reasonable but not absolute assurance against material misstatement or loss.The Audit Committee (on behalf of the Board) oversees management in the design, implementation and monitoringof the risk management and internal control systems, and the management has provided confirmation to the AuditCommittee (and the Board) on the effectiveness of these systems for the year ended 31 December 2021.In respect of internal control system, procedures have been designed for safeguarding assets against unauthoriseduse or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financialinformation for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations.
2021 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(x) Remuneration and Assessment CommitteeThe Remuneration and Assessment Committee of the Company comprises three members, including Yang Biao,the Chairman, and other members, namely Li Xingchun and Sun Jianfei. Two members, including the Chairman,are independent non-executive Directors, which is in compliance with Code on Corporate Governance Practices.The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal ofthe Directors and managers and conducting the appraisal, and studying and formulating the remuneration policyand package of the Directors and the Senior Management of the Company. The Remuneration and AssessmentCommittee is accountable to the Board.The primary duties of the Remuneration and Assessment Committee of the Company are: (1) formulating theremuneration plan or package based on the major scope of work, duties and importance of the Directors and themanagement and the remuneration level of other counterparts; (2) formulating the remuneration plan or packagewhich mainly includes but not limited to standards, procedures and a system for performance appraisals as wellas major plans and a system for rewards and sanctions; (3) examining the performance of the Directors, excludingthe independent non-executive Directors, and the Senior Management and conduct annual performance appraisalsfor them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with othermatters as delegated by the Board.Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period aredetailed in part VII of this section.(xi) Nomination CommitteeThe Nomination Committee of the Company comprises three members, including Sun Jianfei (as the chairman), ChenHongguo and Yin Meiqun. Two of them, including the chairman, are independent non-executive Directors, which isin compliance with Code on Corporate Governance Practices. The Nomination Committee is primarily responsiblefor selecting candidates for directors and the management of the Company, determining the selection criteria andprocedure and making recommendations.The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Boardin light of the Company’s operating activities, asset scale and shareholding structure; (2) studying the selection criteriaand procedure for Directors and the management and advising the Board on the same; (3) extensively identifyingqualified candidates for Directors and the management; (4) examining candidates for Director and the managementand advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision ontheir employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directorsand on skills, knowledge, experience, background, gender and other characteristics required in serving as a directortaking into consideration diversity, balance and efficiency of the Board and benefits thereto; (7) reviewing the Boarddiversity policy, revising thereon in a timely manner and making relevant disclosure in the corporate governance reportin the corresponding annual report; and (8) dealing with other matters as delegated by the Board.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xi) Nomination Committee(Continued)
During the reporting period, the Nomination Committee, after studying the needs of the Company for new Directorsand managerial personnel and taking into consideration the Board diversity policy, identified suitable candidates forDirector and managerial positions through various channels (including from the Group internally and from the humanresources market). Upon acceptance of nomination by the nominated person, the Nomination Committee performedqualification review on preliminary candidates by holding meetings, review criteria include the academic qualifications,relevant experience and specialised skills of the preliminary candidates. One to two months prior to election of newDirectors, the Nomination Committee submitted recommendations and relevant materials of the directorial candidatesto the Board; prior to engaging new Senior Management, the Nomination Committee submitted recommendationsand relevant materials of the new Senior Management personnel to the Board.Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VII ofthis section(xii) Strategic CommitteeThe Company set up a Strategic Committee which comprised three members, including Chen Hongguo, theChairman, and other members, namely, Hu Changqing and Yang Biao. The Strategic Committee is primarilyresponsible for studying the long term strategic development and major investments of the Company and makingrecommendations.The primary duties of the Strategic Committee are (1) conducting research and submitting proposals regarding thelong term development strategic plan; (2) conducting research and submitting proposals regarding the financingplans for major investments which require approval from the Board as stipulated in the Articles of Association of theCompany; (3) conducting research and submitting proposals regarding major capital operations and assets operationprojects which require approval from the Board as stipulated in the Articles of Association of the Company; (4)conducting research and submitting proposals regarding other material matters that may affect the development ofthe Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other mattersas delegated by the Board.Particulars of the meetings held by the Strategic Committee during the reporting period are detailed in part VII of thissection.(xiii) Auditor
Based on the operation development and auditing needs of the Company, the Company convened the 2019 secondextraordinary general meeting on 23 October 2019, and considered and approved the Resolution in relation to theChange of the Auditor, pursuant to which the Company’s auditor for 2019 was changed from Ruihua Certified PublicAccountants (Special General Partnership) to Grant Thornton (Special General Partnership). On 19 June 2020, theCompany convened the 2019 annual general meeting, and considered and approved the Resolution in relation tothe Appointment of the Auditor for 2020, and continued to engage Grant Thornton (Special General Partnership) asthe domestic auditor of the Company for 2020. On 18 June 2021, the Company convened the 2020 annual generalmeeting, and considered and approved the Resolution in relation to the Appointment of the Auditor for 2021, andcontinued to engage Grant Thornton (Special General Partnership) as the domestic auditor of the Company for 2021and be responsible for domestic auditing of the Company for 2021.
2021 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xiv) Remuneration for the AuditorThe financial statements for 2021 prepared in accordance with Accounting Standards for Business Enterprises bythe Group were audited by Grant Thornton (Special General Partnership). The Company paid the auditor in aggregateRMB2,500,000 and RMB800,000 in respect of financial statements audit and non-audit services in relation to internalcontrol for 2021 respectively.Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements ofthe Group in XII. Financial Report of this annual report.(xv) Supervisors and Supervisory CommitteeThe Supervisory Committee comprises three shareholder representatives and two staff representatives. Theshareholder representatives shall be elected and removed at a general meeting and the staff representatives shallbe elected and removed democratically by the staff of the Company. During the reporting period, the SupervisoryCommittee of the Company convened 4 meetings, and all supervisors attended Supervisory Committee meetingsconvened during the year, and carefully reviewed the 2020 Annual Report, 2021 First Quarterly Report, 2021 InterimReport and 2021 Third Quarterly Report, and issued special opinions. The Supervisory Committee is accountable tothe shareholders. It monitors the financial position of the Company and the performance of the Directors, managersand Senior Management of the Company as to whether they are in accordance with relevant requirements of the lawsand regulations to protect the lawful rights of the Company and the shareholders.(xvi) Company SecretaryDuring the year, the company secretary confirmed that he has received relevant professional training for not less than15 hours in accordance with Rule 3.29 of the Listing Rules.(xvii) Communications with ShareholdersThe Company considers effective communication with Shareholders is essential to enable them to have a clearassessment of the Group’s performance as well as accountability of the Board. Principal means of communicationwith Shareholders of the Company are as follows:
Information disclosure on the Company’s websiteThe Company endeavours to disclose all material information about the Group to all interested parties as widely andtimely as possible. The Company maintains its website at www.chenmingpaper.com where important informationabout the Group’s activities and corporate matters such as annual reports and interim reports to Shareholders,announcements, business development and operations, corporate governance practices and other information areavailable for review by Shareholders and other stakeholders.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)
(xvii) Communications with Shareholders(Continued)Information disclosure on the Company’s website(Continued)
When announcements are made through the Stock Exchange, the same information will be made available on theCompany’s website.General meetingsThe Company’s annual general meeting provides a useful platform for direct communication between the Board andShareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Savefor the annual general meeting held on 18 June 2021 by the Company, two extraordinary general meetings, 1 ClassMeeting for Holders of Domestically listed Shares and 1 Class Meeting for Holders of Overseas-listed Shares wereconvened in 2021. The attendance record of Directors at each general meeting is set out below:
NameDirectors attending general meetings in person2021 first extraordinary general meetingHu Changqing, Li Chuanxuan, Sun Jianfei, Yin Meiqun, Yang Biao2021 first class meeting for holders of
domestic-listed shares
Hu Changqing, Li Chuanxuan, Sun Jianfei, Yin Meiqun, Yang Biao2021 first class meeting for holders of
overseas-listed shares
Hu Changqing, Li Chuanxuan, Sun Jianfei, Yin Meiqun, Yang Biao2020 annual general meetingHu Changqing, Li Feng, Han Tingde, Li Chuanxuan, Sun Jianfei,
Yin Meiqun, Yang Biao2021 second extraordinary general meetingHu Changqing, Li Feng, Li Chuanxuan, Sun Jianfei, Yin Meiqun,
Yang Biao
2021 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xvii) Communications with Shareholders(Continued)
General meetings(Continued)The Company’s external auditor also attended the Annual General Meeting and scrutinised voting.Code E.1.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit,remuneration and nomination committees to attend the Annual General Meeting.Mr. Chen Hongguo, the chairman of the Company and its strategy committee, was absent from the annual generalmeeting due to business commitments.Code A.6.7 of the code provisions – This code provision requires independent non-executive Directors and othernon-executive Directors, as equal board members, should give the Board and any committees on which they servethe benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and activeparticipation. They should also attend general meetings and develop a balanced understanding of the views ofshareholders.Mr. Han Tingde was absent from the 2021 first extraordinary general meeting, the 2021 first class meeting for holdersof domestic-listed shares and the 2021 first class meeting for holders of overseas-listed shares due to businesscommitments.Mr. Han Tingde was absent from the 2021 second extraordinary general meeting due to business commitments.Voting by pollResolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conductof the poll are explained to the shareholders at the commencement of each general meeting, and questions fromshareholders regarding the voting procedures are answered. The poll results are posted on the websites of the StockExchange and the Company respectively on the same day.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)
(xvii) Communications with Shareholders(Continued)
Shareholders’ right
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 100 of the Articles of Association of the Company, Shareholder(s) alone or in aggregateholding 10% or more of the Company’s shares shall be entitled to request the Board to convene extraordinarygeneral meetings, provided that such request shall be made in writing. The Board shall, in accordance withprovisions of the laws, administrative regulations and the Articles of Association, furnish a written reply statingits agreement or disagreement to the convening of an extraordinary general meeting within ten days afterreceiving such proposal of the same.In the event that the Board agrees to convene an extraordinary general meeting, the notice of general meetingshall be issued within five days after the passing of the relevant resolution of the Board. Any changes in theoriginal request made in the notice shall require prior approval of Shareholders concerned.In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish anyreply within ten days after receiving such proposal, Shareholder(s) alone or in aggregate holding 10% or more ofthe Company’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinarygeneral meeting, provided that such proposal shall be made in writing.In the event that the Supervisory Committee agrees to convene an extraordinary general meeting, the notice ofgeneral meeting shall be issued within five days after receiving such request. Any changes in the original requestmade in the notice shall require prior approval of Shareholders concerned.Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shallbe deemed as failure of the Supervisory Committee to convene and preside over a general meeting, andShareholder(s) alone or in aggregate holding 10% or more of the Company’s shares for ninety consecutive daysor 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 ageneral meeting on their own, they shall give a written notice to the Board and file the same with the local officeof CSRC at the place where the Company is located and the stock exchange for records. The shareholdingpercentage of shareholders who convened shall not be lower than 10% prior to the announcement ofresolutions of the general meeting.Shareholders who convened shall submit relevant certifications to the local office of CSRC at the place wherethe Company is located and the stock exchange upon the issuance of the notice of general meeting and theannouncement of resolutions of the general meeting.The Board and its secretary shall cooperate with respect to matters relating to general meetings convenedby Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholdingregister. If a general meeting is convened by shareholders on their own, all necessary expenses incurred shallbe borne by the Company.
2021 ANNUAL REPORT
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited (Continued)(xvii) Communications with Shareholders(Continued)Shareholders’right(Continued)
2. Procedures for sending shareholders
’ enquiries to the BoardShareholders may at any time send their enquiries and concerns to the Board of the Company in writing throughthe Company Secretary/Secretary to the Board whose contact details are as follows:
Secretary to the BoardHong Kong Company SecretaryNameYuan XikunChu Hon LeungAddressNo. 2199 East Nongsheng Road,
Shouguang City, Shandong Province
22/F, Universal Building, Central, Hong KongTelephone0536-215800800852-21629600Facsimile0536-215897700852-25010028Emailchenmmingpaper@163.comliamchu@li-partners.comThe Company Secretary and the secretary to the Board shall forward shareholders’enquiries and concernsto the Board and/or relevant Board Committees of the Company, where appropriate, to answer shareholders’
questions.
3. Procedures for putting forward proposals of Shareholders at general meetings
Pursuant to Article 111 of the Articles of Association of the Company, shareholders individually or jointly holdingover 3% of the total shares of the Company with voting right are entitled to propose motions to the Company.Shareholders individually or jointly holding over 3% of the total shares of the Company with voting right maysubmit extraordinary motions to the Board or the secretary to the Board ten working days before the conveningof the General Meeting. The Board or the secretary to the Board shall issue supplementary notice of the GeneralMeeting to announce the extraordinary motions within two working days after receiving the proposed motions.Save for provided above, the Board or Secretary to the Board shall not amend proposals stated in the notice ofgeneral 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 beenstated in the notice of general meeting or that do not comply with provisions of the Articles of Association.Extraordinary general meeting shall not resolve issues that are not contained in the notice.Relationships with investorsThe Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond totheir questions. Investors are received and visited at appropriate times to explain the Group’s business. In addition,questions received from the general public and individual shareholders are answered promptly. In all cases, great careis taken to ensure that no price-sensitive information is disclosed selectively.(xviii) Internal Control
For details of internal control of the Company, please refer to XII. Internal control system development andimplementation during the reporting period and XIV. Internal control self-assessment report or Internal control auditreport of this section.
VI Corporate Governance
XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange ofHong Kong Limited(Continued)(xix) Articles of AssociationOn 3 December 2019, the Company amended the new Articles of Association. The amendments were primarilyrelating to the time for convening general meetings. Memorandum of Association and the amended version of thenew Articles of Association of the Company are available on websites of the Company and Stock Exchange. On 29January 2021, the Company made amendments to its new Articles of Association, and the scope of amendments wasprimarily related to relevant matters of domestic listed foreign shares after the Company’s implementation of changeof listing venue of the domestic listed foreign shares and their listing and trading on the Main Board of The StockExchange of Hong Kong Limited by conversion. The aforementioned amendments were considered and approved atthe 2021 first extraordinary general meeting, the 2021 first class meeting for holders of domestic-listed shares andthe 2021 first class meeting for holders of overseas-listed shares of the Company, and shall be effective on the dateof the listing of the Company’s domestic listed foreign shares converted into overseas-listed foreign shares. Beforethe listing of domestic listed foreign shares converted into overseas-listed foreign shares, the Articles of Associationamended by the Company on 3 December 2019 shall continue to be effective.(xx) Board DiversityOn 21 August 2013, the Company formulated policies to diversify Board members and amended the implementingrules of the nomination committee. Pursuant to the new policies, the nomination committee shall regularly review theBoard diversity policy to improve efficiency and ensure interest thereof.Such policies are summarised as follows:
The Company recognises and embraces the benefits of having a diverse Board, and sees diversity at Board level asan essential element in maintaining a competitive advantage. A truly diverse Board will include and make good useof differences in the talents, skills, regional and industry experience, backgrounds, genders and other qualities of themembers of the Board. These differences will be considered in determining the optimum composition of the Boardand when possible should be balanced appropriately. All appointments of the members of the Board are made onmerit, and in the context of the talents, skills and experience of the Board as a whole.The Nomination Committee of the Company reviews and assesses the composition of the Board and makesrecommendations to the Board on appointment of new directors of the Company. The Nomination Committeealso oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing thecomposition of the Board, the Nomination Committee will consider the benefits of all aspects of diversity, includingwithout limitation those described above, in order to maintain an appropriate range and balance of talents, skills,experience and backgrounds on the Board. In recommending candidates for appointment to the Board, theNomination Committee will consider candidates on merit against objective criteria and with due regard for the benefitsof diversity on the Board.The composition of the Board of the Company is basically diversified. For details, please refer to (iii) Board of thissection.
(xxi) Dividend policyConsidering factors such as the current macroeconomic environment and the Company’s strategic planning, in orderto further optimise its capital structure, reduce its scale of debt, lower its gearing ratio, enhance the Company’sfinancial resilience, satisfy the Company’s capital needs for, among other things, day-to-day production andoperation, and project construction, thereby securing the sustainable and steady development of the Company’s pulpproduction and paper making business, the principal operation of the Company, and better safeguarding the long-term interests of all shareholders, the Company proposed not to pay cash dividend, issue bonus shares or increaseshare capital from reserves.
2021 ANNUAL REPORT
VII Environment and Social Responsibility
I. Major environmental protection mattersAre the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental protectionauthority
√ Yes No
Name of companyor subsidiary
Name of majorpollutantsand specificpollutantsWay of emission
Number ofemissionoutlets
Distribution ofemission outletsEmission concentration
Pollutant emissionstandards implementedTotal emissions
Approvedtotal emissions
ExcessiveemissionsShandong Chenming
Paper HoldingsLimited
SO
Organised
emission
2Chenming Industrial
Park
Power plant no. 1: 5.45mg/m
Power plant no. 2: 4.63mg/m
35mg/m
Power plant no. 1: 11.8tPower plant no. 2: 9.68t
160.32t/yearNo
NOx
Organisedemission
2Chenming Industrial
Park
Power plant no. 1: 38.4mg/m
Power plant no. 2: 39.1mg/m
50mg/m
Power plant no. 1: 83.5tPower plant no. 2: 77.7t
233.91t/yearNo
ParticulatesOrganised
emission
2Chenming Industrial
Park
Power plant no. 1: 0.898mg/m
Power plant no. 2: 0.905mg/m
5mg/m
Power plant no. 1: 1.98tPower plant no. 2: 1.71t
23.39t/yearNo
CODIndirect emission2Chenming Industrial
Park
Sewage outlet no. 1: 169mg/LSewage outlet no. 2: 155mg/L
300mg/LSewage outlet no. 1: 1207t
Sewage outlet no. 2: 1624t
6510.74t/yearNoAmmonia
nitrogen
Indirect emission2Chenming Industrial
Park
Sewage outlet no. 1: 2.69mg/LSewage outlet no. 2: 1.25mg/L
30mg/LSewage outlet no. 1: 18.5t
Sewage outlet no. 2: 13.5t
650.7t/yearNo
Shouguang Meilun Paper
Co., Ltd.
SO
Organised
emission
4Chenming Industrial
Park
Power plant no. 1: 8.58mg/m
Power plant no. 2: 9.9mg/m
Alkali recovery: 1.42mg/m
Lime kiln: 11mg/m
35mg/m
(self-ownedpower plant), 50mg/m
(chemical pulp mill)
Power plant no. 1: 34.3tPower plant no. 2: 34.1tAlkali recovery: 13.7tLime kiln: 15.4t
342.89t/yearNo
NO
x
Organised
emission
4Chenming Industrial
Park
Power plant no. 1: 30.8mg/m
Power plant no. 2: 31.6mg/m
Alkali recovery: 67.4mg/m
Lime kiln: 21.1mg/m
50mg/m
(self-ownedpower plant), 100mg/m
(chemical pulp mill)
Power plant no. 1: 122tPower plant no. 2: 103tAlkali recovery: 631tLime kiln: 29.1t
1202.75t/yearNoParticulatesOrganised
emission
4Chenming Industrial
Park
Power plant no. 1: 0.842mg/m
Power plant no. 2: 0.938mg/m
Alkali recovery: 1.17mg/m
Lime kiln: 1.36mg/m
5mg/m
(self-ownedpower plant), 10mg/m
(chemical pulp mill)
Power plant no. 1: 3.39tPower plant no. 2: 3.05tAlkali recovery: 11tLime kiln: 1.72t
121.979t/yearNo
Wuhan Chenming
Hanyang PaperHoldings Co., Ltd.
SO
Organised
emission
2Within Qianneng
Electric Powerfactory area
130T/h furnace: 5.9mg/m
75T/h furnace: 2.56mg/m
50mg/m
3.523t102.58t/yearNoNO
x
Organised
emission
2Within Qianneng
Electric Powerfactory area
130T/h furnace: 79.58mg/m
75T/h furnace: 41.2mg/m
100mg/m
45.351t205.16t/yearNoParticulatesOrganised
emission
2Within Qianneng
Electric Powerfactory area
130T/h furnace: 2.58 mg/m
75T/h furnace: 2.53mg/m
20mg/m
2.553t41.032t/yearNoCODDirect emission1Total wastewater
discharge
56mg/L80mg/L66.64t184.3t/yearNoAmmonia
nitrogen
Direct emission1Total wastewater
discharge
1.71mg/L8mg/L2.12t17.3t/yearNoJiangxi Chenming Paper
Co., Ltd.
SO
Organised
emission
1Thermal power plant240T/h furnace: 11.6049mg/m
200mg/m
31.584t806t/yearNoNO
x
Organised
emission
1Thermal power plant240T/h furnace: 57.7725mg/m
200mg/m
157.2359t806t/yearNoParticulatesOrganised
emission
1Thermal power plant240T/h furnace: 6.3513mg/m
30mg/m
17.2860t135t/yearNoCODDirect emission1Total wastewater
discharge
44.75mg/L90mg/L372t1260t/yearNoAmmonia
nitrogen
Direct emission1Total wastewater
discharge
1.74mg/L8mg/L14.50t112t/yearNo
VII Environment and Social Responsibility
Name of companyor subsidiary
Name of majorpollutantsand specificpollutantsWay of emission
Number ofemissionoutlets
Distribution ofemission outletsEmission concentration
Pollutant emissionstandards implementedTotal emissions
Approvedtotal emissions
ExcessiveemissionsJilin Chenming Paper
Co., Ltd
SO
Organisedemission
3 (2 in use,
1 spare)Within factory area11.72mg/m
100mg/m
11.97t97t/yearNoNO
x
Organisedemission
3 (2 in use,
1 spare)Within factory area31.68mg/m
100mg/m
32.54t213t/yearNoParticulatesOrganised
emission
3 (2 in use,1 spare)Within factory area10.74mg/m
30mg/m
11.14t51.66t/yearNoCODIndirect emission1Total wastewater
discharge
60.51mg/L90mg/L250.99 t357t/yearNoAmmonia
nitrogen
Indirect emission1Total wastewater
discharge
1.41mg/L8mg/L5.40t34t/yearNoZhanjiang Chenming Pulp
& Paper Co., Ltd.
SO
Organised
emission
5Within factory areaAlkali recovery: 10.119mg/m
Power plant no. 1: 1.605mg/m
Power plant no. 2: 4.333mg/m
Power plant no. 3: 4.990mg/m
Power plant no. 4: 3.996mg/m
Alkali recovery: 200mg/m
1#2#3#4# circulating
fluidised bed boilers:
35mg/m
114.168t620t/yearNoNO
x
Organised
emission
5Within factory areaAlkali recovery: 138.664mg/m
Power plant no. 1: 6.638mg/m
Power plant no. 2: 9.372mg/m
Power plant no. 3: 8.932mg/m
Power plant no. 4: 11.991mg/m
Alkali recovery: 200mg/m
1#2#3#4# circulating
fluidised bed boilers:
50mg/m
1090.244t2169.70t/yearNoParticulatesOrganised
emission
5Within factory areaAlkali recovery: 16.548mg/m
Power plant no. 1: 0.536mg/m
Power plant no. 2: 1.376mg/m
Power plant no. 3: 0.858mg/m
Power plant no. 4: 2.163mg/m
Alkali recovery: 30mg/m
1#2#3#4# circulating
fluidised bed boilers:
10mg/m
123.621t196t/yearNoCODDirect emission1Within factory area44.093mg/L90mg/L797.430t1943t/yearNoAmmonia
nitrogen
Direct emission1Within factory area0.804mg/L8mg/L14.763t43.9t/yearNoTotal
phosphorus
Direct emission1Within factory area0.154mg/L0.8mg/L2.669t21.36t/yearNoTotal nitrogenDirect emission1Within factory area4.383mg/L12mg/L79.204t320.4t/yearNoHuanggang Chenming
Pulp & Paper Co., Ltd.
SO
Organised
emission
1Lime kiln chimney22.9mg/m
80mg/m
16.23t471.289t/yearNoSO
Organised
emission
1Alkali furnace
chimney
8.68mg/m
200mg/m
19.61tNoNO
X
Organised
emission
1Alkali furnace
chimney
174.07mg/m
200mg/m
629.26t1,132.716t/yearNoParticulatesOrganised
emission
1Lime kiln chimney7.51mg/m
200mg/m
4.34t129.07t/yearNoParticulatesOrganised
emission
1Alkali furnace
chimney
10.52mg/m
30mg/m
27.28tNoCODIndirect emission1Total wastewater
discharge
14.08mg/L150mg/L126.41t398.911t/yearNoAmmonia
nitrogen
Indirect emission1Total wastewater
discharge
0.08mg/L14mg/L0.69t39.891t/yearNo
2021 ANNUAL REPORT
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)Construction and operation of facilities for pollution prevention and control
(1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding environmental
protection of the central and local government. The construction of projects strictly adheres to the“threesimultaneities”on environmental protection. In order to ensure pollutants are discharged strictly in accordance withthe requirements under laws and regulations and disposed properly, production and operation strictly comply with thenational Law on the Prevention and Control of Environmental Pollution, Law on the Prevention and Control of WaterPollution, Law on the Prevention and Control of Air Pollution, Action Plan for Prevention and Control of Water Pollutionand Law on the Prevention and Control of Environmental Pollution by Solid Waste and other laws.
(2) The Company and its subsidiaries are equipped with perfect environmental protection treatment facilities, the main
process of sewage treatment is: pre-treatment – anaerobic – aerobic – deep treatment process, which can achieve thestandard discharge of sewage; and each subsidiary is equipped with water reuse system, reuse the treated sewageas much as possible to reduce the pollution of emissions. The Company has built nine sewage treatment plants witha daily treatment capacity of 350,000 cubic meters; and every quarter, government departments regularly visit theCompany to compare the online monitoring data, and the data comparison is qualified.
(3) Each subsidiary
’s organised emission outlets are equipped with an online monitoring system for real-time monitoring.All subsidiaries have their own power plants. Each self-owned plant has its own environmental protection facilitiesfor de-dusting, desulphurisation and denitrification. Denitrification is conducted through SCR or SNCR, whiledesulphurisation is primarily conducted through gypsum desulphurisation (ammonia desulphurisation is adopted inthe self-owned plant of Jiangxi Chenming). The emissions indicators are better than the national and local executionstandards. Other alkali recovery boilers and lime kilns are also in compliance with the emission standards.
Environmental impact assessment of construction projects and other environmental protectionadministrative licensingThe Company has strictly complied with the environmental laws and regulations all along to carry out environmental impactassessment of construction projects. The construction projects are all subject to environmental impact assessment.During the construction process, a reasonable environmental protection project construction plan is formulated and strictlyimplemented. The environmental protection facilities and the main project are designed, constructed and put into operationat the same time. At present, all construction projects put into production have obtained environmental impact assessmentapprovals and acceptance approvalsIn June 2017, the Company and its subsidiaries completed the formalities for new discharge permits in accordance withthe Measures for the Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection, and thedischarge permits of the new projects were renewed according to the environmental protection requirements in a timelymanner.
Emergency plan for emergency environmental incidents
The Company has strictly implemented emergency regulations for emergency environmental incidents, and formulatedvarious emergency plans for emergency environmental incidents according to the technical requirements in the“TechnicalGuidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the EnvironmentalProtection Bureau, and regular emergency training and emergency drills are conducted. Emergency measures in relationto dangerous chemicals are formulated in accordance with the environmental protection requirements. At the same time,necessary emergency supplies are provided with regular inspections and updates.
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)Environmental self-monitoring programme
The Company has strictly complied with self-monitoring laws and regulations, and conducted self-monitoring in accordancewith the environmental protection requirements to establish and perfect the corporate environmental management ledgersand materials. At present, self-monitoring is a combination of manual monitoring and automatic monitoring. At the sametime, qualified units are engaged to conduct regular monitoring. Automatically monitored items include: total wastewaterdischarge (COD, ammonia nitrogen, flow rate, total phosphorus, total nitrogen and PH); power plant, alkali recovery boilersand lime kiln exhaust emissions (sulphur dioxide, nitrogen oxide and smoke). Manually monitored items include: dailymonitoring of COD, ammonia nitrogen, SS, chroma, PH, total phosphorus and total nitrogen indicators. Sewage and othermonitoring items, unorganised exhaust emission, solid waste, and noise at the plant boundary, are monitored on a monthlyor quarterly basis by qualified units engaged in accordance with the local environmental protection requirements in relationto each subsidiary.The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries arepublished on the national key pollution source information disclosure website and the provincial key pollution sourceinformation disclosure websites.Administrative penalty for environmental problems during the reporting periodName of companyor subsidiaryReasons for penaltyViolationsPenalty results
Impact on the productionand operation of listedcompany
Corrective measures of theCompanyJiangxi Chenming
Paper Co., Ltd.
Operation andmaintenance andmanagementirregularities ofonline monitoringequipment
On 17 December 2020, the Nanchang
Municipal Ecological EnvironmentBureau, together with the NorthernJiangxi Commissioner’s Officeand the Environmental InformationCenter, inspected the wastewaterstation of Jiangxi Chenmingand found that there were someoperation and maintenance andmanagement irregularities inrespect of the wastewater onlinemonitoring equipment. Although thenormal operation of the monitoringequipment was not guaranteed, noenvironmental pollution was causedas a result.
The Nanchang
Municipal EcologicalEnvironmentBureau imposedan administrativepenalty of a fineRMB21,000 onJiangxi Chenming inaccordance with thelaw.
The violations did
not result inenvironmentalpollution. JiangxiChenming hascompletedrectification, andpaid the fine ontime. There is nosignificant impacton the productionand operation of thelisted company.
In response to the foregoing
issues, Jiangxi Chenmingimmediately organisedthe rectification of onlinefacilities, strengthened theoperation and maintenancemanagement of onlinedevices, and regularlyconducted comparisonto ensure the normaloperation of the monitoringequipment.
2021 ANNUAL REPORT
VII Environment and Social Responsibility
I. Major environmental protection matters (Continued)Other environmental information to be disclosedThe relevant environmental protection information of the pollutant discharge permit information and the pollutant dischargepermit requirements is announced on the national sewage discharge permit management information platform.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 of the zero position and save electricity consumption.
4. For moisture content of screening unit and squeezing unit of paper machine, the Group reduced out of the press
moisture and the amount of steam used of drying unit.by adjusting the lip plate flow rate, retention rate and linepressure and other measures.
5. The Group strengthened daily energy-saving management by developing a system for temperature of air conditioning
and switching on and off of various power supplies, with tracking and inspection.
6. The Group vigorously developed clean energy and energy recycling projects to reduce carbon emissions. The
construction of Shouguang Chenming 33 MW and Zhanjiang Chenming 24 MW photovoltaic power generationprojects was being promoted, which would reduce carbon emissions by about 68,000 tonnes per year after operation.
7. The Group constructed Shouguang Chemical Pulp, Huanggang Chenming and Zhanjiang Chenming waste heat power
generation projects, and connected to Chenming’s internal power grid nearby, with net power generation capacity of2,400 KW per hour, to reduce part of coal consumption.
8. The Group carried out energy saving and emission reduction at different factories, so that the amount of clean water
was under strict control, the amount of water produced by membrane treatment was increased and the amount ofwastewater recycled was increased.Through a range of emission reduction measures, carbon emissions were reduced by approximately 600,000 tonnes in 2021compared to 2020.Other environmental protection related informationOther environmental protection related information is announced on the Company’s website.
VII Environment and Social Responsibility
II. Social responsibilityFor a long time, the Company always sticks to take“Creating high-quality paper products and sincerely repaying thesociety”as its guiding policy. While pursuing economic benefits of the company, it effectively performs social responsibility,proactively assumes its due responsibility for national and social development, natural environment and for shareholders,staff, customers, suppliers and other stakeholders and achieves organic integration of economic, social and ecologicalbenefits through charitable activities. During the reporting period, the Company continuously made efforts and fulfilled itsduties in good faith in terms of shareholders’benefits, staff interests, environmental protection, aid and poverty alleviationand so on, and was highly praised by all sectors of society. The Company has successively been on the list of“2021Shandong Social Responsibility Enterprise”and“2021 Top 500 Chinese Enterprises for Philanthropy”, and was awardedthe honorary titles of“National Model Workers’ Home”,“The Seventh Shandong Charity Award Shandong Province WorkerPioneer” and other honorary titles.
1. Fulfilment of Shareholders
’ Rights and ResponsibilitiesThe recognition and support of shareholders is the driving force for the Company to promote the sustainable andhealthy development, and it is the Company’s obligation and responsibility to protect the rights and interests ofshareholders. During the reporting period, the Company adopted a combination of on-site and online voting toconvene 5 general meetings strictly in accordance with the Articles of Association, Rules of Procedure of GeneralMeetings to ensure the right of shareholders to know, participate and vote on the Company’s major issues, especiallyfor the minority shareholders. The Company smoothly implemented the 2020 profit distribution scheme with a cashdividend of RMB1.85 (tax inclusive) per 10 shares to ordinary shareholders, and a cash dividend of RMB1.85 (taxinclusive) per 10 simulated ordinary shares converted from the Preference Shares to holders of the second andthird tranches of Preference Shares. Since 2003, the Company has distributed cash dividend to shareholders in 19consecutive years, granting recurring and stable investment returns to all shareholders.
2. Fulfilment of Staff
’s Rights and Responsibilities
The Company sticks to the people-oriented concept and strictly complies with the Labour Law, the Labour ContractLaw, the Women’s Rights Protection Law and other relevant laws and regulations and advocates the policy of equalemployment to fully protect various legitimate interests of the employees. During the reporting period, the Companyestablished Safety Production Responsibility System and strengthened the staff’s awareness of safety production andeffectively protected their personal safety by carrying out activities such as“Safety Production Month”, emergencydrills, and organising the troubleshooting and dealing with potential hazards. The Company improved the evaluationmechanism and performance appraisal system, focusing on employee growth, and carried out multi-level vocationaltraining through online learning platforms, cadre teaching and other methods to continuously improve the professionallevel of employees. In order to improve employees’happiness and enhance corporate cohesion, the Companysent greeting cards and cakes to employees on their birthdays, provided free on-the-job meals to employees, andcontinuously improved the environment of employees’ apartments. The Company enriched employees’spare time bycarrying out billiards games, basketball games, fun sports and games and other activities. Meanwhile, the Companyestablished staff mutual aid foundation and successively helped more than 200 employees in difficulty, concentratingthe huge enterprise development power with care, and promoting the sustainable, healthy and rapid development ofthe enterprise.
2021 ANNUAL REPORT
VII Environment and Social Responsibility
II. Social responsibility(Continued)
3. Fulfilment of environmental protection responsibilities
For a long time, the Company has always been adhering to the concept of green and ecological development,taking environmental protection as a“life project”, thoroughly implementing the national energy conservation andenvironmental protection policy, and unswervingly taking the road of green development, low-carbon developmentand circular development. The Company has invested more than RMB8 billion to actively carry out environmentalprotection governance, and is now leading in all environmental protection indicators. In the paper making industry,the Company has taken the lead in exploring black liquor resource recovery technology, launched the largestalkali recycling project in the domestic paper making industry, and built the first domestic medium-pressure steamgenerator with the utilisation of alkali furnaces which could save 750,000 tonnes of standard coal per annum, with thealkali recovery rate reaching 99.8%; adopts the world’s most advanced osmosis and filtration technology to recyclegreywater, with a conversion rate of up to 75% or above, and the standard of treated greywater is up to drinkingwater standard. At the same time, the Company fully implements clean production, vigorously implements energyconservation and emission reduction, explores the mode of innovative comprehensive utilisation of resources andindustrial circular development, and builds three circular economic ecological chains of“resources-products-renewableresources”, creating a green, clean and low-carbon production system to achieve the goal of“energy saving,consumption reduction, pollution reduction and efficiency improvement”.
4. Fulfilment of Responsibilities for Aid and Poverty Alleviation
While standardising operation, paying taxes, and creating economic value, the Company proactively participates insocial public welfare undertakings, fulfils social responsibility and creates social values. During the reporting period,the Company continuously conduct charitable relief public welfare projects such as“Sunrise Aid for Education”,“Sunset Assistance to Elderly“, and“Aid for the Disabled”, actively took the lead in participating in“Daily Donationwith Compassion”activity in Shouguang City, donated RMB1 million to the Shouguang Federation of Trade Unions,and played a demonstrating and leading role as a leading enterprise. At the same time, the Company fully contributedto the fight against the pandemic and poverty alleviation, and donated 40 tonnes of disinfectant to the WuchuanMunicipal Government to overcome the current difficulties and help fight the pandemic; actively participated in the“Guangdong Poverty Alleviation Day”activity, donated a total of RMB11 million, and made active contributions to thetargeted poverty alleviation work. The Company donated funds to help poor students through the Love EducationFoundation, and donated funds through the Education Alliance Foundation to commend outstanding teachers andcontribute to the construction of the teaching staff.In the future, the Company will remain true to its original aspiration and fulfil its mission, and strive for development.While improving and strengthening the principal business of pulp production and paper making and improvingeconomic benefits, the Company earnestly fulfils its social responsibilities and achieves a benign interaction betweenthe economic value and the social value to create a shared value, and better demonstrate the strength and styleas a leading paper making enterprise in China, and make greater contributions to high-quality economic and socialdevelopment.
VII Environment and Social Responsibility
III. Consolidate and expand the achievements of poverty alleviation and rural revitalisation2021 was the first year to consolidate and expand the achievements of poverty alleviation and achieve effective connectionwith rural revitalisation. Chenming Group was concerned about its hometown, and led its subsidiaries to take the initiativeand the responsibility to alleviate poverty, making positive contributions to the local targeted poverty alleviation work andhelping the poor and vulnerable groups shake off poverty as soon as possible.During the reporting period, Chenming Group actively carried out the“Daily Donation with Compassion”activity, donateda total of RMB1 million to the Charity Federation, supported the communities in pair with Shouguang City No. 3 MiddleSchool, donated love student grants, and helped the construction of local education course. The labour union of the Group,Jilin Chenming, Jiangxi Chenming and other subsidiaries actively applied for municipal-level charitable disability assistance,charitable medical care and other relief funds for employees who became impoverished due to illness, used the Company’smutual aid funds to help them get rid of poverty, and set up documentation for them in respect of poverty alleviation.Zhanjiang Chenming, a subsidiary of the Company, under the guidance and cooperation of the Mazhang Town Committeeand Town Government, conducted field research in 40 administrative villages and communities in the town to learn aboutthe village’s collective economic income, its infrastructure, and its construction of the village party branch; interviewed 429registered households alleviated from poverty in Mazhang Town, established dynamic monitoring and aiding work book toprevent returning to poverty, and dynamic monitored the changes in income and expenditure,“no two worries about foodand clothing, and three guarantees of compulsory education, basic medical care and housing security”, drinking water,employment and other basic information, thereby consolidating the results of poverty alleviation work while maintaining real-time monitoring. The Youth Civilisation Unit Project of Wuhan Chenming, a subsidiary of the Company, actively respondedto the call of the Youth League Municipal Committee and organised a paired assistance activity with the theme of“PovertyAlleviation and Student Aid”. The labour union and the Youth League Committee of Zhuankou Street Office fulfilled a smallwish for impoverished children every quarter, delivering living supplies and school supplies to children from poor families. Inthe next step, the Company will actively participate in“poverty alleviation”and other activities to support poverty alleviationand rural revitalisation & construction, while striving to achieve steady economic performance improvement.
2021 ANNUAL REPORT
VIII Material Matters
I. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period
√ Applicable Not applicable
Undertaking
Party involvedin undertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceUndertaking
made on initialpublic offeringor refinancing
ChenmingHoldingsCo., Ltd
Non-competitiveundertaking
(1) Chenming Holdings Co., Ltd. (
“Chenming Holdings”)shall not engage, whether solely, jointly, or byrepresenting itself or any other persons or companies,and shall not procure its associates (as defined in TheListing Rules of Hong Kong Stock Exchange) to engage,in any business which competes with the business ofthe Company and its subsidiaries (“Chenming Group”
or“we”) directly or indirectly, in any country and regionwhich our business exists (or any part of the world if inany form of electronics business), or in any businessthat directly or indirectly competes with ChenmingGroup’s business which we operate from time to time(including but not limited to any business in the formof sole proprietorship, joint ventures or acquisitions,or holding interests directly or indirectly in suchenterprises, or by any other means); (2) in the eventthat Chenming Holdings is required by its business to,whether solely, jointly, or by representing itself or anyother persons or companies, engage in business whichdirectly or indirectly competes against the business ofChenming Group, or obtain any business opportunitywhich directly or indirectly competes against thebusiness of Chenming Group, it shall endeavour toprocure that Chenming Group shall have priority toobtain the right to operate such business or to obtainsuch business opportunity; (3) if Chenming Holdings isin breach of the abovementioned undertakings, it shallindemnify the Company for any loss caused by suchbreach and the Company shall have the right to acquireall businesses of Chenming Holdings, which directly orindirectly compete with the businesses of our Group, atmarket price or cost price (whichever price is lower); (4)Chenming Holdings shall not make use of its positionas the controlling shareholder (as defined in The ListingRules of Hong Kong Stock Exchange) of our Group tojeopardise the legal interests of Chenming Group andits shareholders with other persons or companies or ontheir behalf.
22 May 2008During the
period whenChenmingHoldingswas themajorshareholderof theCompany
Implementing as
normal
VIII Material Matters
Undertaking
Party involvedin undertaking
Type ofundertakingDetails of undertaking
UndertakingdateTerm
Particulars onthe performanceChenming
HoldingsCo., Ltd
Defectiveproperties
(1) According to the plan on defective properties of the
Company, Chenming Holdings Co., Ltd. (“ChenmingHoldings”) has guaranteed and undertaken that:
according to the application of the Company, fordefective property(ies) owned by the Company andits holding subsidiary company which situated in theadministrative area of Shouguang city, ChenmingHoldings will purchase it (them) and have it(them) beingtransferred to itself pursuant to the law in accordancewith the result of the related asset valuation if theCompany decides to transfer and dispose of it(them)and there is no other transferee; (2) before the Companytransfers and disposes of the defective propertiespursuant to the law, if the Company suffers anyeconomic losses due to the defects of the title (includingbut not limited to damages, penalties and relocationcosts), Chenming Holdings will bear such economiclosses; (3) during the regulatory process taken to thedefective properties of buildings and land of subsidiariesof the Company situated outside the local areas(outside the administrative area of Shouguang city),the economic losses such as penalties or relocationcosts imposed by competent administrative authoritiesto be borne by the subsidiaries arising from defects ofinsufficient title documents shall be paid pursuant to thelaw by Chenming Holdings after verification.
16 January
2008
During the
period whenChenmingHoldingswas themajorshareholderof theCompany
Implementing as
normal
Shandong
ChenmingPaperHoldingsLimited
Specific
remedialmeasuresfor non-publicissuance ofPreferenceShares
In view of the impacts on dilution of current returns for
ordinary shareholders under the Preference Sharesissuance, and in order to implement the Notice ofthe General Office of the State Council on FurtherStrengthening Protection of the Lawful Rights of SmallInvestors in Capital Markets, protect the interestsof ordinary shareholders and provide remedies forthe possible dilution on current returns as a resultof Preference Shares issuance, the Company hasundertaken that it will implement various measuresto ensure the effective utilisation of proceeds raised,which can prevent dilution on current returns effectively,thereby enhancing future returns.
25 March 201624 September
2021
Has beenimplemented
Whether undertakings performed on timeYesIf the undertakings are not performed within
specified period, details of the specific reasonsfor the incomplete performance and the nextsteps should be provided
Not applicable
2. Description on the Company
’s assets and items in meeting original profit forecast and its explanationas there is profit forecast for assets and items of the Company and the reporting period is still withinthe profit forecast period Applicable √ Not applicable
I. Performance of undertakings(Continued)
1. Undertakings made by parties involved in undertakings including the Company
’s beneficial controllers,shareholders, related parties, bidders and the Company during the reporting period or prior periodsbut subsisting to the end of the reporting period(Continued)
2021 ANNUAL REPORT
VIII Material Matters
II. Appropriation of funds of the Company by the controlling shareholder and other relatedparties for non-operating purposes Applicable √ Not applicableThere was no appropriation of funds of the Company by the controlling shareholder and other related parties for non-operating purposes during the reporting period.
III. External guarantees against the rules and regulations Applicable √ Not applicableThere was no external guarantee provided by the Company which was against the rules and regulations during the reportingperiod.IV. Opinions of the Directors regarding the latest“modified auditor’s report” Applicable √ Not applicableV. Opinions of the Board, the Supervisory Committee and independent Directors (if any)
regarding the“modified auditor’s report” for the reporting period issued by the accountants
Applicable √ Not applicableVI. Changes in accounting policies, accounting estimates or correction of major accountingerrors as compared to the financial report for the prior year
Applicable √ Not applicable
There were no retrospective restatements to correct major accounting errors of the Company during the reporting period.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 reporting period, 6 companies were added to the scope of consolidation, including 5 newly established
subsidiaries, namely Shanghai Chenyin Trading Co. Ltd, Nanchang Shengheng Trading Co., Ltd., Nanchang Kunheng
Trading Co., Ltd., Weifang Chendu Equity Investment Partnership (Limited Partnership) and Huanggang Chenming Pulp
& Fiber Trading Co., Ltd., and a subsidiary was acquired not within the definition of business, namely Wuhan Junheng
Property Management Co. Ltd.
During the reporting period, 7 companies were reduced from the scope of consolidation. A subsidiary, Shandong Chenming
Coated Paper Sales Co Ltd, was absorbed into the Group. In order to further focus on the principal business of pulp
production and paper making, divest non-principal business assets and optimise resource allocation, the Company
disposed of 6 subsidiaries, namely Zhanjiang Chenming New-style Wall Materials Co., Ltd, Chengdu Chenming Culture
Communication Co., Ltd., Shandong Chenming Power Supply Holdings Co., Ltd, Shandong Chenming Panels Co., Ltd.,
Shouguang Chenming Cement Co., Limited and Shouguang Chenming Floor Board Co., Ltd.
VIII Material Matters
VIII. Engagement or dismissal of accounting firmsCurrent accounting firm engagedName of the domestic accounting firm
Grant Thornton (Special General Partnership)Remuneration of the domestic accounting firm (RMB’0,000)330Continued term of service of the domestic accounting firm3Name of certified public accountants of the domestic accounting firmLiu Jian and Jiang LeiContinued term of service of certified public accountants of the domestic accounting firm2Whether to appoint another accounting firm during the periodYes √ NoParticulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
√ Applicable Not applicable
During the year, the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal control ofthe Company for 2021. The Company paid RMB800,000 as internal control audit fees during the period. The Companyengaged Guotai Junan Securities Co., Ltd. as its domestic financial advisor due to the change of listing venue of thedomestic listed foreign shares and their listing and trading on the Main Board of The Stock Exchange of Hong Kong Limitedby conversion, and paid RMB1,500,000 as financial advisor fees during the period. The Company engaged Guotai JunanCapital Limited as its overseas financial advisor, and paid RMB500,000 as financial advisor fees during the period.IX. Prospects of withdrawal from listing subsequent to the publication of the annual report
Applicable √ Not applicableX. Matters related to bankruptcy and reorganisation
Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
XI. Material litigation and arbitration
√ Applicable Not applicable
General information
on the litigation
(arbitration)Amount involved
Whetherprovisions aremadeProgressTrial results and impact
Enforcement ofjudgmentDate of disclosureDisclosure index
Statutory demand and
winding-up petition
HK$389,112,432.44YesNo progress during the reporting
period
NoNot applicableNot applicableNot applicable
2021 ANNUAL REPORT
VIII Material Matters
XII. Punishment and rectification
√ Applicable Not applicable
NameTypeReason
Type of investigationpunishmentConclusion (if any)Disclosure dateDisclosure indexJiangxi ChenmingPaper Co., Ltd.
SubsidiaryImproper operation and
management of onlinemonitoring equipment
General administrativepenalties
On 17 December 2020, the Nanchang
Municipal Ecological EnvironmentBureau, together with the NorthernJiangxi Commissioner’s Officeand the Environmental InformationCenter, inspected the wastewaterstation of Jiangxi Chenming PaperCo., Ltd. and found that there weresome operation and maintenanceand management irregularities inrespect of the wastewater onlinemonitoring equipment. Althoughthe normal operation of the testingequipment was not guaranteed, noenvironmental pollution was causedas a result. Hence, Jiangxi Chenmingwas fined RMB21,000 in accordancewith the law.
Not applicableNot applicable
Rectification
√ Applicable Not applicable
In response to the above issues, Jiangxi Chenming immediately organised the rectification of online facilities, strengthenedthe operation and maintenance management of online devices, and regularly conducted comparison to ensure the normaloperation of the monitoring equipment.XIII. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable √ Not applicable
VIII Material Matters
XIV. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Related partytransactions
Relationshipwith theCompany
Types of therelated partytransactions
Subject matter ofthe related partytransactions
Pricingbasis of therelated partytransaction
Related partytransactionprice
Amount ofrelated partytransactions(RMB’0,000)Percentageas the amountof similartransactions
Amount oftransactionsapproved(RMB’0,000)
Whetherexceedingapproved cap
Settlement ofrelated partytransactions
Market priceof availablesimilartransaction
Disclosuredate
DisclosureindexWeifang Sime Darby
West Port Co.,Ltd.
Joint ventureLabour servicePort miscellaneous
fees
Market priceMarket price6,435.196.69%Not applicableNoBank acceptance
and telegraphictransfer
Not applicableNot applicableNot applicableTotal6,435.19Particulars on refund of bulk saleNilEstimated total amount for day-to-day related party transactions to be conducted during the period (by types of
transactions) and their actual implementing during the reporting period (if any)
NilReasons for large differences between transaction price and market reference price (if applicable)Not applicable
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable √ Not applicableThere was no related party transaction of the Company in connection with purchase or sale of assets or equity interestduring the reporting period.
3. Related party transaction connected to joint external investment
Applicable √ Not applicableThere was no related party transaction of the Company connected to joint external investment during the reportingperiod.
2021 ANNUAL REPORT
VIII Material Matters
XIV. Significant related party transactions(Continued)
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 payable to related parties:
Related party
Relationship withthe CompanyReason
Was thereany non-operating
capitaloccupation
Openingbalance(RMB’0,000)
Amountincreasedduring thecurrentperiod(RMB’0,000)
Amount
repaidduring thecurrentperiod(RMB’0,000)Interest rate
Interest forthe currentperiod(RMB’0,000)
Closingbalance(RMB’0,000)Chenming Holdings
Company Limited
The controlling
shareholder
Financialsupport
No0.0045,250.0045,250.00Market
interest rate
160.160.00
Guangdong Nanyue Bank
Co., Ltd.
