SHANDONG CHENMING PAPER HOLDINGS LIMITED
Annual Report 2020
March 2021
2020 ANNUAL REPORT 1
I Important Notice Table of Contents and Definitions
The board of directors (the “Board”) the supervisory committee (the “Supervisory Committee”) and the directors (the
“Directors”) supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby
warrant the truthfulness accuracy and completeness of the contents of the annual report guarantee that there are no false
representations misleading statements or material omissions contained in this annual report and are jointly and severally
responsible for the liabilities of the Company.
Chen Hongguo head of the Company Dong Lianming head in charge of accounting and Zhang Bo head of the accounting
department (Accounting Officer) declare that they warrant the truthfulness accuracy and completeness of the financial report
in the annual report.
All Directors have attended the board meeting to review this report.
The Company is exposed to various risk factors such as macro-economic fluctuation state policies and regulations and
competition in the industry. Investor should be aware of investment risks. For further details please refer to the risk factors
likely to be faced and the measures to be taken to address them as set out in the outlook on the future development of the
Company in Discussion and Analysis of Operations.
The proposed profit distribution plan of the Company was considered and passed by the Board:
The audited consolidated net profit attributable to equity holders of the Company for 2020 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB1712029078.52. When deducting the
interest on Perpetual Bonds of RMB171776438.36 for 2020 and the fixed dividend on Preference Shares of RMB214425000.00
the distributable profit realised for 2020 amounted to RMB1325827640.16.In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares based on the total ordinary share capital of 2984208200 shares and the simulated ordinary shares converted from the
second and third tranches of the Preference Shares using a conversion ratio of 1 share valued at RMB3.82 as at the end of 2020
of 589005236 shares a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to ordinary shareholders
a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from the Preference Shares will be
distributed to holders of the second and third tranches of the Preference Shares. No bonus shares will be issued and there is
no increase of share capital from reserves. A cash dividend of RMB552078517.00 will be distributed to holders of ordinary
shares and a variable cash dividend of RMB108965968.66 will be distributed to holders of the second and third tranches of
the Preference Shares. In other words a cash dividend of RMB4.84 (tax inclusive) per Preference Share with a nominal value of
RMB100 each will be distributed to holders of the second and third tranches of the Preference Shares. If the total share capital of
the Company changes before the date of the equity registration for the implementation of the equity distribution it is proposed to
maintain the same total distribution and adjust the distribution ratio per share accordingly.
SHANDONG CHENMING PAPER HOLDINGS LIMITED2
I Important Notice Table of Contents and Definitions
Table of contents
I Important Notice Table of Contents and Definitions ........................................................................................ 2
II Company Profile and Key Financial Indicators ................................................................................................. 5
III Chairman’s Report ............................................................................................................................................ 10
IV Business Overview ............................................................................................................................................ 12
V Discussion and Analysis of Operations ............................................................................................................. 20
VI Directors’ Report ............................................................................................................................................... 45
VII Material Matters ................................................................................................................................................ 55
VIII Changes in Share Capital and Shareholders .................................................................................................... 90
IX Preference Shares ............................................................................................................................................. 98
X Directors Supervisors and Senior Management and Staff ............................................................................... 102
XI Corporate Governance ...................................................................................................................................... 114
XII Corporate Bonds ............................................................................................................................................... 137
XIII Financial Report ................................................................................................................................................ 142
XIV Documents Available for Inspection .................................................................................................................. 320
2020 ANNUAL REPORT 3
I Important Notice Table of Contents and Definitions
Definitions
Item means Definition
Company Group Chenming Group or
Chenming Paper
means Shandong Chenming Paper Holdings Limited and its subsidiaries
Parent Company or Shouguang Headquarters means Shandong Chenming Paper Holdings Limited
Chenming Holdings means Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong Limited
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co. Ltd.Jiangxi Chenming means Jiangxi Chenming Paper Co. Ltd.Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co. Ltd.Shanghai Chenming means Shanghai Chenming Industry Co. Ltd.Huanggang Chenming means Huanggang Chenming Pulp & Paper Co. Ltd.
Chenming (HK) means Chenming (HK) Limited
Jilin Chenming means Jilin Chenming Paper Co. Ltd.Shouguang Meilun means Shouguang Meilun Paper Co. Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Finance Company means Shandong Chenming Group Finance Co. Ltd.
Chenming Leasing means Shandong Chenming Financial Leasing Co. Ltd. and its
subsidiaries
Chenming GDR Fund means Weifang Chenming Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)
Chenrong Fund means Weifang Chenrong Growth Driver Replacement Equity Investment
Fund Partnership (Limited Partnership)
Chenchuang Fund means Weifang Chenchuang Equity Investment Fund Partnership (Limited
Partnership
SHANDONG CHENMING PAPER HOLDINGS LIMITED4
I Important Notice Table of Contents and Definitions
Item means Definition
Changjiang Chenming Equity Investment Fund means Hubei Changjiang Chenming Huanggang Equity Investment Fund
Partnership (Limited Partnership)
Shanghai Herui means Shanghai Herui Investment Co. Ltd.
Corporate Bonds means 17 Chenming Bond 01 and 18 Chenming Bond 01
Preference Shares means Chenming You 01 Chenming You 02 and Chenming You 03
Perpetual Bonds means 17 Lu Chenming MTN001 and 17 Lu Chenming MTN002
the reporting period or the year means The period from 1 January 2020 to 31 December 2020
the beginning of the year or the period means 1 January 2020
the end of the year or the period means 31 December 2020
the prior year means The period from 1 January 2019 to 31 December 2019
2020 ANNUAL REPORT 5
II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation 晨鳴紙業 Stock code 000488
晨鳴B 200488
晨鳴優01 140003
晨鳴優02 140004
晨鳴優03 140005
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Stock code 01812
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Legal name in Chinese of the Company 山東晨鳴紙業集團股份有限公司
Legal short name in Chinese of the Company 晨鳴紙業
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
Registered address No. 595 Shengcheng Road Shouguang City Shandong Province
Postal code of registered address 262700
Office address No.2199 Nongsheng East Road Shouguang City Shandong Province
Postal code of office address 262705
Website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the Board Hong Kong Company Secretary
Name Yuan Xikun Chu Hon Leung
Correspondence Address No. 2199 Nongsheng East Road Shouguang
City Shandong Province
22nd Floor World Wide House Central Hong
Kong
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email address chenmmingpaper@163.com liamchu@li-partners.com
III. Information disclosure and places for inspection
Designated media for information disclosure China Securities Journal Shanghai Securities News Securities
Times Securities Daily and Hong Kong Commercial Daily
Designated websites for the publication of the annual
report as approved by CSRC
Domestic: http://www.cinifo.com.cn; Overseas: http://www.hkex.