An associateBorrowingNo171,666.46260,100.00211,666.46Market
interest rate
9,088.74220,100.00Effect of related creditors’rights on the operating results andfinancial position of the Company
Financial support was provided by Chenming Holdings without requiring any pledge or guarantee,
which was a testament to its support and confidence in the future development of the Company,and helped the Company promote project construction and satisfy its needs for working capital.Debts receivable from any related party:
Related party
Relationship withthe CompanyReason
Was there
any non-operating
capitaloccupation
Openingbalance(RMB’0,000)
Amountincreasedduring the
currentperiod(RMB’0,000)
Amountrecoveredduring the
currentperiod(RMB’0,000)Interest rate
Interest forthe current
period(RMB’0,000)
Closingbalance(RMB’0,000)Shouguang Meite
EnvironmentalTechnology Co., Ltd.
A joint ventureFinancial
support
No1,630.720.000.006.00%99.201,729.92Weifang Sime Darby
West Port Co., Ltd.
A joint ventureFinancial
support
No6,847.616,800.005,950.006.00%369.188,066.79Effect of related creditors’rights on the operating results andfinancial position of the Company
The above creditors’rights do not affect the ordinary operation of the Company. Moreover, they havecatered to the needs for development of existing businesses of Shouguang Meite Environmentaland Weifang Sime Darby West Port and lowered the financing costs.
VIII Material Matters
XIV. Significant related party transactions(Continued)
5. Deals with related financial companies
Applicable √ Not applicableThere were no deposits, loans, credits, or other financial services between the Company, its related financialcompanies and the related parties.
6. Deals between financial companies controlled by the company and related parties
Applicable √ Not applicableThere were no deposits, loans, credits, or other financial services between the financial companies controlled by theCompany and the related parties.
7. Other significant related party transactions
Applicable √ Not applicableThere was no other significant related party transaction of the Company during the reporting period.
XV. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable √ Not applicableThere was no custody of the Company during the reporting period.
(2) Contracting
Applicable √ Not applicableThere was no contracting of the Company during the reporting period.
2021 ANNUAL REPORT
VIII Material Matters
XV. Material contracts and implementation(Continued)
1. Custody, contracting and leasing
(Continued)
(3) Leasing
√ Applicable Not applicable
Leasing description:
As a lesseeThe Company has simplified the treatment of short-term leases and leases of low-value assets by notrecognising right-of-use assets and lease liabilities. The charges to expense for short-term leases, low-valueassets and variable lease payments not included in the measurement of lease liabilities during the current periodare as follows:
Unit: RMBItem2021Short-term leases8,342,848.21Total8,342,848.21As a lessorWhere an operating lease is formed:
According to paragraph 58 of the new lease standard, the lessor shall disclose in the notes the followinginformation related to operating leases:
Lease income, and make separate disclosure of income related to variable lease payments not included inlease receipts;
Unit: RMBItem2021Lease income126,934,400.32
VIII Material Matters
XV. Material contracts and implementation(Continued)
1. Custody, contracting and leasing
(Continued)
(3) 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 theremaining years.
Unit: RMBYear2021.12.31Within 1 year after the balance sheet date183,225,224.231 to 2 years after the balance sheet date189,101,114.412 to 3 years after the balance sheet date143,884,024.483 to 4 years after the balance sheet date95,451,939.664 to 5 years after the balance sheet date76,068,806.83More than 5 years after the balance sheet date87,970,613.99Total775,701,723.61Items that bring profit or loss of more than 10% of the total profit of the Company during the reportingperiod Applicable √ Not applicableThe Company did not have any leasing project that brought profit or loss to the Company amounting tomore than 10% of the total profit of the Company during the reporting period.
2021 ANNUAL REPORT
VIII Material Matters
XV. Material contracts and implementation(Continued)
2. Significant guarantees
√ Applicable Not applicable
(1) Guarantees
During the reporting period, the Company provided guarantee to subsidiaries and the guarantee amountincurred was RMB7,760.6715 million. The subsidiaries provided guarantee to their subsidiaries and theguarantee amount incurred was RMB213.0852 million.As at 31 December 2021, the balance of the external guarantee provided by the Company (including theguarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)amounted to RMB10,949.3184 million, representing 57.36% of the equity attributable to shareholders of theCompany as at the end of 2021.
Unit: RMB’0,000External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)Name of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount ofguaranteeGuarantee date
Guaranteeprovided
Type ofguaranteeCollateral
Counter-guaranteeTerm
Fulfilled
or not
Guaranteeto relatedparties or notWeifang Sime DarbyWest Port Co., Ltd
24 July 201717,500.0020 December 201712,000.00General
guarantee
Credit guaranteeShareholders’
pro rataguarantee
10 yearsNoYesZhanjiang Runbao
Trading Co., Ltd.
4 December 202016,000.004 December 202016,000.00Pledge34.64% equity
interest in
WuhanChenming
Equity transfer
payment ofRMB160 million
2 yearsNoNoZhanjiang Dingjin Trading
Co., Ltd.
4 December 202013,558.194 December 202013,558.19PledgePropertiesEquity transfer
payment ofRMB136 million
2 yearsNoNoTotal external guarantees approved during the
reporting period (A1)
0.00Total actual external guarantees during the reporting
period (A2)
0.00
Total external guarantees approved
at the end of the reporting period (A3)
47,058.19Balance of total actual guarantees at the end of the
reporting period (A4)
41,558.19
VIII Material Matters
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
(1) Guarantees
(Continued)
Guarantees between the Company and its subsidiaries
Name of obligee
Date ofthe relatedannouncementdisclosingthe guaranteeamount
Amount ofguaranteeGuarantee date
Guaranteeprovided
Type ofguaranteeCollateral
Counter-guaranteeTerm
Fulfilledor notGuaranteeto relatedparties or
notZhanjiang Chenming Pulp & Paper
Co., Ltd.
30 March 20191,088,000.0027 December
2019
374,138.46General
guarantee
Creditguarantee
5 yearsNoNoZhanjiang Chenming Pulp & PaperCo., Ltd.
27 March 2020150,000.0016 October 202036,240.00General
guarantee
Creditguarantee
5 yearsNoNoShouguang Meilun Paper Co., Ltd.27 March 2020400,000.007 July 2021122,532.06General
guarantee
Creditguarantee
5 yearsNoNoHuanggang Chenming Pulp & Paper
Co., Ltd.
25 March 2021500,000.0019 July 202171,500.00General
guarantee
Creditguarantee
2 yearsNoNoHuanggang Chenming Pulp & Paper
Technology Co., Ltd.
25 March 2021500,000.0010 yearsNoNoJiangxi Chenming Paper Co., Ltd.30 March 2019350,000.0028 June 2019189,580.55General
guarantee
Creditguarantee
5 yearsNoNoJilin Chenming Paper Co., Ltd.30 March 2019150,000.0031 March 202111,658.00General
guarantee
Creditguarantee
5 yearsNoNoWuhan Chenming Hanyang Paper
Holdings Co., Ltd.
18 October 2019100,000.0017 December
2021
3,000.00General
guarantee
Creditguarantee
3 yearsNoNoShandong Chenming Group Finance
Co., Ltd.
25 March 2021300,000.003 yearsNoNoShandong Chenming Financial
Leasing Co., Ltd.
25 March 2021200,000.002 yearsNoNoQingdao Chenming Nonghai Financial
Leasing Co., Ltd.
25 March 202120,000.003 yearsNoNoGuangzhou Chenming Financial
Leasing Co., Ltd.
25 March 202120,000.003 yearsNoNoShandong Chenming Paper Sales Co.,Ltd.
30 March 2019600,000.007 May 202167,358.55General
guarantee
Creditguarantee
5 yearsNoNo
2021 ANNUAL REPORT
VIII Material Matters
Guarantees between the Company and its subsidiaries
Name of obligee
Date ofthe relatedannouncementdisclosingthe guaranteeamount
Amount ofguaranteeGuarantee date
Guaranteeprovided
Type ofguaranteeCollateral
Counter-guaranteeTerm
Fulfilled
or notGuaranteeto relatedparties or
notChenming (HK) Limited25 March 2021100,000.0011 March 202157,493.96General
guarantee
Creditguarantee
3 yearsNoNoShouguang Chenming Import andExport Trade Co., Ltd.
30 March 201950,000.005 yearsNoNoShanghai Chenming Pulp & Paper
Sales Co., Ltd.
30 March 2019300,000.0021 June 202112,000.00General
guarantee
Creditguarantee
5 yearsNoNoShandong Chenming CommercialFactoring Co., Ltd.
25 March 2021100,000.003 yearsNoNoKunshan Tuoan Plastic Products Co.,
Ltd.
25 March 202110,000.003 yearsNoNoShouguang Hongyi DecorativePackaging Co., Ltd.
25 March 20215,000.003 yearsNoNoShouguang Hongxin Printing andPackaging Co., Ltd
25 March 20215,000.003 yearsNoNoShouguang Chenming ModernLogistic Co., Ltd
25 March 20215,000.003 yearsNoNoShandong Grand View Hotel Co., Ltd.25 March 20215,000.003 yearsNoNoShouguang Chenming PapermakingMachine Co., Ltd.
25 March 20215,000.003 yearsNoNoTotal amount of guarantee provided for subsidiaries
approved during the reporting period (B1)
1,775,000.00Total amount of guarantee provided for subsidiaries during the reporting period
(B2)
776,067.15Total amount of guarantee provided for subsidiariesapproved as at the end of the reporting period (B3)
4,963,000.00Total balance of guarantee provided for subsidiaries as at the end of the reporting
period (B4)
945,501.58
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
(1) Guarantees
(Continued)
VIII Material Matters
Guarantees between subsidiariesName of obligee
Date of the relatedannouncementdisclosing theguarantee amount
Amount of guaranteeGuarantee date
Guaranteeprovided
Type ofguaranteeCollateral
Counter-guaranteeTerm
Fulfilledor not
Guaranteeto relatedparties or notChenming (HK) Limited30 March 2019200,000.0028 March 20199,563.55
Generalguarantee
Creditguarantee5 yearsNoNoChenming (HK) Limited30 March 2019100,000.0017 March 20219,308.52
Generalguarantee
Creditguarantee5 yearsNoNoZhanjiang Chenming Pulp &
Paper Co., Ltd.7 August 202012,000.0016 August 202112,000.00
Generalguarantee
Creditguarantee3 yearsNoNoShouguang Meilun Paper Co.,
Ltd.4 December 202020,000.004 December 202020,000.00PledgeProperties2 yearsNoNoShouguang Meilun Paper Co.,
Ltd.4 December 202036,400.004 December 202036,400.00PledgeProperties3 yearsNoNoWuhan Chenming Hanyang
Paper Holdings Co., Ltd.4 December 20203,000.004 December 2020600.00PledgeProperties3 yearsNoNoHuanggang Chenming Pulp &
Paper Co., Ltd.4 December 202020,000.004 December 202020,000.00PledgeProperties3 yearsNoNoTotal amount of guarantee provided for subsidiaries
approved during the reporting period (C1)
0.00Total amount of guarantee provided for subsidiaries during the reporting period (C2)21,308.52Total amount of guarantee provided for subsidiaries
approved as at the end of the reporting period (C3)
391,400.00Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4)107,872.07Total amount of guarantee provided (i.e. sum of the above three guarantee amount)Total amount of guarantee approved during the reporting
period (A1+B1+C1)
1,775,000.00 Total amount of guarantee during the reporting period (A2+B2+C2)797,375.67Total amount of guarantee approved as at the end of the
reporting period (A3+B3+C3)
5,401,458.19 Total balance of guarantee as at the end of the reporting period (A4+B4+C4)1,094,931.84The percentage of total amount of guarantee provided (i.e.
A4+B4+C4) to the net assets of the Company
57.36%
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D)0.00Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E)91,358.55Total amount of guarantee provided in excess of 50% of net assets (F)140,442.93Sum of the above three amount of guarantee (D+E+F)231,801.48For outstanding guarantee contracts, a description of the circumstances under which the guarantee obligation has occurred
during the reporting period or where there is evidence of potential joint and several liability (if any)
NilExternal guarantees against the rules and regulations (if any)Nil
XV. Material contracts and implementation(Continued)
2. Significant guarantees
(Continued)
(1) Guarantees
(Continued)
2021 ANNUAL REPORT
VIII Material Matters
XV. Material contracts and implementation(Continued)
3. Entrusted cash and asset management
(1) Entrusted wealth management
Applicable √ Not applicableThe Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
Applicable √ Not applicableThe Company did not have any entrusted loans during the reporting period.
4. Other material contracts
Applicable √ Not applicableThe Company did not have any other material contracts during the reporting period
VIII Material Matters
XVI. Other matters of significance
√ Applicable Not applicable
1. 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 (B-to-H Conversion)On 29 January 2021 and 9 March 2021, the Company held the seventeenth extraordinary meeting of the ninth sessionof the Board and the 2021 first extraordinary general meeting, the 2021 first class meeting for holders of domestic-listed shares, and the 2021 first class meeting for holders of overseas-listed shares. Proposal on the Domestic ListedForeign Shares of the Company Changing Listing Venue to be Listed and Traded on the Main Board of the StockExchange of Hong Kong Limited by Way of Conversion and related matters were considered and approved.On 29 June 2021, the Company received the CSRC Acceptance Notice of the Application for AdministrativePermission issued by the China Securities Regulatory Commission, stating that it had decided to accept theadministrative license application.On 6 August 2021, the Company disclosed the Announcement of 2020 Dividend Distribution Implementation for AShares and B Shares. The dividend on B Shares would be paid in Hong Kong dollar at the medium exchange rate ofRenminbi to Hong Kong dollar (HK$: RMB = 1: 0.8315) as announced by the People’s Bank of China on 21 June 2021,and a dividend of approximately HK$0.222 per share would be distributed to the holders of B Shares. According tothe relevant mandates from the 2021 first extraordinary general meeting, the 2021 first class meeting for holders ofdomestic-listed shares and the 2021 first class meeting for holders of overseas-listed shares of the Company, thecash option cash consideration was adjusted from HK$3.33/share to HK$3.11/share upon ex-dividend.On 12 November 2021, China Securities Regulatory Commission approved the conversion of 706,385,266 domestic-listed foreign shares into overseas-listed shares by the Company and their listing on the Main Board of the Hong KongStock Exchange.For details, please refer to the relevant announcements (announcement no.: 2021-003, 2021-018, 2021-053, 2021-074and 2021-094) of the Company published on CNINFO on 30 January, 10 March, 1 July, 19 August and 23 Novemberin 2021.
2. Full redemption of 45 million Preference Shares
On 18 February 2021, the Company held the eighteenth extraordinary meeting of the ninth session of the Boardto consider and approve the Resolution on Redemption of the First-tranche Preference Shares, and agreed to theCompany redeeming in full 22.5 million first-tranche Preference Shares, with the redeeming price being the par valueof the Preference Shares (RMB100 per share) plus current resolved payment of but unpaid fixed dividends. Theaccounting date of the redemption amount was the date of distribution of fixed dividends of the Preference Shares.The independent Directors provided independent opinions.On 17 March 2021, the Company entrusted the Shenzhen Branch of China Securities Depository and ClearingCorporation Limited to pay shareholders of the first-tranche Preference Shares a total of RMB2,348,100,000 in full toredeem all the 22.5 million first-tranche Preference Shares in issue of the Company, and such Preference Shares weredelisted from the Shenzhen Stock Exchange on 18 March 2021.
2021 ANNUAL REPORT
VIII Material Matters
XVI. Other matters of significance(Continued)
2. Full redemption of 45 million Preference Shares
(Continued)On 15 July 2021, the Company held the twentieth extraordinary meeting of the ninth session of the Board to considerand approve the Resolution on Redemption of the Second-tranche and Third-tranche Preferred Shares, and agreed tothe Company redeeming in full 10 million second-tranche Preference Shares and 12.5 million third-tranche PreferenceShares, with the redeeming price being the par value of the Preference Shares (RMB100 per share) plus currentresolved payment of but unpaid fixed dividends. The accounting date of the redemption amount was the date ofdistribution of fixed dividends of the Preference Shares. The independent Directors provided independent opinions.On 16 August 2021, the Company entrusted the Shenzhen Branch of China Securities Depository and ClearingCorporation Limited to pay shareholders of the second-tranche Preference Shares a total of RMB1,051,700,000 in fullto redeem all the 10 million second-tranche Preference Shares in issue of the Company, and such Preference Shareswere delisted from the Shenzhen Stock Exchange on 19 August 2021.On 22 September 2021, the Company entrusted the Shenzhen Branch of China Securities Depository and ClearingCorporation Limited to pay shareholders of the third-tranche Preference Shares a total of RMB1,314,625,000 in fullto redeem all the 12.50 million third-tranche Preference Shares in issue of the Company, and such Preference Shareswere delisted from the Shenzhen Stock Exchange on 24 September 2021.For further details, please refer to the relevant announcements (announcement No.: 2021-013, 2021-014, 2021-023,2021-060, 2021-061, 2021-073 and 2021-081) disclosed by the Company on CNINFO on 19 February, 19 March, 16July, 19 August and 24 September in 2021.
3. Completion of resale and delisting for
“17 Chenming Bond 01”The Company implemented the resale of the corporate bonds“17 Chenming Bond 01”as agreed in the Prospectuson the Public Issuance of the Corporate Bonds of Shandong Chenming Paper Holdings Limited to Qualified Investorsin 2017 (phase I) at the resale price of RMB107.28 per bond (including accrued interest of RMB7.28 per bond for thecurrent period and the accrued interest including tax). During the resale declaration period (from 12 July 2021 to 16July 2021), 900,000 bonds were registered for resale. After the resale, the number of outstanding bonds to be resoldwas 0. On 23 August 2021, the Company entrusted the Shenzhen Branch of China Securities Depository and ClearingCorporation Limited with the completion of the payment of principle and interest of the partial resale of“17 ChenmingBond 01”, and such bonds were delisted from the Shenzhen Stock Exchange on the same date.For further details, please refer to the relevant announcements No. 2021-075 and No.2021 – 076 disclosed by theCompany on CNINFO on 19 August 2021.
VIII Material Matters
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2021
Announcement no.Subject matterDate of publicationPublication website and index2021-001Announcement on the Release of Pledge of Shares held by
Shareholders
5 January 2021 http://www.cninfo.com.cn2021-002Announcement on the Release of Pledge and Continued Pledge
of Shares held by Shareholders
19 January 2021 http://www.cninfo.com.cn2021-003Announcement on Resolutions of the Seventeenth Extraordinary
Meeting of the Ninth Session of the Board
30 January 2021 http://www.cninfo.com.cn2021-004Notice of the 2021 First Extraordinary General Meeting, the 2021
First Class Meeting for Holders of Domestic-listed Shares andthe 2021 First Class Meeting for Holders of Overseas-listedShares
30 January 2021 http://www.cninfo.com.cn2021-005Announcement on the Solicitation of Voting Rights by the
Independent Director
30 January 2021 http://www.cninfo.com.cn2021-006Announcement on Receipt of Government Subsidies by Wholly-
owned Subsidiaries
30 January 2021 http://www.cninfo.com.cn2021-007Supplemental Notice on Convening the 2021 First Extraordinary
General Meeting, the 2021 First Class Meeting for Holders ofDomestic Listed Shares and the 2021 First Class Meeting forHolders of Overseas-listed Shares
3 February 2021 http://www.cninfo.com.cn2021-008Announcement on Unusual Movement in Share Trading4 February 2021 http://www.cninfo.com.cn2021-009Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
10 February 2021 http://www.cninfo.com.cn2021-010Announcement on Receipt of High and New Technology
Enterprise Certificate by a Subsidiary
10 February 2021 http://www.cninfo.com.cn2021-011Amendment Announcement on The Proposal on the Domestic
Listed Foreign Shares of the Company Changing ListingVenue to be Listed and Traded on the Main Board of TheStock Exchange of Hong Kong Limited by way of Conversion
18 February 2021 http://www.cninfo.com.cn2021-012Announcement on Unusual Movement in Share Trading18 February 2021 http://www.cninfo.com.cn2021-013Announcement in respect of Resolutions of the Eighteenth
Extraordinary Meeting of the Ninth Session of the Board ofDirectors
19 February 2021 http://www.cninfo.com.cn2021-014The First Indicative Announcement on the Redemption of the
First-tranche Preference Shares
19 February 2021 http://www.cninfo.com.cn2021-015Announcement on Unusual Movement in Share Trading19 February 2021 http://www.cninfo.com.cn
2021 ANNUAL REPORT
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index2021-016The Second Indicative Announcement on the Redemption of the
First-tranche Preference Shares
26 February 2021 http://www.cninfo.com.cn2021-017The Third Indicative Announcement on the Redemption of the
First-tranche Preference Shares
5 March 2021 http://www.cninfo.com.cn2021-018Announcement on Resolution of the 2021 First Extraordinary
General Meeting, the 2021 First Class Meeting for Holders ofDomestic-listed Shares, and the 2021 First Class Meeting forHolders of Overseas-listed Shares
10 March 2021 http://www.cninfo.com.cn2021-019Announcement on the Full Redemption and Delisting of the
First-tranche Preference Shares
12 March 2021 http://www.cninfo.com.cn2021-020The First Indicative Announcement on the Delisting of the First-
tranche Preference Shares
12 March 2021 http://www.cninfo.com.cn2021-021Supplemental Announcement on the Poll Results of 2021 First
Class Meeting for Holders of Overseas-listed Shares
13 March 2021 http://www.cninfo.com.cn2021-022Announcement on the Delisting of the First-tranche Preference
Shares
16 March 2021 http://www.cninfo.com.cn2021-023Announcement on the Redemption Result of the First-tranche
Preference Shares
19 March 2021 http://www.cninfo.com.cn2021-024Announcement in respect of Resolutions of the Eighth Meeting
of the Ninth Session of the Board of Directors
26 March 2021 http://www.cninfo.com.cn2021-025Announcement on Resolutions of the Eighth Extraordinary
Meeting of the Ninth Session of the Supervisory Committee
26 March 2021 http://www.cninfo.com.cn2021-026Notice of 2020 Annual General Meeting26 March 2021 http://www.cninfo.com.cn2021-027Announcement on Appointment of Auditor for 202126 March 2021 http://www.cninfo.com.cn2021-028Announcement on the Adjustment to the Guarantee Amount for
Certain Subsidiaries
26 March 2021 http://www.cninfo.com.cn2021-029Announcement on Carrying out Factoring Business of Accounts
Receivable
26 March 2021 http://www.cninfo.com.cn2021-030Announcement on the Receipt of Financial Assistance and
Related Party Transaction
26 March 2021 http://www.cninfo.com.cn2021-031Announcement on the Resignation of Senior Management of the
Company
26 March 2021 http://www.cninfo.com.cn2021-0322020 Annual Report Summary26 March 2021 http://www.cninfo.com.cn2021-033Announcement on the 2020 Annual Online Performance Briefing26 March 2021 http://www.cninfo.com.cn2021-034Announcement on the Signing of the Convertible Bond Strategic
Cooperation Framework Agreement
26 March 2021 http://www.cninfo.com.cn2021-035Supplemental Announcement in respect of Resolutions of the
Eighth Meeting of the Ninth Session of the Board of Directors
27 March 2021 http://www.cninfo.com.cn2021-036Shandong Chenming Paper Holdings Limited Announcement on
Payment of 2021 Interest with Respect to the First Tranche ofCorporate Bonds Publicly Issued to Qualified Investors in 2018
31 March 2021 http://www.cninfo.com.cn2021-037Announcement on the Release of Pledge of Shares held by
Shareholders
2 April 2021 http://www.cninfo.com.cn2021-0382021 First Quarterly Results Forecast7 April 2021 http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2021
(Continued)
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index2021-0392021 First Quarterly Report20 April 2021 http://www.cninfo.com.cn2021-040Announcement on the Resignation of Employee Representative
Supervisors and the By-election of Supervisors
20 April 2021 http://www.cninfo.com.cn2021-041Announcement on Pledge of Shareholders’ Shares22 April 2021 http://www.cninfo.com.cn2021-042Announcement on the Development of Financing Business and
the Provision of Guarantees
30 April 2021 http://www.cninfo.com.cn2021-043Announcement on Receipt of Government Subsidies by
Subsidiaries
15 June 2021 http://www.cninfo.com.cn2021-044Announcement on Resolutions of 2020 Annual General Meeting19 June 2021 http://www.cninfo.com.cn2021-045Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary
23 June 2021 http://www.cninfo.com.cn2021-046Announcement on Resolutions of the Nineteenth Extraordinary
Meeting of the Ninth Session of the Board of Directors
26 June 2021 http://www.cninfo.com.cn2021-047Announcement on Capital Increase and Introduction of Strategic
Investors of a Majority-owned Subsidiary
26 June 2021 http://www.cninfo.com.cn2021-048Announcement on the Development of Equipment Financing
Business
26 June 2021 http://www.cninfo.com.cn2021-049Announcement on External Investment26 June 2021 http://www.cninfo.com.cn2021-050Announcement in respect of Provision of Guarantee in Favour of
Subsidiaries by a Wholly-owned Subsidiary
26 June 2021 http://www.cninfo.com.cn2021-051Announcement on Receipt of Government Subsidies by the
Subsidiary Zhanjiang Chenming
26 June 2021 http://www.cninfo.com.cn2021-052Announcement on Pledge of Shareholders’ Shares29 June 2021 http://www.cninfo.com.cn2021-053Announcement on Progress of Change of Listing Venue of the
Domestic Listed Foreign Shares and their Listing and Tradingon the Main Board of the Stock Exchange of Hong KongLimited by Conversion
1 July 2021 http://www.cninfo.com.cn2021-054The First Indicative Announcement on Non-adjustment of
Coupon Rate of“17 Chenming Bond 01”and ImplementationMeasures for Resale by Investors
9 July 2021 http://www.cninfo.com.cn2021-055Announcement on the Resignation of Senior Management of the
Company
10 July 2021 http://www.cninfo.com.cn2021-0562021 Interim Results Forecast10 July 2021 http://www.cninfo.com.cn2021-057Announcement on Pledge of Shareholders’ Shares14 July 2021 http://www.cninfo.com.cn2021-058The Second Indicative Announcement on Non-adjustment of
Coupon Rate of“17 Chenming Bond 01”and ImplementationMeasures for Resale by Investors
14 July 2021 http://www.cninfo.com.cn2021-059The Third Indicative Announcement on Non-adjustment of
Coupon Rate of“17 Chenming Bond 01”and ImplementationMeasures for Resale by Investors
15 July 2021 http://www.cninfo.com.cn2021-060Announcement on Resolutions of the Twentieth Extraordinary
Meeting of the Ninth Session of the Board of Directors
16 July 2021 http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2021
(Continued)
2021 ANNUAL REPORT
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index2021-061The First Indicative Announcement on the Matters Relating to
Redeeming the Second and Third Tranches of PreferenceShares
16 July 2021 http://www.cninfo.com.cn2021-062The Second Indicative Announcement on the Matters Relating
to Redeeming the Second and Third Tranches of PreferenceShares
23 July 2021 http://www.cninfo.com.cn2021-063Announcement on the Continued Pledge of Shares held by
Shareholders
24 July 2021 http://www.cninfo.com.cn2021-064The Third Indicative Announcement on the Matters Relating
to Redeeming the Second and Third Tranches of PreferenceShares
30 July 2021 http://www.cninfo.com.cn2021-065Announcement on the Implementation of the Participation of
Preferred Shareholders in the Remaining Profit Distribution for2020
6 August 2021 http://www.cninfo.com.cn2021-066Announcement on the Implementation of Dividend Distribution
to Holders of A Shares and B Shares for 2020
6 August 2021 http://www.cninfo.com.cn2021-067Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
9 August 2021 http://www.cninfo.com.cn2021-068Announcement on Resolutions of the Twenty-first Extraordinary
Meeting of the Ninth Session of the Board
9 August 2021 http://www.cninfo.com.cn2021-069Announcement on the Change and Rotation of the General
Manager
9 August 2021 http://www.cninfo.com.cn2021-070Announcement on the Full Redemption of the Second-tranche
Preference Shares
11 August 2021 http://www.cninfo.com.cn2021-071Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
12 August 2021 http://www.cninfo.com.cn2021-072Announcement on Halt of Trading of the Second Tranche of
Preference Shares
14 August 2021 http://www.cninfo.com.cn2021-073Announcement on Redemption Result and Delisting of the
Second Tranche of Preference Shares
19 August 2021 http://www.cninfo.com.cn2021-074Announcement on Adjustment of Cash Option Cash
Consideration Regarding Change of Listing Venue of theDomestic Listed Foreign Shares and Their Listing and Tradingon the Main Board of the Stock Exchange of Hong KongLimited by Conversion
19 August 2021 http://www.cninfo.com.cn
2021-075Announcement on Payment of 2021 Interest with respect to the
First Tranche of Corporate Bonds Publicly Issued to QualifiedInvestors in 2017
19 August 2021 http://www.cninfo.com.cn2021-076Announcement on“17 Chenming Bond 01”Resale Result andDelisting
19 August 2021 http://www.cninfo.com.cn2021-0772021 Interim Report Summary27 August 2021 http://www.cninfo.com.cn2021-078Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
9 September 2021 http://www.cninfo.com.cn2021-079Announcement on Full Redemption of the Third Tranche of
Preference Shares
10 September 2021 http://www.cninfo.com.cn2021-080Announcement on Trading Halt of the Third Tranche of
Preference Shares
18 September 2021 http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2021
(Continued)
VIII Material Matters
Announcement no.Subject matterDate of publicationPublication website and index2021-081Announcement on the Third Tranche of Preference Shares
Redemption Result and Delisting
24 September 2021 http://www.cninfo.com.cn2021-082Announcement on Resolutions of the Twenty-second
Extraordinary Meeting of the Ninth Session of the Board
24 September 2021 http://www.cninfo.com.cn2021-083Announcement on Capital Increase and Introduction of Strategic
Investors of a Majority-owned Subsidiary
24 September 2021 http://www.cninfo.com.cn2021-084Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
24 September 2021 http://www.cninfo.com.cn2021-085Announcement on the Receipt of Government Grants30 September 2021 http://www.cninfo.com.cn2021-086Announcement on Estimated Results for the Nine Months Ended
30 September 2021
15 October 2021 http://www.cninfo.com.cn2021-0872021 Third Quarterly Report30 October 2021 http://www.cninfo.com.cn2021-088Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
10 November 2021 http://www.cninfo.com.cn2021-089Announcement on Participation in the 2021 Annual Online Group
Reception Day for Investors of Listed Companies in ShandongJurisdiction
13 November 2021 http://www.cninfo.com.cn2021-090Announcement on Resolutions of the Twenty-third Extraordinary
Meeting of the Ninth Session of the Board
16 November 2021 http://www.cninfo.com.cn2021-091Announcement on the provision of financial support to a
shareholding company and connected transaction
16 November 2021 http://www.cninfo.com.cn2021-092Notice of the Second Extraordinary General Meeting of 202116 November 2021 http://www.cninfo.com.cn2021-093Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
20 November 2021 http://www.cninfo.com.cn2021-094Announcement on Change of listing venue of the domestic listed
foreign shares and their listing and trading on the Main Boardof the Stock Exchange of Hong Kong Limited by conversionapproved by China Securities Regulatory Commission
23 November 2021 http://www.cninfo.com.cn2021-095Supplemental Announcement in respect of Provision of
Guarantee in Favour of a Subsidiary for Financing
27 November 2021 http://www.cninfo.com.cn2021-096Announcement on Pledge of Shares and Partial Release of
Pledge of Shares by Shareholders
27 November 2021 http://www.cninfo.com.cn2021-097Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
6 December 2021 http://www.cninfo.com.cn2021-098Announcement in respect of Provision of Guarantee in Favour of
a Subsidiary for Financing
11 December 2021 http://www.cninfo.com.cn2021-099Announcement on Resolutions of the Second Extraordinary
General Meeting of 2021
14 December 2021 http://www.cninfo.com.cn2021-100Announcement on the Development of Equipment Financing
Business
31 December 2021 http://www.cninfo.com.cn
XVI. Other matters of significance(Continued)
4. Information disclosure index for 2021
(Continued)
2021 ANNUAL REPORT
VIII Material Matters
XVII. Matters of significant of subsidiaries of the Company
√ Applicable Not applicable
1. Introduction of strategic investors by Shouguang Meilun
On 25 June 2021, the 19th extraordinary meeting of the ninth session of the Board of the Company considered andapproved the Proposal on Capital Contribution and Introduction of Strategic Investors of a Majority-owned Subsidiary.The Company introduced CCB Financial Assets Investment Company Limited (on behalf of the CCB Investment-Shandong Development Debt-to-Equity Swap Investment Scheme) and SWSC Innovation Investment Co., Ltd. tocontribute capital to Shouguang Meilun. CCB Financial Assets Investment Company Limited (on behalf of the CCBInvestment-Shandong Development Debt-to-Equity Swap Investment Scheme) and SWSC Innovation made a capitalcontribution amount of RMB1.4 billion and RMB0.2 billion, respectively.For details, please refer to the relevant announcements (announcement no.: 2021-046 and 2021-047) of the Companypublished on CNINFO on 26 June 2021.
2. Introduction of strategic investors by Zhanjiang Chenming
On 23 September 2021, the 22nd extraordinary meeting of the ninth session of the Board of the Company consideredand approved the Proposal on Capital Contribution and Introduction of Strategic Investors of a Majority-ownedSubsidiary. The Company introduced Beijing Chuanfa Investment Management Co., Ltd. to contribute capitalamounting to RMB350,000,000 to Zhanjiang Chenming Pulp & Paper Co., Ltd.For further details, please refer to the relevant announcements no. 2021-082 and No. 2021 – 083 disclosed by theCompany on CNINFO on 24 September 2021.
IX Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: shareOpening balanceChange during the reporting period (+/-)Closing balanceAmountPercentageNew issueBonus issue
Convertedfrom reservesOthersSubtotalAmountPercentageI. Restricted shares90,276,3243.03%-5,542,803-5,542,80384,733,5212.84%
1. Shares held by other
domestic investors
90,276,3243.03%-5,542,803-5,542,80384,733,5212.84%Of which: Shares held bydomestic natural persons
90,276,3243.03%-5,542,803-5,542,80384,733,5212.84%II. Non-restricted shares2,893,931,87696.97%5,542,8035,542,8032,899,474,67997.16%
1. RMB ordinary shares1,659,241,36055.60%5,542,8035,542,8031,664,784,16355.79%
2. Domestic listed foreign
shares
706,385,26623.67%706,385,26623.67%
3. Overseas listed foreign shares528,305,25017.70%528,305,25017.70%III. Total number of shares2,984,208,200100.00%2,984,208,200100.00%The reasons for such changes
√ Applicable Not applicable
According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and SeniorManagement of the Listed Companies of Shenzhen Stock Exchange, during the reporting period, 18,750restricted RMB ordinary shares (A shares) held by Supervisors who resigned became non-restricted shares; and179,238 unrestricted RMB ordinary shares (A shares) held by the Senior Management who resigned becamerestricted shares.On 15 July 2020, 79,600,000 A shares granted to the participants under the 2020 Restricted A Shares Incentive
Scheme of the Company were issued and listed. From 1 January 2021, the Shenzhen Branch of ChinaSecurities Depository and Clearing Corporation Limited had adjusted the calculation base of the transfer quotafor Directors and Senior Management granted restricted shares, and 5,703,291 restricted RMB ordinary shares (Ashares) became non-restricted shares.Approval of changes in shareholding Applicable √ Not applicableTransfer of shares arising from changes in shareholding Applicable √ Not applicable
2021 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
I. Changes in shares(Continued)
1. Changes in shares
(Continued)
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earningsper share and net assets per share attributable to ordinary shareholders of the Company for the latest year andthe latest period Applicable √ Not applicableOther information considered necessary by the Company or required by the securities regulatory authorities to bedisclosed Applicable √ Not applicable
2. Changes in restricted shares
√ Applicable Not applicable
Unit: share
Name of shareholders
Restrictedshares at thebeginning ofperiod
Restrictedshares releasedduring theperiod
Restrictedshares increasedduring the
period
Restrictedshares at theend of periodReason for restrictionDate of release from restrictionChen Hongguo28,310,0335,000,00023,310,033Restricted share of the participants
of the Share Incentive SchemeLocked-up shares of Directors,Supervisors and SeniorManagement
In accordance with the equity incentiveplan (draft) and relevant requirementsfor shares held by Directors,Supervisors and Senior ManagementLi Xueqin3,645,991645,9913,000,000Restricted share of the participants
of the Share Incentive SchemeLocked-up shares of Directors,Supervisors and SeniorManagement
In accordance with the equity incentive
plan (draft) and relevant requirementsfor shares held by Directors,Supervisors and Senior ManagementLi Weixian2,060,90057,3002,003,600Restricted share of the participants
of the Share Incentive SchemeLocked-up shares of Directors,Supervisors and SeniorManagement
In accordance with the equity incentive
plan (draft) and relevant requirementsfor shares held by Directors,Supervisors and Senior ManagementLi Dong75,00018,75056,250Locked-up shares of Directors,
Supervisors and SeniorManagement
Under relevant requirements for shares
held by Directors, Supervisors andSenior ManagementGeng Guanglin2,537,712179,2382,716,950Restricted share of the participants
of the Share Incentive SchemeLocked-up shares of Directors,Supervisors and SeniorManagement
In accordance with the equity incentive
plan (draft) and relevant requirementsfor shares held by Directors,Supervisors and Senior ManagementTotal36,629,636179,2385,722,04131,086,833
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
3. Existing staff shares
Applicable √ Not applicable
2021 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: shareTotal number of ordinary
shareholders as at the endof the reporting period
183,981, of which 161,495were holders of A shares,22,152 were holders ofB shares and 334 wereholders of H shares
Total number of ordinaryshareholders as at theend of the month prior tothe publication date ofthis annual report
175,747, of which 153,135were holders of A shares,22,279 were holders ofB shares and 333 wereholders of H shares
Total number of holdersof Preference Shares withrestored voting right as atthe end of the reportingperiod (if any) (Note VIII)
0Total number of holdersof Preference Shares withrestored voting right as atthe end of the month priorto the disclosure date ofthe annual report (if any)(Note VIII)
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Name of shareholders
Nature ofshareholders
Percentageofshareholding
Number ofshares heldat the end ofthe reporting
period
Changes(increase or
decrease)during the
reporting
period
Number ofrestrictedshares held
Number of non-restricted shares
heldShare pledged or locked-up
Status of
sharesNumberCHENMING HOLDINGS COMPANY LIMITEDState-owned
legal person
15.32%457,322,91900457,322,919Pledged255,150,000HKSCC NOMINEES LIMITEDOverseas legal
person
12.52%373,506,375147,2500373,506,375CHENMING HOLDINGS (HONG KONG) LIMITEDOverseas legal
person
12.20%364,131,56300364,131,563Chen HongguoDomestic natural
person
1.04%31,080,044023,310,0337,770,011SHANDONG SUN HOLDINGS GROUP CO., LTD.Domestic non-
state-ownedlegal person
0.55%16,387,81716,387,817016,387,817VANGUARD TOTAL INTERNATIONAL STOCK
INDEX FUND
Overseas legal
person
0.50%14,771,9450014,771,945HONG KONG SECURITIES CLEARING COMPANY
LIMITED
Overseas legal
person
0.47%14,060,971-20,107,359014,060,971VANGUARD EMERGING MARKETS STOCK INDEX
FUND
Overseas legal
person
0.47%14,013,646891,700014,013,646GOLDMAN SACHS INTLOverseas legal
person
0.39%11,687,81911,678,100011,687,819MORGAN STANLEY & CO. INTERNATIONAL PLCOverseas legal
person
0.37%11,041,88310,822,774011,041,883Strategic investors or general legal persons who
become the top ten shareholders due to theplacement of new shares
NilRelated party relationship or acting in concert
among the above shareholders
A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder,
Chenming Holdings Company Limited, which is a state-owned legal person; A shareholder, Chen Hongguo, is the legal representative,
chairman and general manager of Chenming Holdings Company Limited. Save for the above, it is not aware that any other shareholders of
tradable shares are persons acting in concert. It is also not aware that any other shareholders of tradable shares are related to each other.Explanation of the aforementioned shareholders’
entrusted/entrusted voting rights and waiver ofvoting rights
NilSpecial explanation for designated repurchase
accounts among the top ten shareholders
Nil
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
1. Total number of shareholders and shareholdings
(Continued)Shareholdings of the top ten non-restricted ordinary shareholders
Name of shareholder
Number of non-restricted ordinaryshares held asat the end of thereporting periodClass of shares
Class of sharesNumberCHENMING HOLDINGS COMPANY LIMITED457,322,919RMB ordinary shares457,322,919HKSCC NOMINEES LIMITED373,506,375Overseas listed
foreign shares
373,506,375CHENMING HOLDINGS (HONG KONG) LIMITED210,717,563Domestic listed
foreign shares
210,717,563153,414,000Overseas listed
foreign shares
153,414,000SHANDONG SUN HOLDINGS GROUP CO., LTD.16,387,817RMB ordinary shares16,387,817VANGUARD TOTAL INTERNATIONAL STOCK
INDEX FUND
14,771,945Domestic listed
foreign shares
14,771,945HONG KONG SECURITIES CLEARINGCOMPANY LIMITED
14,060,971RMB ordinary shares14,060,971VANGUARD EMERGING MARKETS STOCKINDEX FUND
14,013,646Domestic listed
foreign shares
14,013,646GOLDMAN SACHS INTL11,687,819Domestic listed
foreign shares
11,687,819MORGAN STANLEY & CO. INTERNATIONALPLC
11,041,883Domestic listed
foreign shares
11,041,883GUOTAI JUNAN SECURITIES(HONGKONG)LIMITED
10,513,163Domestic listed
foreign shares
10,513,163Related party relationship or acting in concertamong the top ten shareholders of non-restricted shares, and between the top tenshareholders of non-restricted shares and thetop ten shareholders
A shareholder, Chenming Holdings (Hong Kong) Limited, whichis an overseas legal person, is a wholly-owned subsidiary of ashareholder, Shouguang Chenming Holdings Company Limited,which is a state-owned legal person. Save for the above, it is notaware that any other shareholders of tradable shares are personsacting in concert. It is also not aware that any other shareholdersof tradable shares are related to each other.Securities margin trading of top ten ordinary
Shareholders
Chenming Holdings Company Limited held 457,322,919 RMBordinary shares, of which 368,522,919 shares were held throughordinary account and 88,800,000 shares were held through creditguarantee security account.Shandong Sun Holdings Group Co., Ltd. held 16,387,817 RMBordinary shares, of which no share was held through ordinaryaccount and 16,387,817shares were held through creditguarantee security account.
2021 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
1. Total number of shareholders and shareholdings
(Continued)Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinaryshareholders and top 10 non-restricted ordinary shareholders of the Company Yes √ NoThe top 10 ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company did not enter intoany agreed repurchase transaction during the reporting period.
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterpriseType of controlling shareholder: legal personName of controlling shareholders
Legal representative/Personin charge of the unitDate of establishmentEnterprise codePrincipal businessCHENMING HOLDINGS COMPANY LIMITEDChen Hongguo30 December 200591370783783485189QInvestment in paper making, electricity, heat
and arboriculture by its own capitalShareholdings of controlling shareholders who have control or hold shares in otherdomestic or overseas listed companies during the reporting period
Save for the Company, Chenming Holdings Company Limited does not have control over or hold any equityinterest of other domestic or overseas listed companies.Change of controlling shareholders during the reporting period Applicable √ Not applicableThere was no change in the controlling shareholders of the Company during the reporting period.
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
3. Beneficial controller of the Company and persons acting in concert
Nature of the beneficial controller: Regional state-owned assets administration authorityType of the beneficial controller: legal personName of beneficialcontroller
Legalrepresentative/Person in chargeof the unit
Date ofestablishmentEnterprise codePrincipal businessState-owned Assets
Supervision andAdministration Bureau ofShouguang City
N/A1 August 1991N/AResponsible for the
management and capitaloperation of the state-owned assets of enterprisesand business units inShouguang city.Shareholdings of beneficialcontroller who has controlor holds shares in otherdomestic or overseaslisted companies duringthe reporting period
Save for the Company, State-owned Assets Supervision and Administration Officeof Shouguang City is also the beneficial controller of Shandong Molong PetroleumMachinery Co. Ltd.
2021 ANNUAL REPORT
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
3. Beneficial controller of the Company and persons acting in concert
(Continued)Change of beneficial controller during the reporting period Applicable √ Not applicableThere was no change in the beneficial owner of the Company during the reporting period.Chart illustrating the relationship between the Company and the beneficial controller
15.32%
12.20%
100%
45.21%
100%
Administration Commission of Shouguang CityShandong Shouguang Jinxin InvestmentDevelopment Holdings Group Co., Ltd.
Shandong Chenming Paper Holdings Limited
Chenming Holdings Company Limited
Chenming Holdings(Hong Kong) Limited
Beneficial controller controlling the Company through trust or other asset management method Applicable √ Not applicable
4. The number of shares pledged by the controlling shareholder or the largest shareholder of the
Company and persons acting in concert with it reaches 80% of the number of shares held by them inaggregate
Applicable √ Not applicable
IX Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers(Continued)
5. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable √ Not applicable
6. Restrictions on decrease in shareholding by controlling shareholders, beneficial controller,
reorganising party and other undertaking parties Applicable √ Not applicable
IV. The implementation of share repurchase during the reporting period
Progress of share repurchase Applicable √ Not applicableProgress of decrease in the holding of repurchased shares by way of bidding
Applicable √ Not applicable
2021 ANNUAL REPORT
X Preference Shares
√ Applicable Not applicable
I. Issue and listing of Preference Shares during the past three years at the end of the reportingperiod
√ Applicable Not applicable
MethodIssue date
Issueprice (RMB/share)
Coupon
rateIssue size(share)Listing date
With listingpermission(share)Delisting date
Information ofuse of proceeds
Informationof changes toproceedsPrivate16 March 20161004.36%22,500,0008 April 201622,500,00017 March 2021 http://www.cninfo.com.cnNot applicablePrivate16 August 20161005.17%10,000,00012 September 201610,000,00019 August 2021 http://www.cninfo.com.cnNot applicablePrivate21 September 20161005.17%12,500,00024 October 201612,500,00024 September 2021 http://www.cninfo.com.cnNot applicable
X Preference Shares
II. Profit distribution for Preference Shares
√ Applicable Not applicable
Profit distribution for preference shares during the reporting period
√ Applicable Not applicable
Date of Distribution
Dividend
ratio
Distributedamount (RMB)(tax inclusive)
Whether it is incompliance with theconditions and therelevant proceduresof distribution
Way ofdividendpayment
Whetherit was anaccumulateddividend
Whether itparticipatesin distributionof remainingprofit17 March 20214.36%98,100,000.00YesCashNoNo12 August 20214.84%108,965,968.66YesCashNoYes16 August 20215.17%51,700,000.00YesCashNoNo22 September 20215.17%64,625,000.00YesCashNoNoAny adjustment or change in profit distribution policy for preference shares Yes √ NoBoth earnings of the Company and retained profit of the parent company are positive during the reporting period butwithout profit distribution for preference shares Applicable √ Not applicableExplanation on other matters regarding distribution for preference shares
√ Applicable Not applicable
Holders of Preference Shares participate in profit distribution in two portions, namely the fixed dividend distributed basedon a fixed dividend rate and the distribution of retained earnings realised for the year.
2021 ANNUAL REPORT
X Preference Shares
II. Profit distribution for Preference Shares(Continued)
1. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the PreferenceShares at fixed dividend rate if there are distributable profits after making good losses and the contribution toreserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends onthe Preference Shares in accordance with the issuance plan under the framework and principles considered andapproved in the general meeting in respect of the Preference Shares. The general meeting of the Company has theright to cancel part of or all of the current dividends on the Preference Shares. However, when the general meetingof the Company will consider the cancellation of part of or all of the current dividends on the Preference Shares, theCompany shall inform the holders of Preference Shares at least 10 working days before the date of dividend paymentin accordance with the requirements of the related authorities.
2. Participation in the distribution of retained earnings realised for the year
Holders of Preference Shares participate in the distribution of the retained earnings through receipt of cash whichis non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fundaccording to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of Preference Shares canalso participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: theretained earnings for the year arises from net profit attributable to owners of the parent company on a consolidatedbasis upon distribution of relevant fixed income to holders of financial instruments such as the Preference Shareswhich may be classified under equity. 50% of the retained earnings shall be distributed to holders of PreferenceShares and ordinary shareholders. Holders of Preference Shares shall participate in the distribution of the retainedearnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retainedearnings by receiving cash dividends or dividends on ordinary shares.
X Preference Shares
III. Repurchase or conversion
√ Applicable Not applicable
1. Repurchase
√ Applicable Not applicable
Start date ofthe repurchaseperiod
End dateof therepurchaseperiodRepurchasePrice(RMB/share)Pricing principle
Numberof sharesrepurchased
Proportion
of sharesrepurchased
Total amountof funds forrepurchase (RMB)
Term of therepurchase
of shares
Source offunds for therepurchase
Entity toexercise therepurchaseoption17 March 202117 March 2021104.36In accordance with the Prospectus of
Non-public Issuance of PreferenceShares, the redemption price of“Chenming You 01”shall be thepar value of the Preference Shares(RMB100 per share) plus the amountof dividend declared but not yet paidfor the current period (i.e. RMB4.36per share)
22,500,000100.00%2,348,100,000.00N/ASelf-owned
funds
The Company
16 August 202116 August 2021105.17In accordance with the Prospectus of
Non-public Issuance of PreferenceShares, the redemption price of“Chenming You 02”shall be thepar value of the Preference Shares(RMB100 per share) plus the amountof fixed dividend declared but notyet paid for the current period (i.e.RMB5.17 per share)
10,000,000100.00%1,051,700,000.00N/ASelf-owned
funds
The Company
22 September 202122 September
2021
105.17In accordance with the Prospectus of
Non-public Issuance of PreferenceShares, the redemption price of“Chenming You 03”shall be thepar value of the Preference Shares(RMB100 per share) plus the amountof fixed dividend declared but notyet paid for the current period (i.e.RMB5.17 per share)
12,500,000100.00%1,314,625,000.00N/ASelf-owned
fundsThe Company
Impact on the capital structure of the
Company
As at the end of the reporting period, the total number of the Preference Shares of the Company changed from 45 million shares to 0 shares.Procedures in respect of the repurchaseof Preference Shares
On 13 February 2015, the Resolution on the Company’s Proposal on the Non-public Issue of Preference Shares was considered and approved at the 2015 firstextraordinary general meeting of the Company. According to the Company’s proposal on the non-public issue of Preference Shares, with the authority of thegeneral meeting and under the framework and principles approved by the general meeting, the Board shall handle every matter related to the redemption with fullpower subject to related requirements, approval under laws and regulations as well as market conditions.
On 18 February 2021, the Resolution on Redemption of the First-tranche Preference Shares was considered and approved at the 18th extraordinary meeting of theninth session of the Board of the Company. The independent Directors issued independent opinions, agreeing the Company to redeem“Chenming You 01” in full.
On 15 July 2021, the Resolution on Redemption of the Second – and Third – tranche Preference Shares was considered and approved at the 20th extraordinary
meeting of the ninth session of the Board of the Company. The independent Directors issued independent opinions, agreeing the Company to redeem“ChenmingYou 02”and“Chenming You 03” in full.
2021 ANNUAL REPORT
X Preference Shares
III. Repurchase or conversion(Continued)
2. Conversion
Applicable √ Not applicableThere was no conversion during the reporting period.
IV. Resumption and exercise of voting rights
1. Resumption and exercise of voting rights
Applicable √ Not applicable
2. Shareholders and beneficial owner involved in resumption of voting rights of Preference Shares
Applicable √ Not applicableV. Accounting policy and reasons thereof
√ Applicable Not applicable
Pursuant to the requirements of Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement ofFinancial Instruments, Accounting Standard for Business Enterprises No. 37 – Presentation of Financial Instruments, andProvisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, thePreference Shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
XI Bonds
√ Applicable Not applicable
I. Enterprise bonds Applicable √ Not applicableThe Company had no enterprise bonds during the reporting period.
II. Corporate Bonds
√ Applicable Not applicable
1. Basic information on Corporate Bonds
Unit: RMBName of bond
BondabbreviationBond codeIssue dateValue date
Maturitydate
Outstandingamount of thebondsInterestratePaymentmethod
TradingvenueThe public issuance of the Corporate Bonds of ShandongChenming Paper Holdings Limited to qualifiedinvestors in 2018 (phase I)
18 ChenmingBond 01
11264129 March
2018
2 April 20182 April 2023350,000,000.007.60%Interest is
paid annually.The principal
amount willbe paid onthe maturity
date.
Shenzhen
StockExchange
Investor eligibility arrangement (if any)Online subscription: Public investors with A share security account opened under China Securities
Depository and Clearing Co., Ltd. Offline subscription: Institutional investors with A share securityaccount opened under China Securities Depository and Clearing Co., Ltd.Applicable trading mechanismDual listing and trading on the centralised bidding system and the Integrated Negotiated Trading Platform
of the Shenzhen Stock ExchangeWhether there are delisting risks (if any) and counter-measuresNoOverdue and outstanding bonds Applicable √ Not applicable
2021 ANNUAL REPORT
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
3. Particulars of intermediary organisations
Bond Name
Name of theintermediaryorganisationBusiness address
Name ofsigningaccountant
Contact person ofthe intermediaryorganisationContact no.The public issuance of
the Corporate Bonds ofShandong ChenmingPaper Holdings Limitedto qualified investors in2018 (phase I)
GF Securities
Co., Ltd.
37th Floor, TaikangInsurance Building,No. 429 NanquanNorth Road, PudongNew Area, Shanghai
N/AJiang Chuan021-38003800-
3705
China ChengxinSecuritiesRating Co.,Ltd.
Building 6, YinheSoho, No. 2Nanzhugan Hutong,ChaoyangmenneiStreet, DongchengDistrict, Beijing
N/ASun Shu010-66428877
Beijing
ZhonglunW&D LawFirm
19th Floor, Jintai
Building, No. 1Xibahe South Road,Chaoyang District,Beijing
N/AYao Zhengwang010-64402232
Ruihua China
CPAs (SpecialOrdinaryPartnership)
Corporate Square,
35 Finance Street,Xicheng District,Beijing
Wang
Zongpeiand ZhaoYanmei
Wang Zongpei010-88091190
Change of the above intermediary organisations during the reporting period Yes √ No
XI Bonds
II. Corporate Bonds(Continued)
4. Use of proceeds
Unit: RMB
Bond Name
Total amountof proceeds
Utilisedamount
Unutilisedamount
Operation of specialaccount for the proceeds
Rectificationof irregularitiesin the use ofproceeds (ifany)
Is the useof proceedsconsistentwith the useof proceedsguaranteed
under theprospectus,proposed use
of proceeds
and otheragreementThe public issuance of the Corporate
Bonds of Shandong Chenming PaperHoldings Limited to qualified investorsin 2018 (phase I)
900,000,000.00900,000,000.000.00Special account for
proceeds is used for thedeposit of special capital
from bonds.
NilConsistent
Proceeds to be used for construction projects Applicable √ Not applicableChange in the use of proceeds from the above bonds during the reporting period Applicable √ Not applicable
5. Adjustment of credit rating results during the reporting period
Applicable √ Not applicable
2021 ANNUAL REPORT
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
The repayment guarantee measures of“18 Chenming Bond 01”include: setting up a special repayment workinggroup; opening special accounts for proceeds; engaging GF Securities as the bond custodian of the bonds, andentering into the bond custody agreement with GF Securities to systematically guarantee the timely and full repaymentof bond principal and interests; formulating bondholders’meeting rules for the bonds and making reasonable andsystematic arrangements to guarantee the timely and full repayment of bond principal and interests; undertaking tomake strict information disclosure. The Company has designated the planning and finance department to be in chargeof the coordination of bond repayment.The Company has set up special accounts for bonds with Bank of China Limited, Shandong Branch for the bonds,and entered into the Agreement on the Supervision of Special Accounts for Corporate Bonds with Bank of ChinaLimited, Shandong Branch (as the supervising bank of the special accounts) and GF Securities, stipulating that thespecial accounts shall be used specifically for receipt, deposit, transfer and repayment of principal and interest ofbond proceeds, so as to ensure that the bond proceeds are used strictly in accordance with the provisions of theprospectuses, and to ensure the timely collection and transfer of bond repayments. The Company has engaged GFSecurities as the bond custodian for the bonds in accordance with the Administrative Measures and entered intothe Bond Custody Agreement with GF Securities. The Company has strictly fulfilled its obligation of informationdisclosure.There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures,which were consistent with relevant commitments as set out in the prospectuses, during the reporting period.
XI Bonds
III. Non-financial corporate debt financing instruments
√ Applicable Not applicable
1. Basic information of non-financial corporate debt financing instruments
Unit: RMBName of bond
BondabbreviationBond codeIssue dateValue date
Maturity
date
Outstandingamount of the
bonds
Interest
ratePayment methodTrading venue2017 first tranche
of medium-termnotes of ShandongChenming PaperHoldings Limited
17 Lu ChenmingMTN001
1017790012017-07-112017-07-12N/A1,000,000,000.008.97%Interest on
perpetualmedium-termnotes is paidannually and theprincipal is repaidupon maturity.
Inter-bank bond market
2019 first tranche
of medium-termnotes of ShandongChenming PaperHoldings Limited
19 Lu ChenmingMTN001
1019009302019-07-152019-07-172022-07-17700,000,000.006.5%Interest is paid
annually and theprincipal is repaidupon maturity.
Inter-bank bond market
2019 second tranche
of medium-termnotes of ShandongChenming PaperHoldings Limited
19 Lu Chenming
MTN002
1019010582019-08-092019-08-132022-08-13500,000,000.006.5%Interest is paid
annually and theprincipal is repaidupon maturity.
Inter-bank bond market
Investor eligibility arrangement (if any)NilApplicable trading mechanismInter-bank bond market trading mechanismWhether there are delisting risks (if any) and countermeasuresN/AOverdue and outstanding bonds Applicable √ Not applicable
2. Triggering and execution of issuer
’s or investor’s option clause or investor protection clause
Applicable √ Not applicable
2021 ANNUAL REPORT
XI Bonds
III. Non-financial corporate debt financing instruments(Continued)
3. Particulars of intermediary organisations
Bond Name
Name of the intermediaryorganisationBusiness address
Name of signingaccountant
Contact person ofthe intermediaryorganisationContact no.2017 first tranche of medium-term notes of ShandongChenming Paper Holdings Limited
China Galaxy Securities
Co., Ltd
11/F, Tower C, Corporate Square 35Finance Street, Xicheng District, Beijing
N/ADong Desen010-66568876Hengfeng Bank Co., Ltd.No. 248 South Street, Zhifu District, Yantai,
Shandong Province
N/AWang Wanjun010-83571412China ChengxinSecurities RatingCo., Ltd.
Building 6, Yinhe Soho, No. 2 NanzhuganHutong, Chaoyangmennei Street,Dongcheng District, Beijing
N/ASun Shu010-66428877Beijing Zhonglun W&DLaw Firm
19th Floor, Jintai Building, No. 1 XibaheSouth Road, Chaoyang District, Beijing
N/AYao Zhengwang010-64402232Ruihua China CPAs(Special OrdinaryPartnership)
Corporate Square, 35 Finance Street,Xicheng District, Beijing
Wang Zongpei andZhao Yanmei
Wang Zongpei010-880911902019 first tranche of medium-term notes of Shandong
Chenming Paper Holdings Limited
China Minsheng Banking
Corp., Ltd.
No. 2 Fuxingmennei Avenue, Xicheng
District, Beijing
N/ASu Dawei010-56366523Postal Savings Bank of
China Co., Ltd.
No. 3 Finance Street, Xicheng District,
Beijing
N/AZhu Weiliang010-68857403China Chengxin
Securities RatingCo., Ltd.
Building 6, Yinhe Soho, No. 2 Nanzhugan
Hutong, Chaoyangmennei Street,Dongcheng District, Beijing
N/ASun Shu010-66428877Beijing Zhonglun W&D
Law Firm
19th Floor, Jintai Building, No. 1 Xibahe
South Road, Chaoyang District, Beijing
N/AYao Zhengwang010-64402232Ruihua China CPAs
(Special OrdinaryPartnership)
Corporate Square, 35 Finance Street,
Xicheng District, Beijing
Liu Jian and Jiang
Lei
Liu Jian010-880911902019 second tranche of medium-term notes of
Shandong Chenming Paper Holdings Limited
China Minsheng Banking
Corp., Ltd.
No. 2 Fuxingmennei Avenue, Xicheng
District, Beijing
N/ASu Dawei010-56366523Postal Savings Bank of
China Co., Ltd.
No. 3 Finance Street, Xicheng District,
Beijing
N/AZhu Weiliang010-68857403China Chengxin
Securities RatingCo., Ltd.
Building 6, Yinhe Soho, No. 2 Nanzhugan
Hutong, Chaoyangmennei Street,Dongcheng District, Beijing
N/ASun Shu010-66428877Beijing Zhonglun W&D
Law Firm
19th Floor, Jintai Building, No. 1 Xibahe
South Road, Chaoyang District, Beijing
N/AYao Zhengwang010-64402232Ruihua China CPAs
(Special OrdinaryPartnership)
Corporate Square, 35 Finance Street,
Xicheng District, Beijing
Liu Jian and Jiang
Lei
Liu Jian010-88091190Change of the above intermediary organisations during the reporting period Yes √ No
XI Bonds
III. Non-financial corporate debt financing instruments(Continued)
4. Use of proceeds
Unit: RMB
Bond Name
Total amount ofproceedsUtilised amount
Unutilisedamount
Operation ofspecial account forthe proceeds
Rectificationofirregularitiesin the use ofproceeds (ifany)
Is the useof proceedsconsistentwith the useof proceedsguaranteedunder theprospectus,proposed useof proceedsand otheragreement2017 first tranche
of medium-termnotes of ShandongChenming PaperHoldings Limited
1,000,000,000.001,000,000,000.000.00Special account for
proceeds is usedfor the depositof special capitalfrom bonds.
NoConsistent
2019 first trancheof medium-termnotes of ShandongChenming PaperHoldings Limited
700,000,000.00700,000,000.000.00Special account for
proceeds is usedfor the depositof special capitalfrom bonds.
NoConsistent
2019 second tranche
of medium-termnotes of ShandongChenming PaperHoldings Limited
500,000,000.00500,000,000.000.00Special account for
proceeds is usedfor the depositof special capitalfrom bonds.
NoConsistent
Proceeds to be used for construction projects Applicable √ Not applicableChange in the use of proceeds from the above bonds during the reporting period Applicable √ Not applicable
5. Adjustment of credit rating results during the reporting period
Applicable √ Not applicable
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
2021 ANNUAL REPORT
XI Bonds
IV. Convertible bonds
Applicable √ Not applicableThe Company had no convertible bonds during the reporting period.V. The loss in the scope of the consolidated financial statements during the reporting period
exceeding 10% of the net assets as at the end of the prior year Applicable √ Not applicableVI. Overdue interest-bearing debts other than bonds at the end of the reporting period Applicable √ Not applicableVII. Breaches of the regulations during the reporting period
Yes √ NoVIII. Major accounting data and financial indicators of the Company over the past two years as atthe end of the reporting period
Unit: RMB0’
Item
As at the endof the reporting
period
As at the end ofthe prior year
Increase/decrease as atthe end of the reporting
period as compared tothe end of the prior yearCurrent ratio65.05%70.29%-5.24%Gearing ratio72.78%71.83%0.95%Quick ratio54.59%60.23%-5.64%
The reportingperiod
The correspondingperiod of the prior
year
Increase/decrease ofthe reporting period
as compared tocorresponding period of
the prior yearNet profit after extraordinary gains or losses174,387.65111,910.3855.83%Proportion of EBITDA to total debts13.43%12.22%1.21%Interest coverage ratio2.121.968.16%Cash interest coverage ratio4.454.71-5.52%EBITDA interest coverage ratio3.323.029.93%Loans payment ratio100.00%100.00%0.00%Interest payment ratio100.00%100.00%0.00%
Note: EBITDA=Total profit+interest expenses-interest income+depreciation of fixed assets+amortisation of investment property+amortisation of
intangible assets+amortisation of long-term prepaid expenses
XII Financial Report
I. Auditors’ ReportType of auditor’s opinionStandard and unqualified opinionsThe date of the audit report signed30 March 2022Name of the auditorGrant Thornton (Special General Partnership)Reference number of the auditor’s reportAudit Report No. 371A006186 (2022)Name of certified public accountantsLiu Jian and Jiang LeiText of the auditor’s reportTo all shareholders of Shandong Chenming Paper Holdings Limited:
I. Auditor’s opinion
We have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter“ChenmingPaper”), which comprise the consolidated and the Company’s balance sheets as at 31 December 2021, theconsolidated and the Company’s profit and loss statements, the consolidated and the Company’s cash flowstatements and the consolidated and the Company’s statements of changes in shareholders’equity for 2021 andnotes to the relevant financial statements.In our opinion, the accompanying financial statements were prepared in accordance with the Accounting Standardsfor Business Enterprises in all material aspects and give a true and fair view of the consolidated and the Company’sfinancial position of Chenming Paper as at 31 December 2021 and of its consolidated and the Company’s operatingresults and cash flows for 2021.II. Basis of opinions
We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute ofCertified Public Accountants. Our responsibilities under those standards are further described in the responsibilitiesof certified public accountants for the audit of the financial statements section of the auditor’s report. We areindependent of Chenming Paper in accordance with the ethical codes of Chinese certified public accountants, andwe have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
2021 ANNUAL REPORT
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 thefinancial statements for the current period. These matters were addressed in the context of our audit of the financialstatements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.(I) Net realisable value of inventories
For detailed disclosures of relevant information, please see note V. 11 and note VII. 7 of the financial statements.
1. Details
The inventory balance of Chenming Paper for the year 2021 was RMB5,312,234,600, of which theinventory balance related to machine-made paper was RMB3,792,928,700, with a provision for impairmentof RMB29,602,700 and a carrying value of RMB3,763,326,100. As at the balance sheet date, inventoriesare measured at the lower of cost or net realisable value, and provision for impairment of inventories ismade on the basis of the excess of the cost of an individual inventory over its net realisable value. Themanagement determines the estimated selling price based on historical selling prices, contracted sellingprices, etc., taking into account the purpose for which the inventories are held, and the net realisable valueof inventories is determined by deducting the estimated costs to be incurred to completion, estimatedselling expenses and related taxes from the estimated selling price.We have identified net realisable value of inventories as a key audit matter due to the significant amountof inventories and the significant management judgement involved in determining the net realisable valueof inventories.
2. Application for auditing
(1) we identified and assessed the effectiveness of the design of internal controls relating to the
provision for impairment of inventories and tested the effectiveness of such operation;
(2) we identified and evaluated the appropriateness of the Company
’s policy of provision for impairmentof inventories;
(3) we supervised inventory taking and monitored the status of inventories, and checked the
identification of obsolete and aged inventories;
(4) we obtained an inventory ageing schedule and performed an analytical review of the status and
turnover of aged inventories;
(5) we obtained a copy of the inventory impairment table, and reviewed and assessed the
reasonableness of the significant estimates made by management in determining the net realisablevalue; performed recalculations against the table, reviewed subsequent selling prices and analysedthe reasonableness of the estimated selling prices.
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(II) Recognition of revenue from machine-made paper
For detailed disclosures of relevant information, please see note V. 26 and note VII. 47 of the financialstatements.
1. Details
For the year 2021, Chenming Paper achieved operating revenue of RMB33,019,812,300, of whichRMB29,071,777,700 was from machine-made paper, accounting for 88.04% of the operating revenue.For domestic machine-made paper sales business, Chenming Paper recognised the revenue after thegoods were delivered and signed by the customer for confirmation; for foreign machine-made paper salesbusiness, 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 salesof machine-made paper accounts for a relatively huge proportion of the total revenue due to its enormoussales volume, there may be potential misstatement in relation to whether revenue recognition is accountedfor in the appropriate period of the financial statements, which has a significant impact on the financialstatements. Therefore, we have identified recognition of revenue from machine-made paper as a key auditmatter.
2. Application for auditing
We have carried out the following audit procedures for the recognition of revenue from machine-madepaper:
(1) we identified and evaluated and tested the effectiveness of the design and operation of key internal
controls conducted by the management related to revenue recognition;
(2) we conducted sampling inspections on sales contracts, identified contract terms and conditions
related to the transfer of control of the goods, assessed whether the timing of recognition of salesrevenue from Chenming Paper meets the requirements of the Accounting Standards for BusinessEnterprises;
(3) we analysed revenue and gross profit by taking into account product types and identified whether
the abnormal fluctuations in the amount of revenue are reasonable in the current period;
(4) we inspected the occurrence of on-the-spot recognition of sales at the end of the inspection period
and inspected goods returns after the inspection period to determine the accuracy of revenuerecognition during the period;
(5) we collected samples from sales revenue recorded around the balance sheet date for cut-off
tests; verified delivery orders and other supporting documents to assess whether sales revenue isrecorded in the appropriate accounting period; and
(6) we sought external confirmations for clients with larger sales during the period.
2021 ANNUAL REPORT
XII Financial Report
IV. Other informationThe management of Chenming Paper is responsible for other information. Other information includes the informationcovered in the 2021 annual report of Chenming Paper, but does not include the financial statements and our auditreport.Our audit opinions published in the financial statements do not cover other information and we do not publish anyform of assurance conclusion on other information.In conjunction with our audit of the financial statements, our responsibility is to read other information, during whichwe consider whether there is significant inconsistency or other material misstatement of other information with thefinancial statements or what we have learned during the audit.Based on the work we have performed, if we determine that there is a material misstatement of other information, weshould report that fact. In this regard, we have nothing to report.V. Management and management responsibility for financial statementsThe management of Chenming Paper is responsible for the preparation of financial statements in accordance with therequirements of the Accounting Standards for Business Enterprises to enable them to achieve fair reflection, and toachieve the design, implementation and maintenance of necessary internal controls so that the financial statementsare free of material misstatements due to fraud or errors.In the preparation of the financial statements, the management is responsible for assessing the continuing operationscapabilities of Chenming Paper, disclosing issues related to going concern (if applicable), and applying the goingconcern assumption unless the management plans to liquidate Chenming Paper, terminate operations or have noother realistic options.The management is responsible for supervising the financial reporting process of Chenming Paper.
VI. Auditor’s responsibility for auditing financial statements
Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from materialmisstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance isa high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standardscan always discover a major misstatement when it exists. Misstatements may be caused by fraud or errors, and aregenerally considered to be material if it is reasonably expected that misstatements, individually or in aggregate, mayaffect the economic decision made by users of financial statements based on the financial statements.In the process of conducting audit work in accordance with auditing standards, we use professional judgment andmaintain professional suspicion. At the same time, we also perform the following tasks:
(1) To identify and assess risks of material misstatement of financial statements due to fraud or errors, design
and implement audit procedures to address these risks, and obtain adequate and appropriate audit evidence,together perform as a basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentionalomission, misrepresentation or override of internal controls, the risk of failing to detect a material misstatementdue to fraud is higher than the risk of failing to detect a material misstatement due to an error.
(2) To understand audit-related internal controls to design appropriate audit procedures, but not for the purpose of
expressing an opinion as to the effectiveness of internal control.
XII Financial Report
(3) To evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of
accounting estimates and related disclosures.
(4) To conclude on the appropriateness of management
’s use of the continuing operation assumption. At the sametime, according to the audit evidence obtained, it may lead to conclusions as to whether there are significantuncertainties in matters or circumstances that have significant doubts about the ability of Chenming Paper tocontinue its operations. If we conclude that there are significant uncertainties, the auditing standards requireus to request the users of the report to pay attention to the relevant disclosures in the financial statements inthe audit report; if the disclosure is not sufficient, we should publish modified audit report. Our conclusions arebased on the information available as of the date of the audit report.
(5) Evaluate the overall presentation, structure, and content of the financial statements and evaluate whether the
financial statements fairly reflect the relevant transactions and matters.
(6) To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities
in Chenming Paper to express opinions on the financial statements. We are responsible for guiding, supervisingand executing group audits, and take full responsibility for the audit opinion.We communicate with the management on planned audit scope, time arrangements and major audit findings,including communication of the internal control deficiencies that we identified during the audit.We also provide statements to the management on compliance with ethical requirements related to independence,and communicate with the management on all relationships and other matters that may reasonably be considered toaffect our independence, as well as related preventive measures (if applicable).From the matters we communicated with the management, we determine which matters are most important for theaudit of the financial statements for the current period and thus constitute the key audit matters. We describe thesematters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rarecases, if it is reasonably expected that the negative consequences of disclosing something in the audit report willoutweigh the benefits to the public interest, we determine that the matter should not be reported in the audit report.Grant Thornton(Special General Partnership)
Chinese Certified Public Accountant: Liu Jian(Project Partner)Chinese Certified Public Accountant: Jiang LeiBeijing, China 30 March 2022
2021 ANNUAL REPORT
XII Financial Report
II. Financial Statements
The unit in the notes to the financial statements is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited31 December 2021
Unit: RMBItem31 December 202131 December 2020CURRENT ASSETS:
Monetary funds14,119,782,939.6617,759,537,598.98Financial assets held for trading110,886,182.88192,907,800.62Bills receivableAccounts receivable2,656,517,150.461,984,931,665.82Accounts receivable financing435,459,341.76488,385,666.76Prepayments891,485,078.46964,290,512.36Other receivables2,252,864,083.002,417,240,559.46Including: Interest receivable
Dividend receivableInventories5,282,631,922.125,135,293,347.82Non-current assets due within one year5,216,934,172.614,222,744,207.34Other current assets1,903,929,492.852,716,918,695.85Total current assets32,870,490,363.8035,882,250,055.01
XII Financial Report
Item31 December 202131 December 2020NON-CURRENT ASSETS:
Long-term receivables1,788,759,975.354,658,884,857.95Long-term equity investments1,866,587,685.353,906,158,402.45Other non-current financial assets519,927,003.25145,910,000.00Investment property6,473,538,431.915,943,159,568.00Fixed assets35,653,492,676.1537,651,706,658.97Construction in progress197,749,526.05179,857,941.83Right-of-use assets197,429,176.44205,876,719.75Intangible assets1,592,672,934.541,774,624,509.33Goodwill26,946,905.3832,916,531.95Long-term prepaid expenses49,141,773.1451,061,485.49Deferred income tax assets1,114,781,456.781,084,164,679.14Other non-current assets489,936,694.1058,886,418.75Total non-current assets49,970,964,238.4455,693,207,773.61Total assets82,841,454,602.2491,575,457,828.62
2021 ANNUAL REPORT
XII Financial Report
Item31 December 202131 December 2020CURRENT LIABILITIES:
Short term borrowings33,523,025,186.2232,793,992,957.86Bills payable3,089,512,327.402,998,936,736.34Accounts payable3,871,131,345.344,042,430,732.31Receipts in advance38,274,028.20–Contract liabilities1,382,289,597.541,051,147,044.74Employee benefits payable169,899,008.01232,376,585.31Taxes payable321,495,480.67652,647,840.63Other payables1,538,013,585.931,956,715,367.83Including: Interest payable55,437,777.80178,992,959.85Non-current liabilities due within one year6,601,311,227.987,160,949,615.93Other current liabilities157,037,833.35Total current liabilities50,534,951,787.2951,046,234,714.30
XII Financial Report
Item31 December 202131 December 2020NON-CURRENT LIABILITIES:
Long-term borrowings5,276,340,154.988,077,150,979.15Bonds payable155,000,000.001,536,877,351.46Lease liabilities57,281,205.8160,271,769.90Long-term payables2,358,901,022.992,295,309,357.74Provisions325,259,082.28325,259,082.28Deferred income1,573,681,684.251,637,996,636.51Deferred income tax liabilities13,210,529.746,572,535.97Other non-current liabilities789,521,686.07Total non-current liabilities9,759,673,680.0514,728,959,399.08Total liabilities60,294,625,467.3465,775,194,113.38
2021 ANNUAL REPORT
XII Financial Report
Item31 December 202131 December 2020OWNERS’ EQUITY:
Share capital2,984,208,200.002,984,208,200.00Other equity instruments996,000,000.005,473,500,000.00Including: Preference Shares4,477,500,000.00
Perpetual Bonds996,000,000.00996,000,000.00Capital reserves5,282,805,114.625,321,911,413.75Less: Treasury shares226,860,000.00226,860,000.00Other comprehensive income-445,582,729.36-561,686,607.66Surplus reserves1,212,009,109.971,212,009,109.97General risk provisions76,825,918.6074,122,644.20Retained profit9,210,372,613.819,999,764,028.74Total equity attributable to owners of the Company19,089,778,227.6424,276,968,789.00
Minority interest3,457,050,907.261,523,294,926.24Total owners’ equity22,546,829,134.9025,800,263,715.24Total liabilities and owners’ equity82,841,454,602.2491,575,457,828.62Legal Representative:
Chen Hongguo
Financial controller:
Dong Lianming
Head of the financial department:
Zhang Bo
2. Balance sheet of the Company
Unit: RMBItem31 December 202131 December 2020CURRENT ASSETS:
Monetary funds6,827,656,382.374,720,330,804.07Bills receivable3,625,270,000.001,470,720,000.00Accounts receivable141,601,245.51694,836,561.24Accounts receivable financing7,923,732.0924,339,933.19Prepayments239,461,509.151,697,770,445.12Other receivables8,900,179,262.5410,637,425,503.02
Including: Interest receivable
Dividend receivable126,325,018.50200,000,000.00Inventories639,423,803.30637,293,495.29Non-current assets due within one year146,934,211.22Other current assets44,894,366.2945,764,272.71Total current assets20,426,410,301.2520,075,415,225.86
XII Financial Report
Item31 December 202131 December 2020NON-CURRENT ASSETS:
Long-term receivables13,612,038.9964,762,373.99Long-term equity investments18,806,029,815.1822,192,108,035.92Other non-current financial assets119,927,003.25141,910,000.00Fixed assets3,753,927,591.493,984,339,880.51Construction in progress94,436,880.6680,192,749.46Intangible assets520,068,337.11534,900,368.31Deferred income tax assets393,918,032.54418,717,829.13Other non-current assets7,000,000.00Total non-current assets23,708,919,699.2227,416,931,237.32Total assets44,135,330,000.4747,492,346,463.18
2021 ANNUAL REPORT
XII Financial Report
Item31 December 202131 December 2020CURRENT LIABILITIES:
Short-term borrowings13,761,223,259.0910,929,616,612.59Bills payable9,725,713,524.157,603,416,890.27Accounts payable1,129,675,956.85812,111,491.23Contract liabilities888,114,906.08156,487,086.88Staff remuneration payables57,487,223.3989,416,732.50Tax payables115,257,929.68147,669,266.97Other payables970,585,670.475,869,352,883.62Including: Interest payable55,437,777.8097,497,305.56Non-current liabilities due within one year2,111,092,964.342,374,029,490.27Other current liabilities312,130,833.35Total current liabilities28,759,151,434.0528,294,231,287.68
XII Financial Report
Item31 December 202131 December 2020NON-CURRENT LIABILITIES:
Long-term borrowings1,779,135,700.001,295,000,000.00Bonds payable155,000,000.00439,957,250.00Long-term payables52,376,768.35631,776,192.80Provisions325,259,082.28325,259,082.28Deferred income35,232,490.8338,017,165.55Other non-current liabilities1,194,883,344.67Total non-current liabilities2,347,004,041.463,924,893,035.30Total liabilities31,106,155,475.5132,219,124,322.98
2021 ANNUAL REPORT
XII Financial Report
Item31 December 202131 December 2020OWNERS’ EQUITY:
Share capital2,984,208,200.002,984,208,200.00Other equity instruments996,000,000.005,473,500,000.00Including: Preference Shares4,477,500,000.00
Perpetual Bonds996,000,000.00996,000,000.00Capital reserves5,154,365,336.315,124,308,464.42Less: Treasury shares226,860,000.00226,860,000.00Surplus reserves1,199,819,528.061,199,819,528.06Retained profit2,921,641,460.59718,245,947.72Total owners’ equity13,029,174,524.9615,273,222,140.20Total liabilities and owners’ equity44,135,330,000.4747,492,346,463.18
XII Financial Report
3. Consolidated Income Statement
Unit: RMBItemAmount for 2021Amount for 2020I. Total revenue33,019,812,294.1430,736,517,996.90
Including: Revenue33,019,812,294.1430,736,517,996.90II. Total operating costs30,583,840,093.5629,056,210,362.62
Including: Operating costs25,222,275,795.2823,645,594,186.21
Taxes and surcharges284,456,212.31250,528,855.40Sales and distribution expenses293,509,692.51298,246,355.91General and administrative expenses942,360,735.541,025,420,660.39Research and development expense1,453,766,371.461,274,355,241.49Finance expenses2,387,471,286.462,562,065,063.22Including: Interest expenses2,648,200,417.053,125,361,069.00
Interest income587,289,410.33887,004,185.02
Plus: Other income220,600,635.49363,884,128.32Investment income (“-” denotes loss)-69,578,338.92173,363,537.49Including: Investment income from associates and joint
ventures31,476,499.83272,022,434.54Ga ins on derecognition of financial assets
measured at amortised cost-258,113,630.19-93,431,738.91Gain on change in fair value (“-” denotes loss)-77,073,812.676,261,281.76Credit impairment loss (“-” denotes loss)-268,735,361.31-651,724,871.57Loss on impairment of assets (“-” denotes loss)-11,285,890.45-13,573,717.76Gain on disposal of assets (“-” denotes loss)51,559,551.6626,203,497.56
2021 ANNUAL REPORT
XII Financial Report
ItemAmount for 2021Amount for 2020III. Operating profit (“-” denotes loss)2,281,458,984.381,584,721,490.08Plus: Non-operating income71,694,386.81600,465,688.15Less: Non-operating expenses46,973,061.2012,917,235.69IV. Total profit (“-” denotes total loss)2,306,180,309.992,172,269,942.54Less: Income tax expenses216,496,288.54266,056,648.05V. Net profit (“-” denotes net loss)2,089,684,021.451,906,213,294.49(I) Classification according to the continuity of operation
1. Net profit from continuing operations
(“-” denotes net loss)2,089,684,021.451,906,213,294.49
2. Net profit from discontinued operations
(“-” denotes net loss)(II) Classification according to ownership
1. Net profit attributable to shareholders of the Company2,065,513,108.711,712,029,078.52
2. Profit or loss of minority interest24,170,912.74194,184,215.97VI. Net other comprehensive income after tax116,103,878.30317,765,527.44
Net other comprehensive income after tax attributable to
shareholders of the Company116,103,878.30317,765,527.44Other comprehensive income that will be reclassified to profit and
loss in subsequent periods116,103,878.30317,765,527.44Including: Ex change differences arising from translation of
financial statements denominated in foreigncurrencies114,257,267.36330,124,670.94Other comprehensive income that may be reclassified
to profit and loss under the equity method1,846,610.94-12,359,143.50VII. Total comprehensive income2,205,787,899.752,223,978,821.93
Total comprehensive income attributable to shareholders of
the Company2,181,616,987.012,029,794,605.96Total comprehensive income attributable to minority interest24,170,912.74194,184,215.97VIII. Earnings per share:
(I) Basic earnings per share0.560.36(II) Diluted earnings per share0.560.36Legal Representative:
Chen Hongguo
Financial controller:
Dong Lianming
Head of the financial department:
Zhang Bo
XII Financial Report
4. Income statement of the Company
Unit: RMBItemAmount for 2021Amount for 2020I. Revenue8,761,491,410.088,510,073,793.88Less: Operating costs7,357,969,445.556,899,160,821.06
Taxes and surcharges73,724,285.8563,211,127.50Sales and distribution expenses9,558,862.037,441,664.84General and administrative expenses225,572,928.07322,407,985.30Research and development expense357,549,848.69286,590,211.63Finance expenses596,154,250.94501,171,122.74Including: Interest expenses1,026,360,435.961,481,718,871.40
Interest income538,879,542.111,057,852,559.80Plus: Other income7,369,035.1559,165,073.44
Investment income (“-” denotes loss)2,932,306,416.92348,093,079.09Including: Investment income from associates and joint
ventures-3,156,467.36-6,412,281.95
Gains on derecognition of financial assets
measured at amortised cost (“-” denotes loss)-12,601,533.35Gains on changes in fair value (“-” denotes loss)1,600,000.009,464,346.45Credit impairment loss (“-” denotes loss)60,361,147.2842,369,727.64Loss on impairment of assets (“-” denotes loss)-1,108,450.71Gain on disposal of assets (“-” denotes loss)5,690,737.7340,134,455.47II. Operating profit (“-” denotes loss)3,147,180,675.32929,317,542.90Plus: Non-operating income50,666,803.065,225,205.90Less: Non-operating expenses4,482,683.251,891,387.34III. Total profit (“-” denotes total loss)3,193,364,795.13932,651,361.46Less: Income tax expenses24,799,796.597,994,080.85IV. Net profit (“-” denotes net loss)3,168,564,998.54924,657,280.61(I) Net profit from continuing operations (“-” denotes net loss)3,168,564,998.54924,657,280.61(II) Net profit from discontinued operations
(“-” denotes net loss)V. Total comprehensive income3,168,564,998.54924,657,280.61VI. Earnings per share:
(I) Basic earnings per share(II) Diluted earnings per share
2021 ANNUAL REPORT
XII Financial Report
5. Consolidated cash flow statement
Unit: RMBItemAmount for 2021Amount for 2020I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services37,026,791,230.4235,114,699,022.80Tax rebates received59,547,522.6371,675,835.40Cash received relating to other operating activities2,219,955,470.384,956,395,786.44Subtotal of cash inflows from operating activities39,306,294,223.4340,142,770,644.64Cash paid for goods and services25,422,330,671.5724,341,006,232.03Cash paid to and for employees1,467,112,946.721,421,974,787.06Payments of taxes and surcharges1,426,328,693.531,285,210,254.65Cash paid relating to other operating activities2,408,633,718.971,834,776,694.62Subtotal of cash outflows from operating activities30,724,406,030.7928,882,967,968.36Net cash flows from operating activities8,581,888,192.6411,259,802,676.28
XII Financial Report
ItemAmount for 2021Amount for 2020II. Cash flows from investing activities:
Cash received from investments222,670,944.6315,000,000.00Cash received from investment income81,429,872.2126,760,712.33Net cash received from disposal of fixed assets, intangible assets
and other long-term assets217,787,583.26131,924,763.00Net cash received from disposal of subsidiaries and other
business units306,239,547.48217,547,669.15Cash received relating to other investing activities493,700,048.10409,282,077.65Subtotal of cash inflows from investing activities1,321,827,995.68800,515,222.13Cash paid for purchase of fixed assets, intangible assets and
other long-term assets632,606,779.05254,202,396.70Cash paid on investments396,000,000.00471,299,932.73Net cash paid for acquisition of subsidiaries and other business
units256,052,699.51Cash paid relating to other investing activities127,500,000.00Subtotal of cash outflows from investing activities1,156,106,779.05981,555,028.94Net cash flows from investing activities165,721,216.63-181,039,806.81III. Cash flows from financing activities:
Cash received from investments2,350,000,000.00952,070,000.00Including: Ca sh received from subsidiaries from minority
investment2,350,000,000.00725,210,000.00Cash received from borrowings26,078,252,949.1625,471,909,126.85Cash received relating to other financing activities4,808,748,496.675,230,346,076.92Subtotal of cash inflows from financing activities33,237,001,445.8331,654,325,203.77
Cash repayments of amounts borrowed29,423,534,354.3330,646,227,554.94Cash paid for dividend and profit distribution or interest payment3,327,088,059.923,090,605,089.86Including: Div idend and profit paid by subsidiaries to minority
shareholders126,809,125.8717,444,349.31Cash paid relating to other financing activities10,426,875,069.687,511,530,461.76Subtotal of cash outflows from financing activities43,177,497,483.9341,248,363,106.56Net cash flows from financing activities-9,940,496,038.10-9,594,037,902.79IV. Eff ect of foreign exchange rate changes on cash and cash
equivalents-27,367,487.9414,116,969.70V. Net increase in cash and cash equivalents-1,220,254,116.771,498,841,936.38
Plus: Balance of cash and cash equivalents as at
the beginning of the period4,389,169,963.792,890,328,027.41VI. Balance of cash and cash equivalents as at the end of the period3,168,915,847.024,389,169,963.79
2021 ANNUAL REPORT
XII Financial Report
6. Cash flow statement of the Company
Unit: RMBItemAmount for 2021Amount for 2020I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services9,921,458,290.298,315,495,593.76Tax rebates receivedCash received relating to other operating activities318,480,435.451,094,213,214.09Subtotal of cash inflows from operating activities10,239,938,725.749,409,708,807.85Cash paid for goods and services7,949,092,113.557,355,500,996.59Cash paid to and for employees324,850,174.01413,161,984.36Payments of taxes and surcharges296,341,765.94225,151,450.32Cash paid relating to other operating activities835,108,368.36872,500,967.87Subtotal of cash outflows from operating activities9,405,392,421.868,866,315,399.14Net cash flows from operating activities834,546,303.88543,393,408.71II. Cash flows from investing activities:
Cash received from investments3,488,670,944.631,481,345,237.36Cash received from investment income3,346,501,947.10405,420,123.68Net cash received from disposal of fixed assets, intangible assetsand other long-term assets3,871,823.30104,624,763.00Net cash received from disposal of subsidiaries and other
business unitsCash received relating to other investing activities493,655,373.48409,282,077.65Subtotal of cash inflows from investing activities7,332,700,088.512,400,672,201.69
Cash paid for purchase of fixed assets, intangible assets and
other long-term assets19,676,071.8410,850,791.93Cash paid on investments882,210,000.0082,290,000.00Net cash paid for acquisition of subsidiaries and
other business unitsCash paid relating to other investing activitiesSubtotal of cash outflows used in investing activities901,886,071.8493,140,791.93Net cash flows from investing activities6,430,814,016.672,307,531,409.76III. Cash flows from financing activities:
Cash received from investments226,860,000.00Cash received from borrowings22,083,489,278.3215,865,741,633.57Cash received relating to other financing activities110,000,000.005,490,509,924.46Subtotal of cash inflows from financing activities22,193,489,278.3221,583,111,558.03
XII Financial Report
ItemAmount for 2021Amount for 2020Cash repayments of amounts borrowed18,497,803,668.5216,517,425,606.56Cash paid for dividend and profit distribution or interest payment996,025,461.241,188,678,703.00Cash paid relating to other financing activities9,373,355,123.846,565,598,116.70Subtotal of cash outflows from financing activities28,867,184,253.6024,271,702,426.26Net cash flows from financing activities-6,673,694,975.28-2,688,590,868.23IV. Eff ect of foreign exchange rate changes on cash and cash
equivalents504,245.772,622,051.57V. Net increase in cash and cash equivalents592,169,591.04164,956,001.81
Plus: Ba lance of cash and cash equivalents as at
the beginning of the period301,284,723.52136,328,721.71VI. Balance of cash and cash equivalents as at the end of the period893,454,314.56301,284,723.52
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XII Financial Report
7. Consolidated statement of changes in owners
’ equity
Amount for the reporting period
Unit: RMB
Item
2021
Equity attributable to owners of the Company
TotalOther equity instrumentsLess:
OthercomprehensiveSpecialGeneral
Share capitalPreference SharesPerpetual BondsOthersCapital reservestreasury sharesincomereservesSurplus reservesrisk provisionsRetained profitOthersSubtotalMinority interestowners
’ equity
I. Balance as at the end of
the prior year2,984,208,200.004,477,500,000.00996,000,000.005,321,911,413.75226,860,000.00-561,686,607.661,212,009,109.9774,122,644.209,999,764,028.7424,276,968,789.001,523,294,926.2425,800,263,715.24Plus: Others-1,887,031,763.57-1,887,031,763.57-1,887,031,763.57II. Balance as at thebeginning of the year2,984,208,200.004,477,500,000.00996,000,000.005,321,911,413.75226,860,000.00-561,686,607.661,212,009,109.9774,122,644.208,112,732,265.1722,389,937,025.431,523,294,926.2423,913,231,951.67
III. Changes in the period
(“-” denotes decrease)-4,477,500,000.00-39,106,299.13116,103,878.302,703,274.401,097,640,348.64-3,300,158,797.791,933,755,981.02-1,366,402,816.77(I) Total comprehensiveincome116,103,878.302,065,513,108.712,181,616,987.0124,170,912.742,205,787,899.75(II) Capital paid in and
reduced by owners-4,477,500,000.00-39,106,299.13-4,516,606,299.132,312,271,861.82-2,204,334,437.31
1. Ordinary shares paid
by owners2,312,271,861.822,312,271,861.82
2. Capital paid by
holders of otherequity 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 paymentsrecognised inowners’ equity52,556,871.8952,556,871.8952,556,871.89
4. Others-69,163,171.02-69,163,171.02-69,163,171.02
(III) Profit distribution2,703,274.40-967,872,760.07-965,169,485.67-126,809,125.87-1,091,978,611.54
1. Transfer to general
risk provisions2,703,274.40-2,703,274.40
2. Distribution
to owners (orshareholders)-965,169,485.67-965,169,485.67-126,809,125.87-1,091,978,611.54
(IV)Transfer withinowners’ 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 ofthe period2,984,208,200.00996,000,000.005,282,805,114.62226,860,000.00-445,582,729.361,212,009,109.9776,825,918.609,210,372,613.8119,089,778,227.643,457,050,907.2622,546,829,134.90
XII Financial Report
Amount for the prior period
Unit: RMB
Item
2020
Equity attributable to owners of the Company
TotalOther equity instrumentsLess:
Other
comprehensiveSpecialGeneral
Share capitalPreference SharesPerpetual BondsOthersCapital reservestreasury sharesincomereservesSurplus reservesrisk provisionsRetained profitOthersSubtotalMinority interestowners
’ equity
I. Balance as at the end of
the prior year2,904,608,200.004,477,500,000.002,988,000,000.005,086,686,427.30-879,452,135.101,212,009,109.9774,122,644.209,306,269,617.3825,169,743,863.751,170,029,016.8026,339,772,880.55II. Balance as at the
beginning of the year2,904,608,200.004,477,500,000.002,988,000,000.005,086,686,427.30-879,452,135.101,212,009,109.9774,122,644.209,306,269,617.3825,169,743,863.751,170,029,016.8026,339,772,880.55III. Changes in the period (“-”
denotes decrease)79,600,000.00-1,992,000,000.00235,224,986.45226,860,000.00317,765,527.44693,494,411.36-892,775,074.75353,265,909.44-539,509,165.31(I) Total comprehensiveincome317,765,527.441,712,029,078.522,029,794,605.96194,184,215.972,223,978,821.93
(II) Capital paid in and
reduced by owners79,600,000.00-1,992,000,000.00235,224,986.45226,860,000.00-1,904,035,013.55646,180,728.23-1,257,854,285.32
1. Ordinary shares paid
by owners646,180,728.23646,180,728.23
2. Capital paid by
holders of otherequity instruments-1,992,000,000.00-8,000,000.00-2,000,000,000.00-2,000,000,000.00
3. Amount of share-
based paymentsrecognised inowners’ equity178,751,029.23226,860,000.0031,491,029.2331,491,029.23
4. Others64,473,957.2264,473,957.2264,473,957.22
(III) Profit distribution-1,018,534,667.16-1,018,534,667.16-17,444,349.31-1,035,979,016.47
1. Distribution
to owners (orshareholders)-1,018,534,667.16-1,018,534,667.16-17,444,349.31-1,035,979,016.47
(IV) Transfer within owners’
equity-469,654,685.45-469,654,685.45
1. Others-469,654,685.45-469,654,685.45
IV. Balance as at the end of
the period2,984,208,200.004,477,500,000.00996,000,000.005,321,911,413.75226,860,000.00-561,686,607.661,212,009,109.9774,122,644.209,999,764,028.7424,276,968,789.001,523,294,926.2425,800,263,715.24
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XII Financial Report
8. Statement of changes in equity of owners of the Company
Amount for the reporting period
Unit: RMB
2021
Other equity instruments
ItemShare capital
PreferenceSharesPerpetual
BondsOthers
Capitalreserves
Less:
treasurysharesOthercomprehensive
incomeSpecialreservesSurplusreservesRetainedprofitOthersTotal owners’equity
I. Balance as at the end of
the prior year2,984,208,200.004,477,500,000.00996,000,000.005,124,308,464.42226,860,000.001,199,819,528.06718,245,947.7215,273,222,140.20
II. Balance as at thebeginning of the year2,984,208,200.004,477,500,000.00996,000,000.005,124,308,464.42226,860,000.001,199,819,528.06718,245,947.7215,273,222,140.20
III. Changes in the period (
“-”
denotes decrease)-4,477,500,000.0030,056,871.892,203,395,512.87-2,244,047,615.24(I) Total comprehensiveincome3,168,564,998.543,168,564,998.54(II) Capital paid in and
reduced by owners-4,477,500,000.0030,056,871.89-4,447,443,128.11
1. Ordinary shares paid
by owners
2. Capital paid by
holders of otherequity instruments-4,477,500,000.00-22,500,000.00-4,500,000,000.00
3. Amount of share-
based paymentsrecognised inowners’ equity52,556,871.8952,556,871.89
(III) Profit distribution-965,169,485.67-965,169,485.67
1. Transfer to surplus
reserves
2. Distribution
to owners (orshareholders)-965,169,485.67-965,169,485.67
IV.Balance as at the end ofthe period2,984,208,200.00996,000,000.005,154,365,336.31226,860,000.001,199,819,528.062,921,641,460.5913,029,174,524.96
XII Financial Report
Amount for the prior period
Unit: RMB
2020
Other equity instruments
ItemShare capital
PreferenceSharesPerpetualBondsOthers
Capitalreserves
Less:
treasury
sharesOthercomprehensiveincomeSpecialreservesSurplusreservesRetainedprofitOthersTotal owners’equity
I. Balance as at the end of
the prior year2,904,608,200.004,477,500,000.002,988,000,000.004,953,557,435.191,199,819,528.06812,690,534.9117,336,175,698.16Others-567,200.64-567,200.64II. Balance as at thebeginning of the year2,904,608,200.004,477,500,000.002,988,000,000.004,953,557,435.191,199,819,528.06812,123,334.2717,335,608,497.52III. Changes in the period(“-” denotes decrease)79,600,000.00-1,992,000,000.00170,751,029.23226,860,000.00-93,877,386.55-2,062,386,357.32
(I) Total comprehensive
income924,657,280.61924,657,280.61
(II) Capital paid in and
reduced by owners79,600,000.00-1,992,000,000.00170,751,029.23226,860,000.00-1,968,508,970.77
1. Ordinary shares paid
by owners79,600,000.0079,600,000.00
2. Capital paid by
holders of otherequity instruments-1,992,000,000.00-8,000,000.00-2,000,000,000.00
3. Amount of share-
based paymentsrecognised inowners’ equity178,751,029.23226,860,000.00-48,108,970.77
(III) Profit distribution-1,018,534,667.16-1,018,534,667.16
1. Transfer to surplus
reserves
2. Distribution
to owners (orshareholders)-1,018,534,667.16-1,018,534,667.16
IV.Balance as at the endof the period2,984,208,200.004,477,500,000.00996,000,000.005,124,308,464.42226,860,000.001,199,819,528.06718,245,947.7215,273,222,140.20
2021 ANNUAL REPORT
XII Financial Report
III. General Information of the Company
1. Company overview
The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the“Company”) wasShandong Shouguang Paper Mill Corporation, which was changed as a joint stock company with limited liabilitythrough offering to specific investors in May 1993. In December 1996, with approval by Lu Gai Zi [1996] No. 270issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committeeof the State Council, the Company was changed as a joint stock company with limited liability established by shareoffer.In May 1997, with approval by Zheng Wei Fa [1997] No. 26 issued by the Securities Committee of the State Council,the Company issued 115,000,000 domestic listed foreign shares (B shares) under public offering, which were listedand traded on Shenzhen Stock Exchange from 26 May 1997.In September 2000, with approval by Zheng Jian Gong Si Zi [2000] No. 151 issued by the China Securities RegulatoryCommission, the Company issued an additional 70,000,000 RMB ordinary shares (A shares), which were listed andtraded on Shenzhen Stock Exchange from 20 November 2000.In June 2008, with approval by the Stock Exchange of Hong Kong Limited, the Company issued 355,700,000 Hshares. At the same time, 35,570,000 H shares were allocated to the National Council for Social Security Fund byour relevant state-owned shareholder and converted into overseas listed foreign shares (H shares) for the purpose ofreducing the number of state-owned shares. The additionally issued H shares were listed and traded on Hong KongStock Exchange on 18 June 2008.As at 31 December 2021, the total share capital of the Company was changed to 2,984,208,200 shares. For details,please refer to Note VII. 39.The Company has established a corporate governance structure comprising the general meeting, the board ofdirectors and the supervisory committee, and has manufacturing business center, supply chain management center,business department, marketing department, financial capital management center, enterprise management center,public utilities center, securities investment department, audit department and other departments.The Company and its subsidiaries are principally engaged in, among other things, processing and sale ofpaper products (including machine-made paper and paper board), paper making raw materials and machinery;generation and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber;manufacturing, processing and sale of wood products; and hotel service, and equipment financial and operatingleasing, investment properties and property service etc.The financial statements and notes thereto were approved at the twelfth meeting of the ninth session of the board ofdirectors of the Company (the“Board”) on 30 March 2022.