com.hk
Places for inspection of the Company’s annual report Securities investment department of the Company
IV. Change in registration
Organisation registration code 913700006135889860
Change of principal activities since its listing (if any) No
Change of the controlling shareholder (if any) No
SHANDONG CHENMING PAPER HOLDINGS LIMITED6
II Company Profile and Key Financial Indicators
V. Other relevant information
CPAs engaged by the Company
Name of CPAs Grant Thornton (Special General Partnership)
CPAs’ Office Address Floor 11 Building No. 4 HuaChuang GuanLi Center 219 Shunhai Road
Lixia District Jinan
Name of the Signing Certified Public Accountants Liu Jian and Jiang Lei
Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
□ Applicable √ Not applicable
Financial advisors engaged by the Company to continuously perform its supervisory function during the reporting period
□ Applicable √ Not applicable
VI. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company
□ Yes √ No
2020 2019
Increase/decrease
for the year as
compared to the
prior year 2018
Revenue (RMB) 30736517996.90 30395434073.35 1.12% 28875756163.56
Net profit attributable to shareholders of the
Company (RMB) 1712029078.52 1656566584.88 3.35% 2509828858.47
Net profit after extraordinary gains or losses
attributable to shareholders 1119103808.75 702329086.29 59.34% 1953699849.75
Net cash flows from operating activities (RMB) 11259802676.28 12232707222.94 -7.95% 14099701887.04
Basic earnings per share (RMB per share) 0.36 0.33 9.09% 0.51
Diluted earnings per share (RMB per share) 0.36 0.33 9.09% 0.51
Rate of return on weighted average net assets 5.84% 5.57% Increased by 0.27
percentage point
8.51%
As at the
end of 2020
As at the
end of 2019
Increase/decrease
as at the end
of the year
compared to the
end of the prior year
As at the
end of 2018
Total assets (RMB) 91575457828.62 97958909935.15 -6.52% 105318734827.82
Net assets attributable to shareholders
of the Company (RMB) 24276968789.00 25169743863.75 -3.55% 25048731454.79
2020 ANNUAL REPORT 7
II Company Profile and Key Financial Indicators
Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interest
payment deferred and accumulated to subsequent periods for Perpetual Bonds under other equity instruments and the
effect of the dividends on Preference Shares under other equity instruments that have been considered and approved for
distribution. When calculating financial indicators such as earnings per share and rate of return on weighted average net
assets the interest on Perpetual Bonds of RMB171776438.36 the dividends on Preference Shares of RMB387101073.42
declared to be distributed and the cash dividends of RMB116679908.80 attributable to the shareholders of restricted
shares expected to be unlocked in the future among the dividends distributed during the reporting period are deducted.VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report
□ Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
□ Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.VIII. Key Financial Indicators by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Revenue 6085376805.28 7514428960.58 8473304915.35 8663407315.69
Net profit attributable to shareholders of
the Company 202790856.25 313535847.23 560227575.14 635474799.90
Net profit after extraordinary gains or
losses attributable to shareholders of
the Company 143993251.71 -76111135.48 463336879.91 587884812.61
Net cash flows from operating activities 655581522.20 1671452262.48 4941816336.88 3990952554.72
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
disclosed in the quarterly report or interim report
□ Yes √ No
SHANDONG CHENMING PAPER HOLDINGS LIMITED8
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’0000
For the year ended 31 December
2020 2019 2018 2017 2016
Before
adjustment
After
adjustment
Before
adjustment
After
adjustment
Revenue 3073652 3039543 2887576 2985174 2947245 2290711 2256692
Profit before tax 217227 204848 320632 453648 453648 258317 258317
Tax 26606 29518 64158 77752 77752 56056 62597
Profit for the current period attributable to
shareholders of the Company 171203 165657 250983 376933 376933 206399 199858
Minority interests 19418 9673 5491 -1036 -1036 -4138 -4138
Basic earnings per share (RMB/share) 0.36 0.33 0.51 1.13 1.13 0.99 0.95
Rate of return on weighted average
net assets (%) 5.84% 5.57% 8.51% 15.80% 15.80% 9.59% 9.23%
Unit: RMB’0000
For the year ended 31 December
2020 2019 2018 2017 2016
Before
adjustment
After
adjustment
Before
adjustment
After
adjustment
Total assets 9157546 9795891 10531873 10562510 10562510 8228535 8228535
Total liabilities 6577519 7161914 7944704 7535092 7535092 5972050 5972050
Minority interests 152329 117003 82296 249565 249565 34605 34605
Equity attributable to shareholders of the
Company 2427697 2516974 2504873 2777853 2777853 2221881 2221881
Net current assets (liabilities) -1516398 -774633 -1344718 -783090 -783090 -1094182 -1094182
Total assets less current liabilities 4052922 4526014 4390405 4837646 4837646 3557671 3557671
2020 ANNUAL REPORT 9
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable □ Not applicable
Unit: RMB
Item Amount for 2020 Amount for 2019 Amount for 2018 Explanation
Profit or loss from disposal of non-current assets (including
write-off of provision for assets impairment) -51477216.37 135669108.82 17149722.72
Government grants (except for the government grants closely
related to the normal operation of the company and granted
constantly at a fixed amount or quantity in accordance with
a certain standard based on state policies) accounted for in
profit or loss for the current period 943720129.34 623277014.49 535691291.26
Gain arising from investment costs for acquisition of
subsidiaries associates and joint ventures by the corporation
being less than its share of fair value of identifiable net assets
of the investees on acquisition 364597001.77
Profit or loss from debt restructuring -14942498.74 -55792548.82
Except for effective hedging business conducted in the ordinary
course of business of the Company gain or loss arising from
the change in fair value of financial assets held for trading
derivative financial assets financial liabilities held for trading
and derivative financial liabilities as well as investment gains
from disposal of financial assets held for trading derivative
financial assets financial liabilities held for trading derivative
financial liabilities and other debt investments 21166216.02 46445653.55 61750000.00
Consumable biological assets subsequently measured at fair
value -13329852.55 19752911.94 -21464400.65
Other non-operating income and expenses other than the above
items 8582997.62 24876982.31 23291720.22
Loss on abnormal work stoppage -24567901.71
Less: Effect of income tax 120949832.54 131148729.27 52960460.82
Effect of minority interests (after tax) 155276771.30 33934072.32 7328864.01
Total 592925269.77 954237498.59 556129008.72 –
Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 – Extraordinary Gains or Losses defined as its recurring gain or loss items
□ Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No. 1 – Extraordinary Gains or Losses were defined by the Company as
its recurring gain or loss items during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED10
III Chairman’s Report
Dear shareholders
I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2020. On behalf
of the Board I express my sincere gratitude to all shareholders for their concern and support rendered to the Company.