2. Scope of consolidation
Subsidiaries of the Company included in the scope of consolidation in 2021 totalled 75. For details, please refer toNote IX“Equity in other entities”. The scope of consolidation of the Company during the year had six more companiesincluded and seven companies less compared to the prior year. For details, please refer to Note VIII“Changes in thescope of consolidation”.
XII Financial Report
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
These financial statements are prepared in accordance with the accounting standards for business enterprises, theapplication guidelines thereof, interpretations and other related rules (hereinafter referred to as“ASBEs”) promulgatedby the Ministry of Finance. In addition, the Company also discloses relevant financial information in accordance withthe“Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 – GeneralProvisions on Financial Reports” (revised in 2014) of the CSRC.The financial statements are presented on a going concern.The Company’s financial statements have been prepared on an accrual basis. Except for certain financial instruments,the financial statements are prepared under the historical cost convention. In the event that depreciation of assetsoccurs, a provision for impairment is made accordingly in accordance with the relevant regulations.
2. Going concern
No facts or circumstances comprise a material uncertainty about the Company’s going concern basis within 12months since the end of the reporting period.
V. Significant Accounting Policies and Accounting 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, constructionmaterials, paper making chemical products, financial leasing, hotel management and other operations. The Company and itssubsidiaries formulated certain specific accounting policies and accounting estimates for the transactions and matters suchas revenue recognition, determination of performance progress and R&D expenses based on their actual production andoperation characteristics pursuant to the requirements under the relevant accounting standards for business enterprises.For details, please refer to this Note V. 26“Revenue”. For the critical accounting judgments and estimates made by themanagement, please refer to Note V. 31“Change of Significant accounting policies and accounting estimates”.
1. Statement of compliance with the Accounting Standards for Business Enterprises
These financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financialposition of the consolidated entity and the Company as at 31 December 2021 and relevant information such as theoperating results and cash flows of the consolidated entity and the Company for 2021.
2. Accounting period
The accounting period of the Company is from 1 January to 31 December of each calendar year.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
3. Operating cycle
The operating cycle of the Company lasts for 12 months.
4. Functional currency
The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiariesof the Company recognise U.S. dollar (“USD”or“US$”), Japanese yen (“JPY”), Euro (“EUR”) and South KoreanWon (“KRW”) as their respective functional currency according to the general economic environment in which thesesubsidiaries operate. The Company prepares the financial statements in RMB.
5. Accounting treatment of business combinations under common control and not under common
control
(1) Business combination under common control
For the business combination involving entities under common control, the assets and liabilities of the partybeing merged that are obtained in the business combination by the absorbing party shall be measured at thecarrying amounts as recorded by the ultimate controlling party in the consolidated financial statements at thecombination date, except for the adjustments of different accounting policies. The difference between thecarrying amount of the consideration paid for the combination (or the aggregate nominal value of shares issuedas consideration) and the carrying amount of the net assets obtained in the combination is charged to thecapital reserve (share capital premium/capital premium). If the capital reserve (share capital premium/capitalpremium) 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 stagesIn the separate financial statements, the initial investment cost is calculated based on the shareholding portionof the assets and liabilities obtained and are measured at the carrying amounts as recorded by the party beingmerged at the combination date. The difference between the initial investment cost and the sum of the carryingamount of the original investment cost prior to the combination and the carrying amount of consideration paidfor the combination is adjusted to the capital reserve (share capital premium/capital premium), if the capitalreserve is not sufficient to absorb the difference, the excess difference shall be adjusted to retained earnings.In the consolidated financial statements, the assets and liabilities of the party being merged that are obtainedat the combination by the absorbing party shall be measured at the carrying value as recorded by the ultimatecontrolling party in the consolidated financial statements at combination date, except for adjustments ofdifferent accounting policies. The difference between the sum of the carrying value from original shareholdingportion and the new investment cost incurred at combination date and the carrying value of net assets obtainedat combination date shall be adjusted to capital reserve (share capital premium/capital premium), if the balanceof 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, therecognised profit or loss, comprehensive income and other change of owners’equity at the closer date of theacquisition date and combination date under common control shall separately offset the opening balance ofretained earnings and profit or loss during comparative statements.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
5. Accounting treatment of business combinations under common control and not under common
control(Continued)
(2) Business combination not under common control
For business combinations involving entities not under common control, the cost for each combination ismeasured at the aggregate fair value at acquisition date, of assets given, liabilities incurred or assumed, andequity securities issued by the acquirer in exchange for control of the acquiree. At acquisition date, the acquiredassets, liabilities or contingent liabilities of acquiree are measured at their fair value.Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognised as goodwill, and subsequently measured on the basis of its cost minusaccumulative impairment provision; Where the cost of combination is less than the acquirer’s interest in the fairvalue of the acquiree’s identifiable net assets, the difference is recognised in profit or loss for the current periodafter reassessment.Business combinations involving entities not under common control and achieved in stagesIn the separate financial statements, the initial investment cost of the investment is the sum of the carryingamount of the equity investment held by the entity prior to the acquisition date and the additional investmentcost at the acquisition date. The disposal accounting policy of other comprehensive income related withequity investment prior to the acquisition date recognised under equity method shall be compliance with themethod when the acquiree disposes the related assets or liabilities. Owners’equity due to the changes of otherowners’equity other than the changes of net profit, other comprehensive income and profit distribution shallbe transferred to profit or loss for current period when disposed of. If the equity investment held by the entityprior to the acquisition date is measured at fair value, the cumulative changes in fair value recognised in othercomprehensive income shall be transferred to retained earnings for current period when accounted for usingcost method.In the consolidation financial statements, the combination cost is the sum of consideration paid at acquisitiondate and fair value of the acquiree’s equity investment held prior to acquisition date; the cost of equity of theacquiree held prior to acquisition date shall be remeasured at the fair value at acquisition date, the differencebetween the fair value and carrying amount shall be recognised as investment income or loss for the currentperiod. Other comprehensive income and changes of investment equity related with acquiree’s equity heldprior 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 theremeasurement of defined benefit plans.
(3) Transaction fees attribution during business combination
The audit, legal, valuation advisory and other intermediary fees and other relevant administrative expensesarising from business combinations are recognised in profit or loss when incurred. Transaction costs of equityor debt securities issued as the considerations of business combination are included in the initial recognitionamounts.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
6. Preparation of consolidated financial statements
(1) Scope of consolidation
The scope of consolidation of the consolidated financial statements is determined on the basis of control. Theterm“control”refers to the fact that the Company has power over the investee and is entitled to variable returnsfrom its involvement with the investee and the ability to use its power over the investee to affect the amount ofthose returns. A subsidiary is an entity controlled by the Company (including an enterprise, a separable part ofan investee, a structured entity, etc.).
(2) Basis for preparation of the consolidated financial statements
The consolidated financial statements are prepared by the Company based on the financial statements of theCompany and its subsidiaries and other relevant information. In preparing the consolidated financial statements,the accounting policies and accounting periods of the Company and its subsidiaries shall be consistent, andintracompany significant transactions and balances are eliminated.A subsidiary and its business acquired through a business combination involving entities under common controlduring the reporting period shall be included in the scope of the consolidation of the Company from the dateof being controlled by the ultimate controlling party, and its operating results and cash flows from the date ofbeing controlled by the ultimate controlling party are included in the consolidated profit or loss statement andthe consolidated cash flow statement, respectively.For a subsidiary and its business acquired through a business combination involving entities not under commoncontrol during the reporting period, its income, expenses and profits are included in the consolidated profit orloss statement, and cash flows are included in the consolidated cash flow statement from the acquisition dateto the end of the reporting period.The shareholders’equity of the subsidiaries that is not attributable to the Company is presented undershareholders’equity in the consolidated balance sheet as minority interest. The portion of net profit or loss ofsubsidiaries for the period attributable to minority interest is presented in the consolidated income statementunder the“profit or loss of minority interest”. When the amount of loss attributable to the minority shareholdersof a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’equity of thesubsidiary, the excess amount shall be allocated against minority interest.
(3) Acquisition of non-controlling interests in subsidiaries
The difference between the long-term equity investments costs acquired by the acquisition of non-controllinginterests and the share of the net assets from subsidiaries from the date of acquisition or the date ofcombination based on the new shareholding ratio, as well as the difference between the proceeds from thepartial disposal of the equity investment without losing control over its subsidiary and the disposal of thelong-term equity investment corresponding to the share of the net assets of the subsidiaries from the date ofacquisition or the date of combination, is adjusted to the capital reserve (share capital premium), if the capitalreserve is not sufficient, any excess is adjusted to retained earnings.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
6. Preparation of consolidated financial statements
(Continued)
(4) Accounting treatment for loss of control over subsidiaries
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons,the remaining equity is measured at fair value on the date when the control is lost. The difference arising fromthe sum of consideration received for disposal of equity interest and the fair value of remaining equity interestover the sun of the share of the carrying amount of net assets of the former subsidiary calculated continuouslyfrom the purchase date based on the shareholding percentage before disposal and the goodwill is recognisedas investment income in the period when the control is lost.Other comprehensive income related to equity investment in the former subsidiary shall be transferred to currentprofit or loss at the time when the control is lost, except for other comprehensive income arising from changesin net assets or net liabilities due to remeasurement of defined benefit plan by the investee.
7. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of theCompany comprise joint operations and joint ventures.
(1) Joint operations
Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets andobligations of this arrangement.The Company recognises the following items in relation to its interest in a joint operation and accounts for themin accordance with the relevant ASBEs:
A. the assets held solely by it and assets held jointly according to its share;B. the liabilities assumed solely by it and liabilities assumed jointly according to its share;C. the revenue from sale of output from joint operations;D. the revenue from sale of output from joint operations according to its share;E. the fees solely incurred by it and fees incurred from joint operations according to its share.
(2) Joint ventures
Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of thisarrangement.The Company accounts for its investments in joint ventures in accordance with the requirements relating toaccounting treatment using equity method for long-term equity investments.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
8. Standards for recognising cash and cash equivalents
Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short-term and highly liquid investments held by the Company which are readily convertible into known amount of cash andwhich are subject to insignificant risk of value change.
9. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
The foreign currency operations of the Company are translated into the functional currency at the prevailingspot exchange rate on the date of exchange.On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate onthe balance sheet date. The exchange difference arising from the difference between the spot exchange rateon the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date willbe recognised in profit or loss for the period. The foreign currency non-monetary items measured at historicalcost shall still be measured by the functional currency translated at the spot exchange rate on the date of thetransaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchangerate on the date of determination of the fair value. The difference between the amounts of the functionalcurrency before and after the translation will be recognised in profit or loss or other comprehensive income forthe period based on the nature of the non-monetary items.
(2) Translation of financial statements denominated in foreign currency
When translating the financial statements denominated in foreign currency of overseas subsidiaries, assets andliabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;owner’s equity items except for“retained profit”are translated at the spot exchange rates at the dates on whichsuch items arose.Income and expenses items in the profit or loss statement are translated at the prevailing spot exchange rate onthe transaction date.All items in the cash flow statements shall be translated at the prevailing spot exchange rate on the date thatthe cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presentedseparately as the“effect of foreign exchange rate changes on cash and cash equivalents”item in the cash flowstatements.The differences arising from translation of financial statements shall be included in the“other comprehensiveincome” item in owners’ equity in the balance sheet.On disposal of foreign operations and loss of control, exchange differences arising from the translation offinancial statements denominated in foreign currencies related to the disposed foreign operations whichhas been included in owners’equity in the balance sheet, shall be transferred to profit or loss in whole or inproportionate share in the period in which the disposal took place.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equityinstrument of another party.
(1) Recognition and derecognition of financial instruments
Financial asset or financial liability will be recognised when the Company became one of the parties under afinancial instrument contract.Financial asset that satisfied any of the following criteria shall be derecognised:
the contract right to receive the cash flows of the financial asset has terminated;the financial asset has been transferred and meets the derecognition criteria for the transfer of financialasset as described below.A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or inpart. If an agreement is entered between the Company (debtor) and a creditor to replace the existing financialliabilities with new financial liabilities, and the contractual terms of the new financial liabilities are substantiallydifferent from those of the existing financial liabilities, the existing financial liabilities shall be derecognised andthe new financial liabilities shall be recognised.Conventionally traded financial assets shall be recognised and derecognised at the trading date.
(2) Classification and measurement of financial assets
The Company classifies the financial assets according to the business model for managing the financial assetsand characteristics of the contractual cash flows as follows: financial assets measured at amortised cost,financial assets measured at fair value through other comprehensive income, and financial assets measured atfair value through profit or loss.Financial assets measured at amortised costA financial asset is measured at amortised cost if it meets both of the following conditions and is not designatedat fair value through other comprehensive income:
The Company’s business model for managing such financial assets is to collect contractual cash flows;The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solelypayments of principal and interest on the principal amount outstanding.Subsequent to initial recognition, such financial assets are measured at amortised cost using the effectiveinterest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of ahedging relationship shall be recognised in profit or loss for the current period when the financial asset isderecognised, amortised using the effective interest method or with impairment recognised.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(2) Classification and measurement of financial assets
(Continued)
Financial assets measured at fair value through other comprehensive incomeA financial asset is classified as measured at fair value through other comprehensive income if it meets both ofthe following conditions and is not designated at fair value through profit or loss:
The Company’s business model for managing such financial assets is achieved both by collecting collectcontractual cash flows and selling such financial assets;The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solelypayments of principal and interest on the principal amount outstanding.Subsequent to initial recognition, such financial assets are subsequently measured at fair value. Interestcalculated using the effective interest method, impairment losses or gains and foreign exchange gains andlosses are recognised in profit or loss for the current period, and other gains or losses are recognised inother comprehensive income. On derecognition, the cumulative gain or loss previously recognised in othercomprehensive income is reclassified from other comprehensive income to profit or loss.Financial assets measured at fair value through profit or lossThe Company classifies the financial assets other than those measured at amortised cost and measured at fairvalue through other comprehensive income as financial assets measured at fair value through profit or loss.Upon initial recognition, the Company irrevocably designates certain financial assets that are required to bemeasured at amortised cost or at fair value through other comprehensive income as financial assets measuredat fair value through profit or loss in order to eliminate or significantly reduce accounting mismatch.Upon initial recognition, such financial assets are measured at fair value. Except for those held for hedgingpurposes, gains or losses (including interests and dividend income) arising from such financial assets arerecognised in the profit or loss for the current period.The business model for managing financial assets refers to how the Company manages its financial assetsin order to generate cash flows. That is, the Company’s business model determines whether cash flows willresult from collecting contractual cash flows, selling financial assets or both. The Company determines thebusiness model for managing financial assets on the basis of objective facts and specific business objectivesfor managing financial assets determined by key management personnel.The Company assesses the characteristics of the contractual cash flows of financial assets to determinewhether the contractual cash flows generated by the relevant financial assets on a specific date are solelypayments of principal and interest on the principal amount outstanding. The principal refers to the fair valueof the financial assets at the initial recognition. Interest includes consideration for the time value of money, forthe credit risk associated with the principal amount outstanding during a particular period of time and for otherbasic lending risks, costs and profits. In addition, the Company evaluates the contractual terms that may resultin a change in the time distribution or amount of contractual cash flows from a financial asset to determinewhether it meets the requirements of the above contractual cash flow characteristics.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(2) Classification and measurement of financial assets
(Continued)Financial assets measured at fair value through profit or loss(Continued)All affected financial assets are reclassified on the first day of the first reporting period following the change inthe business model where the Company changes its business model for managing financial assets; otherwise,financial assets shall not be reclassified after initial recognition.Financial assets are measured at fair value upon initial recognition. For financial assets measured at fairvalue through profit or loss, relevant transaction costs are directly recognised in profit or loss for the currentperiod. For other categories of financial assets, relevant transaction costs are included in the amount initiallyrecognised. Accounts receivable or notes receivable arising from sales of goods or rendering services, withoutsignificant financing component are initially recognised based on the transaction price expected to be entitledby the Company.
(3) Classification and measurement of financial liabilities
At initial recognition, financial liabilities of the Company are classified as financial liabilities measured at fairvalue through profit or loss and financial liabilities measured at amortised cost. For financial liabilities notclassified as measured at fair value through profit or loss, relevant transaction costs are included in the amountinitially recognised.Financial liabilities measured at fair value through profit or lossFinancial liabilities measured at fair value through profit or loss comprise held-for-trading financial liabilities andfinancial liabilities designated at fair value through profit or loss upon initial recognition. Such financial liabilitiesare subsequently measured at fair value, and the gains or losses from the change in fair value and the dividendor interest expenses related to the financial liabilities are included in the profit or loss of the current period.Financial liabilities measured at amortised costOther financial liabilities are subsequently measured at amortised cost using the effective interest rate method,and the gains or losses arising from derecognition or amortisation are recognised in profit or loss for the currentperiod.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(3) Classification and measurement of financial liabilities
(Continued)
Classification between financial liabilities and equity instrumentsA financial liability is a liability if:
it has a contractual obligation to pay in cash or other financial assets to other parties.it has a contractual obligation to exchange financial assets or financial liabilities under potential adversecondition with other parties. it is a non-derivative instrument contract which will or may be settled with the entity’s own equityinstruments, and the entity will deliver a variable number of its own equity instruments according to suchcontract. it is a derivative instrument contract which will or may be settled with the entity’s own equity instruments,except for a derivative instrument contract that exchanges a fixed amount of cash or other financial assetwith a fixed number of its own equity instruments.Equity instruments are any contract that evidences a residual interest in the assets of an entity after deductingall of its liabilities.If the Company cannot unconditionally avoid the performance of a contractual obligation by paying cash ordelivering other financial assets, the contractual obligation meets the definition of financial liabilities.Where a financial instrument must or may be settled with the Company’s own equity instruments, theCompany’s own equity instruments used to settle such instrument should be considered as to whether it is asa substitute for cash or other financial assets or for the purpose of enabling the holder of the instrument to beentitled to the remaining interest in the assets of the issuer after deducting all of its liabilities. For the former, it isa financial liability of the Company; for the latter, it is the Company’s own equity instruments.
(4) Fair value of financial instruments
The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 12.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
The Company makes provision for impairment based on expected credit losses (ECLs) on the following items:
Financial assets measured at amortised cost;Receivables and debt investments measured at fair value through other comprehensive income;Contract assets as defined in the Accounting Standards for Business Enterprises No. 14 – Revenue;Lease receivables;Financial guarantee contracts (except those measured at fair value through profit or loss or formed bycontinuing involvement of transferred financial assets or the transfer does not qualify for derecognition).Measurement of ECLsECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Creditlosses refer to the difference between all contractual cash flows receivable according to the contract anddiscounted according to the original effective interest rate and all cash flows expected to be received, i.e. thepresent value of all cash shortages.The Company takes into account reasonable and well-founded information such as past events, currentconditions and forecasts of future economic conditions, and calculates the probability-weighted amount ofthe present value of the difference between the cash flows receivable from the contract and the cash flowsexpected to be received weighted by the risk of default.The Company measures ECLs of financial instruments at different stages. If the credit risk of the financialinstrument did not increase significantly upon initial recognition, it is at the first stage, and the Company makesprovision for impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrumentincreased significantly upon initial recognition but has not yet incurred credit impairment, it is at the secondstage, and the Company makes provision for impairment based on the lifetime ECLs of the instrument; if thefinancial instrument incurred credit impairment upon initial recognition, it is at the third stage, and the Companymakes provision for impairment based on the lifetime ECLs of the instrument.For financial instruments with low credit risk on the balance sheet date, the Company assumes that the creditrisk did not increase significantly upon initial recognition, and makes provision for impairment based on theECLs within the next 12 months.Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financialinstrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrumentwithin 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) afterthe balance sheet date, and is a portion of lifetime ECLs.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)
Measurement of ECLs (Continued)The maximum period to be considered when estimating ECLs is the maximum contractual period over whichthe Company is exposed to credit risk, including renewal options.For the financial instruments at the first and second stages and with low credit risks, the Company calculatesthe interest income based on the book balance and the effective interest rate before deducting the impairmentprovisions. For financial instruments at the third stage, interest income is calculated based on the amortisedcost after deducting impairment provisions made from the book balance and the effective interest rate.Bills receivable and accounts receivableFor bills receivable and accounts receivable, regardless of whether there is a significant financing component,the Company always makes provision for impairment at an amount equal to lifetime ECLs.When the Company is unable to assess the information of ECLs for an individual financial asset at a reasonablecost, it classifies bills receivable and accounts receivable into portfolios based on the credit risk characteristics,and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
A. Bills receivable
Bills receivable portfolio 1: Bank acceptance billsBills receivable portfolio 2: Commercial acceptance billsB. Accounts receivable
Accounts receivable portfolio 1: Due from related party customersAccounts receivable portfolio 2: Receivables from non-related party customersAccounts receivable portfolio 3: Factoring receivables
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Bills receivable and accounts receivable (Continued)
For bills receivable and contract assets classified as a portfolio, the Company refers to the historical credit lossexperience, combined with the current situation and the forecast of future economic conditions, to calculate theECLs 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 comparisontable of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs.Other receivablesThe Company classifies other receivables into portfolios based on credit risk characteristics, and calculates theECLs on a portfolio basis. The basis for determining the portfolios is as follows:
Other receivables portfolio 1: Amount due from government authoritiesOther receivables portfolio 2: Amount due from related partiesOther receivables portfolio 3: Other receivablesFor other receivables classified as a portfolio, the Company calculates the ECLs based on default risk exposureand the ECL rate over the next 12 months or the entire lifetime.Long-term receivablesThe Company’s long-term receivables include finance lease receivables and deposits receivable.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Long-term receivables (Continued)
The Company classifies the finance lease receivables, deposits receivable and other receivables into portfoliosbased on the credit risk characteristics, and calculates the ECLs on a portfolio basis. The basis for determiningthe portfolios is as follows:
A. Finance lease receivablesFinance lease receivables portfolio 1: Receivables not past dueFinance lease receivables portfolio 2: Overdue receivablesB. Other long-term receivablesOther long-term receivables portfolio 1: Deposits receivableOther long-term receivables portfolio 2: Other receivablesFor deposits receivable and receivables for construction projects, the Company refers to the historical creditloss experience, combined with the current situation and the forecast of future economic conditions, andcalculates the ECLs based on default risk exposure and lifetime ECL rate.Except for those of finance lease receivables and deposits receivable, the ECLs of other receivables and long-term receivables classified as a portfolio are measured based on default risk exposure and ECL rate over thenext 12 months or the entire lifetime.Debt investments and other debt investmentsFor debt investments and other debt investments, the Company measures the ECLs based on the nature of theinvestment, the types of counterparty and risk exposure, and default risk exposure and ECL rate within the next12 months or the entire lifetime.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Assessment of significant increase in credit riskIn assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition,the Company compares the risk of default of the financial instrument at the balance sheet date with that at thedate of initial recognition to determine the relative change in risk of default within the expected lifetime of thefinancial instrument.In determining whether the credit risk has increased significantly upon initial recognition, the Company considersreasonable and well-founded information, including forward-looking information, which can be obtained withoutunnecessary extra costs or efforts. Information considered by the Company includes:
The debtor’s failure to make payments of principal and interest on their contractually due dates;An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any);An actual or expected significant deterioration in the operating results of the debtor;Existing or expected changes in the technological, market, economic or legal environment that have a significantadverse effect on the debtor’s ability to meet its obligation to the Company.Depending on the nature of the financial instruments, the Company assesses whether there has been asignificant increase in credit risk on either an individual basis or a collective basis. When the assessment isperformed on a collective basis, the financial instruments are grouped based on their common credit riskcharacteristics, such as past due information and credit risk ratings.The Company determines that the credit risk on a financial asset has increased significantly if it is more than 30days past due.Credit-impaired financial assetsAt balance sheet date, the Company assesses whether financial assets measured at amortised cost and debtinvestments measured at fair value through other comprehensive income are credit-impaired. A financial assetis credit-impaired when one or more events that have an adverse effect on the estimated future cash flowsof the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the followingobservable events:
Significant financial difficulty of the issuer or debtor;A breach of contract by the debtor, such as a default or delinquency in interest or principal payments;
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(5) Impairment of financial assets
(Continued)Credit-impaired financial assets(Continued)
For economic or contractual reasons relating to the debtor’s financial difficulty, the Company having granted tothe debtor a concession that would not otherwise consider;It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;The disappearance of an active market for that financial asset because of financial difficulties of the issuer ordebtor.Presentation of provisions for ECLsECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit riskupon initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profitor loss for the current period. For financial assets measured at amortised cost, the provisions of impairment isdeducted from the carrying amount of the financial assets presented in the balance sheet; for debt investmentsat fair value through other comprehensive income, the Company makes provisions of impairment in othercomprehensive income without reducing the carrying amount of the financial asset.Write-offsThe book balance of a financial asset is directly written off to the extent that there is no realistic prospect ofrecovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutesderecognition of such financial asset. This is generally the case when the Company determines that the debtordoes not have assets or sources of income that could generate sufficient cash flows to repay the amountssubject to the write-off. However, financial assets that are written off could still be subject to enforcementactivities in order to comply with the Company’s procedures for recovery of amounts due.If a write-off of financial assets is subsequently recovered, the recovery is credited to profit or loss in the periodin which the recovery occurs.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
10. Financial instruments
(Continued)
(6) Transfer of financial assets
Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than theissuer of such financial assets (the transferee).If the Company transfers substantially all the risks and rewards of ownership of the financial asset to thetransferee, the financial asset shall be derecognised. If the Company retains substantially all the risks andrewards of ownership of a financial asset, the financial asset shall not be derecognised.If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financialasset, it accounts for the transaction as follows: if the Company does not retain control, it derecognises thefinancial asset and recognises any resulting assets or liabilities; if the control over the financial asset is notwaived, the relevant financial asset is recognised according to the extent of its continuing involvement in thetransferred financial asset and the relevant liability is recognised accordingly.
(7) Offset of financial assets and financial liabilities
If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities,which are enforceable currently, and the Company plans to realise the financial assets or to clear off thefinancial liabilities on a net amount basis or simultaneously, the net amount of financial assets and financialliabilities shall be presented in the balance sheet upon offsetting. Otherwise, financial assets and financialliabilities are presented separately in the balance sheet without offsetting.
11. Inventories
(1) Classification of inventories
Inventories of the Company mainly include raw materials, work in progress, goods in stock, developmentproducts, consumable biological assets, etc.
(2) Pricing of inventories dispatched
Inventories of the Company are measured at their actual cost when obtained. Cost of raw materials, goods instock and others will be calculated with weighted average method when being dispatched.Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumablebiological assets without a stock are stated at historical cost at initial recognition, and subsequently measuredat fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the currentperiod. The cost of self-planting, self-cultivating consumable biological assets is the necessary expensesdirectly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation.Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or lossfor the current period.The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carryingamount using the stock volume proportion method.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
11. Inventories
(Continued)
(3) Recognition of net realisable value of inventories and provision for inventory impairment
Net realisable value of inventories refers to the amount of the estimated price of inventories less the estimatedcost incurred upon completion, estimated sales expenses and taxes and levies. The realisable value ofinventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effectof events after the balance sheet date.At the balance sheet date, provision for inventory impairment is made when the cost is higher than the netrealisable value. The Company usually make provision for inventory impairment based on categories ofinventories. At the balance sheet date, in case the factors causing inventory impairment no longer exists, theoriginal provision for inventory impairment shall be reversed.
(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.
12. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date.The Company measures the relevant asset and liability at fair value, based on the presumption that the orderlytransaction to sell the asset or transfer the liability takes place either in the principal market for the relevant asset orliability, or in the absence of a principal market, in the most advantageous market for relevant the asset or liability. Theprincipal or the most advantageous market must be a trading market accessible by the Company at the measurementdate. The Company adopts the presumption that market participants would use when pricing the asset or liability intheir best economic interest.If there exists an active market for a financial asset or financial liability, the Company uses the quotation on the activemarket as its fair value. If the market for a financial instrument is inactive, the Company uses valuation technique torecognise its fair value.Fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economicbenefits by using the asset in its best use or by selling it to another market participant that would use the asset in itsbest use.The Company adopts valuation techniques that are appropriate in the current circumstance and for which sufficientdata and other information are available, prioritises the use of relevant observable inputs and uses unobservableinputs only under the circumstances where such relevant observable inputs cannot be obtained or practicablyobtained.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
12. Fair value measurement
(Continued)Assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised withinthe fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole.Level 1: based on quoted prices (unadjusted) in active markets for identical assets or liabilities obtainable at themeasurement date. Level 2: observable inputs for the relevant asset or liability, either directly or indirectly, except forLevel 1 input. Level 3: unobservable inputs for the relevant assets or liabilityAt each balance sheet date, the Company reassesses assets and liabilities measured at fair value that are recognisedin the financial statements on a recurring basis to determine whether transfers have occurred between fair valuemeasurement hierarchy levels.
13. Long-term equity investments
Long-term equity investments include the equity investments in subsidiaries, joint ventures and associates. Associatesof the Company are those investees that the Company imposes significant influence over.
(1) Determination of initial investment cost
Long-term equity investments acquired through business combinations: for a long-term equity investmentacquired through a business combination involving enterprises under common control, the investment cost shallbe the absorbing party’s share of the carrying amount of the owners’equity under the consolidated financialstatements of the ultimate controlling party on the date of combination. For a long-term equity investmentacquired through a business combination involving enterprises not under common control, the investment costof the long-term equity investment shall be the cost of combination.Long-term equity investments acquired through other means: for a long-term equity investment acquiredby cash payment, the initial investment cost shall be the purchase cost actually paid; for a long-term equityinvestment acquired by issuing equity securities, the initial investment cost shall be the fair value of equitysecurities issued.
(2) Subsequent measurement and method for profit or loss recognition
Investments in subsidiaries shall be accounted for using the cost method. Except for the investments whichmeet the conditions of holding for sale, investments in associates and joint ventures shall be accounted forusing the equity method.For a long-term equity investment accounted for using the cost method, the cash dividends or profits declaredby the investees for distribution shall be recognised as investment gains and included in profit or loss for thecurrent period, except the case of receiving the actual consideration paid for the investment or the declared butnot yet distributed cash dividends or profits which is included in the consideration.For a long-term equity investment accounted for using the equity method, where the initial investment costexceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date,no adjustment shall be made to the investment cost of the long-term equity investment. Where the initialinvestment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at theacquisition date, adjustment shall be made to the carrying amount of the long-term equity investment, and thedifference shall be charged to profit or loss for the current period.
2021 ANNUAL REPORT
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)Under the equity method, investment gain and other comprehensive income shall be recognised based onthe Company’s share of the net profits or losses and other comprehensive income made by the investee,respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carryingamount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividenddistributed by the investee. In respect of the other movement of net profit or loss, other comprehensive incomeand profit distribution of investee, the carrying amount of long-term equity investment shall be adjusted andincluded in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s netprofits or losses based on the fair values of the investee’s individual separately identifiable assets at the time ofacquisition, after making appropriate adjustments thereto according to the accounting policies and accountingperiods of the Company.For additional equity investment made in order to obtain significant influence or common control over investeewithout resulted in control, the initial investment cost under the equity method shall be the aggregate offair value of previously held equity investment and additional investment cost on the date of transfer. Forinvestments in non-trading equity instruments that were previously classified as at fair value through othercomprehensive income, the cumulative fair value changes associated with them that were previously includedin other comprehensive income are transferred to retained earnings upon the change to the equity method ofaccounting.In the event of loss of common control or significant influence over investee due to partial disposal of equityinvestment, the remaining equity interest after disposal shall be accounted for according to the AccountingStandard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. Thedifference between its fair value and carrying amount shall be included in profit or loss for the current period. Inrespect of other comprehensive income recognised under previous equity investment using equity method, itshall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset orliability by investee at the time when equity method was ceased to be used. Movement of other owners’equityrelated to the previous equity investment shall be transferred to profit or loss for the current period.In the event of loss of control over investee due to partial disposal of equity investment, the remaining equityinterest which can apply common control or impose significant influence over the investee after disposal shallbe accounted for using equity method. Such remaining equity interest shall be treated as accounting for usingequity method since it is obtained and adjustment was made accordingly. For the remaining equity interestwhich cannot apply common control or impose significant influence over the investee after disposal, it shall beaccounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurementof Financial Instruments. The difference between its fair value and carrying amount as at the date of losingcontrol shall be included in profit or loss for the current period.If the shareholding ratio of the Company is reduced due to the capital increase of other investors, and as aresult, the Company loses the control of but still can apply common control or impose significant influence overthe investee, the net asset increase due to the capital increase of the investee attributable to the Company shallbe recognised according to the new shareholding ratio, and the difference with the original carrying amount ofthe long-term equity investment corresponding to the shareholding ratio reduction part that should be carriedforward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according tothe new shareholding ratio as if equity method is used for accounting when acquiring the investment.
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 respect of the transactions between the Company and its associates and joint ventures, the share ofunrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable to theCompany. Investment gain or loss shall be recognised accordingly. However, any unrealised loss arising frominternal transactions between the Company and an investee is not eliminated to the extent that the loss isimpairment loss of the transferred assets.
(3) Basis for determining the common control and significant influence on the investee
Common control is the contractually agreed sharing of control over an arrangement, which relevant activitiesof such arrangement must be decided by unanimously agreement from parties who share control. Whendetermining if there is any common control, it should first be identified if the arrangement is controlled byall the participants or the group consisting of the participants, and then determined if the decision on thearranged activity can be made only with the unanimous consent of the participants sharing the control. If all theparticipants or a group of participants can only decide the relevant activities of certain arrangement throughconcerted action, it can be considered that all the participants or a group of participants share commoncontrol on the arrangement. If there are two or more participant groups that can collectively control certainarrangement, it does not constitute common control. When determining if there is any common control, therelevant protection rights will not be taken into account.Significant influence is the power of the investor to participate in the financial and operating policy decisionsof an investee, but to fail to control or joint control the formulation of such policies together with other parties.When determining if there is any significant influence on the investee, the influence of the voting shares of theinvestee held by the investor directly and indirectly and the potential voting rights held by the investor andother parties which are exercisable in the current period and converted to the equity of the investee, includingthe warrants, stock options and convertible bonds that are issued by the investee and can be converted in thecurrent period, shall be taken into account.When the Company holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the votingshares of the investee, it is generally considered to have significant influence on the investee, unless there isconcrete evidence to prove that it cannot participate in the production and operation decision-making of theinvestee and cannot pose significant influence in this situation. When the Company owns less than 20% of thevoting shares of the investee, it is generally considered that it has not significantly influenced on the investee,unless there is concrete evidence to prove that it can participate in the production and operation decision-making of the investee and cannot pose significant influence in this situation.
(4) Held-for-sale equity investments
The equity investments to associates or joint ventures are all or partially classified as assets held for sale.The remaining equity investments that are not classified as assets held for sale shall be accounted for usingequity method.The equity investments to associates or joint ventures already classified as held for sale no longer meet theconditions of assets held for sale shall be adjusted retroactively using equity method from the date of beingclassified as assets held for sale.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
13. Long-term equity investments
(Continued)
(5) Impairment test method and Impairment provision
For the method for making impairment provision for the investment in subsidiaries, associates and jointventures, please refer to Note V. 20.
14. Investment property
Investment property refers to real estate held to earn rentals or for capital appreciation, or both. The investmentproperty of the Company includes leased land use rights, land use rights held for sale after appreciation, and leasedbuildings.The investment property of the Company is measured initially at cost upon acquisition, and subject to depreciation oramortisation in the relevant periods according to the relevant provisions on fixed assets or intangible assets.For the method for making impairment provision for the investment property adopted cost method for subsequentmeasurement, please refer to Note V. 20.When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of theproperty net of the carrying amount and related tax and surcharges is recognised in profit or loss for the currentperiod.
15. Fixed assets
(1) Conditions for recognition
Fixed assets represent the tangible assets held by the Company using in the production of goods, rendering ofservices and for operation and administrative purposes with useful life over one year.Fixed assets are recognised when it is probable that the related economic benefits will flow to the Company andthe costs can be reliably measured.The Company’s fixed assets are initially measured at the actual cost at the time of acquisition.Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probablethat the associated economic benefits will flow to the Company and the related cost can be reliably measured.The cost of routine repairs of fixed assets that do not qualify as capitalised subsequent expenditure is chargedto current profit or loss or included in the cost of the related assets in accordance with the beneficiary objectwhen incurred. The carrying amount of the replaced part is derecognised.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
15. Fixed assets
(Continued)
(2) Depreciation method
The Company adopts the straight-line method for depreciation. Provision for depreciation will be startedwhen the fixed asset reaches its expected usable state, and stopped when the fixed asset is derecognisedor classified as a non-current asset held for sale. Without regard to the depreciation provision, the Companydetermines the annual depreciation rate by category, estimated useful lives and estimated residual value of thefixed assets as below:
CategoryDepreciation method
Useful lives ofdepreciation(Year)
Estimatedresidualvalue (%)
Annualdepreciationrate (%)Housing and building structureStraight-line method20-405-102.25-4.75Machinery and equipmentStraight-line method8-205-104.50-11.88Transportation equipmentStraight-line method5-85-1011.25-19.00Electronic equipment and othersStraight-line method55-1018.00-19.00Where, for the fixed assets for which impairment provision is made, to determine the depreciation rate, theaccumulated amount of the fixed asset impairment provision that has been made shall be deducted.
(3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 20.
(4) The Company will re-check the useful lives, estimated net residual value and depreciation method of the
fixed assets at the end of each year.When there is any difference between the useful lives estimate and the originally estimated value, the usefullives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual valueestimate and the originally estimated value, the estimated net residual value shall be adjusted.
(5) Disposal of fixed assets
A fixed asset is derecognised on disposal or when it is expected that there shall be no economic benefit arisingfrom using or after disposal. Where the fixed assets are sold, transferred, retired or damaged, the incomereceived after disposal after deducting the carrying amount and related taxes are recognised in profit or loss forthe current period.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
16. Construction in progress
Construction in progress of the Company is recognised based on the actual construction cost, including all necessaryexpenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before ithas reached the working condition for its intended use, and other related expenses during the construction period.A construction in progress is reclassified to fixed assets when it has reached the working condition for its intendeduse.The method for impairment provision of construction in progress is set out in Note V. 20.
17. Borrowing costs
(1) Recognition principle for the capitalisation of the borrowing costs
The borrowing costs incurred by the Company directly attributable to the acquisition, construction or productionof a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will berecognised as expenses when incurred according to the incurred amount, and included in the profit or loss forthe current period. When the borrowing costs meet all the following conditions, capitalisation shall be started:
The capital expenditure has been incurred, which includes the expenditure incurred by paying cash,transferring non-cash assets or undertaking interest-bearing liabilities for acquiring, constructing orproducing the qualifying assets; The borrowing costs have been incurred;The acquisition, construction or production activity necessary for the asset to be ready for its intendeduse or sale has been started.
(2) Capitalisation period of borrowing costs
When a qualifying asset acquired, constructed or produced by the Company is ready for its intended use orsale, the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifyingasset is ready for its intended use or sale shall be recognised as expenses when incurred according to theincurred amount, and included in the profit or loss for the current period.Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction orproduction of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period ofmore than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruptionperiod.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
17. Borrowing costs
(Continued)
(3) Calculation methods for capitalisation rate and capitalised amount of the borrowing costs
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actualinterest expense incurred on that borrowing for the period less any bank interest earned from depositing theborrowed funds before being used into banks or any investment income on the temporary investment of thosefunds. Where funds are borrowed for general purpose, the Company shall determine the amount of interestto be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excessamounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings.The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purposeborrowings.During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreigncurrency shall be capitalised. Exchange differences related to general-purpose borrowings denominated inforeign currency shall be included in profit or loss for the current period.
18. Right-of-use assets
Conditions for recognition of right-of-use assets.Right-of-use assets are defined as the right of underlying assets in the lease term for the Company as a lessee.Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes theamount of the initial measurement of lease liability; lease payments made at or before the inception of the leaseless any lease incentives enjoyed; initial direct costs incurred by the Company as lessee; costs to be incurred indismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlyingasset to the condition required by the terms and conditions of the lease incurred by the Company as lessee. Asa lessee, the Company recognises and measures the costs of dismantling and restoration in accordance with theAccounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently, the lease liability is adjusted forany remeasurement of the lease liability.Depreciation method of right-of-use assetsThe Company uses the straight-line method for depreciation. Where the Company, as a lessee, is reasonably certainto obtain ownership of the leased asset at the end of the lease term, such asset is depreciated over the remaininguseful life of the leased asset. Where ownership of the lease assets during the lease term cannot be reasonablydetermined, right-of-use assets are depreciated over the lease term or the remainder of useful lives of the leaseassets, whichever is shorter.For the methods of impairment test and impairment provision of right-of-use assets, please refer to Note V. 20.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
19. Intangible assets
The intangible assets of the Company include land use rights, software and certificates of third party right.The intangible asset is initially measured at cost, and its useful life is determined upon acquisition. If the useful lifeis finite, the intangible asset will be amortised over the estimated useful life using the amortisation method thatcan reflect the estimated realisation of the economic benefits related to the asset, starting from the time when it isavailable for use. If it is unable to reliably determine the estimated realisation, straight-line method shall be adoptedfor amortisation. The intangible assets with uncertain useful life will not be amortised.The amortisation methods for the intangible assets with finite useful life are as follows:
TypeUseful life (year)
Method ofamortisationRemarkLand use rights50-70Straight-line methodSoftware5-10Straight-line methodCertificates of third party right3Straight-line methodThe Company reviews the useful life and amortisation method of the intangible assets with finite useful life at the endof each year. If it is different from the previous estimates, the original estimates will be adjusted, and will be treated asa change in accounting estimate.If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic benefitto the company, the carrying amount of the intangible asset will be entirely transferred into the profit or loss for thecurrent period.The impairment method for the intangible assets is set out in Note V. 20.
20. Asset impairment
Impairment of long-term equity investments in subsidiaries, associates and joint ventures, asset impairment oninvestment property, fixed assets, construction in progress, materials for project, right-of-use assets, intangibleassets, goodwill and others (excluding inventories, deferred tax assets and financial assets) subsequently measuredat cost is determined as follows:
The Company determines if there is any indication of asset impairment as at the balance sheet date. If there is anyevidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test.Goodwill arising from business combinations, intangible assets with an indefinite useful life and intangible assets notready for use will be tested for impairment annually, regardless of whether there is any indication of impairment.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
20. Asset impairment
(Continued)The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of thefuture cash flows expected to be derived from the asset. The Company estimates the recoverable amount of anindividual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company shalldetermine the recoverable amount of the asset group to which the asset belongs. The determination of an asset groupis based on whether major cash inflows generated by the asset group are independent of the cash inflows from otherassets or asset groups.When the recoverable amount of an asset or an asset group is less than its carrying amount, the carrying amount isreduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision ismade accordingly.For the purpose of impairment test of goodwill, the carrying amount of goodwill acquired in a business combination isallocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocateto the related asset groups, it is allocated to the combination of related asset groups. The related asset groups orcombination of asset groups are those which can benefit from the synergies of the business combination and are notlarger than the reportable segments identified by the Company.In the impairment test, if there is any indication that an asset group or a combination of asset groups related togoodwill may be impaired, the Group first tests the asset group or set of asset groups excluding goodwill forimpairment, calculates the recoverable amount and recognises the corresponding impairment loss. An impairment testis then carried out on the asset group or combination of asset groups containing goodwill by comparing its carryingamount with its recoverable amount. If the recoverable amount is lower than the carrying amount, an impairment lossis recognised for goodwill.An impairment loss recognised shall not be reversed in a subsequent period.
21. Long-term prepaid expenses
The long-term prepaid expenses incurred by the Company shall be recognised based on the actual cost, and evenlyamortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequentaccounting periods, its value after amortisation shall be entirely included in the profit or loss for the current period.
22. Employee benefits
(1) Scope of employee benefits
Employee benefits are all forms of considerations or compensation given by an entity in exchange forservices rendered by employees or for the termination of employment. Employee benefits include short-termstaff remuneration, post-employment benefits, termination benefits and other long-term employee benefits.Employee benefits include benefits provided to employees’spouses, children, other dependants, survivors ofthe deceased employees and other beneficiaries.Employee benefits are presented as“employee benefits payable”and“long-term employee benefits payable”inthe balance sheet, respectively, according to liquidity.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
22. Employee benefits
(Continued)
(2) Short-term staff remuneration
Employee wages or salaries actually incurred, bonuses, and social insurance contributions such as medicalinsurance, work injury insurance, maternity insurance, and housing fund, contributed at the applicablebenchmarks and rates, are recognised as a liability as the employees provide services, with a correspondingcharge to profit or loss or included in the cost of assets where appropriate. Where the payment of liability isexpected not to be fully settled within 12 months after the end of the annual reporting period in which theemployees render the related services, and the financial impact would be material, these liabilities are measuredat their discounted values.
(3) Post-employment benefits
Post-employment benefit plans include defined contribution plans and defined benefit plans. A definedcontribution plan is a post-employment benefit plan under which the Group pays fixed contributions intoa separate fund and the Group has no further obligations for payment. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.Defined contribution plansDefined contribution plans include basic pension insurance and unemployment insurance.During the accounting period in which an employee provides service, the amount payable calculated accordingto the defined contribution plan is recognised as a liability and included in the profit or loss for the current periodor the cost of relevant assets.
(4) Termination benefits
When the Company provides termination benefits to employees, employee benefits liabilities arising fromtermination benefits are recognised in profit or loss for the current period at the earlier of the following dates:
when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labourrelationship plans and employee redundant proposals; the Company recognises cost and expenses related topayment of compensation for dismissal and restructuring.For the early retirement plans, economic compensations before the actual retirement date were classified astermination benefits. During the period from the date of cease of render of services to the actual retirementdate, relevant wages and contribution to social insurance for the employees proposed to be paid are recognisedin profit or loss on a one-off basis. Economic compensation after the official retirement date, such as normalpension, is accounted for as post-employment benefits.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
23. Provisions
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as provisions:
(1) the obligation is a current obligation borne by the Company;
(2) it is likely that an outflow of economic benefits from the Company will be resulted from the performance of the
obligation;
(3) the amount of the obligation can be reliably measured.
The provisions shall be initially measured based on the best estimate for the expenditure required for the performanceof the current obligation, after taking into account relevant risks, uncertainties, time value of money and otherfactors pertinent to the contingencies. If the time value of money has significant influence, the best estimates shallbe determined after discounting the relevant future cash outflow. The Company reviews the carrying amount of theprovisions on the balance sheet date and adjust the carrying amount to reflect the current best estimates.If all or some expenses incurred for settlement of recognised provisions are expected to be borne by the third party,the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensationamount recognised shall not be more than the carrying amount of provisions.
24. Share-based payments
(1) Category of share-based payment
The Company’s share-based payment is either equity-settled or cash-settled.
(2) Determination of fair value of equity instruments
For the existence of an active market for options and other equity instruments granted by the Company, thefair value is determined at the quoted price in the active market. For options and other equity instruments withno active market, option pricing model shall be used to estimate the fair value of the equity instruments. Thefollowing factors shall be taken into account using option pricing models: A. the exercise price of the option; B.the validity period of the option; C. the current market price of the share; D. the expected volatility of the shareprice; E. predicted dividend of the share; and F. risk-free rate of the option within the validity period.
(3) Recognition of vesting of equity instruments based on the best estimate
On each balance sheet date within the vesting period, the estimated number of equity instruments expected tovest is revised based on the best estimate made by the Company according to the latest available subsequentinformation as to changes in the number of employees with exercisable rights. On the vesting date, the finalestimated number of equity instruments expected to vest should equal the actual number of equity instrumentsexpected to vest.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
24. Share-based payments
(Continued)
(4) Accounting treatment of implementation, modification and termination of share-based payment
Equity-settled share-based payment shall be measured at the fair value of the equity instruments granted toemployees. For those may immediately vest after the grant, the fair value of equity instrument at the grant dateshall be included in the relevant costs or expenses, and the capital reserve shall be increased accordingly.If the right may not be exercised until the vesting period comes to an end or until the specified performanceconditions are met, within the vesting period, the services obtained in the current period shall, based on thebest estimate of the number of vested equity instruments, be included in the relevant costs or expenses and thecapital reserve at the fair value of the equity instrument at the grant date. After the vesting period, relevant costsor 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 calculatedand recognised based on the shares or other equity instruments undertaken by the Company. For those mayimmediately vest after the grant, the fair value of the liability undertaken by the Company shall, on the dateof 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 performanceconditions are met, within the vesting period, the services obtained in the current period shall, based on thebest estimate of the information about the exercisable right, be included in the relevant costs or expenses andthe corresponding liabilities at the fair value of the liability undertaken by the Company. For each of the balancesheet date and settlement date before the settlement of the relevant liabilities, fair value of the liabilities shall beremeasured and the changes will be included in the profit or loss for the current period.When there are changes in Company’s share-based payment plans, if the modification increases the fair valueof the equity instruments granted, corresponding recognition of service increase in accordance with the increasein the fair value of the equity instruments; if the modification increases the number of equity instrumentsgranted, the increase in fair value of the equity instruments is recognised as a corresponding increase in serviceachieved. Increase in the fair value of equity instruments refer to the difference between the fair values of themodified date. If the modification reduces the total fair value of shares paid or not conductive to the use of otheremployees share-based payment plans to modify the terms and conditions of service, it will continue to beaccounted for in the accounting treatment, as if the change had not occurred, unless the Company cancelledsome or all of the equity instruments granted.During the vesting period, if the cancelled equity instruments (except for failure to meet the conditions of thenon-market vesting conditions) granted by the Company to cancel the equity instruments granted amounttreated as accelerated vesting of the remaining period should be recognised immediately in profit or loss, whilerecognising capital reserves. If employees or other parties can choose to meet non-vesting conditions but theyare not met in the vesting period, the Company will treat them as cancelled equity instruments granted.
25. Preference Shares, Perpetual Bonds and other financial instruments
(1) Classification of financial liabilities and equity instruments
Financial instruments issued by the Company are classified into financial assets, financial liabilities or equityinstruments on the basis of the substance of the contractual arrangements and the economic nature not onlyits legal form, together with the definition of financial asset, financial liability and equity instruments on initialrecognition.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
25. Preference Shares, Perpetual Bonds and other financial instruments
(Continued)
(2) Accounting treatment of preference shares, perpetual bonds and other financial instruments
Financial instruments issued by the Company are initially recognised and measured in accordance with thefinancial instrument standards; thereafter, interest or dividends are accrued on each balance sheet dateand accounted for in accordance with relevant specific ASBEs, i.e. to determine the accounting treatmentfor interest expenditure or dividend distribution of the instrument based on the classification of the financialinstrument issued. For financial instruments classified as equity instruments, their interest expenses or dividenddistributions are treated as profit distribution of the Company, and their repurchases and cancellations aretreated as changes in equity; for financial instruments classified as financial liabilities, their interest expenses ordividend distribution are in principle accounted for with reference to borrowing costs, and the gains or lossesarising from their repurchases or redemption are included in the profit or loss for the current period.For the transaction costs such as fees and commissions incurred by the Company for issuing financialinstruments, if such financial instruments are classified as debt instruments and measured at amortised cost,they are included in the initial measured amount of the instruments issued; if such financial instruments areclassified as equity instruments, they are deducted from equity.
26. Revenue
(1) General principles
The Company recognises revenue when it satisfies a performance obligation in the contract, i.e. when thecustomer obtains control of the relevant goods or services.Where a contract has two or more performance obligations, the Company allocates the transaction price toeach performance obligation based on the percentage of respective unit price of goods or services guaranteedby each performance obligation, and recognises as revenue based on the transaction price that is allocated toeach performance obligation.If one of the following conditions is fulfilled, the Company performs its performance obligation within a certainperiod; otherwise, it performs its performance obligation at a point of time:
when the customer simultaneously receives and consumes the benefits provided by the Company whenthe Company performs its obligations under the contract;when the customer is able to control the goods in progress in the course of performance by the Companyunder the contract;when the goods produced by the Company under the contract are irreplaceable and the Company has
the right to payment for performance completed to date during the whole contract term.For performance obligations performed within a certain period, the Company recognises revenue by measuringthe progress towards complete of that performance obligation within that certain period. When the progressof performance cannot be reasonably determined, if the costs incurred by the Company are expected tobe compensated, the revenue shall be recognised at the amount of costs incurred until the progress ofperformance can be reasonably determined.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
26. Revenue
(Continued)
(1) General principles
(Continued)For performance obligation performed at a point of time, the Company recognises revenue at the point of timeat which the customer obtains control of relevant goods or services. To determine whether a customer hasobtained control of goods or services, the Company considers the following indications:
The Company has the current right to receive payment for the goods, which is when the customer has thecurrent payment obligations for the goods.The Company has transferred the legal title of the goods to the customer, which is when the client
possesses the legal title of the goods.The Company has transferred the physical possession of goods to the customer, which is when thecustomer obtains physical possession of the goods.The Company has transferred all of the substantial risks and rewards of ownership of the goods to thecustomer, which is when the customer obtain all of the substantial risks and rewards of ownership of thegoods to the customer. The customer has accepted the goods. Other information indicates that the customer has obtained control of the goods.The Company’s right to consideration in exchange for goods or services that the Company has transferred tocustomers (and such right depends on factors other than passage of time) is accounted for as contract assets,and contract assets are subject to impairment based on ECLs (Note VII. 47). The Company’s unconditionalright to receive consideration from customers (only depends on passage of time) is accounted for as accountsreceivable. The Company’s obligation to transfer goods or services to customers for which the Company hasreceived or should receive consideration from customers is accounted for as contract liabilities.Contract assets and contract liabilities under the same contract are presented on a net basis. Where the netamount has a debit balance, it is presented in“contract assets”or“other non-current assets”according to itsliquidity. Where the net amount has a credit balance, it is presented in“contract liabilities”or“other non-currentliabilities” according to its liquidity.
(2) Specific methods
Specific method for revenue recognition of machine-made paper business of the Company: in terms ofdomestic sales of machine-made paper, revenue is recognised when goods are delivered to the customers andsuch deliveries are confirmed; while in terms of overseas sales of machine-made paper, revenue is recognisedon the day when goods are loaded on board and declared.Specific method for recognition of finance lease income of the Company: according to the repayment schedule,the income is recognised by instalments according to the effective interest rate.Specific method for recognition of revenue from real estate of the Company: revenue is recognised byamortising the rental income on a straight-line basis over the lease term.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
27. Government grants
A government grant is recognised when the grant will be received and that the Company will comply with theconditions attaching to the grant.If a government grant is in the form of a monetary asset, it is measured at the amount received or receivable. If agovernment grant is in the form of non-monetary asset, it is measured at fair value; if the fair value cannot be obtainedin a reliable way, it is measured at the nominal amount of RMB1.Government grants obtained for acquisition or construction of long-term assets or other forms of long-term assetformation are classified as government grants related to assets, while the remaining government grants are classifiedas government grants related to revenue.Regarding the government grant not clearly defined in the official documents and can form long-term assets, thepart of government grant which can be referred to the value of the assets is classified as government grant relatedto assets and the remaining part is government grant related to revenue. For the government grant that is difficult todistinguish, the entire government grant is classified as government grant related to revenue.A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or lossover the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue,if the grant is a compensation for related costs, expenses or losses incurred, the grant shall be recognised in profitor loss for the current period; if the grant is a compensation for related costs, expenses or losses to be incurredin subsequent periods, the grant shall be recognised as deferred income, and recognised in profit or loss over theperiods in which the related costs, expenses or losses are recognised. A government grant measured at nominalamount is directly included in profit or loss for the current period. The Company adopts a consistent approach to thesame or similar government grants.A government grant related to daily activities is recognised in other gains relying on the essence of economicbusiness; otherwise, recognised in non-operating income or non-operating expenses.For the repayment of a government grant already recognised, if there is any related deferred income, the repaymentshall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit orloss for the current period; otherwise, the repayment shall be recognised immediately in profit or loss for the currentperiod.For the policy preferential interest subsidy, if it is provided by the financial authority through banks, it is recognisedat the amount of borrowings actually received, and the borrowings costs are calculated based on the principalof the borrowings and the policy preferential interest rate; if it is provided by the financial authority directly, thecorresponding interest will be used to offset the relevant borrowing expenses.
28. Deferred income tax assets/deferred income tax liabilities
Income tax comprises current income tax expense and deferred income tax expense, which are included in profit orloss for the current period as income tax expenses, except for deferred tax related to transactions or events that aredirectly recognised in owners’ equity which are recognised in owners’equity, and deferred tax arising from a businesscombination, which is adjusted against the carrying amount of goodwill.Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax baseat the balance sheet date of the Company shall be recognised as deferred income tax using the balance sheet liabilitymethod.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
28. Deferred income tax assets/deferred income tax liabilities
(Continued)All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in thefollowing transactions:
(1) The initial recognition of goodwill, and the initial recognition of an asset or liability in a transaction which is
neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when thetransaction occurs;
(2) The taxable temporary differences associated with investments in subsidiaries, associates and joint ventures,
and the Company is able to control the timing of the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.The Company recognises a deferred income tax asset for the carry forward of deductible temporary differences,deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable profitswill be available against which the deductible temporary differences, deductible losses and tax credits can be utilised,except for those incurred in the following transactions:
(1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or deductible
loss) when the transaction occurs;
(2) The deductible temporary differences associated with investments in subsidiaries, associates and joint ventures,
the corresponding deferred income tax asset is recognised when both of the following conditions are satisfied:
it is probable that the temporary difference will reverse in the foreseeable future, and it is probable that taxableprofits will be available in the future, against which the temporary difference can be utilised.At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the taxrates that are expected to apply to the period when the asset is realised or the liability is settled, and their tax effect isreflected accordingly.At the balance sheet date, the Company reviews the carrying amount of a deferred income tax asset. If it is probablethat sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to beutilised, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when itbecomes probable that sufficient taxable profits will be available.
29. Lease
(1) Identification of leases
On the beginning date of the contract, the Company (as a lessee or lessor) assesses whether the customer inthe contract has the right to obtain substantially all of the economic benefits from use of the identified assetthroughout the period of use and has the right to direct the use of the identified asset throughout the period ofuse. If a contract conveys the right to control the use of an identified asset and multiple identified assets for aperiod of time in exchange for consideration, the Company identifies such contract is, or contains, a lease.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. Lease
(Continued)
(2) The Company as lessee
On the beginning date of the lease, the Company recognises right-of-use assets and lease liabilities for allleases, except for short-term lease and low-value asset lease with simplified approach.The accounting policy for right-of-use assets is set out in Note V. 18.The lease liability is initially measured at the present value of the lease payments that are not paid at thebeginning date of the lease using the interest rate implicit in the lease. Where the interest rate implicit in thelease cannot be determined, the incremental borrowing rate is used as the discount rate. Lease paymentsinclude fixed payments and in-substance fixed payments, less any lease incentives receivable; variablelease payments that are based on an index or a rate; the exercise price of a purchase option if the lessee isreasonably certain to exercise that option; payments for terminating the lease, if the lease term reflects thelessee exercising that option of terminating; and amounts expected to be payable by the lessee under residualvalue guarantees. Subsequently, the interest expense on the lease liability for each period during the lease termis calculated using a constant periodic rate of interest and is recognised in profit or loss for the current period.Variable lease payments not included in the measurement of lease liabilities are charged to profit or loss in theperiod in which they actually arise. The Company calculates the interest expense of the lease liability for eachperiod of the lease term based on the fixed periodic interest rate and is included in the current profit and loss.The variable lease payments that are not included in the measurement of the lease liability are recognised inprofit or loss when incurred.Short-term leaseShort-term leases refer to leases with a lease term of less than 12 months from the commencement date,except for those with a purchase option.Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on astraight-line basis over the lease term.For short-term leases, the Company chooses to adopt the above simplified approach for the following types ofassets that meet the conditions of short-term lease according to the classification of leased assets.Low-value equipmentTransportation vehicles
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. Lease
(Continued)
(2) The Company as lessee
(Continued)Low-value asset leaseA low-value asset lease is a lease that the value of a single leased asset is below RMB40,000 when it is a newasset.Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term, andeither included in the cost of the related asset or charged to profit or loss for the current period.For a low-value asset lease, the Company chooses the above simplified approach based on the specificcircumstances of each lease.Lease modificationThe Company accounts for a lease modification as a separate lease when the modification occurs and thefollowing conditions are met: the lease modification expands the scope of lease by adding the right to useone or more of the leased assets; and the increase in consideration is equivalent to the separate price for theexpanded scope of lease adjusted for that contractual situation.Where a lease modification is not accounted for as a separate lease, at the effective date of the leasemodification, the Company reallocates the consideration of the modified contract, redetermines the lease termand remeasures the lease liability based on the present value of the lease payments after the modification andthe revised discount rate.If a lease modification results in a reduction in the scope of the lease or a shortening of the lease term, theCompany reduces the carrying amount of the right-of-use asset accordingly and includes in the profit or loss forthe period the gain or loss associated with the partial or complete termination of the lease.Where other lease modifications result in a remeasurement of the lease liability, the Company adjusts thecarrying amount of the right-of-use asset accordingly.
(3) The Company as lessor
When the Company is a lessor, a lease is classified as a finance lease whenever the terms of the lease transfersubstantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases areclassified as operating leases.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. Lease
(Continued)
(3) The Company as lessor
(Continued)Finance leasesUnder finance leases, the Company accounts for finance lease receivables at the beginning of the lease termat the net lease investment, which is the sum of the unsecured residual value and the present value of thelease receipts outstanding at the commencement date of the lease, discounted at the interest rate implicit inthe lease. The Company as lessor calculates and recognises interest income for each period of the lease termbased on a fixed periodic interest rate. Variable lease payments acquired by the Company as lessor that are notincluded in the net measurement of lease investments are included in profit or loss for the period when they areactually incurred.Derecognition and impairment of finance lease receivables are accounted for in accordance with therequirements under the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurementof Financial Instruments and the Accounting Standards for Business Enterprises No. 23 – Transfer of FinancialAssets.Operating leaseLease payments under operating leases are recognised in profit or loss on a straight-line basis over the leaseterm. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease termon the same basis as rental income and recognised in profit or loss for the current period. The variable leasepayments obtained in relation to operating leases that are not included in the lease payments are recognised inprofit or loss in the period in which they actually incurred.Lease modificationThe Company accounts for a modification in an operating lease as a new lease from the effective date of themodification and the amount of lease receipts received in advance or receivable in respect of the lease prior tothe modification is treated as a receipt under the new lease.The Company accounts for a modification in a finance lease as a separate lease when the change occurs andthe following conditions are met: the modification expands the scope of lease by adding the right to use oneor more of the leased assets; and the increase in consideration is equivalent to the separate price for theexpanded scope of lease adjusted for that contractual situation.Where a finance lease is modified and not accounted for as a separate lease, the Company accounts for themodified lease in the following circumstances: If the modification takes effect on the lease commencementdate, the lease will be classified as an operating lease, the Company will account for it as a new lease from theeffective date of the lease modification, and use the net lease investment before the effective date of the leasemodification; If the modification takes effect on the lease commencement date, the lease will be classifiedas a finance lease, and the Company will conduct accounting treatment in accordance with the AccountingStandards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments onmodifying or renegotiating contracts.
2021 ANNUAL REPORT
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
29. Lease
(Continued)
(4) Sublease
When the Company is an intermediate lessor, the sublease is classified with reference to the right-of-use assetsarising from the head lease. If the head lease is a short-term lease for which the Company adopts a simplifiedapproach, then the Company classifies the sublease as an operating lease.
(5) Sale and leaseback
The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and leasebacktransaction is a sale in accordance with the requirements of the Accounting Standard for Business EnterprisesNo. 14 – Revenue.Where asset transfer under the sale and leaseback transactions is a sale, the lessee shall measure the right-of-use assets created by the sale and leaseback based on the portion of carrying amount of the originalassets related to right of use obtained upon leaseback, and only recognise relevant profit or loss for the righttransferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicableASBEs and account for the lease of assets in accordance with this standard.Where asset transfer under the sale and leaseback transactions is not a sale, the lessee shall continue torecognise the transferred assets while recognising a financial liability equal to the transfer income and accountfor such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition andMeasurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial assetequal to the transfer income and account for such asset according to the Accounting Standard for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments.
30. Critical accounting judgments and estimates
The Company gives continuous assessment on, among other things, the reasonable expectations of future eventsand the critical accounting estimates and key assumptions adopted according to its historical experience and otherfactors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks ofthe carrying amount of assets and liabilities for the next financial year are listed as follows:
Classification of financial assetsSignificant judgements involved in determining the classification of financial assets include the analysis of businessmodels and contractual cash flow characteristics.Factors considered by the Company in determining the business model for a group of financial assets include how theasset’s performance is evaluated and reported to key management personnel, how risks are assessed and managedand how the relevant management personnel are compensated.When the Company assesses whether the contractual cash flows of the financial assets are consistent with basiclending arrangements, the main judgements are described as below: whether the principal amount may change overthe life of the financial asset (for example, if there are repayments of principal); whether the interest includes onlyconsideration for the time value of money, credit risk, other basic lending risks and a profit margin and cost. Forexample, whether the amount repaid in advance reflects only the outstanding principal and interest thereon, as well asreasonable compensation paid for early termination of the contract.
XII Financial Report
V. Significant Accounting Policies and Accounting Estimates(Continued)
30. Critical accounting judgments and estimates
(Continued)Measurement of the ECLs of accounts receivableThe Company calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accountsreceivable, and determines the ECL rate based on default probability and default loss rate. When determining theECL rate, the Company adjusts its historical data by referring to information such as historical credit loss experienceas well as current situation and forward-looking information. When considering the forward-looking information,indicators used by the Company include the risk of economic downturn, external market environment, technologyenvironment and changes in customers. The assumptions relating to the ECL calculation are monitored and reviewedby the Company on a regularly basis.Impairment of goodwillThe Company assesses the impairment of goodwill at least annually, which requires estimates on the use value ofasset groups allocated with goodwill. When estimating use value, the Company is required to estimate the future cashflow from such asset groups while selecting the appropriate discount rate to calculate the present value of future cashflow.Deferred income tax assetsDeferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profitwill be available against which the losses can be utilised. Significant management judgement is required to determinethe amount of deferred income tax assets that can be recognised, based upon the likely timing and level of futuretaxable profits together with future tax planning strategies.Share-based paymentsWhen calculating the liabilities and expenses related to the equity incentive plan, the management of the Company isrequired to make judgments and estimates on issues such as the turnover rate and vesting conditions. Differences inthe judgments and estimates will have a material effect on the financial statements.
31. Changes in significant accounting policies and estimates
(1) Changes in significant accounting policies
The Company did not have any change in significant accounting policies during the year.
(2) Changes in significant accounting estimates
The Company did not have any change in significant accounting estimates during the year.
(3) Adjustment to the relevant items in the financial statements at the beginning of the year due to the first
adoption of the New Leases Standard in 2021 Applicable √ Not applicable
(4) Reason for retrospective adjustment to the comparative data in the prior period due to the first adoption the
New Leases Standard in 2021 Applicable √ Not applicable
2021 ANNUAL REPORT
XII Financial Report
VI. Taxation
1. Main tax types and tax rates
Tax typeTax baseTax rate (%)Value added tax (VAT)Taxable income13/9/6Property taxRental income and property price1.2/12Urban maintenance and construction taxTurnover tax payable7Enterprise income tax (EIT)Taxable income25Disclosure of taxable entities subject to different EIT tax ratesName of taxable entityEIT tax rate (%)Shandong Chenming Paper Holdings Limited15Shouguang Meilun Paper Co., Ltd.15Jilin Chenming Paper Co., Ltd.15Jiangxi Chenming Paper Co., Ltd.15Zhanjiang Chenming Pulp & Paper Co., Ltd.15Wuhan Chenming Hanyang Paper Holdings Co., Ltd.15Huanggang Chenming Pulp & Paper Co., Ltd.15Kunshan Tuoan Plastic Products Co., Ltd.15Shouguang Shun Da Customs Declaration Co, Ltd.20Qingdao Chenming Pulp & Paper Electronic Commodity Spot Trading Co., Ltd.20Zhanjiang Chenming Arboriculture Development Co., Ltd.Exempt from EITNanchang Chenming Arboriculture Development Co., Ltd.Exempt from EITChenming Arboriculture Co., Ltd.Exempt from EITYangjiang Chenming Arboriculture Development Co., Ltd.Exempt from EIT
2. Tax incentives
(1) Enterprise income tax
On 15 December 2021, the Company received a high and new technology enterprise certificate with acertification number of GR202137005666. Pursuant to the requirements under the Law of the People’s Republicof China on Enterprise Income Tax and the relevant policies, the Company is subject to a corporate income taxrate of 15% of taxable income, and is entitled to the preferential treatment from 2021 to 2023.Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, received a high and new technologyenterprise certificate with a certification number of GR202137005468 on 15 December 2021. Pursuant to therequirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Shouguang Meilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitledto the preferential treatment from 2021 to 2023.Jilin Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprisecertificate with a certification number of GR201922000658 on 2 September 2019. Pursuant to the requirementsunder the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, JilinChenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to thepreferential treatment from 2019 to 2021.
XII Financial Report
VI. Taxation(Continued)
2. Tax incentives
(Continued)
(1) Enterprise income tax
(Continued)Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprisecertificate with a certification number of GR201936002184 on 3 December 2019. Pursuant to the requirementsunder the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, JiangxiChenming is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to thepreferential treatment from 2019 to 2021.Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and new technologyenterprise certificate with a certification number of GR202144001212 on 20 December 2021. Pursuant to therequirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Zhanjiang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and isentitled to the preferential treatment from 2021 to 2023.Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company, received a high andnew technology enterprise certificate with a certification number of GR202042001502 on 1 December 2020.Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax andthe relevant policies, Wuhan Chenming is subject to an enterprise income tax rate of 15% of taxable income,and is entitled to the preferential treatment from 2020 to 2022.Huanggang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and newtechnology enterprise certificate with a certification number of GR202042001471 on 1 December 2020. Pursuantto the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Huanggang Chenming is subject to an enterprise income tax rate of 15% of taxable income, and isentitled to the preferential treatment from 2020 to 2022.Kunshan Tuoan Plastic Products Co., Ltd., a subsidiary of the Company, received a high and new technologyenterprise certificate with a certification number of GR202032004526 on 2 December 2020. Pursuant to therequirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevantpolicies, Kunshan Tuoan is subject to an enterprise income tax rate of 15% of taxable income, and is entitled tothe preferential treatment from 2020 to 2022.Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Taxand Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on EnterpriseIncome Tax, Zhanjiang Chenming Arboriculture Development Co., Ltd., Yangjiang Chenming ArboricultureDevelopment Co., Ltd., Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming ArboricultureCo., Ltd., which are the subsidiaries of the Company, have completed the filings for EIT reduction for exemptionfrom EIT.
2021 ANNUAL REPORT
XII Financial Report
VI. Taxation(Continued)
2. Tax incentives
(Continued)
(1) Enterprise income tax
(Continued)
Shouguang Shun Da Customs Declaration Co, Ltd. and Qingdao Chenming Pulp & Paper Electronic CommoditySpot Trading Co., Ltd., which are subsidiaries of the Company, are small and micro enterprises. Pursuant to theNotice on Implementing the Inclusive Tax Deduction and Exemption Policies for Micro and Small Enterprises (CaiShui [2019] No. 13), the annual taxable income of a small low-profit enterprise that is less than RMB1 millionshall be included in its taxable income at a reduced rate of 12.5%, with the applicable enterprise income taxrate of 20%. The annual taxable income of a small low-profit enterprise that is more than RMB1 million but notexceeding RMB3 million shall be included in its taxable income at a reduced rate of 50%, with the applicableenterprise income tax rate of 20%.Guangdong Chenming Panels Co., Ltd., a subsidiary of the Company, meets the requirements of Rule 99 of theRegulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax (DecreeNo. 512 of the State Council of the People’s Republic of China) and the Notice of the Ministry of Finance andthe State Taxation Administration on Issues Concerning the Implementation of the Catalogue of PreferentialTax Treatments for Comprehensive Resource Utilisation Enterprises (Cai Shui [2008] No. 47): since 1 January2008, for enterprises that derive income from the products listed in the Catalogue which are in line with relatednational 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 for that year. To be entitledto the above tax benefits, the ratio of the resources listed in the Catalogue and the raw materials used for theproduct 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, ZhanjiangChenming Arboriculture Development Co., Ltd., Yangjiang Chenming Arboriculture Development Co., Ltd.,Nanchang Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture Co., Ltd., which aresubsidiaries of the Company, are exempt from VAT, and have completed the filings for VAT reduction forexemption from VAT.Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use ofResources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrateduse of resources may enjoy the immediate VAT refund policy. Guangdong Chenming Panels Co., Ltd., asubsidiary of the Company, produces products applying integrated use of resources, and is therefore subject tothe immediate VAT refund policy in 2021.
XII Financial Report
VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMBItemClosing balanceOpening balanceTreasury cash2,926,080.682,161,684.57Bank deposit3,166,431,843.704,387,725,487.05Other monetary funds10,950,425,015.2813,369,650,427.36Total14,119,782,939.6617,759,537,598.98Of which: Total deposits in overseas banks462,952,909.20229,837,092.53
Including: To tal restricted amount due to mortgages,
pledges or freezes10,756,936,714.5913,022,652,331.98Other explanation:
Other monetary funds of RMB7,801,613,023.62 were the guarantee deposit for the application for bank acceptance with the banks by
the Company;Other monetary funds of RMB1,775,828,450.84 were the guarantee deposit for the application for letter of credit with the banks by theCompany;Other monetary funds of RMB961,122,545.14 were the guarantee deposit for the application for guarantees with the banks by theCompany; Other monetary funds of RMB70,000,000.00 were the guarantee deposit for the application for loans with the banks by the Company; Other monetary funds of RMB125,980,000.00 were the Company’s statutory reserve deposits at the People’s Bank of China; Other monetary funds of RMB22,392,694.99 were locked-up due to litigations, resulting in restriction on the use of that account’sbalance;Bank deposit included interest receivable of RMB442,077.36, and other monetary funds included interest receivable of
RMB193,488,300.69.
2. Financial assets held for trading
Unit: RMBItemClosing balanceOpening balanceFinancial assets measured at fair value through profit or loss110,886,182.88192,907,800.62Or which:
Investment in debt instruments Investment equity instruments110,886,182.88192,907,800.62Total110,886,182.88192,907,800.62
Explanation: Financial assets held for trading were shares of Bohai Bank subscribed by the Company.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMBClosing balanceOpening balanceBook balanceBad debt provisionBook balanceBad debt provisionCarrying amountCategoryAmountPercentageAmount
Provisionpercentage
CarryingamountAmountPercentageAmount
ProvisionpercentageAccounts receivable
assessed individually forbad debt provision224,831,742.247.24%224,831,742.24100.00%338,943,643.2613.70%338,943,643.26100.00%Of which:
Accounts receivableassessed collectively forbad debt provision2,880,986,860.2492.76%224,469,709.787.79%2,656,517,150.462,135,216,813.3286.30%150,285,147.507.04%1,984,931,665.82Of which:
Due from related partycustomers109,385.420.004%109,385.422,000,017.960.08%87,306.274.37%1,912,711.69Receivables from non-
related party customers1,855,021,764.8259.73%84,870,622.114.58%1,770,151,142.711,815,359,418.6773.37%97,096,893.565.35%1,718,262,525.11Factoring receivables1,025,855,710.0033.03%139,599,087.6713.61%886,256,622.33317,857,376.6912.85%53,100,947.6716.71%264,756,429.02Total3,105,818,602.48100.00%449,301,452.0214.47%2,656,517,150.462,474,160,456.58100.00%489,228,790.7619.77%1,984,931,665.82
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Items assessed individually for bad debt provision:
Unit: RMBClosing balanceNameBook balance
Bad debtsprovision
ProvisionpercentageProvision reasonHengfeng Hongyuan Real Estate
Holdings Co., Ltd.45,493,811.4045,493,811.40100.00%Long outstandingNingxia Lingwu Baota DaguStorage and TransportationCo., Ltd.27,600,000.0027,600,000.00100.00%Long outstandingFoshan Shunde Xingchen PaperCo., Ltd.26,236,528.7026,236,528.70100.00%Long outstandingShanxi Printing Materials Co.,Ltd.15,526,488.0415,526,488.04100.00%Long outstandingZhengzhou Hongyang PaperProducts Co., Ltd.15,491,432.9315,491,432.93100.00%Long outstandingShandong Bisheng PrintingMaterials Co., Ltd.14,813,369.2714,813,369.27100.00%Long outstanding95 companies including HenanYibang Technology TradingCo., Ltd.79,670,111.9079,670,111.90100.00%Long outstandingTotal224,831,742.24224,831,742.24100.00%Items assessed collectively for bad debt provision: Due from related party customers
Unit: RMBClosing balanceNameBook balanceBad debt provisionProvision percentageWithin 1 year109,385.42Total109,385.42
2021 ANNUAL REPORT
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 customers
Unit: RMBClosing balanceNameBook balanceBad debt provisionProvision percentageWithin 1 year1,750,739,072.8720,246,468.541.16%1-2 years7,011,563.741,637,130.0723.35%2-3 years27,294,968.1012,900,091.0547.26%Over 3 years69,976,160.1150,086,932.4571.58%Total1,855,021,764.8284,870,622.114.58%Items assessed collectively for bad debt provision: Factoring receivables
Unit: RMBClosing balanceNameBook balanceBad debt provisionECL rateWithin 1 year820,016,666.6482,001,666.6610.00%1-2 years11,785,852.502,357,670.7120.00%2-3 years169,370,528.4347,834,951.5828.24%Over 3 years24,682,662.437,404,798.7230.00%Total1,025,855,710.00139,599,087.6713.61%
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(Continued)
(1) Disclosure of accounts receivable by category
(Continued)If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, pleasedisclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year (including 1 year)2,570,865,124.931,822,584,474.741-2 years128,884,575.48379,812,071.802-3 years196,893,864.0087,426,356.99Over 3 years209,175,038.07184,337,553.05Total3,105,818,602.482,474,160,456.58
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMBChanges in the periodCategory
OpeningbalanceProvision
Recovery or
reversalTransferWritten-off
ClosingbalanceBad debt provision489,228,790.76229,439,721.79233,334,350.9319,046,894.9116,985,814.69449,301,452.02Total489,228,790.76229,439,721.79233,334,350.9319,046,894.9116,985,814.69449,301,452.02
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
3. Accounts receivable
(Continued)
(3) Top five accounts receivable based on closing balance of debtors
The total amount of top five accounts receivable based on closing balance of debtors for the period amountedto RMB774,792,293.32 in total, accounting for 24.95% of the total closing balance of accounts receivable. Theclosing balance of the corresponding bad debt provision amounted to RMB104,503,899.01 in total.
Unit: RMBName of entity
Closing balance ofaccounts receivable
Percentage to closingbalance of otherreceivables
Closing balance ofbad debt provisionCustomer 1300,000,000.009.66%30,000,000.00Customer 2148,138,960.004.77%41,838,565.68Customer 3115,480,000.003.72%11,548,000.00Customer 4111,173,333.323.58%11,117,333.33Customer 5100,000,000.003.22%10,000,000.00Total774,792,293.3224.95%104,503,899.01
4. Accounts receivable financing
Unit: RMBItemClosing balanceOpening balanceBills receivable435,459,341.76488,385,666.76Total435,459,341.76488,385,666.76Changes (increase or decrease) during the period and change in fair value of accounts receivable financing Applicable √ Not applicableIf the provision for impairment of accounts receivable financing is made in accordance with the general model ofECLs, please disclose the information about provision for impairment with reference to the way of disclosure of otherreceivables:
Applicable √ Not applicable
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
5. Prepayments
(1) Presentation of prepayments according to ageing analysis
Unit: RMBClosing balanceOpening balanceItemAmountPercentageAmountPercentageWithin 1 year803,771,958.8190.16%871,877,663.5590.42%1-2 years87,713,119.659.84%92,412,848.819.58%Total891,485,078.46100.00%964,290,512.36100.00%
(2) Top five prepayments based on closing balance of prepaid parties
The total amount of top five prepayments based on closing balance of prepaid parties for the period amountedto RMB388,782,923.49, accounting for 43.61% of the closing balance of the total prepayments.Name of entity
Closing balanceof prepayments
Percentage of theclosing balance of thetotal prepaymentsCustomer 1100,728,705.5111.30%Customer 2100,533,400.0011.28%Customer 376,523,442.858.58%Customer 466,797,145.287.49%Customer 544,200,229.854.96%Total388,782,923.4943.61%
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
Unit: RMBItemClosing balanceOpening balanceOther receivables2,252,864,083.002,417,240,559.46Total2,252,864,083.002,417,240,559.46
(1) Other receivables
1) Other receivables by nature
Unit: RMBNatureClosing book balanceOpening book balanceOpen credit2,692,253,554.582,675,531,581.63Guarantee deposit5,125,826.9611,732,998.24Insurance premium588,343.66636,635.53Reserve and borrowings11,980,522.2943,437,509.57Others79,972,395.80229,207,636.15Total2,789,920,643.292,960,546,361.12
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMBCategoryBook balance
ECL rate (%)for the next12 months
Bad debtprovision
CarryingamountReasonBad debt provision assessedindividuallyInterests receivableDividends receivableBad debt provision assessedcollectively494,496,617.6213.16%65,083,288.44429,413,329.18Amount due from
government agencies19,012,602.8088.87%16,896,802.272,115,800.53Amount due from related
parties103,408,120.647.20%7,445,333.0295,962,787.62Other receivables372,075,894.1810.95%40,741,153.15331,334,741.03Total494,496,617.6213.16%65,083,288.44429,413,329.18As at the end of the period, the Group did not have interest receivables, dividends receivables and otherreceivables in phase 2.As at the end of the period, closing bad debt provision at phase 3:
Unit: RMBCategoryBook balance
ECL rate (%)
over theentire life
Bad debtprovision
CarryingamountReasonBad debt provision assessedindividually2,295,424,025.6720.56%471,973,271.851,823,450,753.82Total2,295,424,025.6720.56%471,973,271.851,823,450,753.82
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
2) Particulars of bad debt provision
(Continued)
Disclosure by ageing
Unit: RMBAgeingClosing balanceOpen balanceWithin 1 year (including 1 year)797,531,460.411,356,457,308.621-2 years1,344,225,352.93813,310,977.702-3 years484,647,394.76634,042,365.77Over 3 years163,516,435.19156,735,709.03Total2,789,920,643.292,960,546,361.12
3) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMBChanges in the periodCategoryOpening balanceProvision
Recoveryor reversalTransferOthersClosing balanceBad debt provision543,305,801.66293,910,655.32260,287,400.1839,872,496.51537,056,560.29Total543,305,801.66293,910,655.32260,287,400.1839,872,496.51537,056,560.29
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
6. Other receivables
(Continued)
(1) Other receivables
(Continued)
4) Top five other receivables based on closing balance of debtors
The total amount of the Company’s top five other receivables based on closing balance of debtors for theperiod was RMB2,028,415,346.66 which accounted for 72.71% of the closing balance of the total otherreceivables. The closing balance of corresponding bad debt provision amounted to RMB327,237,152.54.
Unit: RMB
Name of entityNatureClosing balanceMaturity
Percentageto closingbalance ofotherreceivables
Closing balanceof bad debtprovisionCustomer 1Consideration for equity
transfer684,000,000.001-2 years24.52%102,600,000.00Customer 2Consideration for equity
transfer533,800,000.001-2 years19.13%53,380,000.00Customer 3Consideration for equity
transfer467,402,316.852-3 years16.75%93,480,463.37Customer 4Consideration for equity
transfer219,054,783.561-2 years7.85%21,905,478.36Customer 5Consideration for equity
transfer124,158,246.25Within 1 year4.45%55,871,210.81Total2,028,415,346.6672.71%327,237,152.54
7. Inventories
Whether the Company needs to comply with the disclosure requirements for real estate industriesNo
(1) Categories of inventories
Unit: RMBClosing balanceOpening balanceItemBook balance
Impairmentprovision forinventories orperformance costsCarrying amountBook balance
Impairmentprovision forinventories orperformance costsCarrying amountRaw materials1,734,387,984.2124,660,967.321,709,727,016.891,712,610,505.6320,535,018.691,692,075,486.94Work-in-process products148,489,098.95148,489,098.95128,761,554.31128,761,554.31Goods in stock1,910,051,642.164,941,686.651,905,109,955.511,464,455,062.791,464,455,062.79Developing products314,614,378.34314,614,378.34Consumable biological assets1,519,305,850.771,519,305,850.771,535,386,865.441,535,386,865.44Total5,312,234,576.0929,602,653.975,282,631,922.125,155,828,366.5120,535,018.695,135,293,347.82
Note: Consumable biological assets are forestry assets.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
7. Inventories
(Continued)
(2) Impairment provision for inventories or performance costs
Unit: RMBIncrease during the periodDecrease during the periodItem
OpeningbalanceProvisionOthers
Reversalor transferOthers
ClosingbalanceRaw materials20,535,018.6911,952,470.027,826,521.3924,660,967.32Goods in stock4,941,686.654,941,686.65Total20,535,018.6916,894,156.677,826,521.3929,602,653.97
Item
Basis for recognition of netrealisable value/residual consideration
with future cost
Reason for reversal or written-off ofimpairment provision for inventories/performance costs during the periodRaw materialsThe cost of raw materials is higher
than their net realisable value
Written-off of impairment provisionfor inventories due to sales of impaired
spare parts during the periodGoods in stockThe cost of goods in stock is higher
than their net realisable value
8. Non-current assets due within one year
Unit: RMBItemClosing balanceOpening balanceLong-term receivables due within one year5,216,934,172.614,222,744,207.34Total5,216,934,172.614,222,744,207.34
Explanations:
(1) Long-term receivables due within one year amounting to RMB5,188,103,553.61 (amount for the beginning of the period:
RMB4,039,428,218.16) were financial lease receivables;
(2) Long-term receivables due within one year amounting to RMB28,830,619.00 (amount for the beginning of the period:
RMB183,315,989.18) were deposits receivable.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
9. Other current assets
Unit: RMBItemClosing balanceOpening balanceInput tax amount to be deducted807,004,437.681,041,552,455.22Prepaid tax132,297,740.9053,146,519.47Receivables under financial lease due within one year388,156,667.35601,364,577.40Factoring receivables due within one year303,281,361.74596,856,928.35Prepaid expenses195,453,994.69329,739,882.81Other payments77,735,290.4994,258,332.60Total1,903,929,492.852,716,918,695.85
10. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMBClosing balanceOpening balanceItemBook balance
Bad debtprovision
CarryingamountBook balance
Bad debtprovision
Carryingamount
Discountrate rangeFinance lease payments8,344,107,765.881,211,551,549.727,132,556,216.169,963,461,389.491,103,339,754.728,860,121,634.774%-12%Less: Unrealisedfinancing income366,945,292.53366,945,292.53351,498,895.63351,498,895.63Equipment leasefinancing272,996,696.64272,996,696.64412,239,088.74412,239,088.74Less: Unrealisedfinancing income32,913,472.3132,913,472.3139,232,762.5939,232,762.59Subtotal8,217,245,697.68 1,211,551,549.72 7,005,694,147.96 9,984,968,820.011,103,339,754.728,881,629,065.29Less: long-term
receivables due withinone year6,244,230,790.741,027,296,618.135,216,934,172.614,808,190,306.85585,446,099.514,222,744,207.34Total1,973,014,906.94184,254,931.591,788,759,975.355,176,778,513.16517,893,655.214,658,884,857.95
2021 ANNUAL REPORT
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)Particulars of bad debt provision impairment
Unit: RMBClosing balanceOpening balanceBook balanceBad debts provisionBook balanceBad debts provisionCategoryAmountPercentageAmount
ECLrate (%)
CarryingamountAmountPercentageAmount
ECLrate (%)
CarryingamountAccounts receivableassessed individuallyfor impairment1,716,394,801.6186.99%183,801,256.5910.71%1,532,593,545.024,839,015,749.9293.48%516,412,930.9510.67%4,322,602,818.97Of which:
Financial leasepayments1,716,394,801.6186.99%183,801,256.5910.71%1,532,593,545.024,839,015,749.9293.48%516,412,930.9510.67%4,322,602,818.97Accounts receivableassessed collectivelyfor impairment256,620,105.3313.01%453,675.000.18%256,166,430.33337,762,763.246.52%1,480,724.260.44%336,282,038.98Of which:
Receivables not past
due45,367,500.002.30%453,675.001.00%44,913,825.00148,072,426.272.86%1,480,724.261.00%146,591,702.01Deposits receivable211,252,605.3310.71%211,252,605.33189,690,336.973.66%189,690,336.97Total1,973,014,906.94100.00%184,254,931.599.34%1,788,759,975.355,176,778,513.16100.00%517,893,655.2110.00%4,658,884,857.95Accounts receivable assessed collectively for bad debt provision:
Collectively assessed item: receivables not past due
Closing balanceBook balanceBad debt provisionECL rate (%)Within 1 year1 – 2 years45,367,500.00453,675.001.00%2 – 3 yearsTotal45,367,500.00453,675.001.00%
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)Collectively assessed item: Deposits receivable
Closing balanceBook balanceBad debt provisionECL rate (%)Within 1 year1-2 years81,445,239.802-3 years77,641,082.85Over 3 years52,166,282.68Total211,252,605.33Changes 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: RMBChanges in the periodCategory
OpeningbalanceProvision
Recoveryor reversalWrite-offOthers
ClosingbalanceBad debt provision517,893,655.21259,974,174.66593,612,898.28184,254,931.59Total517,893,655.21259,974,174.66593,612,898.28184,254,931.59
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
11. Long-term equity investments
Unit: RMBChange for the period
Investee
Openingbalance(carryingamount)Additionalcontribution
Withdrawncontribution
Investmentgain or lossrecognisedunder equity
method
Adjustmentof othercomprehensiveincome
Otherchange inequityinterestDistributionof cashdividendor profitdeclared
ImpairmentprovisionOthers
Closingbalance(carryingamount)
Closingbalance ofimpairment
provisionI. Joint venturesShouguang Chenming Huisen
New-style ConstructionMaterials Co., Ltd.4,945,742.032,957,127.841,000,000.006,902,869.87Weifang Sime Darby WestPort Co., Ltd.81,943,506.92-4,572,508.1777,370,998.75Shouguang Meite
Environmental TechnologyCo., Ltd.17,087,192.44-2,471,067.7314,616,124.71Weifang Chenrong New
and Old Kinetic EnergyConversion EquityInvestment FundPartnership (LimitedPartnership)199,705,636.28200,247,244.0217,501,451.1616,959,843.42Weifang Xingxing UnitedChemical Co., Ltd.91,874,385.12-7,250,597.3884,623,787.74Subtotal395,556,462.79200,247,244.026,164,405.7217,959,843.42183,513,781.07II. Associates
Zhuhai Dechen New ThirdBoard Equity InvestmentFund Company (LimitedPartnership)52,401,659.62-433,763.3115,000,000.0036,967,896.31Ningbo Kaichen Huamei
Equity Investment FundPartnership (LimitedPartnership)198,549,926.27-1,252,440.68197,297,485.59Jiangxi Chenming Port Co.,
Ltd.1,310,585.65-756,003.20554,582.45Goldtrust Futures Co., Ltd.189,366,931.59-3,914,469.09185,452,462.50Chenming (Qingdao) AssetManagement Co., Ltd.8,674,551.18145,116.961,886,000.006,933,668.14Guangdong Nanyue BankCo., Ltd.3,060,298,285.3531,523,653.431,846,610.9477,231,023.1428,000,000.00-1,887,031,763.571,255,867,809.29Subtotal3,510,601,939.6625,312,094.111,846,610.9477,231,023.1444,886,000.00-1,887,031,763.571,683,073,904.28Total3,906,158,402.45200,247,244.0231,476,499.831,846,610.9477,231,023.1462,845,843.42-1,887,031,763.571,866,587,685.35
Explanation: For other changes of Guangdong Nanyue Bank Co., Ltd., please refer to VII. 46. Retained profit.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
12. Other non-current financial assets
Unit: RMBItemClosing balanceOpening balanceInvestment in debt instruments400,000,000.004,000,000.00Investment in equity instruments119,927,003.25141,910,000.00Total519,927,003.25145,910,000.00
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
13. Investment property
(1) Investment property under the cost method
√ Applicable Not applicable
Unit: RMBItem
Housing andbuilding structureLand use rights
Constructionin progressTotalI. Original carrying amount
1. At 31 December 20206,446,222,194.786,446,222,194.78
2. Increase during the period763,625,528.06763,625,528.06
(1) Purchase
(2) Transferred from
construction in progress21,853,611.3521,853,611.35
(3) Without additions
arising from businesscombinations741,771,916.71741,771,916.71
3. Decrease during the period13,037,866.2213,037,866.22
(1) Disposal13,037,866.2213,037,866.22
4. At 31 December 20217,196,809,856.627,196,809,856.62II. Accumulated depreciation andaccumulated amortisation
1. At 31 December 2020503,062,626.78503,062,626.78
2. Increase during the period221,180,376.65221,180,376.65
(1) Provision or amortisation162,228,719.27162,228,719.27
(2) Without additions
arising from businesscombinations58,951,657.3858,951,657.38
3. Decrease during the period971,578.72971,578.72
(1) Disposal971,578.72971,578.72
4. At 31 December 2021723,271,424.71723,271,424.71III. Provision for impairment
1. At 31 December 2020
2. Increase during the period
(1) Provision
3. Decrease during the period
(1) Provision
4. At 31 December 2021
IV. Carrying amount
1. Carrying amount at 31
December 20216,473,538,431.916,473,538,431.91
2. Carrying amount at 31
December 20205,943,159,568.005,943,159,568.00
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 officepurposes;Jinan Chenming Finance Building (), located in No. 7 Zone, Hanyu Financial Business Center, No. 7000, JingshiRoad, Jinan Innovation Zone, is a long-term held office property of Shandong Chenming Investment Limited, a subsidiary of theCompany, 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 along-term held apartment property of Shanghai Herui Investment Co., Ltd., a subsidiary of the Company, mainly used for externalrental purposes;Guangzhou Zhengjia Plaza (), located at Room 3901-3926, No. 372, Huanshi East Road, Yuexiu District,Guangzhou, is a long-term held office property of Guangzhou Chenming Financial Leasing Co., Ltd., a subsidiary of theCompany, mainly used for external rental purposes;Shenzhen Zhuoyue Baozhong Times Square (), located at Room 3201-3210, Building C, ZhuoyueBaozhong Times Square (Phase 2), Xin’an Sub-district, Bao’an District, Shenzhen, is a long-term held office property ofGuangzhou Chenming Financial Leasing Co., Ltd., a subsidiary of the Company, mainly used for external rental purposes.