During the reporting period in the face of the unexpected COVID-19 and the complicated and ever-changing international trade
environment the Company resolutely implemented the national decision-making and deployment on epidemic prevention and
control actively coordinated the work of epidemic prevention and control resumed work and production supported the epidemic
areas and actively fulfilled its social responsibilities which fully demonstrated the responsibilities and the sense of responsibility
of a national paper making enterprise. Under the leadership of the Board and the management of the Company and the
guidance of the policy of “efficient management structural adjustment market development and risk control” the Group focused
on the development of its principal activities i.e. pulp production and paper making) carried forward the spirit of craftsman
concentrated efforts strengthened its conviction and overcame difficulties to ensure that neither the epidemic prevention and
control nor the production and operation were neglected. In the second half of 2020 with the effective control of COVID-19 in
China the recovery of domestic demand the eradication of foreign waste a stricter ban on plastics and other favourable policies
the prices of paper products such as white cardboard and the upstream pulp rose steadily and the paper making industry
entered an ascending channel. The prices of the Company’s major paper types rose several times and the advantages of pulp
and paper integration stood out. The core competitiveness of the Company was further enhanced. During the year not only did
the Company complete all its tasks but it also achieved all its goals with flying colours.I. Results of Operations
In 2020 the Company completed the production of machine-made paper of 5.77 million tonnes and achieved sales of 5.61
million tonnes representing a year-on-year increase of 15.17% and 6.86% respectively. The Company achieved revenue of
RMB30737 million representing a year-on-year increase of 1.12%. Total profit and net profit attributable to equity holders
of the Company were RMB2172 million and RMB1712 million respectively up by 6.04% and 3.35% year on year. The
Company’s total assets amounted to RMB91575 million.
II. Corporate Governance
During the reporting period the Company regulated its operation under the requirements of the Companies Law the
Securities Law the Code of Corporate Governance for Listed Companies the Guidelines of the Shenzhen Stock Exchange
for Standardised Operation the Rules Governing Listing of Stocks on Shenzhen Stock Exchange the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related regulations of the China Securities
Regulatory Commission. The Company kept on improving and optimising its legal person governance structure and
regulating its operation in practice. During the reporting period the Company held 14 board meetings 8 Supervisory
Committee meetings and 8 general meetings. The operation of the “three meetings” was efficient and compliant. The Board
and I considered the status of the Company’s corporate governance was substantially in compliance with the provisions
and requirements of the regulatory documents such as the Code of Corporate Governance for Listed Companies. At the
same time the Board strived to regulate the operation of the Company. The Company improved its corporate governance
system in a timely manner and successively amended the Registration Management System for Insiders External
Guarantee Decision System and Securities Investment Management System to further enhance the standard operation level
of corporate governance.Strict enforcement of relevant internal control systems has promoted a regulated operation and healthy development of the
Company thus protecting the legitimate rights and interests of the investors. The overall status of corporate governance
is in compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development
strives forward its regulated operation and internal control will continue to improve.
2020 ANNUAL REPORT 11
III Chairman’s Report
III. Dividend Distribution
The Company has always placed much emphasis on the benefits of and returns to its shareholders. The audited
consolidated net profit attributable to equity holders of the Company for 2020 prepared in accordance with Accounting
Standards for Business Enterprises by the Company amounted to RMB1712029078.52. When deducting the interest on
Perpetual Bonds of RMB171776438.36 and the fixed dividend on Preference Shares of RMB214425000.00 for 2020 the
distributable profit realised for 2020 amounted to RMB1325827640.16. In accordance with the requirements of the Articles
of Association and the Prospectus of Non-public Issuance of Preference Shares the proposed profit distribution plan of the
Company for 2020 is as follows:
Based on the total ordinary share capital of 2984208200 shares and the second and third tranches of the simulated
ordinary shares converted from the Preference Shares using a conversion ratio of 1 share valued at RMB3.82 as at the end
of 2020 of 589005236 shares a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to holders of
ordinary shares; a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from the Preference
Shares will be distributed to holders of the second and third tranches of the Preference Shares. No bonus shares will be
issued and there is no increase of share capital from reserves. A cash dividend of RMB552078517.00 will be distributed to
holders of ordinary shares and a variable cash dividend of RMB108965968.66 will be distributed to holders of the second
and third tranches of the Preference Shares. In other words a cash dividend of RMB4.84 (tax inclusive) per Preference
Share with a nominal value of RMB100 each will be distributed to holders of the second and third tranches of the Preference
Shares. If the total share capital of the Company changes before the date of the equity registration for the implementation
of the equity distribution it is proposed to maintain the same total distribution and adjust the distribution ratio per share
accordingly.IV. Future Development
Success goes to the one who is determined to pursue the long and rough road. As the beginning year of the 14th Five-
Year Plan 2021 will also see opportunities and challenges. This year the Company will shoulder the responsibility of“revitalising the national paper making industry persistently deepen and focus on the development of its principal activities;adhere to the general keynote of a green low carbon recycling and sustainable development regard environmental
protection engineering as the “Life Project” of its corporate development comprehensively implement clean production
energy conservation emission reduction and resource recycling fulfil social responsibilities and realise an all-win situation
for economic benefits social benefits and ecological benefits. Adhering to the theme of scientific development and
concentrating on improving quality and efficiency the Company will comprehensively enhance its corporate management
and operation quality. Adhering to the pulp and paper integrated development strategy the Company will focus on the
construction of Hubei Huanggang production base in central China form the pattern comprising three production bases
with Shouguang in the north Huanggang in the middle and Zhanjiang in the south enhance the synergy effect strive to
create a new situation of high-quality corporate development and consolidate its leading position in the paper making
industry thus forging ahead to become the most competitive paper making enterprise in the world!