14. Fixed assets
Unit: RMBItemClosing balanceOpening balanceFixed assets35,653,492,676.1537,651,706,658.97Total35,653,492,676.1537,651,706,658.97
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Fixed assets
(Continued)
1) Particulars of fixed assets
Unit: RMBItem
Housing andbuildingstructure
Machinery andequipmentVehicles
Electronicequipment and
othersTotalI. Original carrying amount:
1. At 31 December 202010,640,660,046.6544,092,418,191.46308,616,664.66456,461,101.4155,498,156,004.18
2. Increase during the period149,459,764.51117,225,399.264,916,941.026,891,328.77278,493,433.56
(1) Acquisition149,459,764.5156,838,420.094,916,941.026,891,328.77218,106,454.39
(2) Transferred from
construction in progress60,386,979.1760,386,979.17
3. Decrease during the period116,822,260.05411,472,907.0917,332,165.036,308,408.71551,935,740.88
(1) Disposal or retirement116,822,260.05411,472,907.0917,332,165.036,308,408.71551,935,740.88
4. At 31 December 202110,673,297,551.1143,798,170,683.63296,201,440.65457,044,021.4755,224,713,696.86
II. Accumulated depreciation
1. At 31 December 20202,055,823,328.6415,125,890,831.31182,038,050.14276,762,643.9417,640,514,854.03
2. Increase during the period309,980,598.661,841,513,062.7723,898,494.7528,470,778.312,203,862,934.49
(1) Provision309,980,598.661,841,513,062.7723,898,494.7528,470,778.312,203,862,934.49
3. Decrease during the period63,673,178.21394,560,345.5215,023,027.184,855,662.64478,112,213.55
(1) Disposal or retirement63,673,178.21394,560,345.5215,023,027.184,855,662.64478,112,213.55
4. At 31 December 20212,302,130,749.0916,572,843,548.56190,913,517.71300,377,759.6119,366,265,574.97
III. Provision for impairment
1. At 31 December 202027,808,852.79170,676,515.3413,889.137,435,233.92205,934,491.18
2. Increase during the period
(1) Provision
3. Decrease during the period979,045.44979,045.44
(1) Disposal or retirement979,045.44979,045.44
4. At 31 December 202127,808,852.79169,697,469.9013,889.137,435,233.92204,955,445.74IV. Carrying amount
1. Carrying amount at 31
December 20218,343,357,949.2327,055,629,665.17105,274,033.81149,231,027.9435,653,492,676.15
2. Carrying amount at 31
December 20208,557,027,865.2228,795,850,844.81126,564,725.39172,263,223.5537,651,706,658.97
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
14. Fixed assets
(Continued)
(2) Particulars of temporarily idle fixed assets
Unit: RMBItem
Originalcarrying amount
Accumulateddepreciation
Provision forimpairment
Carrying
amountRemarkHousing and buildingstructure100,192,301.6337,821,385.003,093,008.6459,277,907.99Machinery andequipment902,412,382.63520,140,669.14151,618,968.02230,652,745.47Electronic equipment754,860.94672,773.807,187.2774,899.87Total1,003,359,545.20558,634,827.94154,719,163.93290,005,553.33
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMBItemCarrying amount
Reason for not yetobtaining propertyright certificatesHousing and building structure
(Zhanjiang Chenming Pulp & Paper Co., Ltd.)1,096,012,481.78Under applicationHousing and building structure(Huanggang Chenming Pulp & Paper Co., Ltd.)527,801,819.33Under applicationHousing and building structure(Shouguang Meilun Paper Co., Ltd.)470,657,826.65Under applicationHousing and building structure(Jilin Chenming Paper Co., Ltd.)379,117,972.03Under applicationHousing and building structure
(Jiangxi Chenming Paper Co., Ltd.)205,518,010.27Under applicationHousing and building structure
(Shandong Chenming Paper Holdings Limited)112,402,583.17Under applicationHousing and building structure
(Wuhan Chenming Hanyang Paper Holdings Co., Ltd.)77,285,113.28Under application
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Construction in progress
Unit: RMBItemClosing balanceOpening balanceConstruction in progress189,818,292.48171,178,595.73Materials for project7,931,233.578,679,346.10Total197,749,526.05179,857,941.83
(1) Particulars of construction in progress
Unit: RMBClosing balanceOpening balanceItemBook balance
Impairmentprovision
CarryingamountBook balance
Impairmentprovision
CarryingamountTechnological transformation project50,534,096.0450,534,096.0459,209,256.2459,209,256.24Integrated forestry, pulp and paperproject (Huanggang Pulp & Paper)16,687,683.2916,687,683.2916,235,880.6716,235,880.67Fly ash cement ceramsite productionproject (Shandong Chenming)54,246,139.1954,246,139.1954,246,139.1954,246,139.19Light calcium carbonate project (Meilun)13,836,002.2713,836,002.27Relocation of Wuhan household paperproject (Phase II) (Meilun)28,705,483.2528,705,483.2510,210,593.7510,210,593.75Others60,783,562.4721,138,671.7639,644,890.7147,129,181.7829,688,458.1717,440,723.61Total210,956,964.2421,138,671.76189,818,292.48200,867,053.9029,688,458.17171,178,595.73
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
15. Construction in progress
(Continued)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Project nameBudget
Openingbalance
Increaseduringthe period
Transferto fixedasset duringthe period
Transferintoinvestmentproperty
OtherDeductionsduringthe period
Closingbalance
Accumulated
Investmentto budgetConstruction
in progress
AccumulatedCapitalisedinterestOf which:
CapitalisedInterestamount duringthe period
Capitalisationrate of theinterestamount forthe period
Sourceof fundRelocation
of Wuhanhouseholdpaper project(Phase II)(Meilun)270,000,000.0010,210,593.7518,494,889.5028,705,483.2510.63%50.00%
Self-ownedfunds andborrowingsLight calcium
carbonateproject (Meilun)24,000,000.0013,836,002.278,017,609.0821,853,611.3591.06%100.00%
Self-ownedfunds andborrowingsForestry-pulp-
paper project(HuanggangPulp & Paper)70,000,000.0016,235,880.6744,844,691.3644,392,888.7416,687,683.2987.26%99.00%
Self-owned
fundsTotal364,000,000.0040,282,476.6971,357,189.9444,392,888.7421,853,611.3545,393,166.54–
(3) Materials for project
Unit: RMBClosing balanceOpening balanceItemBook balance
Impairment
provision
CarryingamountBook balance
Impairment
provision
CarryingamountSpecial materials7,931,233.577,931,233.578,679,346.108,679,346.10Total7,931,233.577,931,233.578,679,346.108,679,346.10
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
16. Right-of-use assets
Unit: RMBItemLand use rights
Housing andbuilding structureTotalI. Original carrying amount:
1. Opening balance219,101,390.275,571,378.54224,672,768.81
2. Increase during the period
(1) Lease
3. Decrease during the period1,003,531.211,003,531.21
(1) Sublease to finance lease
(2) Transfer or held for sale
(3) Other deductions1,003,531.211,003,531.21
4. Closing balance218,097,859.065,571,378.54223,669,237.60II. Accumulated depreciation
1. Opening balance18,548,990.80247,058.2618,796,049.06
2. Increase during the period7,447,711.11525,070.617,972,781.72
(1) Provision7,447,711.11525,070.617,972,781.72
(2) Other increases
3. Decrease during the period528,769.62528,769.62
(1) Sublease to finance lease
(2) Transfer or held for sale
(3) Other deductions528,769.62528,769.62
4. Closing balance25,467,932.29772,128.8726,240,061.16III. Provision for impairment
1. Opening balance
2. Increase during the period
(1) Provision
3. Decrease during the period
(1) Sublease to finance lease
4. Closing balance
IV. Carrying amount
1. Closing carrying amount192,629,926.774,799,249.67197,429,176.44
2. Opening carrying amount200,552,399.475,324,320.28205,876,719.75Explanation: Other deductions during the period were the termination of some lease contracts of Zhanjiang Arboriculture and YangjiangArboriculture.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
17. Intangible assets
(1) Particulars of intangible assets
Unit: RMBItemLand use rightsPatents
Unpatentedtechnology
Certificates ofthird party rightTotalI. Original carrying amount
1. Opening balance2,191,720,025.2321,573,963.2527,358,613.0515,908,674.872,256,561,276.40
2. Increase during the
period430,015.51430,015.51
(1) Acquisition430,015.51430,015.51
3. Decrease during the
period151,593,041.8857,153.12151,650,195.00
(1) Disposal151,593,041.8857,153.12151,650,195.00
4. Closing balance2,040,126,983.3521,946,825.6427,358,613.0515,908,674.872,105,341,096.91II. Accumulated amortisation
1. Opening balance448,158,030.3820,561,952.90911,953.7712,304,830.02481,936,767.07
2. Increase during the
period46,466,945.501,252,638.0728,200.003,603,844.8551,351,628.42
(1) Provision46,466,945.501,252,638.0728,200.003,603,844.8551,351,628.42
(2) Other increases
3. Decrease during the
period20,620,233.1220,620,233.12
(1) Disposal20,620,233.1220,620,233.12
4. Closing balance474,004,742.7621,814,590.97940,153.7715,908,674.87512,668,162.37III. Impairment provision
1. Opening balance
2. Increase during the
period
(1) Provision
(2) Other increases
3. Decrease during the
period
(1) Disposal
(2) Other deductions
4. Closing balance
IV. Carrying amount
1. Closing carrying
amount1,566,122,240.59132,234.6726,418,459.281,592,672,934.54
2. Opening carrying
amount1,743,561,994.851,012,010.3526,446,659.283,603,844.851,774,624,509.33
Explanation:
For details of restricted ownership, please refer to note VII. 65.Certificates of third party right refer to enterprise emission rights, with the validity period between 14 September 2021 and 13September 2026.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
18. Goodwill
(1) Original carrying amount of goodwill
Unit: RMBIncrease during
the periodDecreaseName of investee or eventgenerating goodwill
Openingbalance
Arising frombusinesscombinations
duringthe period
Disposal
ClosingbalanceShandong Chenming Panels Co., Ltd.5,969,626.575,969,626.57Jilin Chenming Paper Co., Ltd.14,314,160.6014,314,160.60Kunshan Tuoan Plastic Products Co., Ltd.26,946,905.3826,946,905.38Total47,230,692.555,969,626.5741,261,065.98
(2) Provision for impairment of goodwill
Unit: RMBName of investee or event Opening
Increase duringthe period
Decrease during
the periodClosinggenerating goodwill balanceProvisionDisposal balanceJilin Chenming Paper Co., Ltd.14,314,160.6014,314,160.60Total14,314,160.6014,314,160.60
Explanation:
The Company assessed the recoverable amount of goodwill and determined that the goodwill related to the Company’s plasticbusiness was not impaired. With the category of the principal activities as the basis for determining the reporting segments, theCompany regarded Kunshan Tuoan Plastic Products Co., Ltd. as an asset group. The recoverable amount was determined based onthe present value of the estimated future cash flows. Future cash flows were determined based on the financial budget for 2022 to 2026as approved by the management, and adopted 7.28% as the discount rate which was the interest rate of the 5-year bonds issued bythe Company in 2018. The cash flows for more than 5 years are calculated based on the growth rate of 5%. Other key assumptionsused in estimating future cash flows included the estimated sales and gross profit based on the performance of such asset group inthe past and the expectation to market development by the management. The management believed that any reasonable change inthe above assumptions will not result in the total book value of the asset group Kunshan Tuoan Plastic Products Co., Ltd. exceeding itsrecoverable amount.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
19. Long-term prepaid expenses
Unit: RMBItemOpening balance
Increase during
the period
Amortisationduring the periodOther deductionsClosing balanceWoodland expenses9,036,428.6037,323.97686,703.848,387,048.73Others42,025,056.892,007,010.163,277,342.6440,754,724.41Total51,061,485.492,044,334.133,964,046.4849,141,773.14
20. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMBClosing balanceOpening balanceItem
Deductible temporary difference
Deferred income tax assets
Deductible temporary difference
Deferred income tax
assetsProvision for impairment of assets2,323,311,804.03544,452,793.222,210,402,262.82509,732,949.61Unrealised profit arising from intra-
group transactions110,621,031.6027,655,257.90205,628,008.4051,407,002.10Outstanding payables646,596,211.5397,758,308.63538,679,932.1788,774,034.53Deferred income202,273,476.7630,341,021.50127,445,713.4621,358,762.71Deductible loss2,508,683,883.40409,890,367.802,445,427,000.05400,915,339.22Debt reconstructing18,734,830.914,683,707.7347,906,363.9411,976,590.97Total5,810,221,238.231,114,781,456.785,575,489,280.841,084,164,679.14
(2) Deferred income tax liabilities before offsetting
Unit: RMBClosing balanceOpening balanceItem
Taxable temporary differences
Deferred income tax
liabilities
Taxable temporary differences
Deferred income tax
liabilitiesAsset valuation increment from business
combinations involving entities notunder common control22,697,097.445,674,274.3643,816,906.476,572,535.97Debt reconstructing30,145,021.527,536,255.38Total52,842,118.9613,210,529.7443,816,906.476,572,535.97
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
20. Deferred income tax assets/deferred income tax liabilities
(Continued)
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMBItemClosing balanceOpening balanceDeductible temporary difference1,671,856.5259,564,220.72Deductible loss730,122,476.10776,900,858.71Total731,794,332.62836,465,079.43
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMBYearClosing balanceOpening balanceRemark202166,234,527.652022166,532,843.73187,801,057.212023129,523,478.05138,151,854.93202490,461,838.25108,619,258.722025249,242,062.93276,094,160.20202694,362,253.14Total730,122,476.10776,900,858.71
21. Other non-current assets
Unit: RMBClosing balanceOpening balanceItem
Bookbalance
Impairment
provision
Carryingamount
Bookbalance
Impairment
provision
CarryingamountLand transfer fees298,072,250.68298,072,250.68Consideration for acquisition of companies127,500,000.00127,500,000.00Payments for engineering and equipment64,364,443.4264,364,443.4258,886,418.7558,886,418.75Total489,936,694.10489,936,694.1058,886,418.7558,886,418.75
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
22. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMBItemClosing balanceOpening balanceMortgage borrowings675,627,536.66279,524,407.05Guaranteed borrowings7,734,756,765.41 7,536,960,272.39Credit borrowings8,847,850,884.158,189,875,845.09Discounted borrowings16,194,790,000.0016,752,556,600.00Pledged borrowings70,000,000.0035,075,833.33Total33,523,025,186.2232,793,992,957.86
Other explanations:
For classification and amount of pledged assets of mortgage borrowings, please see notes in relation, please see 1. Monetaryfunds and 65. Assets with restricted ownerships or right to use in Note VII;For classification and amount of mortgage assets of mortgage borrowings, please see notes in relation, please see 1. Monetaryfunds and 65. Assets with restricted ownerships or right to use in Note VII;Overdue short-term borrowings: total outstanding short-term borrowing past due as at the end of the year amounted to
RMB0.00. Short-term borrowings included interest payable of RMB21,320,661.85
23. Bills payable
Unit: RMBItemClosing balanceOpening balanceCommercial acceptance bills1,398,922,636.21984,661,462.19Bank acceptance bills1,690,589,691.192,014,275,274.15Total3,089,512,327.402,998,936,736.34Total outstanding bills payable due as at the end of the period amounted to RMB0.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
24. Accounts payable
(1) Particulars of accounts payable
Unit: RMBItemClosing balanceOpening balancePayment for goods3,074,700,464.483,416,069,031.99Payment for engineering307,195,168.83139,679,646.76Payment for equipment249,371,719.69260,995,383.02Others239,863,992.34225,686,670.54Total3,871,131,345.344,042,430,732.31
(2) Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year (including 1 year)3,282,236,529.523,478,181,213.771-2 years229,465,372.73252,769,346.062-3 years164,915,158.41131,122,082.59Over 3 years194,514,284.68180,358,089.88Subtotal3,871,131,345.344,042,430,732.30
(3) Significant advance receipts for over 1 year
Unit: RMBItemClosing balanceReasonsBEIJING GUODIAN FUTONG SCIENCE AND
DEVELOPMENT CO., LTD.46,122,225.40Not due for paymentWEIFANG XINGXING UNITED CHEMICAL CO., LTD.23,311,078.67Not due for paymentOMYA HAIMING (NANCHANG) CHEMICAL CO. LTD.16,000,000.00Not due for paymentCSSC 704TH RESEARCH INSTITUTE15,654,258.23Not due for paymentZHEJIANG JNDIA PIPELINE INDUSTRY CO., LTD.6,728,957.42Not due for paymentTOTAL107,816,519.72–
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
25. Receipts in advance
Unit: RMBItemClosing balanceOpen balancePrepaid property rents38,274,028.20Total38,274,028.20
26. Contract liabilities
Unit: RMBItemClosing balanceReasonsPayment for goods in advance1,382,289,597.541,051,147,044.74Total1,382,289,597.541,051,147,044.74
27. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMBItem
Openingbalance
Increase duringthe period
Decrease duringthe period
Closing
balanceI. Short-term remuneration231,749,583.091,249,838,322.011,311,733,655.40169,854,249.70II. Retirement benefit plan-definedcontribution scheme627,002.22217,038,437.98217,620,681.8944,758.31III. Termination benefits1,031,921.951,031,921.95Total232,376,585.311,467,908,681.941,530,386,259.24169,899,008.01
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
27. Staff remuneration payables
(Continued)
(2) Particulars of short-term remuneration
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closing
balance
1. Salaries, bonuses, allowance and
subsidies170,642,761.741,002,414,649.761,012,871,371.68160,186,039.82
2. Staff welfare57,305,121.6057,305,121.60
3. Social insurance premium585,607.7397,321,175.4497,559,834.49346,948.68Of which: Medical insurancepremium575,413.7188,822,377.0689,053,438.61344,352.16
Work-related injuryinsurance premium3,538.605,051,271.915,054,712.0798.44Maternity insurance
premium6,655.423,447,526.473,451,683.812,498.08
4. Housing provident funds7,998,911.3878,972,630.2881,876,733.995,094,807.67
5. Union funds and workers
’
education30,774,839.4811,636,725.4740,923,229.441,488,335.51
6. Other short-term remuneration21,747,462.762,188,019.4621,197,364.202,738,118.02Total231,749,583.091,249,838,322.011,311,733,655.40169,854,249.70
(3) Defined contribution plan
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closing
balance
1. Basic pension insurance premiums559,683.60208,864,586.33209,380,659.9943,609.94
2. Unemployment insurance premiums
67,318.628,173,851.658,240,021.901,148.37Total627,002.22217,038,437.98217,620,681.8944,758.31
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
28. Taxes payable
Unit: RMBItemClosing balanceOpening balanceEnterprise income tax89,597,918.41274,637,537.42Value added tax125,522,336.03294,438,467.26Land use tax9,240,921.987,522,959.20Property tax13,083,934.419,232,558.17Urban maintenance and construction tax3,748,576.7710,137,043.67Educational surcharges and others2,931,140.788,112,168.27Individual income tax61,378,163.2441,648,852.90Land appreciation tax4,076,160.222,024,028.20Environmental Protection Tax3,959,856.452,263,933.52Resource tax4,500,000.00255.00Stamp duty3,456,472.382,630,037.02Total321,495,480.67652,647,840.63
29. Other payables
Unit: RMBItemClosing balanceOpening balanceInterest payable55,437,777.80178,992,959.85Dividend payableOther payables1,482,575,808.131,777,722,407.98Total1,538,013,585.931,956,715,367.83
(1) Interest payable
Unit: RMBItemClosing balanceOpening balanceInterest on borrowings81,495,654.29Interest on Corporate Bonds21,132,222.2417,401,472.25Interest on medium-term notes34,305,555.5680,095,833.31Total55,437,777.80178,992,959.85
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
29. Other payables
(Continued)
(2) Other payables
1) Other payables by nature
Unit: RMBItemClosing balanceOpening balanceOpen credit550,223,956.81625,546,672.65Deposit261,990,665.03259,341,777.01Accrued expenses341,923,505.85525,268,287.87The obligation to repurchase shares under the share
incentive scheme226,860,000.00226,860,000.00Others101,577,680.44140,705,670.45Total1,482,575,808.131,777,722,407.98
2) Significant advance receipts for over 1 year
Unit: RMBItemClosing balanceReasonsSHANGHAI SHUILAN PROPERTY MANAGEMENT
CO., LTD.136,000,000.00Not yet dueNINE DRAGONS DAWEI HOLDINGS CO., LTD.30,000,000.00Not yet dueWEIFANG XINGXING UNITED CHEMICAL CO., LTD.16,860,000.00Not yet dueWUHAN TIANRUI PAPER CO., LTD.7,941,708.00Not yet dueSHENZHEN BAIYIXUAN PAPER CO., LTD.4,050,000.00Not yet dueTotal194,851,708.00–
30. Non-current liabilities due within one year
Unit: RMBItemClosing balanceOpening balanceLong-term receivables due within one year2,583,730,366.672,935,835,697.30Bonds payable due within one year1,270,636,933.46Long-term payables due within one year1,543,620,543.601,621,095,530.96Lease liabilities due within one year4,606,717.584,606,717.58Other non-current liabilities due within one year1,198,716,666.672,599,411,670.09Total6,601,311,227.987,160,949,615.93
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
31. Other current liabilities
Unit: RMBItemClosing balanceOpening balanceShort-term bonds payable157,037,833.35Total157,037,833.35Increase/decrease in short-term bonds payable:
Unit: RMB
Name of commercialpaperPar value
Date of
issueTermAmount
Openingbalance
Issueduring theperiodInterest
at parvalueAmortisationof premium/discount
RedemptionDuring theperiod
Closingbalance2020 first tranche ofsuper & short-termcommercial paper300,000,000.002020-4-22270 days299,550,000.00157,037,833.35157,037,833.35Total–––299,550,000.00157,037,833.35157,037,833.35
32. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMBItemClosing balanceOpening balancePledged borrowings3,921,048,883.744,618,249,057.65Guarantee borrowings2,028,979,800.004,319,737,618.80Credit borrowings1,910,041,837.912,075,000,000.00Less: long-term borrowings due within 1 year2,583,730,366.672,935,835,697.30Total5,276,340,154.988,077,150,979.15Other explanation:
For classification and amount of pledged assets of pledged borrowings, please see 1. Monetary funds and 65. Assets withrestricted ownerships or right to use in Note VII. Long-term borrowings included interest payable of RMB11,954,863.48.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
33. Bonds payable
(1) Bonds payable
Unit: RMBItemClosing balanceOpening balance17 Chenming Bond 01 – Chenming Group89,957,250.0018 Chenming Bond 01 – Chenming Group155,000,000.00350,000,000.00Chenming USD Bonds1,096,920,101.46Total155,000,000.001,536,877,351.46
(2) Increase/decrease in bonds payable (excluding other financial instruments such as Preference Shares and
Perpetual Bonds classified as financial liabilities)
Unit: RMB
Name ofcommercial paperPar value
Date of
issueTermAmount
OpeningbalanceIssueduringtheperiod
Interestat par value
Amortisationof premium/
discount
Redemptionduring the
period
Changesin foreignexchangegains and
losses
Closingbalance17 Chenming Bond
01 – ChenmingGroup1,200,000,000.002017-8-225 years1,198,200,000.0089,957,250.003,753,750.0042,750.0093,753,750.0018 Chenming Bond
01 – ChenmingGroup350,000,000.002018-4-25 years350,000,000.00350,000,000.0026,600,000.0026,600,000.00350,000,000.00Chenming USD
Bonds1,137,120,600.002019-8-62.6 years1,125,276,863.461,096,920,101.4694,314,839.954,104,713.2694,909,032.00-24,793,689.211,075,636,933.46Less: bondspayable duewithin one year1,270,636,933.46Total2,687,120,600.00––2,673,476,863.461,536,877,351.46124,668,589.954,147,463.26215,262,782.00-24,793,689.21155,000,000.00
34. Lease liabilities
Unit: RMBItemClosing balanceOpening balanceLease payments payable81,362,458.4585,933,149.45Less: Unrecognised financing expenses19,474,535.0621,054,661.97Less: Lease liabilities due within one year4,606,717.584,606,717.58Total57,281,205.8160,271,769.90
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
35. Long-term payables
Unit: RMBItemClosing balanceOpening balanceLong-term payables2,358,901,022.992,295,309,357.74Total2,358,901,022.992,295,309,357.74
(1) By nature
Unit: RMBItemClosing balanceOpening balanceRetention for the financial leasing operations1,000,000.0064,196,192.92China Development Bank Special Fund488,000,000.00517,500,000.00Contributions by other partners225,000,000.0034,210,000.00Financial leasing3,188,521,566.593,300,498,695.78Subtotal3,902,521,566.593,916,404,888.70Less: Long-term payables due within 1 year1,543,620,543.601,621,095,530.96Total2,358,901,022.992,295,309,357.74Other explanations:
Contributions by other partners refer to the contributions made by other partners to Weifang Chenming Growth Driver ReplacementEquity Investment Fund Partnership (Limited Partnership), the Company’s special structured entity, Huanggang Chenming Pulp & PaperCo., Ltd., Zhanjiang Chenming Pulp & Paper Co., Ltd. and Weifang Chendu Equity Investment Partnership (Limited Partnership), andsuch contributions are reclassified as financial liabilities on a consolidation basis.
36. Provisions
Unit: RMBItemClosing balanceOpening balanceReasonPending litigation
325,259,082.28325,259,082.28
Losses fromArjo’s lawsuitTotal325,259,082.28325,259,082.28–
Other explanations:
In February 2017, Arjowiggins HKK2 Limited (“HKK2 Company”) submitted a H share winding-up petition against the Company to Hong KongHigh Court due to a joint venture dispute, which required a compensation for economic loss of RMB167 million and interest thereon, and legalcosts of USD3.54 million and arbitration fee of HK$3.3 million and interest thereon to HKK2. The Company made provision of RMB320 millionfor such pending litigation in 2017. On 5 August 2020, Hong Kong High Court rejected the Company’s appeal. On 21 January 2022, Hong KongCourt of Final Appeal accepted the Company’s appeal, and no ruling has been made.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
37. Deferred income
Unit: RMBItemOpening balance
Increase duringthe period
Decrease duringthe periodClosing balanceReasonGovernment grants1,637,996,636.5153,605,132.80117,920,085.061,573,681,684.25Financial provisionTotal1,637,996,636.5153,605,132.80117,920,085.061,573,681,684.25–Items in respect of government grants:
Unit: RMB
Liability item
Openingbalance
New grantsduring the
period
Include innon-operatingincome forthe period
Include inother incomefor the period
Amountchargedagainstcost expensesOther changesClosing balance
Asset-related/income-relatedProject fund for National Key
Technology Research andDevelopment Program1,287,825.00164,700.001,123,125.00
Asset-relatedgovernment grantsInfrastructure and environmental
protection engineering233,097,511.4612,227,345.2812,835,606.2213,216,025.00219,273,225.52
Asset-relatedgovernment grantsHuanggang forestry-pulp paper
project479,669,171.1341,377,787.5224,200,216.24496,846,742.41
Asset-relatedgovernment grantsZhanjiang forestry-pulp paper project
54,901,230.114,094,632.9250,806,597.19
Asset-relatedgovernment grantsFinancial subsidies for technological
transformation project155,686,141.0811,535,807.72144,150,333.36
Asset-relatedgovernment grantsFunding for environmental protection
677,639,567.5650,592,141.88627,047,425.68
Asset-relatedgovernment grantsOthers
35,715,190.171,280,955.0834,434,235.09
Asset-relatedgovernment grantsTotal1,637,996,636.5153,605,132.80104,704,060.0613,216,025.001,573,681,684.25
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
38. Other non-current liabilities
Unit: RMBItemClosing balanceOpening balanceMedium-term notes1,198,716,666.673,388,933,356.16Less: Other non-current liabilities due within 1 year1,198,716,666.672,599,411,670.09Total789,521,686.07
39. Share capital
Unit: RMBIncrease/decrease during the year (+/-)Opening balanceNew issueBonus issue
Sharesconvertedfrom reservesOthersSubtotalClosing balanceTotal number of shares2,984,208,200.002,984,208,200.00
40. Other equity instruments
(1) Preference Shares, Perpetual Bonds and other financial instruments outstanding at the end of the period
Outstanding financialinstruments
Year ofissuance
Accountingclassification
Dividend orinterest rateIssue priceIssue sizeAmount (RMB)
Maturitydate orrenewal status
Condition for
conversionConversion17 Lu Chenming MTN001
2017Equity instrument6.80%100.0010,000,000.001,000,000,000.00
No definedmaturity dateNoneNon-convertibleTotal10,000,000.001,000,000,000.00
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
40. Other equity instruments
(Continued)
(2) Changes in Preference Shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period
Unit: RMBBeginning of the periodIncrease during the periodDecrease during the periodEnd of the periodOutstanding financialinstrumentsNumberCarrying amountNumberCarrying amountNumberCarrying amountNumberCarrying amount17 Lu Chenming MTN00110,000,000.00996,000,000.0010,000,000.00996,000,000.00Chenming You 0122,500,000.002,238,750,000.0022,500,000.002,238,750,000.00Chenming You 0210,000,000.00999,000,000.0010,000,000.00999,000,000.00Chenming You 0312,500,000.001,239,750,000.0012,500,000.001,239,750,000.00Total55,000,000.005,473,500,000.0045,000,000.004,477,500,000.0010,000,000.00996,000,000.00
Changes (increase or decrease) in other equity instruments during the period, the reasons for such changes, and the basis for relevantaccounting treatment:
The Company issued medium-term notes amounting to RMB1,000 million on 12 July 2017 at a coupon rate of 6.80%. Theproceeds net of issue costs amounted to RMB996.00 million.The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of redemption bythe Company. The interest rate of the bills is determined by the basic interest rate + the initial interest rate + 300BP. It has thefeature of capped interest rates and the capped interest rate does not exceed the average interest rate level of the same typeof instruments in the same industry in the same period; The Company has the right to defer any payment of interest. The rightof redemption of the notes is vested in the Company so that it is up to the Company to decide whether to redeem or not; thepriority of repayment of the principal and interest of medium-term notes for the period is the same as other outstanding debtfinancing instruments of the issuers in the event of winding up, because there is low probability of bankruptcy that the Companywill not be liable for contractual obligations to deliver cash or other financial assets expected.Based on the above, the notes do not contain any term giving rise to any contractual obligation to deliver cash or other financialassets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adversecircumstances. Consequently, they are eligible to be recognised and accounted for as equity instruments and included underother equity instruments.The Company non-publicly issued Preference Shares amounting to RMB4,500 million on 17 March, 17 August and 22 September2016 respectively. The proceeds net of issue costs amounted to RMB4,477.50 million.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
40. Other equity instruments
(Continued)
(2) Changes in Preference Shares, Perpetual Bonds and other financial instruments outstanding at the end of
the period(Continued)Holders of Preference Shares participate in profit distribution in two portions, namely the fixed dividend distributed based on a fixeddividend rate and the distribution of retained earnings realised for the year.Distribution of fixed dividendAccording to the Articles of Association, the Company shall distribute fixed dividends to holders of the Preference Shares at fixeddividend rate if there are distributable profits after making good losses and the contribution to reserve fund according to law. TheBoard is authorised by the general meeting to declare and pay all dividends on the Preference Shares in accordance with the issuanceplan under the framework and principles considered and approved in the general meeting in respect of the Preference Shares. Thegeneral meeting of the Company has the right to cancel part of or all of the current dividends on the Preference Shares. However, whenthe general meeting of the Company considers the cancellation of part of or all of the current dividends on the Preference Shares,the Company shall inform the shareholders of Preference Shares at least 10 working days before the date of dividend payment inaccordance with the requirements of the related authorities.Participation in the distribution of retained earnings realised for the yearHolders of Preference Shares participate in the distribution of the retained earnings through receipt of cash which is non-cumulativeand non-deferrable. In the event of making good losses and the contribution to reserve fund according to law, after receiving fixeddividends at fixed dividend rate as agreed, holders of Preference Shares can also participate in the distribution of the retained earningsfor the year in proportion. Specific terms are as follows: the retained earnings for the year arises from net profit attributable to ownersof the parent company on a consolidated basis upon distribution of relevant fixed income to holders of financial instruments such asthe Preference Shares which may be classified under equity. 50% of the retained earnings shall be distributed to holders of PreferenceShares and ordinary shareholders. Holders of Preference Shares shall participate in the distribution of the retained earnings by receivingcash dividends, and the ordinary shareholders shall participate in the distribution of the retained earnings by receiving cash dividends ordividends on ordinary shares.Based on the above, the Preference Shares do not contain any term giving rise to any contractual obligation to deliver cash or otherfinancial assets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adversecircumstances. Consequently, they were accounted for as other equity instruments – Preference Shares. The Company redeemed in full the Preference Shares in issue during the year.
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
41. Capital reserves
Unit: RMBItem
Openingbalance
Increase duringthe period
Decrease duringthe period
ClosingbalanceCapital premium (share premium)4,619,101,981.31141,595,645.49233,258,816.514,527,438,810.29Other capital reserves702,809,432.4452,556,871.89755,366,304.33Total5,321,911,413.75194,152,517.38233,258,816.515,282,805,114.62
Other explanations, including changes (increase or decrease) during the period and reasons for such changes:
the Company repaid equity-settled Preference Shares with a decrease of capital reserves of RMB22,500,000.00 during the year;the Company recognised the management fees during the vesting period for the share-based payments with an increase of capital
reserves of RMB52,556,871.89;the Company acquired the non-controlling interests of Wuhan Chenming Hanyang Paper Holdings Co., Ltd. and Jiangxi ChenmingPaper Co., Ltd. with a decrease of capital reserves of RMB184,122,332.33;a capital increase of Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, was contributed on the part of otherinvestors, which causing a decrease in the Company’s shareholding without loss of control, and a decrease of capital reserves ofRMB26,636,484.18;a capital increase of Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, was contributed on the part of otherinvestors, which causing a decrease in the Company’s shareholding without loss of control, and an increase of capital reserves ofRMB64,364,622.35;Guangdong Nanyue Bank Co., Ltd., an associate of the Company, introduced investment on the part of other investors, which dilutedthe Company’s equity interest, and an increase of capital reserves of RMB77,231,023.14.
42. Treasury shares
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the period
Closing balanceShare incentive226,860,000.00226,860,000.00Total226,860,000.00226,860,000.00Other explanations, including changes (increase or decrease) during the period and reasons for such changes:
During the year, the Company issued additional 79,600,000 A shares by implementing the share incentive schemeand recognised treasury shares for the obligation to repurchase.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
43. Other comprehensive income
Unit: RMBDuring the period
ItemOpening balance
Incurred beforeincome taxfor the period
Less: Transferredfrom othercomprehensiveincome in priorperiods to profitor loss duringthe period
Less: Transferredfrom othercomprehensiveincome in priorperiods toretained earningsduring the period
Less:
Income taxexpenses
Attributable
to parentcompanyafter tax
Attributableto minorityshareholdersafter taxClosing balanceI. Other comprehensive income that
cannot be reclassified to profit or lossin subsequent periodsII. Other comprehensive income that willbe reclassified to profit and loss insubsequent periods-561,686,607.66116,103,878.30116,103,878.30-445,582,729.36
1. Other comprehensive income that
may be reclassified to profit andloss under the equity method-12,359,143.501,846,610.941,846,610.94-10,512,532.56
2. Translation differences of financial
statements denominated in foreigncurrency-549,327,464.16114,257,267.36114,257,267.36-435,070,196.80Total other comprehensive income-561,686,607.66116,103,878.30116,103,878.30-445,582,729.36
44. Surplus reserves
Unit: RMBItem
Openingbalance
Increase during
the period
Decrease during
the periodClosing balanceStatutory surplus reserves1,212,009,109.971,212,009,109.97Total1,212,009,109.971,212,009,109.97
45. General risk reserves
Item
Openingbalance
Increase during
the period
Decrease during
the periodClosing balanceGeneral risk reserves74,122,644.202,703,274.4076,825,918.60Total74,122,644.202,703,274.4076,825,918.60
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
46. Retained profit
Unit: RMBItemThe periodThe prior periodRetained profit as at the end of the prior year before adjustment9,999,764,028.749,306,269,617.38Adjustment to opening balance of retained earnings (increase +,decrease -)-1,887,031,763.57Opening balance of retained profit after adjustment8,112,732,265.179,306,269,617.38Plus: Net profit for the period attributable to shareholders of the parent company2,065,513,108.711,712,029,078.52Less: Transfer of statutory surplus reservesTransfer of discretionary surplus reservesTransfer of general risk reserves2,703,274.40Ordinary dividend payable552,078,517.01437,433,593.74Perpetual Bonds interest payable89,700,000.00194,000,000.00Preference Shares interest payable323,390,968.66387,101,073.42Retained profit as at the end of the period9,210,372,613.819,999,764,028.74Breakdown of adjustments to opening balance of retained earnings:
The Company implemented the new financial instrument standard earlier than its associate, Guangdong NanyueBank Co., Ltd., but during the period in which the associate had yet to implement the new standard, the Companydid not adjust the financial statements of associates or joint ventures in accordance with the new standard when itadopted the equity method of accounting due to objective limitations. Pursuant to the“Fifth Batch of Questions andAnswers on the Implementation of Accounting Standards for Enterprises for 2021 – (I) Questions and Answers on theImplementation of Long-term Equity Investment Standards”of the Accounting Department of the Ministry of Finance,since 1 January 2021, the associate adjusted the opening balances of the financial statements in accordance with theconvergence requirements of the new standard, and the Company should adjust the opening balances of its 2021financial statements accordingly when adopting the equity method of accounting.
47. Revenue and operating costs
Unit: RMBAmount for the periodAmount for the prior periodItemRevenueOperating costsRevenueOperating costsPrincipal activities31,933,583,202.5424,460,067,257.5330,047,258,084.9723,046,708,818.72Other activities1,086,229,091.60762,208,537.75689,259,911.93598,885,367.49Total33,019,812,294.1425,222,275,795.2830,736,517,996.9023,645,594,186.21Whether the lower of the audited net profit before or after deducting extraordinary gains or losses is a negativenumber Yes √ No
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
47. Revenue and operating costs
(Continued)
Information related to revenue:
Unit: RMBCategory of contract
Machine-madepaper segmentFinancial services
Hotel andproperty rentalsOthersTotalType of goods31,681,986,516.67352,102,173.73166,355,538.98819,368,064.7633,019,812,294.14Including:
Machine-made paper29,071,777,731.5029,071,777,731.50Financial leasing327,001,050.30327,001,050.30Electricity and steam303,940,594.69303,940,594.69Construction materials349,945,005.51349,945,005.51Paper chemicals131,104,964.35131,104,964.35Hotel and property rentals148,941,357.80148,941,357.80Others2,175,163,226.1325,101,123.4317,414,181.18469,423,059.252,687,101,589.99By geographical area31,681,986,516.67352,102,173.73166,355,538.98819,368,064.7633,019,812,294.14Including:
Mainland China27,556,185,875.73352,102,173.73 166,355,538.98 819,368,064.76 28,894,011,653.20Other countries and regions4,125,800,640.944,125,800,640.94By the timing of delivery31,681,986,516.67352,102,173.73166,355,538.98819,368,064.7633,019,812,294.14Including:
Goods (at a point in time)31,371,259,273.1219,738,820.03819,253,881.7432,210,251,974.89Services (within a certainperiod)303,940,594.69346,399,581.1132,285,743.13682,625,918.93Leasing income6,786,648.865,702,592.62114,330,975.82114,183.02126,934,400.32Breakdown of revenue from principal activities By industry
Unit: RMBAmount for the yearAmount for the prior yearName of industryRevenueCostsRevenueCostsMachine-made paper29,071,777,731.5022,238,585,916.6626,799,197,492.5421,227,455,753.49Construction materials349,945,005.51315,912,453.93419,138,839.41358,729,667.72Financial leasing327,001,050.3021,147,808.43935,121,026.20127,620,095.42Electricity and steam303,940,594.69260,019,123.96195,367,954.91130,435,496.35Hotels and property rentals148,941,357.80124,619,857.8193,370,973.05165,846,288.06Paper chemicals131,104,964.35117,040,239.12144,274,657.39124,475,985.43Others1,600,872,498.391,382,741,857.621,460,787,141.47912,145,532.25Total31,933,583,202.5424,460,067,257.5330,047,258,084.9723,046,708,818.72
2021 ANNUAL REPORT
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: RMBAmount for the yearAmount for the prior yearName of industryRevenueCostsRevenueCostsWhite paper board9,579,581,625.056,540,978,628.517,900,414,595.225,764,493,788.34Duplex press paper7,287,152,353.076,004,341,245.636,880,399,009.215,658,261,879.44Coated paper4,310,744,513.873,130,491,004.154,134,523,188.763,253,634,912.22Electrostatic paper3,857,097,045.493,140,962,690.624,052,403,877.823,196,464,794.41Anti-sticking raw paper1,168,436,835.30872,987,808.221,118,932,774.91868,748,128.10Thermal paper540,941,351.36475,188,142.15519,335,040.60460,436,980.49Others2,327,824,007.362,073,636,397.382,193,189,006.022,025,415,270.49Total29,071,777,731.5022,238,585,916.6626,799,197,492.5421,227,455,753.49 Machine-made paper, by geographical segment
Unit: RMBAmount for the yearAmount for the prior yearName of industryRevenueCostsRevenueCostsMainland China24,945,977,090.5618,540,658,115.7523,746,039,543.4018,651,686,646.79Other countries and regions4,125,800,640.943,697,927,800.913,053,157,949.142,575,769,106.70Total29,071,777,731.5022,238,585,916.6626,799,197,492.5421,227,455,753.49 Revenue from top 5 customers
Unit: RMBPeriod
Total revenue fromtop 5 customers
Percentage of thetotal revenue in the
same period (%)20215,259,350,805.4515.93%20204,206,250,003.0013.68%Information related to the transaction price allocated to residual performance obligations:
At the end of the reporting period, the amount of revenue with signed contracts but unfulfilled or uncompletedperformance obligation was RMB862,831,558.41, which was expected to be recognised in 2022.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
48. Taxes and surcharges
Unit: RMBItem
Amount forthe period
Amount for theprior periodProperty tax77,555,756.0368,375,017.95Urban maintenance and construction tax46,766,679.9652,280,034.26Land use tax40,855,126.3929,847,867.46Stamp duty35,545,109.1931,389,172.39Resource tax22,892,129.8010,367,209.74Educational surcharges20,195,996.3922,418,855.28Local education surcharges13,463,933.819,679,449.17Land appreciation tax9,175,506.882,681,494.52Water conservation funds697,713.502,683,161.08Vehicle and vessel tax142,969.16125,784.05Others17,165,291.2020,680,809.50Total284,456,212.31250,528,855.40
49. Selling and distribution expenses
Unit: RMBItem
Amount forthe period
Amount for the
prior periodWages133,989,802.96122,235,622.89Hospitality expenses59,259,329.1655,229,939.72Travel expenses21,203,755.0318,618,459.51Selling commissions11,490,724.5927,552,636.35Depreciation expenses11,299,358.2212,008,055.46Rental expenses8,941,037.146,714,594.29Office expenses2,318,832.063,071,737.33Warehouse expenses555,915.721,108,765.35Others44,450,937.6351,706,545.01Total293,509,692.51298,246,355.91
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
50. General and administrative expenses
Unit: RMBItem
Amount forthe period
Amount for theprior periodWages and surcharges287,370,208.75320,742,683.51Production interruption loss153,841,164.2694,624,006.41Depreciation expenses104,079,387.00104,091,133.86Business hospitality expenses75,588,054.1587,331,837.47Welfare expenses67,448,271.7464,686,363.40Amortisation of intangible assets and long-term expenses47,623,471.6944,383,804.21Repair cost and consumption of materials29,577,039.4223,829,844.68Insurance premium21,399,854.7929,822,263.59Travel expenses14,082,788.4216,069,151.86Office expenses6,016,174.243,759,121.11Audit fees5,211,323.995,668,334.66Waste disposal expenses1,438,177.809,862,736.52Others128,684,819.29220,549,379.11Total942,360,735.541,025,420,660.39Note: 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. R&D expenses
Unit: RMBItem
Amount for
the period
Amount for the
prior periodConsumption of materials1,008,124,599.58875,193,790.53Energy and power194,161,253.86147,453,048.82Wages and surcharges155,808,154.72148,290,430.65Depreciation expenses53,538,054.0162,483,794.25Insurance premium29,407,238.8620,343,290.79Housing provident funds5,375,717.769,489,172.29Welfare expenses2,838,027.334,551,325.39Union funds1,601,052.82779,789.00Installation expenses1,423,823.711,885,550.14Travel expenses17,449.7325,245.51Other expenses1,470,999.083,859,804.12Total1,453,766,371.461,274,355,241.49
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
52. Finance expenses
Unit: RMBItem
Amount for
the period
Amount for theprior periodInterest expenses2,648,200,417.053,144,464,077.81Less: capitalised interest amount19,103,008.81interest income587,289,410.33887,004,185.02Foreign exchange gains and losses-9,455,468.81-27,516,846.19Less: capitalisation of foreign exchange gains and losses
Bank charges and others336,015,748.55351,225,025.43Total2,387,471,286.462,562,065,063.22
53. Other income
Unit: RMBSource of other income
Amount for
the period
Amount for theprior periodGovernment grants – amortised deferred income included inprofit or loss104,704,060.06108,476,698.60Government grants – directly included in profit or loss115,896,575.43255,407,429.72Total220,600,635.49363,884,128.32
54. Investment income
Unit: RMBItem
Amount forthe period
Amount for the
prior periodInvestment gain on derecognition of financial assets-258,113,630.19-93,431,738.91Investment gain on disposal of long-term equity investments112,907,083.0516,778,042.01Income from long-term equity investments accounted for usingthe equity method31,476,499.83272,022,434.54Investment gain on debt restructuring24,593,731.72-22,005,200.15Dividend on financial assets held for trading and other non-
current financial assets19,557,976.67Total-69,578,338.92173,363,537.49
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
55. Gain on change in fair value
Unit: RMBSource of gain on change in fair value
Amount forthe period
Amount for theprior periodFinancial assets held for trading-78,631,913.6210,126,787.86Other non-current financial assets1,600,000.009,464,346.45Gain on change in fair value of consumable biological assetsmeasured at fair value-41,899.05-13,329,852.55Total-77,073,812.676,261,281.76
56. Credit impairment loss
Unit: RMBItem
Amount forthe period
Amount for the
prior periodBad debt loss of bills receivable20,880,443.8363,022,468.83Bad debt loss of financial lease payments-239,469,507.89-650,157,592.24Bad debt loss of other receivables-33,623,255.14-47,955,924.76Bad debt loss of other payments-16,523,042.11-16,633,823.40Total-268,735,361.31-651,724,871.57
57. Loss on impairment of assets
Unit: RMBItem
Amount forthe period
Amount for theprior periodLoss on inventory impairment-11,285,890.45Loss on fixed asset impairment-13,410,000.00Loss on construction in progress impairment-163,717.76Total-11,285,890.45-13,573,717.76
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
58. Asset disposal income
Unit: RMBSource of asset disposal income
Amount forthe period
Amount for theprior periodGain on disposal of fixed assets (“-” denotes loss)9,375,163.9317,450,629.19Gain on disposal of intangible assets (“-” denotes loss)42,184,387.738,752,868.37Total51,559,551.6626,203,497.56
59. Non-operating income
Unit: RMB
Item
Amount for
the period
Amount forthe prior period
Amount included inextraordinary gains
or losses for
the periodGovernment grants42,486,362.10577,140,958.9342,355,655.95Non-current assets damage and scrap profits1,035,196.66879,060.701,035,196.66Exempted debts12,729,703.077,086,812.2012,729,703.07Fine income5,723,762.721,811,183.885,723,762.72Others9,719,362.2613,547,672.449,719,362.26Total71,694,386.81600,465,688.1571,563,680.66Government grants included in profit or loss for the period:
Unit: RMBGrants item
Amount for
the period
Amount forthe prior period
Asset-related/income-relatedGrant income42,486,362.1043,750,958.93Income-relatedRelocation subsidy533,390,000.00Income-relatedTotal42,486,362.10577,140,958.93
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
60. Non-operating expenses
Unit: RMB
Item
Amount forthe period
Amount forthe prior period
Included innon-recurringprofit or loss inthe periodTrading of carbon emission quota42,396,793.4242,396,793.42Loss from destroyed and damaged non-current
assets3,338,528.872,178,029.293,338,528.87Donation1,142,550.008,922,077.881,142,550.00Others95,188.911,817,128.5295,188.91Total46,973,061.2012,917,235.6946,973,061.20
61. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMBItem
Amount forthe period
Amount forthe prior periodCurrent income tax calculated according to tax law andrelated regulations185,879,510.90457,778,696.15Deferred income tax expenses30,616,777.64-191,722,048.10Total216,496,288.54266,056,648.05
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMBItemAmount for the periodTotal profit2,306,180,309.99Income tax expenses calculated at statutory (or applicable) tax rates345,927,046.50Effect of different tax rates applicable to certain subsidiaries566,463,757.61Adjustments to income tax for prior periods5,048,497.22Profit and loss of joint ventures and associates accounted for using the equity method4,721,474.97Income not subject to tax (listed with“-”)-516,586,757.30Non-deductible costs, expenses and losses17,359,539.31The effect of tax rate changes on the opening balance of deferred income taxTax effect of utilisation of unrecognised deductible losses and deductible temporary
differences in the previous year (listed with“-”)-121,859,010.96Tax effect of utilisation of unrecognised deductible losses and deductible temporary
differences83,208,654.66Tax effect of R&D fee deduction (listed with“-”)-154,331,913.47The pre-tax deduction of the interest on Perpetual Bonds accounted as equity-13,455,000.00Income tax expense216,496,288.54
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
62. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMBItem
Amount for
the period
Amount forthe prior periodNet proceedings from the financial leasing business1,153,242,827.873,562,339,444.74Finance expenses – Interest income506,274,390.31380,426,195.87Open credit and other income349,416,906.77200,271,888.17Government grants actually received199,176,622.64792,045,853.85Default penalty and fine11,844,722.7921,312,403.81Total2,219,955,470.384,956,395,786.44
(2) Cash paid relating to other operating activities
Unit: RMBItem
Amount for
the period
Amount forthe prior periodTransportation expenses961,442,438.951,098,519,658.39Net investment in factoring business737,000,000.00Financial institutions charge210,288,974.16244,065,319.39Business hospitality expenses106,007,628.02114,049,421.75Intermediary service expenses39,555,241.6249,981,129.73Travel expenses35,150,617.2434,480,991.74Repair expenses33,427,722.4530,764,539.64Cargo handling charges30,088,978.0936,441,851.25Office expenses28,618,557.1525,301,574.10Insurance premium22,171,792.2030,058,435.52Leasing expenses17,039,644.4211,613,158.79Waste disposal expenses20,081,650.1918,878,944.13Donation1,142,550.008,922,077.88Others166,617,924.48131,699,592.31Total2,408,633,718.971,834,776,694.62
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
62. Items on statements of cash flow
(Continued)
(3) Cash received relating to other investing activities
Unit: RMBItem
Amount for
the period
Amount forthe prior periodRecovery of consideration for equity transfer493,655,373.48409,282,077.65Net cash received from subsidiaries44,674.62Total493,700,048.10409,282,077.65
(4) Cash paid relating to other investing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior periodEquity payment for acquisition of companies127,500,000.00Total127,500,000.00
(5) Cash received relating to other financing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior periodShort-term commercial paper200,000,000.00814,457,000.00Equipment leaseback2,071,358,708.00900,000,000.00Deposit for finance lease60,000,000.00362,299,603.12Net recovery of guarantee deposit2,286,599,788.673,153,589,473.80Contributions by other partners190,790,000.00Total4,808,748,496.675,230,346,076.92
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
62. Items on statements of cash flow
(Continued)
(6) Cash paid relating to other financing activities
Unit: RMBItem
Amount forthe period
Amount forthe prior periodRepayment of short-term commercial paper and MTN2,745,000,000.002,190,000,000.00Repayment of bonds90,000,000.00900,000,000.00Repayment of equipment leaseback2,252,587,404.382,568,988,488.34Redemption of Preference Shares4,500,000,000.00Payment of Preference Shares dividend323,390,968.66387,101,073.42Payment of Perpetual Bonds interest89,700,000.00194,000,000.00Repayment of financial support from shareholders708,440,900.00Security deposit for financial leasing96,696,696.6435,500,000.00Repurchase of equity in China Development Bank funds29,500,000.0077,500,000.00Acquisition of non-controlling interests300,000,000.00450,000,000.00Total10,426,875,069.687,511,530,461.76
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMBSupplementary information
Amount forthe period
Amount forthe prior period
1. Reconciliation of net profit as cash flows from operating
activities:––Net profit2,089,684,021.451,906,213,294.49Plus: Provision for impairment of assets280,021,251.76665,298,589.33Depreciation of fixed assets, depreciation of investment
property2,366,091,653.762,260,280,953.35Depreciation of right-of-use assets7,972,781.727,602,966.21Amortisation of intangible assets51,351,628.4249,691,095.45Amortisation of long-term prepaid expenses3,964,046.482,916,033.48Loss on disposal of fixed assets, intangible assets andother long-term assets (“-” denotes gain)-51,559,551.66-26,203,497.56Loss on scrapped fixed assets (“-” denotes gain)2,303,332.211,298,968.59Loss on changes in fair value (“-” denotes gain)77,073,812.67-6,261,281.76Finance expenses (“-” denotes gain)2,648,200,417.052,139,908,266.82Investment loss (“-” denotes gain)69,578,338.92-173,363,537.49Decrease in deferred income tax assets (“-”denotesincrease)-30,616,777.64-191,722,048.10Increase in deferred income tax liabilities (“-”denotesdecrease)6,637,993.775,161,410.38Decrease in inventories (“-” denotes increase)-156,406,209.61-360,128,826.69Decrease in operating receivables (“-” denotes increase)3,208,289,966.455,956,184,790.79Increase in operating payables (“-” denotes decrease)-1,990,698,513.11-977,074,501.01OthersNet cash flows from operating activities8,581,888,192.6411,259,802,676.28
2. Major investing and financing activities not involving cash
settlements:
Capital converted from debtsConvertible bonds of the Company due within one yearFinance leases of fixed assets
3. Net change in cash and cash equivalents:
Closing balance of cash3,168,915,847.024,389,169,963.79Less: Opening balance of cash4,389,169,963.792,890,328,027.41Plus: Closing balance of cash equivalentsLess: Opening balance of cash equivalentsNet increase in cash and cash equivalents-1,220,254,116.771,498,841,936.38
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: RMBAmountCash or cash equivalents paid in the current period for business combinations that
occurred during the period:–Of which: Wuhan Junheng Property Management Co. Ltd.–-Less: Cash and cash equivalents held by the subsidiary on the acquisition date44,674.62Of which: Wuhan Junheng Property Management Co. Ltd.44,674.62Plus: Cash or cash equivalents paid in the current period for business combinationsthat occurred during previous periodsOf which: Wuhan Junheng Property Management Co. Ltd.–-Net cash paid for acquisition of subsidiaries-44,674.62
(3) Net cash received from disposal of subsidiaries during the current period
Unit: RMBAmountCash or cash equivalents received from disposal of subsidiaries during the period318,000,000.00Of which:–-Shandong Chenming Power Supply Holdings Co., Ltd.298,000,000.00Chengdu Chenming Culture Communication Co., Ltd.10,000,000.00Zhanjiang Chenming New-style Wall Materials Co., Ltd.10,000,000.00Less: Cash and cash equivalents held by subsidiaries as at the date of loss of control11,760,452.52Of which:–-Shandong Chenming Power Supply Holdings Co., Ltd.6,233,192.36Chengdu Chenming Culture Communication Co., Ltd.30,677.96Zhanjiang Chenming New-style Wall Materials Co., Ltd.5,496,582.20Plus: Cash or cash equivalents received in the current period for disposal of
subsidiaries during previous periodsOf which:–-Net cash received from disposal of subsidiaries306,239,547.48
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
63. Supplementary information on cash flow statement
(Continued)
(3) Cash and cash equivalents composition
Unit: RMBItemClosing balanceOpening balanceI. Cash3,168,915,847.024,389,169,963.79Of which: Treasury cash2,926,080.682,161,684.57Bank deposit that can be used for payment at any time3,165,989,766.344,387,008,279.22Other monetary funds that can be used for payment atany timeDeposit at central bank deposit that can be used forpaymentAmount due from banksAmount due to banksII. Cash equivalentsOf which: Bond investment with maturity within 3 monthsIII. Balance of cash and cash equivalent at end of period3,168,915,847.024,389,169,963.79Of which: Restricted cash and cash equivalents used bythe Company or subsidiaries within the Group
64. Notes to items of statements of changes in owners
’ equity
The Company implemented the new financial instrument standard earlier than its associate, Guangdong Nanyue BankCo., Ltd., but during the period in which the associate had yet to implement the new standard, the Company did notadjust the financial statements of associates or joint ventures in accordance with the new standard when it adoptedthe equity method of accounting due to objective limitations. Since 1 January 2021, the associate adjusted theopening balances of the financial statements in accordance with the convergence requirements of the new standard,and the Company should adjust the opening balances of its 2021 financial statements accordingly when adopting theequity method of accounting, resulting in opening balance of retained earnings – other decrease.