On behalf of the Board I would like to take this opportunity to express our heartfelt gratitude to the support and trust of all
investors customers business partners of various circles and the general public. I also would like to express our sincere
thanks to all Directors Supervisors the management and staff members of the Company who put in a lot of mental and
physical hard work in the past year. We are looking forward to working with you aiming to build a bright future for Chenming
Paper and provide good results as returns to our shareholders and society!
Chen Hongguo
Chairman
25 March 2021
SHANDONG CHENMING PAPER HOLDINGS LIMITED12
IV Business Overview
I. Principal activities of the Company during the Reporting Period
(i) Principal activities of the Company during the reporting period
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic
development in finance forestry logistics and construction materials. Its key indicators in respect of business and
economic efficiency have been in a leading position in the industry in China for over 20 consecutive years. The
Company has been on the Fortune 500 China list for 11 years. The Company focuses on its principal activities i.e.
pulp production and paper making. The machine-made paper business is the major source of revenue and profit of
the Company. During the reporting period there was no significant change in the principal activities of the Company.
1. Business overview
The Company has committed itself to implementing a pulp and paper integration strategy. It takes the lead in
laying out the entire industrial chain with 6 production bases in Shandong Guangdong Hubei Jiangxi Jilin
and other places with an annual pulp and paper production capacity of more than 11 million tonnes. It is the
only large-scale pulp and paper integrated company in China that achieves a balance between pulp and paper
production. The Company implements an innovation-driven strategy and has introduced world-leading pulp
production and paper making technology and equipment. Its product series include high-end offset paper white
paper board coated paper light weight coated paper household paper electrostatic copy paper and thermal
paper with each major product ranking among the highest in terms of market share in China.The Company focuses on product and technology research and development has scientific research institutions
including the national enterprise technology centre the post-doctoral working station the state certified CNAS
pulp and paper testing centre Shandong Pulp and Paper Making Laboratory as well as the Guangdong Pulp
and Paper Production Technology Research Center and has obtained 303 national patents including 25 patents
for invention with 7 products selected as national new products. The Company has obtained 15 science and
technology progress awards above the provincial level and undertaken five national science and technology
projects and 63 provincial technological innovation projects. The Company has pioneered to obtain the ISO9001
quality certification ISO14001 environmental protection certification and FSC-COC certification among its
industry peers.
2020 ANNUAL REPORT 13
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
2. Main products
Coated paper
White cardboard
Major
brands
Major
brands
Major
brands
BIYUNTIAN CLOUDY MIRROR and CLOUDY LEOPARD all-wood
pulp offset paper; “CLOUDY LION” and “CLOUDY CRANE” offset
paper; and “CEDAR” and “GREEN PINE” light weight paper.“SNOW SHARK” and “EAGLE” one-sided coated paper;
“SNOW SHARK” “EAGLE” “RABBIT” and “SNOW SWALLOW”
doublesided coated paper and “EAGLE” “RABBIT” and “SNOW
SWALLOW” matte coated paper.
White cardboard and ivory cardboard of ZITAN series and POPLAR
series super high bulk cardboard Chenming cigarette cardboard
fluid inclusion cardboard and base paper for mugs.Range of
application
Range of
application
Range of
application
Printing publications textbooks magazines covers illustrations
notebooks test papers teaching materials reference books etc.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.Upscale tobacco package paper adhesive sticker shopping bags
slipcases envelopes gift wrapping and so on.High-end gift boxes cosmetics boxes tags shopping bags
publicity pamphlets high-end postcards; cigarette package printing
of medium and high quality; milk package beverage package
disposable paper cups milk tea cups and noodle bowls.
Culture paper
SHANDONG CHENMING PAPER HOLDINGS LIMITED14
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
2. Main products (Cont’d)
Industrial paper
Light weight coated paper
Electrostatic copy paper
Household paper
Major
brands
Major
brands
Major
brands
Major
brands
Jinzhou high-grade light weight coated paper and refined light
weight coated paper
High-grade yellow antisticking base paper ordinary yellow/white
anti-sticking base paper bill base paper cast coated base paper
PE paper stripping base paper and white kraft paper
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
Toilet paper facial tissue pocket tissue napkin paper towels
“XINGZHILIAN” “FOREST LOVE” and “BEIYING”
Range of
application
Range of
application
Range of
application
Range of
application
Printing advertisements high-end publications magazine inner
pages and picture albums; suitable for highspeed sheetfed press
or high-speed rotary speed press.
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.Printing and copying business documents training materials and
writing.
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.
2020 ANNUAL REPORT 15
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
3. Operation model
(1) Purchase model
The Company has established a comprehensive procurement information system fully realised machine
control management and optimised the authorisation approval process. It strives to promote the
construction of procurement information systems establishes an enterprise network bidding platform
improves the contract management module optimises the SAP three-level authority approval process
and effectively establishes a standardised procurement management system. Meanwhile the Company
cooperates with financial institutions and third parties in the supply chain financial business to enhance
business reputation establishes synergistic relationships leverages core enterprise scale advantages
and improves the competitiveness of the supply chain; strengthens source procurement implements the
80/20 procurement concept introduces a competitive mechanism improves supply quality and reduces
procurement costs; actively uses futures tools to optimise raw material pricing prevents price risks and
realises futures pricing benefits.
(2) Production model
The Company has committed itself to implementing a pulp and paper integration strategy. The Companyalways adheres to the concept of “placing green development and environmental protection as itspriority”. Several supporting projects have been built for instance alkali recovery system middle water
treatment system and middle water reuse system. Clean production has been actively promoted and
energy conservation and emission reduction have been carried out vigorously. The Company is building
a resource-saving and environmentally friendly model enterprise. It is innovating an integrated use of
resources and a circular industrial development mode and an “ecological chain” featuring resources
products and recycled resources has been established. Its production volume is determined based on the
sales and its production is arranged scientifically. The product mix is being optimised and its inventories
are under strict control. The core competitiveness of the Company is further enhanced thanks to the
increased beneficial results brought by the new project that has gone into operation.
(3) Marketing model
The Company has a relatively mature sales network and has set up specialised sales companies
responsible for the development of domestic and overseas markets product sales and formulation
of sales policies. The sales companies’ management systems are divided into product lines product
companies management areas and branches to achieve matrix management. The sales companies
are divided into product companies of cultural paper series coated paper series and household paper
series according to product line. Each product company has its administrative district. A regional general
manager is responsible for his administrative district under which branch companies are set up. The chief
representatives of the branch companies have full authority to deal with branch business.The Company has implemented a three-level scheduling mechanism. Branch companies administrative
districts and sales companies schedule task indicators daily to ensure the effective implementation of the
plans. Meanwhile by perfecting our information systems and optimising business procedures realising
IT-based management the Company is improving its marketing management.
SHANDONG CHENMING PAPER HOLDINGS LIMITED16
IV Business Overview
I. Principal activities of the Company during the Reporting Period (Cont’d)
(i) Principal activities of the Company during the reporting period (Cont’d)
3. Operation model (Cont’d)
(4) R&D Mode
The Company is market-oriented and innovation is it driving force. Its investment in R&D and
its development of new products have been taken to a higher level to maintain a strong ability in
technological innovation. The Company has many scientific research institutions for instance the national
enterprise technology centre the post-doctoral working station the state certified CNAS pulp and paper
testing centre Shandong Pulp and Paper Making Engineering Lab and the Guangdong Pulp and Paper
Production Technology Research Centre. The Company also works hard on the following aspects:
carrying out academic research with colleges and universities and R&D institutions such as Qilu University
of Technology Qingdao University of Science and Technology Tianjin University of Science and
Technology and Institute of Chemical Industry of Forest Products of the Chinese Academy of Forestry
building a contingent of high-quality talents with hands-on experience in innovation accelerating the
industrialisation of new and high technologies optimising product mix and improving the competitiveness
of its products in the market.(ii) The situation of the industry where the Company operated and its position in the industry during the
reporting period
The paper making industry is one of the basic industries of the national economy. The paper making industry has the
typical characteristics of large-scale industrial production such as continuous and efficient operation and significant
economies of scale. The paper making industry is also vitally interrelated with people’s daily life. Not only is the paper
making industry the provider of basic goods and materials but it also makes a lot of important materials related to
packaging construction chemical industry electronics energy transportation national security and other fields. The
paper making industry plays an irreplaceable role in the national economy. Affected by the supply-side reform the
development of paper making industry has evolved from an extensive form to an intensive form. The increase in the
societal demands the publishing of environmental protection policies the continuous advances in technology and the
changes in the supply of resources have resulted in an accelerating reduction of the production capacity of low-end
products the increasing concentration ratio of the industry and an improving industrial pattern.
Affected by the outbreak of COVID-19 in 2020 the ever-changing pattern of trade and other factors the global
economy slumped and the external environment became complicated and difficult. In the face of difficulties the
control and prevention of COVID-19 and every aspect of economic and societal development were carried out
efficiently on a national level. All decision-making and deployment were implemented with a determined attitude. The
resumption of work and production were progressing steadily. The overall national economy was looking up and the
prices of paper products and the upstream pulp rose steadily. The implementation of the ban on plastics the ban
on importing waste and other policies brought a new scope for development to the paper making industry. Safety
stability and economic efficiency became a new issue in the industry. The major development trend of the paper
making industry consisted of the further expansion of the industrial chain of paper making and the integration of pulp
and paper.
As a leading player in the paper making industry of China the Company has implemented the strategy of innovative
operation quickened its pace in growth driver replacement and led the way in full industry chain operation and has
emerged as the only paper making enterprise in China to achieve capacity balance between pulp production and
paper making. Currently the Company has the annual pulp and paper production capacity of over 11 million tonnes
tops the industry in its paper product variety and ranks among the best in China in terms of the market share of its
major products. In 2020 the Company was once again listed in Top 500 Enterprises in China with the highest rank
among paper making enterprises which demonstrated the strength in the Company’s development as it continued to
lead the growth of the industry.
2020 ANNUAL REPORT 17
IV Business Overview
II. Material Changes of Major Assets
1. Material Changes of Major Assets
Major assets Description
Fixed assets During the reporting period the pulping project and biomass power generation
project of Huanggang Chenming were reclassified as assets.
Construction in progress During the reporting period the pulping project and biomass power generation
project of Huanggang Chenming were reclassified as assets.
Financial leasing assets During the reporting period the Company continuously reduced the scale of the
financial leasing business with net recovery of RMB3600 million.
2. Major Assets Overseas
□ Applicable √ Not applicable
III. Analysis of Core Competitiveness
As a leading player in the paper making industry and a top 500 enterprise in China after innovation and development for
more than 60 years the Company has created own brand and nurtured its core competitiveness. By quickening the pace
in growth driver replacement and focusing on the main activities of pulp production and paper making the Company has
formed the following advantages:
1. Advantages of pulp and paper integration
The official promulgation of the “ban on importing waste” and the improvement of relevant environmental protection
standards have further expanded the supply gap of wood pulp and put forward new requirements for the safety and
stability of the industrial supply chain. The Company has unwaveringly implemented a pulp and paper integration
strategy. At present its major production bases located in Shouguang Zhanjiang and Huanggang are equipped with
chemical pulp production lines with total production capacity of wood pulp of over 4.30 million tonnes. It is the only
modern large-scale paper making company that basically realises wood pulp self-sufficiency in China. A complete
supply chain not only creates cost advantage for the Company but also safeguards the safety stability and quality of
upstream raw materials and renders strong support for the Company to maintain its long-term competitiveness.
2. Scale advantages
The paper making industry is a typical capital-intensive and technology-intensive industry that follows the laws of
economies of scale. The Company is a leading player in the paper making industry in China. Its large-scale production
bases can be found in the major markets in Southern Central Northern and Northeast China with annual pulp and
paper production capacity of over 11 million tonnes which have obvious economies of scale. Meanwhile leveraging
the self-built international logistics centre and supporting railway dedicated lines and docks the Company offers
comprehensive logistics services such as unitised transportation bonded warehousing transfer and storage at
stations and terminals. Through building an industrial ecosystem the Company covers the whole business chain from
production to sales and achieved a scientific reduction in costs and distinguished scale merit.