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
65. Assets with restricted ownerships or right to use
Unit: RMBItemClosing carrying amountReason for such restrictionsMonetary funds10,756,936,714.59As guarantee deposits for bank acceptance bills and
letter of credit and deposit reserves (Note VII. 1)Bills receivable/accounts receivable
financing
3,778,108.58As collateral for letters of guarantee and letters of
credit (Note VII. 4)Accounts receivables232,200,000.00As deposits to obtain loans (Note VII. 3)Financial assets held for trading55,443,091.44As deposits for borrowings from CMB International
Securities (Note VII. 2)Fixed assets12,866,125,795.19As collateral for bank borrowings and long-term
payables (Note VII. 14)Intangible assets1,210,395,050.42As collateral for bank borrowings and long-term
payables (Note VII. 17)Investment property5,033,765,366.00As collateral for bank borrowings (Note VII. 13)Total30,158,644,126.22–Other explanation:
As at 31 December 2021, housing, building structure and equipment with the carrying amount of RMB12,866,125,795.19 (31 December2020: carrying amount of RMB11,147,836,807.04), intangible assets with the carrying amount of RMB1,210,395,050.42 (31 December 2020:
carrying amount of RMB1,247,015,765.23), and investment properties with the carrying amount of RMB5,033,765,366.00 (31 December 2020:
carrying amount of RMB4,929,794,589.62) was pledged as collateral for long-term borrowings of RMB3,921,048,883.74 (31 December 2020:
RMB4,618,249,057.65) and short-term borrowings of RMB70,000,000.00 (31 December 2020: RMB35,075,833.33).
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
66. Foreign currency items
(1) Foreign currency items
Unit: RMBItem
Closing foreigncurrency balanceExchange rate
Closing balance
in RMBMonetary fundsOf which: USD73,901,874.686.3757471,176,182.40
EUR1,411,646.447.219710,191,663.80HKD854,853.230.8176698,928.00GBP8,174.648.606470,354.22JPY1,197.000.055466.31Accounts receivablesOf which: USD31,844,557.986.3757203,031,348.31
EUR3,952,003.657.219728,532,280.75JPY146,734,998.000.05548,129,118.89Other receivablesOf which: USD266,342.716.37571,698,121.22
EUR79,086.837.2197570,983.19Accounts payableOf which: USD62,361,234.076.3757397,596,520.06
EUR2,518,428.327.219718,182,296.94Other payablesOf which: USD17,729,514.036.3757113,038,062.60
EUR127,684.257.2197921,841.98Short-term borrowingsOf which: USD301,125,515.816.37571,919,885,951.15
HKD49,602,769.390.817640,555,224.25Long-term borrowingsOf which: USD1,589,700.006.375710,135,450.29Non-current liabilities due within one yearOf which: USD183,708,837.226.37571,171,272,433.46
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
66. Foreign currency items
(Continued)
(2) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose
their overseas principal places of business, functional currency and basis. Reasons shall be disclosed ifthere is any change in the functional currency.
√ Applicable Not applicable
No.Name of subsidiary
Principal place ofbusinessPlace of incorporationFunctional currency1Chenming GmbHHamburg, GermanyHamburg, GermanyEUR2Chenming Paper Korea Co., Ltd.Seoul, KoreaSeoul, KoreaKRW3Chenming International Co., Ltd.Los Angeles, USALos Angeles, USAUSD4Chenming Paper Japan Co., Ltd.Tokyo, JapanTokyo, JapanJPY5Chenming Paper United States Co., Ltd.Los Angeles, USALos Angeles, USAUSD6Chenming (Overseas) LimitedHong Kong, ChinaHong Kong, ChinaUSD7Chenming (Singapore) LimitedSingaporeSingaporeUSD8Chenming (HK) LimitedHong Kong, ChinaHong Kong, ChinaUSD
2021 ANNUAL REPORT
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
67. Government grants
(1) General information of government grants
Unit: RMBTypeAmountReporting item
Amount includedin the currentprofit and lossProject Funding for National Key
Technology Research andDevelopment Program164,700.00Other income164,700.00Infrastructure and environmentalprotection engineering12,835,606.22Other income12,835,606.22Zhanjiang forestry-pulp-paper project4,094,632.92Other income4,094,632.92Enterprise reform and developmentsubsidies74,297,897.20
Other income and non-operating income74,297,897.20Financial subsidies for technologicaltransformation project38,603,317.72Other income38,603,317.72Funding for environmental protection50,794,311.52Other income50,794,311.52Huanggang forestry-pulp-paper project24,200,216.24Other income24,200,216.24Refund of VAT upon assessment768,780.56Other income768,780.56Subsidy for top-notch talents660,000.00Other income660,000.00Subsidy for inviting investments22,921,843.36Other income22,921,843.36Employment stabilisation subsidies1,626,174.63Other income1,626,174.63Subsidies for social insurance345,163.82Other income345,163.82Subsidies for R&D2,476,800.00Other income2,476,800.00Subsidies for financing576,300.00Other income576,300.00Refund of tax8,149,743.76Other income8,149,743.76Government Incentive6,821,907.00Non-operating income6,821,907.00Subsidies for the pandemic200,000.00Non-operating income200,000.00Subsidies for forestation1,404,769.00Other income1,404,769.00Others12,144,833.64
Other income and non-
operating income12,144,833.64Total263,086,997.59263,086,997.59
XII Financial Report
VII. Notes to items of the consolidated financial statements(Continued)
67. Government grants
(Continued)
(2) The condition of the refund of government grants
√ Applicable Not applicable
Unit: RMBItemAmountReasonInfrastructure and environmentalprotection engineering13,216,025.00The government repossessed the landTotal13,216,025.00
VIII. Change in scope of consolidation
1. Disposal of subsidiaries
Whether there is loss of control over subsidiaries on a single disposal
√ Yes No
Unit: RMB
Name ofsubsidiary
Considerationof disposal ofequity interest
Shareholdingof disposal ofequity interest
Way ofdisposal ofequityinterest
Time ofloss ofcontrol
Basis fordeterminingthe time of
loss ofcontrol
Difference
betweenconsiderationand share of
net assetsof relevantsubsidiary
as perconsolidated
financialstatements
Remainingshareholding
as of the
date of loss
of control
Carryingamount ofremainingshareholding
as of thedate of loss
of control
Fair value of
remainingshareholding
as of thedate of loss
of control
Gain orloss in fair
value ofremainingshareholding
Determination
and keyassumptionof fair valueof remainingshareholding
as of thedate of loss
of control
Relevant otherComprehensiveincomeof formersubsidiarytransferred toprofit or lossZhanjiang Chenming
New-styleWall Materials Co., Ltd.12,580,000.00100.00%Transfer2021/1/1Without control676,586.270.00%0.000.000.000.00Chengdu Chenming
Culture
Communication
Co., Ltd.11,040,000.00100.00%Transfer2021/9/30Without control2,215,273.260.00%0.000.000.000.00Shandong Chenming
Power Supply
Holdings Co., Ltd.298,000,000.00100.00%Transfer2021/9/30Without control110,262,467.540.00%0.000.000.000.00
2021 ANNUAL REPORT
XII Financial Report
VIII. Change in scope of consolidation(Continued)
1. Disposal of subsidiaries
(Continued)Other explanation:
Whether there was disposal of the investment in a subsidiary in stages through multiple transactions and loss ofcontrol during the period Yes √ NoTransactions in a basket Applicable √ Not applicable
2. Others
During the reporting period, 6 companies were added to the scope of consolidation. In particular, 5 companies werenewly established subsidiaries, namely Shanghai Chenyin Trading Co., Ltd., Nanchang Shengheng Trading Co., Ltd.,Nanchang Kunheng Trading Co., Ltd., Weifang Chendu Equity Investment Partnership (Limited Partnership) andHuanggang Chenming Pulp & Fiber Trading Co., Ltd. During the reporting period, a subsidiary was acquired not withinthe definition of business, namely Wuhan Junheng Property Management Co., Ltd.During the reporting period, 7 companies were reduced from the scope of consolidation. In order to further focuson the principal business of pulp production and paper making, divest non-principal business assets and optimiseresource allocation, the Company disposed of 100% equity interest in Zhanjiang Chenming New-style Wall MaterialsCo., Ltd., Chengdu Chenming Culture Communication Co., Ltd., Shandong Chenming Power Supply Holdings Co.,Ltd., Shandong Chenming Panels Co., Ltd., Shouguang Chenming Cement Co., Limited and Shouguang ChenmingFloor Board Co., Ltd. Such companies were excluded from the scope of consolidation. A subsidiary, ShandongChenming Coated Paper Sales Co. Ltd., was absorbed into the Group.
XII Financial Report
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Name of subsidiary
Principleplaceof business
Place of incorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued debtsecurities
Issuedshare capitalDirectIndirectZhanjiang Chenming Pulp & Paper
Co., Ltd.
ZhanjiangZhanjiangPaper makingFor-profit corporation96.26%Establishment00Shouguang Meilun Paper Co., Ltd.ShouguangShouguangPaper makingFor-profit corporation62.4864%Establishment00Jilin Chenming Paper Co., Ltd.JilinJilinPaper makingFor-profit corporation100%Acquisition00Huanggang Chenming Pulp &Paper Co., Ltd.
HuanggangHuanggangPulp productionFor-profit corporation70.15%29.85%Establishment00Shandong Chenming Paper SalesCo., Ltd.
ShouguangShouguangSales of
paper product
For-profit corporation100%Establishment00Shouguang Chenming Import and
Export Trade Co., Ltd.
ShouguangShouguangTradingFor-profit corporation100%Establishment00Jiangxi Chenming Supply Chain
Management Co., Ltd.
JiangxiJiangxiTradingFor-profit corporation70%Establishment00Chenming GmbHGermanyGermanyPaper product
trading
For-profit corporation100%Establishment00Shouguang Chenming
Papermaking Machine Co., Ltd.
ShouguangShouguangMachinery
manufacturing
For-profit corporation100%Establishment00Shouguang Hongxiang Printing
and Packaging Co., Ltd.
ShouguangShouguangPrinting and
packaging
For-profit corporation100%Acquisition00Shouguang Chenming Modern
Logistic Co., Ltd
ShouguangShouguangTransportationFor-profit corporation100%Establishment00Jinan Chenming Paper Sales
Co., Ltd.
JinanJinanInvestment
management/Paper product
trading
For-profit corporation100%Establishment00Huanggang Chenming
Arboriculture Development
Co., Ltd.
HuanggangHuanggangArboricultureFor-profit corporation100%Establishment00Chenming Arboriculture Co., Ltd.WuhanWuhanArboricultureFor-profit corporation100%Establishment00Chenming Paper Korea Co., Ltd.KoreaKoreaPaper product
trading
For-profit corporation100%Establishment00Shouguang Shun Da Customs
Declaration Co, Ltd.
ShouguangShouguangCustoms
declaration
For-profit corporation100%Establishment00Shanghai Chenming Industry
Co., Ltd.
ShanghaiShanghaiProperty
investment and management
For-profit corporation100%Establishment00Shanghai Chenyin Trading
Co., Ltd.
ShanghaiShanghaiTradingFor-profit corporation51%Establishment00
2021 ANNUAL REPORT
XII Financial Report
Name of subsidiary
Principleplaceof business
Place of incorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued debtsecurities
Issuedshare capitalDirectIndirectShandong Chenming Group
Finance Co., Ltd.
JinanJinanFinanceFor-profit corporation80%20%Establishment00Jiangxi Chenming Paper Co., Ltd.NanchangNanchangPaper makingFor-profit corporation100%Establishment00Nanchang Shengheng Trading
Co. Ltd.
NanchangNanchangTradingFor-profit corporation100%Establishment00Nanchang Kunheng Trading
Co. Ltd.
NanchangNanchangTradingFor-profit corporation100%Establishment00Shouguang Chenming Art Paper
Co., Ltd.
ShouguangShouguangPaper makingFor-profit corporation75%Establishment00Hailaer Chenming Paper Co., Ltd.HailaerHailaerPaper makingFor-profit corporation75%Establishment00Shandong Grand View Hotel
Co., Ltd.
ShouguangShouguangCateringFor-profit corporation70%Establishment00Wuhan Chenming Hanyang PaperHoldings Co., Ltd
WuhanWuhanPaper makingFor-profit corporation65.205%34.64%Establishment00Shandong Chenming FinancialLeasing Co., Ltd.
JinanJinanFinancial leasingFor-profit corporation100%Establishment00Qingdao Chenming Nonghai
Financial Leasing Co., Ltd
QingdaoQingdaoFinancial leasingFor-profit corporation100%Establishment00Chenming (HK) LimitedHong KongHong KongPaper product
tradingFor-profit corporation100%Establishment00Shouguang Hongyi Decorative
Packaging Co., Ltd.
ShouguangShouguangPackagingFor-profit corporation100%Merger and
acquisition
Shouguang Xinyuan Coal Co., Ltd.ShouguangShouguangCoalFor-profit corporation100%Merger and
acquisition
Shouguang City Run Sheng
Wasted Paper Recycle Co., Ltd.
ShouguangShouguangPurchase and
sale of waste
For-profit corporation100%Merger and
acquisition
Shouguang Wei Yuan Logistics
Company Limited
ShouguangShouguangLogisticsFor-profit corporation100%Merger and
acquisition
Wuhan Chenming Qianneng
Electric Power Co., Ltd.
WuhanWuhanThermal powerFor-profit corporation51%Establishment00Shandong Chenming Investment
Limited
JinanJinanInvestmentFor-profit corporation100%Establishment00
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
Name of subsidiary
Principle
placeof business
Place of incorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued debt
securities
Issuedshare capitalDirectIndirectJapan Chenming Paper Co., Ltd.JapanJapanPaper product
tradingFor-profit corporation100%Establishment00Chenming International Co., Ltd.the United
States
the United StatesPaper product trading
For-profit corporation100%Establishment00Zhanjiang Chenming ArboricultureDevelopment Co., Ltd.
ZhanjiangZhanjiangArboricultureFor-profit corporation100%Establishment00Yangjiang Chenming Arboriculture
Development Co., Ltd.
YangjiangYangjiangArboricultureFor-profit corporation100%Establishment00Nanchang Chenming ArboricultureDevelopment Co., Ltd.
NanchangNanchangArboricultureFor-profit corporation100%Establishment00Guangdong Huirui Investment
Co., Ltd.
ZhanjiangZhanjiangInvestmentFor-profit corporation100%Establishment00Jilin Chenming New-style WallMaterials Co., Ltd
JilinJilinWall materialsFor-profit corporation100%Establishment00Jilin Chenming Logistics Co., Ltd.JilinJilinLogisticsFor-profit corporation100%Establishment00Jiangxi Chenming Logistics Co.,Ltd.
NanchangNanchangLogisticsFor-profit corporation100%Establishment00Fuyu Chenming Paper Co., Ltd.FuyuFuyuPaper makingFor-profit corporation100%Establishment00Zhanjiang Meilun Pulp & PaperCo., Ltd.
ZhanjiangZhanjiangPaper makingFor-profit corporation100%Establishment00Shanghai Chenming FinancialLeasing Co., Ltd.
ShanghaiShanghaiFinancial leasingFor-profit corporation100%Establishment00Wuhan Junheng Property
Management Co. Ltd.
WuhanWuhanPropertyFor-profit corporation100%Merger and
acquisition
Guangzhou Chenming Financial
Leasing Co., Ltd.
GuangzhouGuangzhouFinancial
leasing
For-profit corporation100%Establishment00Shanghai Hongtai Real Estate Co.,
Ltd.
ShanghaiShanghaiReal estateFor-profit corporation100%Merger and
acquisition
Shanghai Hongtai Property
Management Co., Ltd.
ShanghaiShanghaiPropertyFor-profit corporation100%Merger and
acquisition
Shandong Chenming Commercial
Factoring Co., Ltd
JinanJinanBusiness
factoring
For-profit corporation100%Establishment00Guangzhou Chenming Commercial
Factoring Co., Ltd.
GuangzhouGuangzhouBusiness
factoring
For-profit corporation51%Establishment00
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
2021 ANNUAL REPORT
XII Financial Report
Name of subsidiary
Principleplaceof business
Place of incorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued debt
securities
Issuedshare capitalDirectIndirectQingdao Chenming Pulp & Paper
Electronic Commodity SpotTrading Co., Ltd.
QingdaoQingdaoTradingFor-profit corporation30%70%Establishment00Zhanjiang Chenming Port Co., Ltd.ZhanjiangZhanjiangPortFor-profit corporation100%Establishment00Beijing Chenming Financial
Leasing Co., Ltd.
BeijingBeijingFinancial leasingFor-profit corporation100%Establishment00Chenming Paper United StatesCo., Ltd.
the United
States
the United
StatesPaper product
trading
For-profit corporation100%Establishment00Guangdong Chenming Panels Co.,Ltd.
GuangdongGuangdongPanelsFor-profit corporation100%Establishment00Shanghai Chenming Pulp & PaperSales Co., Ltd.
ShanghaiShanghaiPaper product
tradingFor-profit corporation100%Establishment00Meilun (BVI) LimitedCaymanCaymanCommerceFor-profit corporation100%Establishment00Weifang Chenming Growth DriverReplacement Equity InvestmentFund Partnership (LimitedPartnership)
WeifangWeifangFundFor-profit corporation79%Establishment00Nanjing Chenming CultureCommunication Co., Ltd.
NanjingNanjingMarketingFor-profit corporation100%Establishment00Chenming (Overseas) Co., Ltd.Hong KongHong KongPaper product
tradingFor-profit corporation100%Establishment00Chenming (Singapore) Co., Ltd.SingaporeSingaporePaper product
trading
For-profit corporation100%Establishment00Kunshan Tuoan Plastic ProductsCo., Ltd.
KunshanKunshanRubber and
plastic
For-profit corporation100%Merger and
acquisition
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
XII Financial Report
Name of subsidiary
Principle
placeof business
Place of incorporation
Nature ofbusinessType of legal person
Shareholding
Acquisition
Issued debtsecurities
Issuedshare capitalDirectIndirectHubei Changjiang Chenming
Huanggang Equity InvestmentFund Partnership (LimitedPartnership)
HuanggangHuanggangFundFor-profit corporation59.97%Establishment00Hainan Chenming Technology
Co., Ltd.
HaikouHaikouWholesale and
retailFor-profit corporation100%Establishment00Qingdao Chenming Import andExport Trade Co., Ltd.
QingdaoQingdaoTradingFor-profit corporation100%Establishment00Shanghai Herui Investment
Co., Ltd.
ShanghaiShanghaiBusiness
services
For-profit corporation100%Merger and
acquisition
Hubei Huanggang Chenming
Equity Investment FundManagement Co., Ltd.
HuanggangHuanggangCapital market
services
For-profit corporation60%Establishment00Shandong Dingkun Asset
Management Partnership(Limited Partnership)
ShouguangShouguangBusiness servicesFor-profit corporation99.9001%Establishment00Huanggang Chenming Paper
Technology Co., Ltd.
HuanggangHuanggangPaper makingFor-profit corporation100%Establishment00Huanggang Chenming Port Co.,Ltd.
HuanggangHuanggangPort servicesFor-profit corporation51%Establishment00Huanggang Chenming Pulp &
Fiber Trading Co., Ltd.
HuanggangHuanggangTradingFor-profit corporation100%Establishment00Weifang Chendu Equity Investment
Partnership
(Limited Partnership)
ShouguangShouguangCapital market
services
For-profit corporation79.75%Establishment00
(2) Major non-wholly owned subsidiaries
Unit: RMB
Name of subsidiary
Minorityinterest
Gain or loss attributable to minority interest during the period
Dividend tominority interestdeclared duringthe period
Closing balance of minority interestShouguang Chenming Art
Paper Co., Ltd.25.00%-3,455,996.3195,294,190.47Shouguang Meilun PaperCo., Ltd.37.5136%34,688,699.6848,309,125.872,559,498,470.96Zhanjiang Chenming Pulp &Paper Co., Ltd.3.74%2,000,000.00283,635,377.65
IX. Interest in other entities(Continued)
1. Interest in subsidiaries
(Continued)
(1) Constitution of the Group
(Continued)
2021 ANNUAL REPORT
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 balanceOpening balanceName of subsidiaryCurrent assets
Non-currentassetsTotal assets
Currentliabilities
Non-currentliabilitiesTotal liabilitiesCurrent assets
Non-currentassetsTotal assets
Current liabilities
Non-currentliabilities
TotalliabilitiesShouguang Chenming Art
Paper Co., Ltd.664,927,705.80499,632,230.381,164,559,936.18783,383,174.36783,383,174.36210,008,389.30531,396,869.27741,405,258.57346,404,511.49346,404,511.49Shouguang Meilun Paper Co.,Ltd.7,009,260,465.1110,661,260,325.9917,670,520,791.107,674,675,762.571,687,766,004.189,362,441,766.753,954,358,701.8210,971,104,092.0314,925,462,793.857,816,696,759.191,228,430,785.129,045,127,544.31Zhanjiang Chenming Pulp &Paper Co., Ltd.11,650,935,934.5712,965,150,000.4124,616,085,934.9814,550,859,440.021,994,649,794.0316,545,509,234.059,674,420,109.4014,008,067,430.7423,682,487,540.1410,656,651,818.592,827,774,072.2213,484,425,890.81
Unit: RMBAmount for the periodAmount for the prior periodName of subsidiaryRevenueNet profit
Total comprehensive
income
Cash flows fromoperating activitiesRevenueNet profit
Total comprehensive
income
Cash flows from operating activitiesShouguang Chenming Art
Paper Co., Ltd.689,339,213.30-13,823,985.26-13,823,985.26-437,908,937.70642,697,593.981,535,786.881,535,786.88-345,949,577.00Shouguang Meilun PaperCo., Ltd.8,705,143,361.05 245,313,174.65245,313,174.651,502,784,779.108,070,365,747.22219,893,721.83219,893,721.831,505,697,902.65Zhanjiang Chenming Pulp& Paper Co., Ltd.13,110,229,643.091,093,678,580.621,095,525,191.562,993,663,137.4611,870,586,483.291,192,007,567.151,179,648,423.651,603,505,193.56
XII Financial Report
IX. Interest in other entities(Continued)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(1) Changing in shareholding in subsidiaries
The Company previously held 89.95% of equity interest in Jiangxi Chenming Paper Co., Ltd. In December2021, the Company entered into the Equity Purchase Agreement with Western Trust Co., Ltd. to purchase anadditional 10.05% equity interest. As of 31 December 2021, the Equity Purchase Agreement was fulfilled andthe consideration for the transaction was RMB300.00 million. The transaction resulted in a decrease in minorityinterest of RMB275.8777 million and a decrease in capital reserves of RMB24.1223 million.The Company previously held 87.40% of equity interest in Shouguang Meilun Paper Co., Ltd. In March 2021,Weifang Chenchuang Equity Investment Fund Partnership (Limited Partnership) made a unilateral capitalcontribution to Shouguang Meilun Paper Co., Ltd. Upon completion of the capital increase, its equity interestin Shouguang Meilun Paper Co., Ltd. was 13.04%, and the transaction did not result in loss of control overShouguang Meilun Paper Co., Ltd. by the Company. The transaction resulted in a decrease in capital reservesof RMB12.3030 million.The Company previously held 76.00% of equity interest in Shouguang Meilun Paper Co., Ltd. In June 2021,the Company, SWSC Innovation Investment Co., Ltd. and CCB Financial Asset Investment Co., Ltd. jointlymade capital contribution to Shouguang Meilun Paper Co., Ltd. Upon completion of the capital increase,SWSC Innovation Investment Co., Ltd.’s equity interest in Shouguang Meilun Paper Co., Ltd. was 2.22%, andthe transaction did not result in the loss of control over Shouguang Meilun Paper Co., Ltd. by the Company.CCB Investment-Shandong Development Debt-to-Equity Swap Investment Scheme, which is controlled by theCompany, has acquired 15.56% equity interest in Shouguang Meilun Paper Co., Ltd. The transaction resulted ina decrease in capital reserves of RMB14.3335 million.The Company previously held 100.00% of equity interest in Zhanjiang Chenming Pulp & Paper Co., Ltd. InDecember 2021, Beijing Chuanfa Investment Management Co. Ltd. made a unilateral capital contribution toZhanjiang Chenming Pulp & Paper Co., Ltd. Upon completion of the capital increase, its equity interest inZhanjiang Chenming Pulp & Paper Co., Ltd. was 3.74%, and the transaction did not result in the loss of controlover Zhanjiang Chenming Pulp & Paper Co., Ltd. by the Company. The transaction resulted in an increase incapital reserves of RMB64.3646 million.
(2) Effect of the transactions on minority interest and equity attributable to the owners of the parent company
Unit: RMBItem
Jiangxi ChenmingPaper Co., Ltd.Acquisition cost/disposal consideration300,000,000.00
– Cash300,000,000.00– Fair value of non-cash assetsTotal acquisition cost/disposal consideration300,000,000.00Less: share of net assets in subsidiaries based on shares acquired/disposed275,877,667.67Difference24,122,332.33Of which: capital reserve adjustment-24,122,332.33
2021 ANNUAL REPORT
XII Financial Report
IX. Interest in other entities(Continued)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(Continued)
(3) Effect of unilateral capital increase by minority interests on minority interests and equity attributable to the
owners of the parent company
Unit: RMB
Item
Capital contribution of
Weifang ChenchuangEquity InvestmentPartnership (LimitedPartnership) toShouguang MeilunPaper Co., Ltd.Amount of capital increase900,000,000.00Share of net assets of the Company after the capital increase5,325,833,586.12Share of net assets of the Company before the capital increase5,338,136,620.06Difference12,303,033.94Of which: capital reserve adjustment-12,303,033.94
(4) Effect of capital increase jointly by the Company and minority interests on minority interests and equity
attributable to the owners of the parent company
Unit: RMB
Item
Capital contribution ofthe Company andSWSC InnovationInvestment Co., Ltd. to
Shouguang Meilun
Paper Co., Ltd.Amount of capital increase by minority interest200,000,000.00Share of net assets of the Company after the capital increase6,476,705,570.96Share of net assets of the Company before the capital increase5,091,039,021.20Difference1,385,666,549.76Amount of capital increase by the Debt-to-Investment Swap Investment Schemecontrolled the Company1,400,000,000.00Difference-14,333,450.24Of which: capital reserve adjustment-14,333,450.24
XII Financial Report
IX. Interest in other entities(Continued)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(Continued)
(5) Effect of unilateral capital increase by minority interests on minority interests and equity attributable to the
owners of the parent company
Unit: RMB
Item
Capital contribution of Beijing Chuanfa
InvestmentManagement Co. Ltd.to Zhanjiang Chenming Pulp & Paper Co., Ltd.Amount of capital increase350,000,000.00Share of net assets of the Company after the capital increase7,344,941,323.28Share of net assets of the Company before the capital increase7,280,576,700.93Difference64,364,622.35Of which: capital reserve adjustment64,364,622.35
3. Interest in joint arrangements or associates
(1) Major joint ventures or associates
Name of joint venture orassociate
Principal placeof business
Place ofincorporationNature of business
Shareholding
Accounting methodfor investment in jointventures or associatesDirectIndirectI. Joint venture
Weifang Sime Darby West PortCo., Ltd.
WeifangWeifangPort construction50%Equity methodWeifang Xingxing United
Chemical Co., Ltd.
WeifangWeifangChemical50%Equity methodII. Associate
Ningbo Kaichen Huamei Equity
Investment Fund Partnership(Limited Partnership)
NingboNingboInvestment management40%Equity methodZhuhai Dechen New Third
Board Equity InvestmentFund Company (LimitedPartnership)
ZhuhaiZhuhaiInvestment management50%Equity methodGoldtrust Futures Co., Ltd.ChangshaChangshaFutures35.43%Equity methodGuangdong Nanyue Bank
Co., Ltd.
GuangdongGuangdongBank6.76%Equity method
2021 ANNUAL REPORT
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(2) Key financial information of major joint ventures
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodWeifang Sime Darby
West Port Co., Ltd.
Weifang Sime DarbyWest Port Co., Ltd.Current assets21,774,345.8511,717,494.06Of which: Cash and cash equivalents7,054,019.115,739,139.97Non-current assets507,959,459.20526,006,172.67Total assets529,733,805.05537,723,666.73Current liabilities12,094,403.3317,876,446.30Non-current liabilities377,812,252.49370,515,018.03Total liabilities389,906,655.82388,391,464.33Minority interestEquity interest attributable to shareholders ofthe parent company139,827,149.23149,332,202.40Share of net assets based on shareholding69,913,574.6274,666,101.20Adjustments
– Goodwill– Unrealised profit arising from intra-group
transactions7,457,424.137,277,405.72– OthersCarrying amount of equity investment in
joint ventures77,370,998.7581,943,506.92Fair value of equity investment in joint ventures
where publicly quoted prices existRevenue62,902,209.9156,243,755.61Finance expenses21,543,430.5721,875,452.03Income tax expensesNet profit-9,145,016.34-15,604,782.40Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-9,145,016.34-15,604,782.40Dividends received from joint ventures
during the year
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)
Closing balance/amount for the period
Opening balance/amount for the prior periodWeifang Xingxing UnitedChemical Co., Ltd.
Weifang Xingxing United
Chemical Co., Ltd.Current assets100,024,598.36118,868,385.80Of which: Cash and cash equivalents10,187,071.6037,588,664.71Non-current assets20,299,403.1924,644,081.09Total assets120,324,001.55143,512,466.89Current liabilities27,883,399.2226,318,294.93Non-current liabilities12,417,862.0622,662,556.59Total liabilities40,301,261.2848,980,851.52Minority interestEquity interest attributable to shareholders of
the parent company80,022,740.2794,531,615.37Share of net assets based on shareholding40,011,370.1447,265,807.69Adjustments
– Goodwill
– Unrealised profit arising from intra-group
transactions44,612,417.6144,608,577.43
– OthersCarrying amount of equity investment in
joint ventures84,623,787.7491,874,385.12Fair value of equity investment in joint ventures
where publicly quoted prices existRevenue12,677,764.431,596,938.76Finance expenses-338,798.67-733,877.86Income tax expensesNet profit-14,501,194.76-3,183,622.90Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-14,501,194.76-3,183,622.90Dividends received from joint ventures
during the year
2021 ANNUAL REPORT
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(3) Key financial information of major associates
Unit: RMBClosing balance/amount for the period
Opening balance/amount for the prior periodNingbo Kaichen HuameiEquity Investment FundPartnership (Limited
Partnership)
Ningbo Kaichen HuameiEquity Investment Fund
Partnership (Limited
Partnership)Current assets4,378,938.8124,928,544.79Non-current assets189,276,706.00171,877,206.00Total assets193,655,644.81196,805,750.79Current liabilities19,749.95Non-current liabilitiesTotal liabilities19,749.95Net assets193,655,644.81196,786,000.84Minority interestEquity interest attributable to shareholders ofthe parent company193,655,644.81196,786,000.84Share of net assets based on shareholding77,459,159.4378,714,400.34Adjustments
– Goodwill– Unrealised profit arising from intra-grouptransactions– Others119,838,326.16119,835,525.93Carrying amount of equity investment in associates197,297,485.59198,549,926.27Fair value of equity investment in associate where
publicly quoted prices existRevenueNet profit-3,131,226.94-2,447,303.13Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-3,131,226.94-2,447,303.13Dividends received from associatesduring the year
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)
Closing balance/amount for the period
Opening balance/amount for the prior periodZhuhai Dechen New ThirdBoard Equity InvestmentFund Company (Limited
Partnership)
Zhuhai Dechen New ThirdBoard Equity InvestmentFund Company (Limited
Partnership)Current assets7,991,295.945,788,211.20Non-current assets65,956,891.0099,020,108.00Total assets73,948,186.94104,808,319.20Current liabilities5,000.005,000.00Non-current liabilitiesTotal liabilities5,000.005,000.00Net assets73,943,186.94104,803,319.20Minority interestEquity interest attributable to shareholders ofthe parent company73,943,186.94104,803,319.20Share of net assets based on shareholding36,967,896.3152,401,659.62Adjustments– Goodwill– Unrealised profit arising from intra-grouptransactions– OthersCarrying amount of equity investment in associates36,967,896.3152,401,659.62Fair value of equity investment in associate where
publicly quoted prices existRevenueNet profit-857,132.26-22,660.59Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-857,132.26-22,660.59Dividends received from associatesduring the year15,000,000.00
2021 ANNUAL REPORT
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)
Closing balance/amount for the period
Opening balance/amount for the prior periodGoldtrust Futures Co., Ltd.Goldtrust Futures Co., Ltd.Current assets764,880,728.01764,236,547.83Non-current assets20,791,974.1118,545,737.98Total assets785,672,702.12782,782,285.81Current liabilities556,373,303.71544,534,428.24Non-current liabilities34,269,041.1032,169,041.10Total liabilities590,642,344.81576,703,469.34Net assets195,030,357.31206,078,816.47Minority interestEquity interest attributable to shareholders of
the parent company195,030,357.31206,078,816.47Share of net assets based on shareholding69,099,255.5973,013,724.68Adjustments– Goodwill104,073,292.25104,073,292.25– Unrealised profit arising from intra-grouptransactions– Others12,279,914.6612,279,914.66Carrying amount of equity investment in associates185,452,462.50189,366,931.59Fair value of equity investment in associate where
publicly quoted prices existRevenue103,690,500.6749,996,217.01Net profit-9,202,201.83-9,500,497.09Net profit from discontinued operationsOther comprehensive incomeTotal comprehensive income-9,202,201.83-9,500,497.09Dividends received from associates
during the year
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)
Closing balance/amount for the period
Opening balance/amount for the prior periodGuangdong Nanyue
Bank Co., Ltd.
Guangdong Nanyue
Bank Co., Ltd.Current assets146,917,546,535.28180,617,874,651.18Non-current assets58,633,124,899.8947,461,533,497.99Total assets205,550,671,435.17228,079,408,149.17Current liabilities163,449,937,524.03196,409,034,455.53Non-current liabilities23,509,056,497.4725,010,828,827.69Total liabilities186,958,994,021.50221,419,863,283.22Net assets18,591,677,413.676,659,544,865.95Minority interestEquity interest attributable to shareholders ofthe parent company18,591,677,413.676,659,544,865.95Share of net assets based on shareholding1,255,867,809.291,173,266,521.78Adjustments – Goodwill– Unrealised profit arising from intra-group
transactions – Others-1,887,031,763.57Carrying amount of equity investment in associates1,255,867,809.293,060,298,285.35Fair value of equity investment in associate where
publicly quoted prices existRevenue3,251,913,154.264,849,150,132.82Net profit422,983,523.891,539,105,400.52Net profit from discontinued operationsOther comprehensive income27,336,949.46Total comprehensive income450,320,473.351,539,105,400.52Dividends received from associatesduring the year28,000,000.0012,560,712.33
2021 ANNUAL REPORT
XII Financial Report
IX. Interest in other entities(Continued)
3. Interest in joint arrangements or associates
(Continued)
(4) Summary financial information of non-major joint ventures and associates
Unit: RMBClosing balance/Amount for the period
Opening balance/Amount for the prior periodJoint ventures:––Total carrying amount of investment21,518,994.5822,032,934.47Total amount of the following items based onshareholding486,060.111,646,466.86– Net profit486,060.111,646,466.86– Other comprehensive income– Total comprehensive income486,060.111,646,466.86Associates:
Total carrying amount of investment7,488,250.599,985,136.83Total amount of the following items based onshareholding-610,886.24-374,714.00– Net profit-610,886.24-374,714.00– Other comprehensive income– Total comprehensive income-610,886.24-374,714.00X. Risk relating to financial instruments
Main financial instruments of the Group include monetary funds, accounts receivable, accounts receivable financing, otherreceivables, non-current assets due within one year, other current assets, financial assets held for trading, other non-currentfinancial assets, long-term receivables, bills payable, accounts payable, other payables, short-term borrowings, non-currentliabilities due within one year, long-term borrowings, lease liabilities and long-term payables. Details of financial instrumentsrefer to related notes. The risks associated with these financial instruments and the risk management policies adopted bythe Company to mitigate these risks are described below. The management of the Company manages and monitors theseexposures to ensure that the above risks are controlled in a limited extent.
1. Risk management goals and policies
The Company aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverseeffects on the Company’s financial performance from financial risk. Based on such objectives, the Company’s riskmanagement policies are established to identify and analyse the risks faced by the Company, to set appropriate risklimits and devise corresponding internal control procedures, and to monitor risks faced by the Company. Such riskmanagement policies and internal control systems are reviewed regularly to adapt to changes in market conditionsand the Company’s activities. The internal audit department of the Company undertakes both regular and ad-hocreviews of risk management controls and procedures.
XII Financial Report
X. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)Risks associated with the financial instrument of the Company mainly include credit risk, liquidity risk, market risk(including exchange rate risk, interest rate risk and commodity price risk).The board of directors is responsible to plan and establish the Company’s risk management structure, make riskmanagement policies and related guidelines, and supervise the implementation of risk management. The Companyhas already made risk management risks to identify and analyse risks that the Company face. These policiesmentioned specific risks, covering market, credit risk and liquidity risk etc. The Company regularly assesses marketenvironment and the operation of the Company changes to determine if to make alteration to risk management policyand systems. The Company’s risk management is implemented by Risk Management Committee according to theapproval of the board of directors. The Risk Management Committee works closely with other business department ofthe Company to identify, evaluating and avoiding certain risks. The Company’s internal audit department will audit therisk management control and procedures regularly and report the result to audit committee of the Company.The Company spreads risks through diverse investment and business lines, and through making risk managementpolicy to reduce risks of single industry, specific area and counterpart.
(1) Credit risk
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty resultingin financial losses to the Company.The Company manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable,accounts receivable, other receivables and long-term receivables etc.The Company’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listedbanks. The Company anticipated that the bank deposit does not have significant credit risk.For bill receivable, accounts receivables, other receivables and long-term receivables, the Company set relatedpolicies to control exposure of credit risks. The Company evaluates client’s credit quality and set related creditperiod based on the client’s financial status, credit records and other factors such as current market situationetc. The Company keeps monitor the client’s credit record and for client with deteriorate credit records, theCompany 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 creditevaluation to receivables and purchase credit guarantee insurance if necessary.The biggest credit risk exposure of the Company is the carrying amount of each financial asset in the balancesheet. The Company did not provide financial guarantee which resulted in credit risks.The amount of top 5 accounts receivable of the Company accounted for 24.95% (2020: 21.47%) of theCompany’s total accounts receivables. The amount of top 5 other receivable of the Company accounted for
72.71% (2020: 81.22%) of the Company
’s total other receivables.
2021 ANNUAL REPORT
XII Financial Report
X. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(2) Liquidity risk
Liquidity risk refers to the risks that the Company will not be able to meet its obligations associated with itsfinancial liabilities that are settled by delivering cash or other financial assets.To manage the liquidity risk, the Company monitors and maintains a level of cash and cash equivalents tofinance the Company’s operations and mitigate the effects of fluctuations in cash flows. The management ofthe Company monitors the usage of bank borrowings and ensures compliance with the borrowing agreements.In the meantime, we obtain commitments from major financial institutions to provide sufficient standby funds tomeet short-term and long-term funding needs.Operating cash of the Company was generated from capital and bank and other borrowings. As at 31December 2021, the Company’s unused bank loan credit was RMB42,832.1880 million (31 December 2020:
RMB38,894.7823 million).As at the end of the period, the financial assets, financial liabilities and off balance sheet guarantee held by theCompany are analysed by their maturity date as below at their remaining undiscounted contractual cash flows (inten thousand RMB):
2021.12.31
ItemWithin 1 year1-2 years2-3 years3-4 yearsOver 4 yearsTotalFinancial assets:
Monetary funds1,411,978.291,411,978.29Accounts receivable310,581.86310,581.86Accounts receivablefinancing43,545.9343,545.93Other receivables278,992.06278,992.06Long-term receivables201,047.518,329.675,600.00214,977.18Other current assets124,691.54124,691.54Non-current assets due
within one year684,643.44684,643.44Total financial assets2,854,433.13201,047.518,329.675,600.003,069,410.31Financial liabilities:
Short-term borrowings3,352,302.523,352,302.52Bills payable308,951.23308,951.23Accounts payable387,113.13387,113.13Other payables148,257.58148,257.58Non-current liabilities due
within one year694,976.96694,976.96Bonds payable15,500.0015,500.00Long-term borrowings124,525.0288,929.0010,929.00303,251.00527,634.02Lease liabilities472.831,312.991,312.994,594.137,692.94Long-term payables135,205.5247,993.9518,273.94201,473.41Total financial liabilities and
contingent liabilities4,891,601.42260,203.37153,735.9430,515.93307,845.135,643,901.81
XII Financial Report
X. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(2) Liquidity risk
(Continued)As at the beginning of the period, the financial assets, financial liabilities and off balance sheet guarantee heldby the Company are analysed by their maturity date as below at their remaining undiscounted contractual cashflows (in ten thousand RMB):
2020.12.31ItemWithin 1 year1-2 years2-3 years3-4 yearsOver 4 yearsTotalFinancial assets:
Monetary funds1,775,953.761,775,953.76Accounts receivable247,416.05247,416.05Accounts receivablefinancing48,838.5748,838.57Other receivables296,054.64296,054.64Long-term receivables452,285.9361,971.923,420.00517,677.85Other current assets271,691.87271,691.87Non-current assets due
within one year422,274.42422,274.42Total financial assets3,062,229.31452,285.9361,971.923,420.003,579,907.16Financial liabilities:
Short-term borrowings3,279,399.303,279,399.30Bills payable299,893.67299,893.67Accounts payable404,243.07404,243.07Other payables177,772.24177,772.24Non-current liabilities due
within one year716,094.96716,094.96Other current liabilities15,703.7815,703.78Long-term borrowings258,446.95203,956.6910,909.00334,402.46807,715.10Bonds payable153,687.74153,687.74Lease liabilities443.29472.835,111.066,027.18Long-term payables148,649.6964,102.6516,778.59229,530.93Total financial liabilities and
contingent liabilities4,893,107.02561,227.67268,532.1732,798.65334,402.466,090,067.97The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from thecarrying amount of the line items of the balance sheet.Maximum guarantee amount for signed guarantee contracts does not represent the amount to be paid.
2021 ANNUAL REPORT
XII Financial Report
X. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(3) Market risk
Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow ofa financial instrument will be fluctuated due to the changes in market price.Interest rate riskInterest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuateddue to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument andunrecognised financial instrument (e.g. loan commitments).The Company’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowingand bonds payable. Financial liabilities issued at floating rate expose the Company to cash flow interest raterisk. Financial liabilities issued at fixed rate expose the Company to fair value interest rate risk. The Companydetermines the relative proportions of its fixed rate and floating rate contracts depending on the prevailingmarket conditions and to maintain an appropriate combination of financial instruments at fixed rate and floatingrate through regular reviews and monitors.The Company’s finance department continuously monitors the interest rate position of the Company. TheCompany did not enter into any interest rate hedging arrangements. But the management is responsibleto monitor the risks of interest rate and consider to hedge significant interest risk if necessary. Increase ininterest rates will increase the cost of new borrowing and the interest expenses with respect to the Company’soutstanding floating rate interest-bearing borrowings, and therefore could have a material adverse effect onthe Company’s financial result. The management will make adjustments with reference to the latest marketconditions. These adjustments may include enter into interest swap agreement to mitigate its exposure to theinterest rate risk.Interest bearing financial instrument held by the Company are as follows (in ten thousand RMB):
Item
Balance for
the year
Balance forthe prior yearFinancial instrument with fixed interest rateFinancial liabilitiesOf which: Short-term borrowings3,350,170.453,279,399.30
Long-term borrowings526,438.53807,715.10Bonds payable15,500.00153,687.74Long-term borrowings due within one year258,373.04Bonds payable due within one year127,063.69Total4,277,545.714,240,802.14Financial instrument with float interest rateFinancial assetsOf which: Monetary funds316,598.98438,700.83Total316,598.98438,700.83
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)
The financial instruments held by the Company at the reporting date expose the Company to fair value interestrate risk. This sensitivity analysis as above has been determined assuming that the change in interest rates hadoccurred at the reporting date and arisen from the recalculation of the above financial instrument issued at newinterest rates. The non-derivative tools issued at floating interest rate held by the Company at the reportingdate expose the Company to cash flow interest rate risk. The effect to the net profit and shareholder’s equityillustrated in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interestexpenses or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.Exchange rate riskExchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuateddue to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that aredenominated in a currency other than the functional currency in which they are measured.The principal business of the Company is situated within the PRC and is denominated in RMB. However,foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currencytransactions as recognised by the Company (assets and liabilities in foreign currencies and foreign currencytransactions are mainly denominated in US dollar, Japanese yen, South Korean Won, Euro, Hong Kong dollarand British pound).The following table details the financial assets and liabilities held by the Company which denominated in foreigncurrencies and amounted to RMB as at 31 December 2021 are as follows (in RMB ten thousands):
Liabilities denominatedin foreign currency
Asset denominatedin foreign currencyItem
As at theend ofthe period
As at thebeginning of
the period
As at theend ofthe period
As at thebeginning ofthe periodUSD361,192.84589,167.1167,590.5736,393.34EUR1,910.412,692.093,929.494,547.15HKD4,055.529,131.7369.89294.97KRW7.04YEN0.05812.91880.88GBP4.64Total367,158.77600,990.9872,409.9042,120.98The Company closely monitors the impact of exchange rate changes on the Company’s foreign exchangerisk. The Company has not taken any measures to avoid foreign exchange risks. However, the management isresponsible for monitoring exchange rate risks and will consider hedging significant exchange rate risks whennecessary.
2021 ANNUAL REPORT
XII Financial Report
X. Risk relating to financial instruments(Continued)
1. Risk management goals and policies
(Continued)
(3) Market risk
(Continued)Exchange rate risk(Continued)With other variables unchanged, the after-tax effect of the possible reasonable changes in the exchange rate offoreign currency to RMB on the current profit and loss of the Company is as follows (in RMB ten thousands):
Increase (decrease) in after-tax profitsBalance for the yearBalance for the prior yearIncrease in exchange rate of USD5%-14,680.115%-27,638.69Decrease in exchange rate of USD-5%14,680.11-5%27,638.69Increase in exchange rate of Euro5%100.955%92.75Decrease in exchange rate of Euro-5%-100.95-5%-92.75
2. Capital management
The objective of the Company’s capital risk management is to safeguard the Company’s ability to continue as a goingconcern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimalcapital structure to reduce the cost of capital.In order to maintain or adjust the capital structure, the Company may adjust its financing methods, adjust the numberof dividends paid to shareholders, return capital to shareholders, issue new shares or disposes assets to reduce itsliabilities.The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided bytotal capital. As at 31 December 2021, the Company’s gearing ratio is 72.78% (31 December 2020: 71.83%).
XI. Fair value disclosure
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMBFair value as at the end of the periodItemLevel 1Level 2Level 3TotalI. Continuous measurement of fair value
(i) Financial liabilities held for trading110,886,182.88110,886,182.88
1. Equity instrument investments110,886,182.88110,886,182.88(ii) Accounts receivable financing435,459,341.76435,459,341.76(iii) Other non-current financial assets519,927,003.25519,927,003.25(iv) Biological assets1,519,305,850.771,519,305,850.77
1. Consumable biological assets1,519,305,850.771,519,305,850.77Total assets continuously measured at fair value110,886,182.882,474,692,195.782,585,578,378.66
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 significantItem
Fair value as at theend of the periodValuation techniquesUnobservable inputsRangeEquity instrument investments:
Shandong Hongqiao Venture Capital Co., Ltd.72,510,000.00Cost methodConsumable biological assets:
Forestry1,519,305,850.77Replacement cost
method
Cost per mu for the first year of
Eucalyptus
854.36(ton/RMB)
Cost per mu for the first year of
Pines
627.52(ton/RMB)
Roll back method ofmarket price
Unit price per tonne of Eucalyptuswood
600.00(ton/RMB)
Unit price per tonne of wet pine532.00(ton/RMB)Unit price per tonne of Chinese fir800.00(ton/RMB)XII. Related parties and related party transactions
1. Parent company of the Company
Name of parent company
Place ofincorporationBusiness natureRegistered capital
Shareholding of the
parent companyin the Company
Voting right of the
parent companyin the CompanyChenming Holdings Co., Ltd.ShouguangInvestment in manufacture of paper, electricity,
steam, and arboriculture
1,238,787,70027.53%27.53%The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office.
2. Subsidiaries of the Company
For details of our subsidiaries, please refer to Note IX. 1.
2021 ANNUAL REPORT
XII Financial Report
XII. Related parties and related party transactions(Continued)
3. Joint ventures and associates of the Company
For details of joint ventures and associates, please refer to Note IX. 3.Balance of related party transaction between the Company and its joint ventures or associates during the period orprior periods are as follows:
Name of joint ventures or associatesRelationWeifang Sime Darby West Port Co., Ltd.A joint venture of the GroupShouguang Meite Environmental Technology Co., Ltd.A joint venture of the GroupWeifang Xingxing United Chemical Co., Ltd.A joint venture of the GroupShouguang Chenming Huisen New-style ConstructionMaterials Co., Ltd.A joint venture of the GroupAnhui Time Source CorporationAn associate of the GroupLide Technology Co., Ltd.An associate of the GroupChenming (Qingdao) Asset Management Co., Ltd.An associate of the GroupJiangxi Chenming Port Co., Ltd.An associate of the GroupGuangdong Nanyue Bank Co., Ltd.An associate of the Group
4. Other related parties
Name of other related partiesRelationShouguang Huixin Construction Materials Co., Ltd.A company invested by the Directors and Senior
Management of the CompanyChen Hongguo, Hu Changqing, Li Xingchun, Li Feng,Li Chuanxuan, Chen Gang, Yuan Xikun, Li Xueqin, LiZhenzhong, Li Weixian and Dong Lianming
Key management personnel
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods/receiving of services
Unit: RMB
Related party
Details of relatedparty transaction
Amount forthe period
Transactionfacility approved
Whether theTransactionfacility isexceeded
Amount forthe prior periodWeifang Sime Darby WestPort Co., Ltd.
Port miscellaneous
expenses
64,351,915.96Not applicableTable on sales of goods/providing of services
Unit: RMBRelated party
Details of related partytransaction
Amount forthe period
Amount forthe prior periodShouguang Chenming Huisen
New-style Construction MaterialsCo., Ltd.
Sales of electricity andsteam
9,729,537.528,668,152.00Shouguang Huixin ConstructionMaterials Co., Ltd.
Sales of cement, coal, oil,
etc.
2,686,019.844,662,205.59Related party transactions regarding purchase and sale of goods and provision and receipt of services.
2021 ANNUAL REPORT
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(2) Related party guarantee
The Company as guarantor
Unit: RMB
Party being guaranteed
Amount under
guarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedWeifang Sime Darby West Port Co., Ltd.120,000,000.002017-12-202027-12-20NoChenming (HK) Limited188,083,150.002021-3-112022-2-25NoChenming (HK) Limited127,514,000.002021-11-192022-11-4NoChenming (HK) Limited15,301,680.002021-9-72022-3-7NoChenming (HK) Limited36,458,460.252021-9-232022-2-7NoChenming (HK) Limited16,781,992.962021-10-202022-4-19NoChenming (HK) Limited16,636,933.032021-11-52022-5-4NoChenming (HK) Limited36,023,512.482021-12-212022-3-28NoChenming (HK) Limited17,534,917.352021-12-92022-6-7NoChenming (HK) Limited18,592,685.832021-10-222022-1-18NoChenming (HK) Limited21,080,464.592021-10-222022-1-18NoChenming (HK) Limited17,174,824.962021-12-22022-2-28NoChenming (HK) Limited63,757,000.002021-5-302022-5-30NoWuhan Chenming Hanyang Paper Holdings Co., Ltd.30,000,000.002021-12-172022-10-16NoHuanggang Chenming Pulp & Paper Co., Ltd.200,000,000.002021-8-302022-8-25NoHuanggang Chenming Pulp & Paper Co., Ltd.300,000,000.002021-12-232022-12-22NoHuanggang Chenming Pulp & Paper Co., Ltd.20,000,000.002021-4-202022-4-19NoHuanggang Chenming Pulp & Paper Co., Ltd.30,000,000.002021-7-192022-7-18NoHuanggang Chenming Pulp & Paper Co., Ltd.45,000,000.002021-8-92022-8-8NoHuanggang Chenming Pulp & Paper Co., Ltd.30,000,000.002021-7-282022-7-27NoHuanggang Chenming Pulp & Paper Co., Ltd.90,000,000.002021-5-122022-5-11NoJilin Chenming Paper Co., Ltd.98,580,000.002021-7-212022-1-19NoJilin Chenming Paper Co., Ltd.18,000,000.002021-3-312022-3-8NoJiangxi Chenming Paper Co., Ltd.200,000,000.002019-6-282022-6-27NoJiangxi Chenming Paper Co., Ltd.300,000,000.002019-7-12022-6-27NoJiangxi Chenming Paper Co., Ltd.85,000,000.002019-10-232022-6-27NoJiangxi Chenming Paper Co., Ltd.114,750,000.002019-11-222022-6-27NoJiangxi Chenming Paper Co., Ltd.150,000,000.002021-2-252022-2-24NoJiangxi Chenming Paper Co., Ltd.99,000,000.002021-3-312022-3-30NoJiangxi Chenming Paper Co., Ltd.73,000,000.002021-5-282022-5-27NoJiangxi Chenming Paper Co., Ltd.150,000,000.002021-12-162022-12-15NoJiangxi Chenming Paper Co., Ltd.13,450,000.002021-12-292022-6-27NoJiangxi Chenming Paper Co., Ltd.90,000,000.002021-3-192022-3-18NoJiangxi Chenming Paper Co., Ltd.100,000,000.002021-5-272022-5-23NoJiangxi Chenming Paper Co., Ltd.100,000,000.002021-7-152022-5-23NoJiangxi Chenming Paper Co., Ltd.10,000,000.002021-8-312022-8-24NoJiangxi Chenming Paper Co., Ltd.10,000,000.002021-9-12022-8-24NoJiangxi Chenming Paper Co., Ltd.20,000,000.002021-10-92022-9-28No
XII Financial Report
Party being guaranteed
Amount underguarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedJiangxi Chenming Paper Co., Ltd.12,555,519.372021-10-282022-4-25NoJiangxi Chenming Paper Co., Ltd.27,000,000.002021-12-312022-12-23NoJiangxi Chenming Paper Co., Ltd.16,550,000.002021-9-152022-3-14NoJiangxi Chenming Paper Co., Ltd.70,000,000.002021-6-102022-5-23NoJiangxi Chenming Paper Co., Ltd.10,000,000.002021-6-152022-6-13NoJiangxi Chenming Paper Co., Ltd.10,000,000.002021-6-232022-6-17NoJiangxi Chenming Paper Co., Ltd.10,000,000.002021-6-242022-6-17NoJiangxi Chenming Paper Co., Ltd.80,000,000.002021-6-182022-6-17NoJiangxi Chenming Paper Co., Ltd.25,000,000.002021-12-242022-6-22NoJiangxi Chenming Paper Co., Ltd.70,000,000.002021-4-162022-4-15NoJiangxi Chenming Paper Co., Ltd.49,500,000.002021-3-312022-3-30NoShandong Chenming Paper Sales Co., Ltd.253,133,148.962021-8-162022-2-14NoShandong Chenming Paper Sales Co., Ltd.420,452,396.282021-5-72022-4-29NoShanghai Chenming Pulp & Paper Sales Co., Ltd.20,000,000.002021-12-202022-6-21NoShanghai Chenming Pulp & Paper Sales Co., Ltd.10,000,000.002021-6-212022-6-21NoShanghai Chenming Pulp & Paper Sales Co., Ltd.10,000,000.002021-6-222022-5-30NoShanghai Chenming Pulp & Paper Sales Co., Ltd.80,000,000.002021-6-232022-5-30NoShouguang Meilun Paper Co., Ltd.124,867,323.202021-7-72022-7-4NoShouguang Meilun Paper Co., Ltd.123,595,694.492021-7-262022-1-23NoShouguang Meilun Paper Co., Ltd.98,878,044.292021-7-82022-1-4NoShouguang Meilun Paper Co., Ltd.98,678,874.122021-7-82022-1-4NoShouguang Meilun Paper Co., Ltd.69,568,916.522021-7-162022-1-12NoShouguang Meilun Paper Co., Ltd.285,000,000.002021-8-262022-2-23NoShouguang Meilun Paper Co., Ltd.100,000,000.002021-10-122022-10-11NoShouguang Meilun Paper Co., Ltd.30,000,000.002021-8-312022-8-31NoShouguang Meilun Paper Co., Ltd.131,601,861.132021-12-82022-6-7NoShouguang Meilun Paper Co., Ltd.163,129,855.272021-12-162022-6-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.49,500,000.002021-8-122022-8-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.140,000,000.002021-12-232023-12-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.631,194,300.002019-12-272022-12-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.123,000,000.002021-1-202022-1-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.44,629,900.002021-10-182022-9-30NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,333,820.002021-11-162022-11-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002021-1-52024-1-4NoZhanjiang Chenming Pulp & Paper Co., Ltd.40,000,000.002021-8-172022-2-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002021-2-22022-2-1NoZhanjiang Chenming Pulp & Paper Co., Ltd.70,000,000.002021-2-192022-2-18NoZhanjiang Chenming Pulp & Paper Co., Ltd.25,502,800.002021-3-262022-2-25NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002021-9-262022-9-25NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002021-3-22022-2-28No
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(2) Related party guarantee
(Continued)
2021 ANNUAL REPORT
XII Financial Report
Party being guaranteed
Amount under
guarantee
Commencementdate of guarantee
Expiry dateof guarantee
Whetherperformanceof guaranteeis completedZhanjiang Chenming Pulp & Paper Co., Ltd.99,000,000.002021-8-102022-2-7NoZhanjiang Chenming Pulp & Paper Co., Ltd.90,000,000.002021-8-102022-2-7NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002021-2-202022-2-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.84,600,000.002021-8-262022-2-22NoZhanjiang Chenming Pulp & Paper Co., Ltd.67,000,000.002021-9-152022-9-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.99,600,000.002021-9-162022-3-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.45,267,470.002021-12-172022-12-1NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,000,000.002020-10-162023-10-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.60,000,000.002021-11-122022-11-11NoZhanjiang Chenming Pulp & Paper Co., Ltd.90,000,000.002021-11-232022-11-22NoZhanjiang Chenming Pulp & Paper Co., Ltd.115,000,000.002020-11-112023-11-10NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002021-12-152022-12-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.9,000,000.002021-12-202022-12-19NoZhanjiang Chenming Pulp & Paper Co., Ltd.30,000,000.002021-11-242022-11-23NoZhanjiang Chenming Pulp & Paper Co., Ltd.60,000,000.002021-11-172022-11-16NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002021-7-132022-7-12NoZhanjiang Chenming Pulp & Paper Co., Ltd.99,000,000.002020-12-102023-12-9NoZhanjiang Chenming Pulp & Paper Co., Ltd.81,200,000.002021-12-222022-7-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.60,000,000.002021-10-182022-10-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.90,000,000.002021-11-162022-11-15NoZhanjiang Chenming Pulp & Paper Co., Ltd.30,000,000.002021-3-102022-3-9NoZhanjiang Chenming Pulp & Paper Co., Ltd.50,000,000.002021-4-82022-3-29NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002021-4-192022-4-18NoZhanjiang Chenming Pulp & Paper Co., Ltd.28,690,650.002021-4-302022-4-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.42,450,000.002021-5-12022-4-26NoZhanjiang Chenming Pulp & Paper Co., Ltd.80,000,000.002021-11-92022-5-8NoZhanjiang Chenming Pulp & Paper Co., Ltd.100,000,000.002021-5-282022-5-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.29,965,790.002021-6-162022-5-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.162,449,860.332021-10-82022-1-14NoZhanjiang Chenming Pulp & Paper Co., Ltd.26,000,000.002021-6-182022-5-27NoZhanjiang Chenming Pulp & Paper Co., Ltd.70,000,000.002021-6-182022-6-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.200,000,000.002021-12-222022-6-20NoZhanjiang Chenming Pulp & Paper Co., Ltd.70,400,000.002020-10-192022-10-13NoChenming (HK) Limited95,635,500.002019-3-282022-1-7NoChenming (HK) Limited93,085,220.002021-3-172022-3-17NoZhanjiang Chenming Pulp & Paper Co., Ltd.120,000,000.002021-8-162022-8-15NoShouguang Meilun Paper Co., Ltd.200,000,000.002020-12-42022-6-27NoShouguang Meilun Paper Co., Ltd.364,000,000.002020-12-42023-10-30NoWuhan Chenming Hanyang Paper Holdings Co., Ltd.6,000,000.002020-12-42023-10-30NoHuanggang Chenming Pulp & Paper Co., Ltd.200,000,000.002020-12-42023-10-30NoTotal10,653,736,565.41
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(2) Related party guarantee
(Continued)
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(3) Related party lending and borrowing
Unit: RMBRelated partyBorrowing amount
CommencementdateExpiry dateDescriptionBorrowingChenming Holdings Co., Ltd.452,500,000.002021-4-202021-12-31Controlling
shareholderGuangdong Nanyue Bank Co., Ltd.2,601,000,000.002021-1-112022-11-26AssociateLendingWeifang Sime Darby West Port Co., Ltd.68,000,000.002021-11-112024-12-12Joint venture
(4) Remuneration of key management staff
Unit: RMB’0,000Item
Amount duringthe period
Amount duringthe prior periodRemuneration of key management staff3,051.593,067.34
(5) Other related party transactions
Distribution band of remuneration of key management staffBand of annual remuneration
Amount duringthe year(RMB’0,000)
Amount duringthe prior year(RMB’0,000)Total3,051.593,067.34Of which: (number of staff in each band of amount)RMB4.80-5.20 million22RMB3.60-4.00 millionRMB3.20-3.60 million11RMB2.80-3.20 million23RMB2.40-2.80 millionRMB2.00-2.40 million1RMB1.60-2.00 million21RMB1.20-1.60 million2RMB0.80-1.20 million3Below RMB0.80 million1314
2021 ANNUAL REPORT
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(5) Other related party transactions
(Continued)
Breakdown of remuneration of key management staff
Amount during the year (RMB’0,000)Key management staff
Basic annualremuneration
Social welfarecontribution
Payments ofhousing funds
Total(RMB’0,000)Yin Meiqun20.0020.00Yang Biao20.0020.00Sun Jianfei20.0020.00Subtotal of independent non-executiveDirectors60.0060.00Li Chuanxuan20.0020.00Han Tingde20.0020.00Subtotal of non-executive Directors40.0040.00Chen Hongguo491.925.661.42499.00Hu Changqing340.987.061.96350.00Li Xingchun480.00480.00Li Feng288.905.661.42295.98Subtotal of executive Directors1,601.8018.384.801,624.98Li Kang93.425.731.42100.57Pan Ailing10.0010.00Zhang Hong10.0010.00Qiu Lanju53.255.760.9759.98Sang Ailing20.713.530.6324.87Li Xinggui2.430.760.223.41Total of Supervisor189.8115.783.24208.83Subtotal of other Senior Management
members1,071.2538.328.211,117.78Total2,962.8672.4816.253,051.59
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(5) Other related party transactions
(Continued)Breakdown of remuneration of key management staff(Continued)Amount during the prior year (RMB’0,000)Key management staff
Basic annualremuneration
Social welfarecontribution
Payments ofhousing funds
Total(RMB’0,000)
Yin Meiqun20.0020.00Yang Biao20.0020.00Sun Jianfei20.0020.00Subtotal of independent non-executiveDirectors60.0060.00Li Chuanxuan20.0020.00Han Tingde20.0020.00Subtotal of non-executive Directors40.0040.00Chen Hongguo492.225.431.35499.00Hu Changqing294.733.062.21300.00Li Xingchun480.00480.00Li Feng328.825.431.35335.60Subtotal of executive Directors1,595.7713.924.911,614.60Li Kang57.325.431.3564.10Pan Ailing10.0010.00Zhang Hong10.0010.00Li Xinggui15.583.840.8820.30Qiu Lanju58.884.250.9764.10Total of Supervisor151.7813.523.20168.50Subtotal of other Senior Management
members1,142.8432.888.521,184.24Total2,990.3960.3216.633,067.34
Note: Social welfare contribution includes basic pension insurance, medical insurance, work-related injury insurance, maternity
insurance, and unemployment insurance.
2021 ANNUAL REPORT
XII Financial Report
XII. Related parties and related party transactions(Continued)
5. Related party transactions
(Continued)
(5) Other related party transactions
(Continued)
The 5 highest paid individuals of the Company during the year comprised of 4 directors and 1 other SeniorManagement member of the Company. The remuneration band of the 1 Senior Management member wasRMB2.80-3.20 million, with basic annual remuneration of RMB3.0227 million, social welfare contributionof RMB75,500, and payments of housing funds of RMB6,800.A. Remuneration of the five highest paid individualsItem
Amounts during
the year(RMB’0,000)
Amounts during
the prior year
(RMB’0,000)Basic annual remuneration1,904.071,887.99Provident fund5.486.26Social welfare contribution25.9319.35Total1,935.481,913.60B. Distribution band of remuneration of the five highest paid individuals
Band of annual remuneration
Number of individualsduring the year
Number of individualsduring the prior yearRMB4.80-5.20 million22RMB3.20-3.60 million11RMB2.80-3.20 million22RMB2.40-2.80 millionRMB2.00-2.40 millionRMB1.60-2.00 millionRMB1.20-1.60 millionFor the financial year ended 31 December 2021, no other bonuses, which are discretionary or are basedon the Company’s, the Company’s or any member of the Company’s performance, were paid to orreceivable by the 5 highest paid individuals, and no other emoluments were paid by the Company to theDirectors of the Company and the 5 highest paid individuals as an inducement to join or upon joining theCompany or as compensation for loss of office. None of the Directors waived any emoluments during theyear.
XII Financial Report
XII. Related parties and related party transactions(Continued)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMBClosing balanceOpening balanceItemRelated partyBook balanceBad debtBook balanceBad debtAccounts receivableShouguang Chenming Huisen New-
style Construction Materials Co., Ltd.
2,000,017.9687,306.27Other receivablesWeifang Sime Darby West Port Co.,
Ltd.
80,667,961.327,423,984.2668,476,127.9819,038,071.06Other receivablesShouguang Meite Environmental
Technology Co., Ltd.
22,740,159.3221,348.7616,307,200.0070,132.59Accounts receivableJiangxi Chenming Port Co., Ltd.109,385.42109,385.42
(2) Accounts payable
Unit: RMBItemRelated party
Closingbook balance
Openingbook balanceAccounts payableWeifang Xingxing United Chemical
Co., Ltd.
26,905,494.3426,905,494.34Other payablesWeifang Xingxing United Chemical
Co., Ltd.
16,860,000.0016,860,000.00Other non-current liabilitiesGuangdong Nanyue Bank Co., Ltd.400,000,000.00Accounts payableWeifang Sime Darby West Port
Co., Ltd.
7,609,782.512,739,941.79Other payablesChenming (Qingdao) Asset
Management Co., Ltd.
115,633.4250.00Receipts in advanceChenming (Qingdao) Asset
Management Co., Ltd.
49,539.63Contract liabilitiesAnhui Time Source Corporation1,570.101,570.10Other payablesLide Technology Co., Ltd.508,619.46
(3) Deposits with related parties
Unit: RMBItemRelated partyClosing balanceOpening balanceBank depositGuangdong Nanyue Bank Co., Ltd.42,791.18655,073,601.28Other monetary fundsGuangdong Nanyue Bank Co., Ltd.1,048,000,000.00724,668,000.00
(4) Loans from related parties
Unit: RMBItemRelated partyClosing balanceOpening balanceShort-term borrowingsGuangdong Nanyue Bank Co., Ltd.2,201,000,000.001,316,664,600.00
2021 ANNUAL REPORT
XII Financial Report
XIII. Share-based payment
1. General information of share-based payment
√ Applicable Not applicable
Unit: RMBTotal equity instruments of the Company granted during the period0.00Total exercised equity instruments of the Company during the period0.00Total invalid equity instruments of the Company during the period2,830,000.00Range of exercise prices and contractual remaining period for share options issuedby the Company at the end of the period
See explanationfor detailsRange of exercise prices and remaining contractual maturity of
other equity instruments issued by the Company at the end of the periodOther explanationOn 29 May 2020, the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share IncentiveScheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants wereconsidered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinarymeeting of the ninth session of the Supervisory Committee of the Company, by which 79.60 million restricted shareswere granted. The grant date was 29 May 2020, and the fair value of the restricted shares was the ex-rights priceof the shares on the grant date. The Restricted Shares to be granted under the Incentive Scheme were“grantedonce and unlocked in batches”. For the period commencing from the first trading day after expiry of the 24-monthperiod from the date on which the registration of the grant of the Restricted Shares is completed and ending on thelast trading day of the 36-month period from the date on which the registration of the grant of the Restricted Sharesis completed, 40% of the Restricted Shares will be unlocked; for the period commencing from the first trading dayafter expiry of the 36-month period from the date on which the registration of the grant of the Restricted Sharesis completed and ending on the last trading day of the 48-month period from the date on which the registrationof the grant of the Restricted Shares is completed, 30% of the Restricted Shares will be unlocked; for the periodcommencing from the first trading day after expiry of the 48-month period from the date on which the registration ofthe grant of the Restricted Shares is completed and ending on the last trading day of the 60-month period from thedate on which the registration of the grant of the Restricted Shares is completed, 30% of the Restricted Shares will beunlocked. Meanwhile, during the three accounting years from 2021 to 2023, the Restricted Shares granted under theIncentive Scheme shall be subject to annual performance appraisal for unlocking (for details of specific performanceevaluation conditions, please refer to the announcement of the Company). At each balance sheet date during thevesting period, the Company, based on the latest information such as the latest update on the change in the numberof entitled employees, will make best estimates to adjust the expected number of equity instruments that can bevested. As at the exercise date, the final estimated number of exercisable equity instruments should equal the actualnumber of exercisable equity instruments. 2.83 million shares lapsed during the year due to the resignation of someSenior Management members.
XII Financial Report
XIII. Share-based payment(Continued)
2. Equity-settled share-based payment
√ Applicable Not applicable
Unit: RMBThe method of determining the fair value of equity instrument on the grant dateEx-right price of
grant of shareBasis for determining the quantity of exercisable equity instrumentsSee explanation
for detailsReasons for significant difference between the current estimate and previous estimateNoneAccumulated amount of equity-settled share-based payment included in the capital reserve85,043,797.12Total amount of equity-settled share-based payment recognised in the current period52,556,871.89Other explanationAt each balance sheet date during the vesting period, the Company, based on the latest information such as the latestupdate on the change in the number of entitled employees, will make best estimates to adjust the expected numberof equity instruments that can be vested. As at the exercise date, the final estimated number of exercisable equityinstruments should equal the actual number of exercisable equity instruments.XIV. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
Unit: RMBCapital commitments contracted for but not yet necessary to berecognised on the balance sheetClosing balanceOpening balanceCommitments in relation to acquisition and construction of
long-term assets181,254,971.61236,106,766.83
2. Contingency
(1) Significant contingency as at the balance sheet date
(1) Contingent liabilities arising from pending litigation and its financial impacts
In October 2005, the Company and Hong Kong ArjowigginsHKK2Limited (“HKK2”) jointly establishedArjoWiggins Chenming Specialty Paper Co., Ltd. in Shouguang, Shandong Province, which wasengaged in the production of special paper, decoration paper and draft paper. However, such companyexperienced poor management due to financial crisis. Hence, such company was forced to dissolve inOctober 2008.
2021 ANNUAL REPORT
XII Financial Report
XIV. Undertaking and contingency(Continued)
2. Contingency
(Continued)
(1) Significant contingency as at the balance sheet date
(Continued)
(1) Contingent liabilities arising from pending litigation and its financial impacts
(Continued)In October 2012, HKK2 submitted for arbitration application to Hong Kong International Arbitration Centre,Hong Kong Special Administration of PRC, on the ground of default of the joint venture agreement by theCompany. In November 2015, Hong Kong International Arbitration Centre announced arbitration result,stating that the Company should compensate HKK2 with economic loss of RMB167 million, arbitration feeof HK$3.30 million and legal fee of USD3.54 million, together with interest thereon calculated at 8% perannum. In October 2016, the Company received a statutory demand, stating that if the Company fails toperform the arbitration results within 21 days, the liquidation application on H shares of the Company willbe submitted. Subsequently, HKK2 submitted a H shares liquidation application to the arbitration centre.In November 2016, the Company submitted an application to the Court of First Instance of the HighCourt of the HKSAR and received an injunction, stating that“the applicant is prohibited from applying forliquidation on the Company”.In February 2017, HKK2 submitted an appeal to the court. In June 2017, the court dismissed the injunctionreceived by the Company. In the same month, the Company received the liquidation application submittedby the defendant to the High Court of Hong Kong, which alleged that the Company should compensatethe defendant with economic loss of RMB167 million, legal fee of USD3.54 million and arbitration fee ofHK$3.30 million, together with interest thereon due to failure in compliance of the arbitration results.In 2017, the Company made provision of RMB325,259,082.28 for the pending litigation.Relevant appeal hearing of the Company on 12 July 2017 was completed in the Hong Kong High CourtAppeal Court on the morning of 11 May 2018. At the end of the hearing, the court had instructed thatanother sentence be adjudicated.On 5 August 2020, the Court of Appeal of the High Court of Hong Kong made a judgment and rejectedthe Company’s appeal request.On 21 January 2022, Hong Kong Court of Final Appeal accepted the Company’s appeal request. TheCompany is seeking ways to re-appeal to protect the legal rights and interests of the Company andinvestors. However, as of 31 December 2021, the estimated loss was still uncertain. Therefore, theprovision must still be listed in the balance sheet.
(2) On 14 September 2021, Beijing Guodianfutong Science and Development Co., Ltd. (
“Futong Science”),being the plaintiff, was involved in a construction agreement dispute with Huanggang Chenming Pulpand Paper Co., Ltd. (“Huanggang Chenming”) and Shandong Chenming Paper Holdings Limited(“Shandong Chenming”), being the defendants. The case was filed in Huanggang Intermediate People’sCourt Huanggang People’s Court and the first judgement ruled that Huanggang Chenming need to payconstruction fee of RMB54,715,691.40, along with overdue interests, to Futong Science.Huanggang Chenming has accrued arrears in accounts payable. Meanwhile, appeal against judgmentwas submitted by Huanggang Chenming. As of 30 March 2022, the second instance is still in progress.As of 31 December 2021, the Company had no other contingencies that should be disclosed.
XII Financial Report
XV. Post-balance sheet event
As of 30 March 2022, the Group has no other events that should be disclosed after the balance sheet date.
XVI. Other material matters
1. Segment information
(1) Basis for determination and accounting policies
According to the Company’s internal organisational structure, management requirements and internal reportingsystem, the Company’s operating business is divided into 4 reporting segments. These report segments aredetermined based on the financial information required by the company’s daily internal management. Themanagement of the Group regularly evaluates the operating results of these reporting segments to determinethe allocation of resources to them and evaluate their performance.The Company’s reporting segments include:
(1) Machine paper segment, which is responsible for production and sales of machine paper;
(2) Financial services segment, which provides financial services;
(3) Hotels and property rentals segment, which is responsible for property rental;
(4) Other segments, which is responsible for the above segments otherwise.
Segment report information is disclosed in accordance with the accounting policies and measurement standardsadopted by each segment when reporting to management. These accounting policies and measurement basisare consistent with the accounting policies and measurement basis used in preparing the financial statements.
(2) Financial Information of Reporting Segment
Unit: RMB’0,000Current period or end of current period
Machine-madepaper
Financialservices
Hotels and property rentalsOthersOffsetTotalRevenue3,174,975.0065,440.3940,526.16133,313.93112,274.253,301,981.23Of which: revenue from external transactions3,168,198.6535,210.2216,635.5581,936.810.003,301,981.23
Revenue from inter-segment transactions6,776.3530,230.1823,890.6051,377.12112,274.250.00Of which: Revenue from principal activities3,084,442.2265,195.1123,111.51127,829.53107,220.053,193,358.32Operating costs2,566,477.1424,602.3412,939.43123,637.48205,428.812,522,227.58Of which: Costs of principal activities2,414,343.7424,602.347,362.71118,084.03118,386.092,446,006.73Operating expenses49,085.83339.022,345.00903.4023,322.2729,350.97Operating profit/(loss)330,978.2111,821.37468.23-8,164.59106,957.32228,145.90Total assets9,069,982.562,039,544.30794,932.41969,230.154,589,543.968,284,145.46Total liabilities6,622,082.54791,449.37411,845.72297,958.832,093,873.916,029,462.55
2021 ANNUAL REPORT
XII Financial Report
XVI. Other material matters(Continued)
1. Segment information
(Continued)
(2) Financial Information of Reporting Segment
(Continued)
Unit: RMB’0,000Prior period or end of prior period
Machine-made
paper
Financialservices
Hotel andpropertyOthersOffsetTotalRevenue2,920,631.44129,212.5719,619.77101,144.0596,956.033,073,651.80Of which: revenue from external transactions2,902,152.3195,273.8913,863.9462,361.660.003,073,651.80Revenue from inter-segment transactions18,479.1333,938.685,755.8338,782.3996,956.030.00Of which: Revenue from principal activities2,859,475.79128,228.6715,074.8997,954.6496,008.183,004,725.81Operating costs2,247,053.4979,811.9517,761.5587,410.5567,478.122,364,559.42Of which: Costs of principal activities2,184,452.8279,811.9517,115.8686,891.5863,601.332,304,670.88Operating expenses28,400.67332.361,987.971,227.102,123.4629,824.64Operating profit/(loss)389,249.1929,513.92-24,353.545,372.98241,310.40158,472.15Total assets8,512,412.612,016,849.03752,335.96725,475.062,849,526.889,157,545.78Total liabilities6,110,415.471,258,701.14465,545.60281,988.121,539,130.926,577,519.41
2. Government grants
(1) Government subsidies included in deferred income will be subsequently measured using the gross method
Unit: RMBItem of subsidiesType2020.12.31
New subsidy
amount forthe period
Amounttransferred toprofit or lossfor the period
Othermovements2021.12.31
Presentable itemstransferred toprofit or lossfor the period
Asset-related/revenue-relatedProject Funding for
National Key TechnologyResearch andDevelopment Program
Financial
appropriation
1,287,825.00164,700.001,123,125.00Other incomeAsset-related
government grantsInfrastructure and
environmentalprotection engineeringtransformation project
Financial
appropriation
233,097,511.4612,227,345.2812,835,606.2213,216,025.00219,273,225.52Other incomeAsset-related
government grantsHuanggang pulp-forestry-paper project
Financialappropriation
479,669,171.1341,377,787.5224,200,216.24496,846,742.41Other incomeAsset-related
government grantsZhanjiang forestry-pulp-
paper project
Financialappropriation
54,901,230.114,094,632.9250,806,597.19Other incomeAsset-related
government grantsFinancial subsidies fortechnical transformationproject
Financial
appropriation
155,686,141.0811,535,807.72144,150,333.36Other incomeAsset-related
government grantsFunding for environmental
protection
Financial
appropriation
677,639,567.5650,592,141.88627,047,425.68Other incomeAsset-related
government grantsOthersFinancial
appropriation
35,715,190.171,280,955.0834,434,235.09Other incomeAsset-related
government grantsTotal1,637,996,636.5153,605,132.80104,704,060.0613,216,025.001,573,681,684.25Explanation: Other movements of the infrastructure and environmental construction in 2021 representrecovery of the government subsidies relating to the land by the government after the government resumed theland.
XII Financial Report
XVI. Other material matters(Continued)
2. Government grants
(Continued)
(2) Government subsidies calculated into the current profit and loss using the total method
Unit: RMBSubsidy ItemType
Amount creditedto profit or lossfor the prior period
Amount credited
to profit or loss
for the period
Presentable itemsincluded inprofit or loss
Asset-related/revenue-relatedProject Funding for National Key Technology
Research and Development Program
Financial appropriation164,700.00164,700.00Other incomeAsset-relatedEnvironmental Monitoring and Controlling
Capability Improvement Subsidies
Financial appropriation20,000.00Non-operating incomeRevenue-relatedProvincial manufacturing individual championship
subsidy
Financial appropriation800,000.00Non-operating incomeRevenue-relatedSewage treatment and water conservation
transformation project
Financial appropriation1,192,682.8812,835,606.22Other incomeAsset-relatedZhanjiang forestry-pulp-paper projectFinancial appropriation12,145,971.394,094,632.92Other incomeAsset-relatedEnterprise reform and development subsidiesFinancial appropriation107,578,937.5174,297,897.20Other income and non-
operating income
Revenue-relatedFinancial subsidies for technical transformationproject
Financial appropriation101,984,107.7238,603,317.72Other income and non-
operating income
Asset-related andrevenue relatedFunding for environmental protectionFinancial appropriation72,505,645.8850,794,311.52Other incomeAsset-related and
revenue relatedHuanggang pulp-forestry-paper projectFinancial appropriation7,543,321.5324,200,216.24Other incomeAsset-relatedResearch and development grantsFinancial appropriation564,000.00Other incomeRevenue-relatedEnterprise technology innovation subsidiesFinancial appropriation100,000.00Other incomeRevenue-relatedImmediate VAT refundFinancial appropriation1,846,849.03768,780.56Other incomeRevenue-relatedSubsidies for foreign trade projectsFinancial appropriation211,200.00Other incomeRevenue-relatedLeading talent subsidyFinancial appropriation400,000.00660,000.00Other incomeRevenue-relatedEquipment technology subsidiesFinancial appropriation115,400.00Other incomeRevenue-relatedInvestment promotion subsidyFinancial appropriation6,306,806.2522,921,843.36Other incomeRevenue-relatedJob stabilisation subsidyFinancial appropriation4,856,411.211,626,174.63Other income and non-
operating income
Revenue-relatedSocial security subsidiesFinancial appropriation486,607.82345,163.82Other incomeRevenue-relatedR&D subsidyFinancial appropriation2,469,900.002,476,800.00Other incomeRevenue-relatedFinancing subsidyFinancial appropriation130,000.00576,300.00Other incomeRevenue-relatedTax returnFinancial appropriation71,675,835.408,149,743.76Other incomeRevenue-relatedGovernment awardsFinancial appropriation6,821,907.00Non-operating incomeRevenue-relatedFinancial discountFinancial appropriation3,753,300.60Finance expensesRevenue-relatedPandemic subsidyFinancial appropriation1,495,150.00200,000.00Other income and non-
operating income
Revenue-relatedAfforestation subsidyFinancial appropriation6,316,370.501,404,769.00Other incomeRevenue-relatedOthersFinancial appropriation540,115,190.1312,144,833.64Other income and non-
operating income
Asset-related and
revenue relatedTotal944,778,387.85263,086,997.59
(3) The condition of the refund of government grants
Unit: RMBItemAmountReasonInfrastructure and environmental protection engineering
13,216,025.00The government repossessed the landTotal13,216,025.00
2021 ANNUAL REPORT
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements
1. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMBClosing balanceOpening balanceBook balanceBad debt provisionBook balanceBad debt provisionCarrying valueTypeAmountPercentageAmount
ProvisionproportionCarrying valueAmountPercentageAmount
ProvisionproportionAccounts receivableassessed individually forbad debt provisionAccounts receivableassessed collectively forbad debt provision146,213,282.74100%4,612,037.233.15%141,601,245.51698,032,192.53100.00%3,195,631.290.46%694,836,561.24Of which:
Accounts receivable fromrelated party customers126,108,166.7586.25%126,108,166.75692,218,139.2699.17%692,218,139.26Accounts receivablefrom non-related partycustomers20,105,115.99 13.75%4,612,037.2322.94%15,493,078.765,814,053.270.83%3,195,631.2954.96%2,618,421.98Total146,213,282.74100.00%4,612,037.233.15%141,601,245.51698,032,192.53100.00%3,195,631.290.46%694,836,561.24Accounts receivable assessed collectively for bad debt provision: Accounts receivable from related partycustomers
Unit: RMBClosing balanceAgeingBook balanceBad debt provisionProvision proportionWithin 1 year126,108,166.75Total126,108,166.75–
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
1. Accounts receivable
(Continued)
(1) Disclosure of accounts receivable by category
(Continued)Accounts receivable assessed collectively for bad debt provision: Accounts receivable from non-related partycustomers
Unit: RMBClosing balanceAgeingBook balanceBad debt provisionProvision proportionWithin 1 year17,102,294.821,609,216.069.41%1-2 years2-3 yearsOver 3 years3,002,821.173,002,821.17100.00%Total20,105,115.994,612,037.23 22.94%If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs, pleasedisclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable Not applicable
Disclosure by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year143,210,461.57695,029,371.361-2 years2-3 yearsOver 3 years3,002,821.173,002,821.17Subtotal146,213,282.74698,032,192.53
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMBChanges in the periodCategory
OpeningbalanceProvision
Recovery or
reversalWrite-offOthers
ClosingbalanceBad debt provision3,195,631.294,522,553.533,106,147.594,612,037.23Total3,195,631.294,522,553.533,106,147.594,612,037.23
2021 ANNUAL REPORT
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
1. Accounts receivable
(Continued)
(3) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for theperiod was RMB146,133,061.57, which accounted for 99.95% of the closing balance of the total accountsreceivable. The closing balance of corresponding bad debt provision amounted to RMB4,531,816.06.
Unit: RMBClosing balanceNameBook balanceBad debt provisionProvision percentageCustomer 1111,108,166.75Customer 215,602,294.82109,216.060.70%Customer 310,000,000.00Customer 45,000,000.00Customer 54,422,600.004,422,600.00100%Total146,133,061.574,531,816.063.10%
2. Bill receivable
Unit: RMBClosing balanceOpening balanceBill typeBook balanceBad debt provisionBook valueBook balanceBad debt provisionBook valueBank acceptance bills3,091,000,000.003,091,000,000.00553,050,000.00553,050,000.00Commercial acceptance bills534,270,000.00534,270,000.00917,670,000.00917,670,000.00Total3,625,270,000.003,625,270,000.001,470,720,000.001,470,720,000.00
(1) Bills receivable pledged by the Company at the end of the period
Unit: RMBType
Pledged amountat the end of the periodBank acceptance bills3,778,108.58Total3,778,108.58
(2) Bills receivable endorsed or discounted at the end of the period but not yet due
Unit: RMBType
Amount derecognisedat the end of the period
Amount notderecognised at the
end of the periodBank acceptance bills3,091,000,000.00Commercial bills acceptance 534,270,000.00Total3,625,270,000.00
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
3. Other receivables
Unit: RMBItemClosing balanceOpening balanceDividend receivables126,325,018.50200,000,000.00Other receivables8,773,854,244.0410,437,425,503.02Total8,900,179,262.5410,637,425,503.02
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMBItem (or investee)Closing balanceOpening balanceShandong Chenming Group Finance Co., Ltd.200,000,000.00Jiangxi Chenming Paper Co., Ltd.72,896,218.50Zhanjiang Chenming Pulp & Paper Co., Ltd.53,428,800.00Total126,325,018.50200,000,000.00
(2) Other receivables
1) Classification of other receivables by nature
Unit: RMBNature
Closingbook balance
Openingbook balanceOpen credit8,849,264,265.1310,482,693,848.05Guarantee deposit240,000.007,421,297.60Insurance premium291,708.31Reserve and borrowings6,103,279.466,971,976.60Others11,961,652.4395,539,178.66Total8,867,569,197.0210,592,918,009.22
2021 ANNUAL REPORT
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
Closing bad debt provision at phase 1:
Unit: RMBCategoryBook balance
ECL rate (%)
for the next12 months
Bad debtprovisionCarrying amountReasonBad debt provision assessed
individuallyInterests receivableDividends receivableBad debt provision assessedcollectively8,815,142,549.270.47%41,288,305.238,773,854,244.04Amount due from governmentagencies15,879,555.87100.00%15,879,555.87Amount due from related parties8,751,092,442.650.08%7,423,984.278,743,668,458.38Other receivables48,170,550.7537.34%17,984,765.0930,185,785.66Total8,815,142,549.270.47%41,288,305.238,773,854,244.04As at the end of the period, closing bad debt provision at phase 3:
Unit: RMBCategoryBook balance
Lifetime ECL
rate (%)
Bad debtprovisionCarrying amountReasonShouguang Paper Mill No.21,500,000.00100.00%1,500,000.00Overdue for a
prolongedperiod andunlikely to berecoveredArjo Wiggins Chenming Specialty
Paper Co., Ltd.
1,290,901.12100.00%1,290,901.12Overdue for a
prolongedperiod andunlikely to berecovered65 entities including Qingdao
Jieneng Qilunji Group Co., Ltd.
49,635,746.63100.00%49,635,746.63Overdue for a
prolongedperiod andunlikely to berecoveredTotal52,426,647.75100.00%52,426,647.75
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
3. Other receivables
(Continued)
(2) Other receivables
(Continued)
2) Particulars of bad debt provision
(Continued)Changes in carrying book balances with significant changes in loss provision for the period Applicable √ Not applicableDisclosed by ageing
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year7,121,706,162.1010,315,335,710.071-2 years1,468,300,735.77190,920,767.762-3 years190,900,767.7640,248,068.73Over 3 years86,661,531.3946,413,462.66Total8,867,569,197.0210,592,918,009.22
3) Provision, recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMBChanges in the periodCategory
OpeningbalanceProvision
Recovery or
reversalWritten offOthers
ClosingbalanceBad debt provision155,492,506.2016,240,877.6678,018,430.8893,714,952.98Total155,492,506.2016,240,877.6678,018,430.8893,714,952.98
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 theyear was RMB5,259,826,262.78, which accounted for 59.32% of the closing balance of the total otherreceivables. The closing balance of corresponding bad debt provision amounted to RMB0.00.
Unit: RMBName of entityNatureClosing balanceMaturity
Percentage toclosing balanceof other receivables
Closing balance ofbad debt provisionCustomer 1Borrowings2,183,400,000.00Within 1 year24.62%0.00Customer 2Borrowings1,197,553,000.00Within 1 year, 1-2 years and 2-3 years13.50%0.00Customer 3Borrowings697,940,000.00Within 1 year7.87%0.00Customer 4Open credit597,670,802.71Within 1 year6.74%0.00Customer 5Borrowings583,262,460.07Within 1 year and 1-2 years6.58%0.00Total–5,259,826,262.78–59.32%0.00
2021 ANNUAL REPORT
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
4. Long-term equity investments
Unit: RMBClosing balanceOpening balanceItemBook balance
ImpairmentprovisionBook valueBook balance
ImpairmentprovisionBook valueInvestment in subsidiaries18,480,556,896.5218,480,556,896.5221,845,592,649.9021,845,592,649.90Investment in joint ventures andassociates331,467,464.625,994,545.96325,472,918.66352,509,931.985,994,545.96346,515,386.02Total18,812,024,361.145,994,545.9618,806,029,815.1822,198,102,581.885,994,545.9622,192,108,035.92
(1) Investment in subsidiaries
Unit: RMBChange for the periodInvestee
Openingbalance(Book value)
Additionalcontribution
Withdrawncontribution
ImpairmentprovisionOthers
Closing balance(Book value)
Closing balance
of impairment
provisionChenming Paper Korea Co., Ltd.6,143,400.006,143,400.00Chenming GmbH4,083,235.004,083,235.00Hailaer Chenming Paper Co., Ltd.12,000,000.0012,000,000.00Huanggang Chenming Pulp & Paper Co., Ltd.2,300,000,000.002,000,000.002,302,000,000.00Huanggang Chenming Arboriculture
Development Co., Ltd.70,000,000.0070,000,000.00Jinan Chenming Paper Sales Co., Ltd.100,000,000.00100,000,000.00Jiangxi Chenming Paper Co., Ltd.822,867,646.40822,867,646.40Shandong Chenming Power Supply Holdings
Co., Ltd.157,810,117.43157,810,117.43Wuhan Chenming Hanyang Paper Holdings Co.,
Ltd.264,493,210.21264,493,210.21Shandong Grand View Hotel Co., Ltd.80,500,000.0080,500,000.00Zhanjiang Chenming Pulp & Paper Co., Ltd.5,082,500,000.0027,500,000.005,110,000,000.00Shouguang Chenming Modern Logistic Co., Ltd.10,000,000.0010,000,000.00Shouguang Chenming Art Paper Co., Ltd.113,616,063.80113,616,063.80Shouguang Meilun Paper Co., Ltd.4,449,441,979.314,449,441,979.31
XII Financial Report
Change for the periodInvestee
Openingbalance(Book value)
Additionalcontribution
Withdrawncontribution
ImpairmentprovisionOthers
Closing balance(Book value)
Closing balanceof impairmentprovisionShouguang Shun Da Customs Declaration
Co, Ltd.1,500,000.001,500,000.00Shandong Chenming Paper Sales Co., Ltd.762,641,208.20762,641,208.20Shouguang Chenming Import and Export TradeCo., Ltd.250,000,000.00250,000,000.00Shouguang Chenming Papermaking Machine
Co., Ltd.2,000,000.002,000,000.00Shouguang Chenming Hongxiang Packaging
Co., Ltd.3,730,000.003,730,000.00Shandong Chenming Group Finance Co., Ltd.4,000,000,000.004,000,000,000.00Chenming Arboriculture Co., Ltd.45,000,000.0045,000,000.00Shanghai Chenming Industry Co., Ltd.3,000,000,000.003,000,000,000.00Chenming (HK) Limited118,067,989.55118,067,989.55Chenming Paper United States Co., Ltd.6,407,800.006,407,800.00Shandong Coated Paper Sales Co. Ltd.20,000,000.0020,000,000.00Weifang Chenming Growth Driver Replacement
Equity Investment Fund Partnership
(Limited Partnership)162,790,000.00469,210,000.00632,000,000.00Weifang Chendu Equity Investment Partnership
(Limited Partnership)255,000,000.00255,000,000.00Total21,845,592,649.90753,710,000.004,118,745,753.3818,480,556,896.52
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
4. Long-term equity investments
(Continued)
(1) Investment in subsidiaries
(Continued)
2021 ANNUAL REPORT
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
(Continued)
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: RMBChange for the periodInvestee
Openingbalance(book value)
Additionalcontribution
Withdrawncontribution
Investmentgain or lossrecognisedunder equitymethod
Adjustmentof othercomprehensiveincome
Otherchangein equityinterestDistribution ofcash dividendor profitdeclaredImpairment
provisionOthers
Closingbalance(book value)
Closingbalance ofimpairment
provisionI. Associates
Zhuhai Dechen New ThirdBoard Equity InvestmentFund Company (LimitedPartnership)52,401,659.62-433,763.3115,000,000.0036,967,896.31Ningbo Kaichen Huamei
Equity Investment FundPartnership (LimitedPartnership)198,549,926.27-1,252,440.68197,297,485.59Chenming (Qingdao) Asset
Management Co., Ltd.8,674,551.18145,116.961,886,000.006,933,668.14Xuchang Chenming Paper
Co., Ltd.5,994,545.96Subtotal259,626,137.07-1,541,087.0316,886,000.00241,199,050.045,994,545.96II. Joint ventures
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd.4,945,742.032,957,127.841,000,000.006,902,869.87Weifang Sime Darby West
Port Co., Ltd.81,943,506.92-4,572,508.1777,370,998.75Subtotal86,889,248.95-1,615,380.331,000,000.0084,273,868.62Total346,515,386.02-3,156,467.3617,886,000.00325,472,918.665,994,545.96
5. Accounts payable
Unit: RMBAgeingClosing balanceOpening balanceWithin 1 year929,767,031.76691,849,228.911-2 years135,879,646.0948,012,965.292-3 years15,621,599.1539,906,363.15Over 3 years48,407,679.8532,342,933.88Subtotal1,129,675,956.85812,111,491.23
XII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements(Continued)
6. Revenue and operating costs
Unit: RMBAmount for the periodAmount for the prior periodItemRevenueOperating costsRevenueOperating costsPrincipal activities7,457,655,880.746,282,245,216.896,881,284,099.005,528,211,060.91Other activities1,303,835,529.341,075,724,228.661,628,789,694.881,370,949,760.15Total8,761,491,410.087,357,969,445.558,510,073,793.886,899,160,821.06
7. Investment income
Unit: RMBItem
Amount for
the period
Amount forthe prior periodIncome from long-term equity investments accounted forusing the cost method2,552,823,636.61604,220,123.68Income from long-term equity investments accounted forusing the equity method-3,156,467.36-6,412,281.95Investment gain on disposal of long-term equity investments379,035,504.15-249,714,762.64Investment gain on derecognition of financial assets-13,074,419.85Investment gain on debt restructuring472,886.50Investment gain on holding other non-current financial assets16,205,276.87Total2,932,306,416.92348,093,079.09
2021 ANNUAL REPORT
XII Financial Report
XVIII. Supplementary information
1. Breakdown of extraordinary gains or losses for the current period
√ Applicable Not applicable
Unit: RMBItemAmountRemarkProfit or loss from disposal of non-current assets162,163,302.50Government grants (except for the government grants closely related to
the normal operation of the Company and granted constantly at a fixedamount or quantity in accordance with a certain standard based onstate policies) accounted for in profit or loss for the current period261,974,874.53Profit or loss from debt restructuring24,593,731.72Except for effective hedging business conducted in the ordinary course
of business of the Company, gain or loss arising from the change infair value of financial assets held for trading, derivative financial assets,financial liabilities held for trading and derivative financial liabilities,as well as investment gains from disposal of financial assets held fortrading, derivative financial assets, financial liabilities held for trading,derivative financial liabilities and other debt investments-54,802,461.29Gain or loss arising from fair value change of consumable biological
assets subsequently measured at fair value-41,899.05Other gain or loss items within the definition of extraordinary gain or loss-15,461,704.28Total extraordinary gains or losses378,425,844.13Less: Effect of income tax of extraordinary gains or losses60,135,956.19
Net extraordinary gains or losses318,289,887.94Less: Net effect of extraordinary gains or losses attributable to minority
interest (after tax)-3,346,683.65Extraordinary gains or losses attributable to ordinary shareholders of the
Company321,636,571.59Other profit or loss items consistent with the definition of extraordinary items:
Applicable √ Not applicableThe Company does not have other profit or loss items consistent with the definition of extraordinary items.Explanation on classification of non-recurring profit and loss listed in Explanatory Announcement No. 1 on InformationDisclosure of Companies Offering Their Securities to the Public – Non-recurring Profit and Loss as non-recurring profitand loss Applicable √ Not applicable
XII Financial Report
XVIII. Supplementary information(Continued)
2. Return on net assets and earnings per share
Earnings per shareProfit for the reporting period
Rate of return on net assetson weighted average basis
Basic(RMB per share)
Diluted(RMB per share)Net profit attributable to ordinary shareholdersof the Company9.60%0.560.56Net profit after extraordinary gains or losses attributable toordinary shareholders of the Company7.72%0.450.45Data specification: When calculating financial indicators such as earnings per share and rate of return on weightedaverage net assets, the interest on Perpetual Bonds of RMB89,700,000.00, the dividends on Preference Shares ofRMB323,390,968.66 declared to be distributed and the cash dividends of RMB14,202,450.00 attributable to theshareholders of restricted shares expected to be unlocked in the future among the dividends distributed during thereporting period are deducted.
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 2022