SHANDONG CHENMING PAPER HOLDINGS LIMITED18
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
3. Product advantages
The Company is an enterprise that offers the widest product range in the paper making industry. The product
series include high-end offset paper white paper board coated paper lightweight coated paper household paper
electrostatic copy paper thermal paper etc. with each major product ranking among the best in terms of market
share among which the market share of cultural paper ranks first and the market share of white cardboard and
coated paper ranks second. Over the years the Company has attached great importance to technology research
and development introduced the most advanced pulping and paper making technology and equipment refined its
products and promoted dynamic upgrade of products by persisting in technological innovation and work process
optimisation so as to continuously enhance the value of the brand of Chenming and improve brand benefits.
4. Industry layout advantages
Centring on the pulp and paper integration strategy the Company has integrated resources and established its
production bases in the core target market to achieve coordinated development. Currently the Company has six
production bases in Shandong Guangdong Hubei Jiangxi Jilin and other places. With all products sold at close
distances the Company overcomes the transportation radius restriction. The swift and efficient delivery services
drastically reduce production costs and improve market radiating capacity of its products.
5. Advantages in technical equipment
”One cannot make brick without straw.” The Company highly values the introduction and upgrades of technical
equipment and boasts the largest and most advanced pulping and paper making production line in the world. The
Company’s major production equipment has been imported from internationally renowned manufacturers including
Metso and Valmet of Finland Voith of Germany Andritz of Austria etc. and reached the advanced international level.
For the moment the Company has three paper machines with a paper width of more than 11 metres which ensures
production efficiency and product quality. While making full use of international resources the Company combines
product characteristics and actual needs to improve technology and technical processes refine operations transform
and optimise the pulp system’s degassing technology wet end chemical technology intelligent sheet lateral control
technology coating preparation technology and other technical processes thereby significantly improving the overall
efficiency.
6. Advantages in research and innovation
The Company Zhanjiang Chenming Shouguang Meilun Jiangxi Chenming Jilin Chenming Huanggang Chenming
and Wuhan Chenming are high and new technology enterprises. Supported by the national enterprise technology
centre and the post-doctoral working station in recent year the Company has vigorously implemented innovation
promotion strategy actively carried out in-depth industry-university-research cooperation with various prestigious
domestic universities and research institutes put more and more efforts in technical innovation and scientific research
and development to develop new products with high technology contents and high added value as well as proprietary
technologies. As of the date of this report the Company has obtained 303 national patents including 25 patents
for invention 7 products selected as national new products 15 science and technology progress awards above
the provincial level and undertaken five national science and technology projects and 63 provincial technological
innovation projects.
2020 ANNUAL REPORT 19
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
7. Team management advantages
With a reasonable and balanced professional structure the Company has an experienced and stable core
management team including high-end talents specialised in production technology sales finance laws etc. In the
course of business operations the stable core team has developed an internal corporate culture that ties in with the
Company’s development summarised management experience with industry characteristics and formed a team
advantage combining management and culture. At the same time the Company has paid attention to the construction
of a talent reserve cultivation mechanism. With advanced business concepts and enormous development space
the Company has attracted an array of high-calibre professionals and improved the level of talent pool. During the
reporting period the Company optimised its mid- and long-term incentive mechanism implemented an equity
incentive plan and granted a total of 79.6 million restricted A-shares to 111 participants which further stimulated the
creativity of the management team.
8. Advantages in environmental governance capacity
The Company has actively upheld the concept of “lucid waters and lush mountains are invaluable assets” adhered
to the development idea of “placing green development and environmental protection as its priority” unswervingly
followed the path of green development and always regarded environmental protection as the “life project” to fully
implement clean production energy conservation emission reduction and resource recycling and earnestly shoulderthe corporate responsibility of environmental protection. The Company was awarded the honorary title of “2020
Environmental and Social Responsibility Enterprise”.
In recent years the Company and its subsidiaries have constructed the pollution treatment facilities including the
alkali recovery system middle water treatment system middle water reuse system white water recovery system and
black liquor comprehensive utilisation system. The environmental indicators of the Company rank high in the countryand in the world. At present the Company adopts the world’s most advanced “ultrafiltration membrane+reverseosmosis membrane” technology to complete the reclaimed water recycling membrane treatment project which is
the largest middle water reuse project in the domestic paper industry. The reclaimed water recycle rate reaches more
than 75%. The reclaimed water quality meets drinking water standards which can save fresh water every day 170000
cubic meters.
SHANDONG CHENMING PAPER HOLDINGS LIMITED20
V Discussion and Analysis of Operations
I. Overview
In 2020 the unexpected COVID-19 epidemic posed unprecedented shock to the global economy and increased the
downward pressure of the economy. Under the leadership of the Central Committee of the Communist Party of China
China adhered to the general principle of seeking progress while maintaining stability carried out epidemic prevention
and control and promoted economic development in a coordinated manner. With the continuous implementation of the
“six stability” and “six guarantees” tasks domestic economy embraced steady resuscitation and China became the only
country among the world’s major economies that achieved positive growth. As one of the important basic raw materialindustries in China the output and total profit of the paper making and paper product industry exhibited a trend of “turninga negative into a positive accelerating quarter by quarter”. Reeled from the epidemic in the first quarter during this reporting
period the paper making industry was confronted with problems such as insufficient raw materials delays in production
resumption and return to work difficulties in logistics and delivery decline in foreign trade and insufficient market demand.
According to the National Bureau of Statistics the output of machine-made paper and paper board in China decreased by
12.4% year on year the total profit of industrial enterprises above designated size in the paper making and paper product
industry fell by 5.5% year on year. Since entering the second quarter with the gradual strengthening of epidemic prevention
and control achievements enterprises resumed work and production in an orderly manner. Thanks to the combined effects
of favourable policies such as the “ban on importing waste” and a stricter ban on plastics market demand gradually picked
up which stimulated a price rise of pulp and machine-made paper and improved prosperity of the paper making industry.The major indicators changed from negative to positive and recorded growth against the overall downtrend. According
to the data from the National Bureau of Statistics from January to December 2020 the national output of machine-made
paper and paper board was 127006300 tonnes a record high since the founding of the People’s Republic of China.The Company seized opportunities during crisis and sought stability in changes. During the reporting period the Company
as a leading player in the paper making industry in China took strict control over the epidemic during the critical period of
epidemic prevention and control carried out production resumption and return to work in an orderly manner and stabilised
production and product quality. As the prevention and control of the epidemic bore fruits market demand increased with a
higher pulp price. The Company’s major types of paper saw a price rise. The advantages of the pulp and paper integration
became more apparent with further enhanced profitability and successful fulfilment of various mission goals.
In 2020 the Company produced 5.77 million tonnes machine-made paper with sales of 5.61 million tonnes representing
a year-on-year increase of 15.17% and 6.86% respectively. The Company recorded revenue of RMB30737 million
representing a year-on-year increase of 1.12%. Total profit and net profit attributable to equity holders of the Company
amounted to RMB2172 million and RMB1712 million respectively representing a year-on-year increase of 6.04% and
3.35%. The operation and management results were mainly reflected in the following aspects:
(i) Achieving objectives of production capacity and efficiency strategic optimisation and upgrading
In recent years the Company continued to focus on the development of the principal business of pulping and paper
making. It successively invested in the 500000-tonne cultural paper renovation project of Shouguang headquarters
the 510000-tonne high-end cultural paper project of Shouguang Meilun the 1 million-tonne chemical pulp project of
Shouguang Meilun and 600000-tonne of chemical wood pulp project of Huanggang Chenming. The Company’s pulp
and paper production capacity reached more than 11 million tonnes becoming the only pulping and paper making
enterprise in China with a balanced pulp and paper production capacity. During the reporting period as the pulp price
continued to rise the Company’s advantages of low costs became prominent. New projects achieved the objectives
of production capacity and efficiency and recorded year-on-year growth of total profit.
2020 ANNUAL REPORT 21
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(ii) Satisfying performance brought by innovative sales
In 2020 the COVID-19 epidemic brought a severe impact on sales work. In face of challenges all sales personnel
actively strengthened marketing and promotion assessed the current situation seized the opportunity generated
by improved market sentiment and continued to increase prices so as to achieve increases in both production and
sales. The sales volume of machine-made paper was 5.61 million tonnes representing an increase of 360000 tonnes
over last year. Firstly we strengthened channel development and customer management. As a result the number of
contracted customers increased significantly and the market construction has been steadily improved. Secondly
we gave full play to the advantages of the production base layout and increased sales at close distances. Thirdly we
improved credit management increased prepayments and strictly control business risks. Fourthly we insisted on
structural adjustments actively developed new products increased sales of products with greater profit margin and
strengthened competitive advantages.(iii) Significant effects of supply chain management
During the reporting period the management of the supply chain management centre was improved. The centre
strove for favourable policies and the direct procurement from sources was taken to a higher level. The highlights
of our unparalleled results are as follows: 1. the amount of funds used was lowered by improving plan management
regulating and sharing materials and selling on consignment. 2. National policies were researched on and strivedfor. The Company was approved as “The Experimental Unit for the Regulatory Reform of the Processing Trade of
Enterprise Groups”. The Company and relevant import and export trade companies were approved to enjoy the tax
payment guarantee policies provided by the Finance Company of Chenming leading to a lower cost of customs
clearance and quicker clearance than ever before. 3. The management of suppliers was further improved. We
explored new sources vigorously. Its cooperation with customers the stability of the supply of raw materials and the
quality of raw materials were taken to a higher level.(iv) Improving financial management and capital structure
During the reporting period even though being confronted with harsh economic conditions the Company improved
its financial management steadily. Various measures were adopted to optimise our debt and capital structure leading
to a better financial conditions. 1. By enhancing capital management lowering the balance of bonds and reducing our
debt and lease in a sustained way the Company withdrew capital with a net value of RMB3600 billion. Risks were
under effective control and financial security was ensured. 2. Promoting setting up a financial information system and
a capital management platform realising a comprehensive improvement of the overall arrangement standardisation
and financial management of the Group’s financial business. 3. The policies benefiting enterprises the scientific tax
planning improved analysis on the trend of exchange rates and other measures resulted in a lower cost of funds and
a better financial position.
SHANDONG CHENMING PAPER HOLDINGS LIMITED22
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(v) Improving production management and exploring our potentials for a higher efficiency
During the reporting period our production system adhered to the guiding principles and goals of the Company.
Our production management was enhanced. Our production was sped up for a high production volume. We also
explored our potentials for a higher efficiency. The Company produce 5.77 million tonne machine-made paper in
2020 representing a year-on-year increase of 0.76 million tonnes. 1. We carried out standard practice vigorously to
ensure that our paper making machines can operate in best conditions aiming to increase production and efficiency. 2.Upholding the operation philosophy of “pulp and paper integration”. Maximising the production of self-produced pulp
by increasing the production of paper making machines. 3. Producing products with high added value by adjusting
product mix. Optimising the proportion of pulp to other materials to lower production costs. Our volume of production
is determined on sales and our production is arranged scientifically. We manage our inventory vigorously. Measures
in relation to saving water and reducing pollutants discharges were adopted. The purpose of all of these actions is to
explore our potentials and increase efficiency.(vi) Strict corporate management producing initial success
In 2020 the Company’s management centre improved its basic management to conform to a series of requirements
and a certain amount of effect was produced. The details are as follows:
1. Improving and streamlining our institutions and enhancing our implementation. The Group’s overall management
institutions were streamlined to make them simple and easy to use. We have developed 160 new procedures
and the number of existing procedures is over 1200. Certain parts of these procedures are monitored by a
mechanically controlled early warning system leading to a higher operational efficiency. We obeyed our rules
and regulations in a stricter manner. Problems were solved immediately once they were discovered. Weekly
examinations and appraisals were conducted on essential works improving the quality of our works effectively.
2. Improving our incentive mechanism and strengthening our team building. Our check-up system was organised
comprehensively and our medium-term and long-term incentive mechanism was improved. The 2020
Restricted A Shares Incentive Plan was implemented thus members of our team were motivated effectively.
Everyone’s enthusiasm was aroused by taking up a job through competition among cadres appraising through
democratic discussion choosing excellent employees and other activities. We improved the quality of our
training and trained our own talents by building an online learning platform and an operational classroom and
conducting training with special topic.
2020 ANNUAL REPORT 23
V Discussion and Analysis of Operations
II. Analysis of principal operations
1. Overview
Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2020 2019
Increase/decrease Amount % of revenue Amount % of revenue
Total revenue 30736517996.90 100% 30395434073.35 100% 1.12%
By industry
Machine-made paper 26799197492.54 87.19% 25911568864.47 85.25% 3.43%
Financial leasing 935121026.20 3.04% 1815459714.28 5.97% -48.49%
Construction materials 419138839.41 1.36% 311264909.38 1.02% 34.66%
Electricity and steam 195367954.91 0.64% 143725243.14 0.47% 35.93%
Chemicals 144274657.39 0.47% 126550115.28 0.42% 14.01%
Others 2243418026.45 7.30% 2086865226.80 6.87% 7.50%
By product
White paper board 7900414595.22 25.70% 6908899578.15 22.73% 14.35%
Duplex press paper 6880399009.21 22.39% 7728877039.07 25.43% -10.98%
Coated paper 4134523188.76 13.45% 3779487348.44 12.43% 9.39%
Electrostatic paper 4052403877.82 13.18% 3270064358.54 10.76% 23.92%
Anti-sticking raw paper 1118932774.91 3.64% 1238578315.18 4.07% -9.66%
Household paper 531378922.70 1.73% 620993038.46 2.04% -14.43%
Other machine-made
paper 2181145123.92 7.10% 2364669186.64 7.78% -7.76%
Financial leasing 935121026.20 3.04% 1815459714.28 5.97% -48.49%
Construction materials 419138839.41 1.36% 311264909.38 1.02% 34.66%
Electricity and steam 195367954.91 0.64% 143725243.14 0.47% 35.93%
Chemicals 144274657.39 0.47% 126550115.28 0.42% 14.01%
Others 2243418026.45 7.30% 2086865226.80 6.87% 7.50%
By geographical
segment
Mainland China 27683360047.76 90.07% 26788134394.76 88.13% 3.34%
Other countries and
regions 3053157949.14 9.93% 3607299678.59 11.87% -15.36%
SHANDONG CHENMING PAPER HOLDINGS LIMITED24
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(2) Industries products or regions accounting for over 10% of revenue or operating profit of the Company
√ Applicable □ Not applicable
Unit: RMB
Revenue Operating costs Gross profit margin
Increase/decrease
of revenue as
compared to the
corresponding
period of the
prior year
Increase/decrease
of operating costs
as compared to the
corresponding
period of the
prior year
Increase/decrease
of gross profit
margin as compared
to the corresponding
period of the
prior year
By industry
Machine-made
paper 26799197492.54 21227455753.49 20.79% 3.43% 3.94% -0.39%
Financial leasing 935121026.20 127620095.42 86.35% -48.49% 6.41% -7.04%
By product
White paper board 7900414595.22 5764493788.34 27.04% 14.35% -4.69% 14.57%
Duplex press paper 6880399009.21 5658261879.44 17.76% -10.98% -5.85% -4.48%
Coated paper 4134523188.76 3253634912.22 21.31% 9.39% 13.16% -2.62%
Electrostatic paper 4052403877.82 3196464794.41 21.12% 23.92% 32.27% -4.98%
Anti-sticking raw
paper 1118932774.91 868748128.10 22.36% -9.66% -2.21% -5.91%
Financial leasing 935121026.20 127620095.42 86.35% -48.49% 6.41% -7.04%
By geographical
segment
Mainland China 27683360047.76 21069825079.51 23.89% 3.34% 8.21% -3.42%
Other countries
and regions 3053157949.14 2575769106.70 15.64% -15.36% -21.45% 6.54%
Under the circumstances that the statistics specification for the Company’s principal operations data
experienced adjustment in the reporting period the principal activity data upon adjustment of the statistics
specification as at the end of the reporting period in the latest year
□ Applicable √ Not applicable
2020 ANNUAL REPORT 25
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes □ No
By industry Item Unit 2020 2019
Increase/
decrease
Machine-made paper Sales ’0000 tonnes 561 525 6.86%
Production output ’0000 tonnes 577 501 15.17%
Inventories ’0000 tonnes 40 24 66.67%
Explanation on why the related data varied by more than 30%
√ Applicable □ Not applicable
As at the end of 2020 the inventories of machine-made paper increased by 66.67% from 240000 tonnes to
400000 tonnes as at the end of 2019 primarily due to lower sales as compared to production output due to the
COVID-19 epidemic during the reporting period.
(4) Performance of material sales contracts of the Company during the reporting period
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(5) Composition of operating costs
By industry
Unit: RMB
By industry Item
2020 2019
Increase/decreaseAmount % of operating costs Amount % of operating costs
Machine-made paper Raw materials 12830708837.34 60.44% 11895067318.85 58.24% 7.87%
Chemicals 2571910928.88 12.12% 2919986264.98 14.30% -11.92%
Energy and power 2278028439.77 10.73% 2258151625.63 11.06% 0.88%
Shipping fee 1108102345.78 5.22% 968334036.25 4.74% 14.43%
Depreciation 1024679469.64 4.83% 998944171.58 4.89% 2.58%
Labour costs 273064171.97 1.29% 302162995.36 1.48% -9.63%
Other production costs 1140961560.11 5.37% 1080852932.00 5.29% 5.56%
Subtotal 21227455753.49 100.00% 20423499344.65 100.00% 3.94%
Power and steam Raw materials 100417013.28 76.99% 93231639.91 81.42% 7.71%
Depreciation 11986604.72 9.19% 8188723.61 7.15% 46.38%
Labour costs 5042260.92 3.87% 3266996.70 2.85% 54.34%
Energy and power 5424201.15 4.16% 3133240.96 2.74% 73.12%
Chemicals 197996.81 0.15% 201122.01 0.18% -1.55%
Other production costs 7367419.47 5.65% 6485517.59 5.66% 13.60%
Subtotal 130435496.35 100.00% 114507240.78 100.00% 13.91%
Construction materials Raw materials 253136606.53 70.56% 186642183.80 73.31% 35.63%
Energy and power 40584938.35 11.31% 22421006.56 8.81% 81.01%
Labour costs 22635978.10 6.31% 15055767.95 5.91% 50.35%
Depreciation 10376987.54 2.89% 7047835.66 2.77% 47.24%
Shipping fee 9368706.78 2.61% 2284676.48 0.90% 310.07%
Other production costs 22626450.43 6.31% 21130132.76 8.30% 7.08%
Subtotal 358729667.72 100.00% 254581603.21 100.00% 40.91%
(6) Change of scope of consolidation during the reporting period
√ Yes □ No
During the reporting period the scope of consolidation had 8 newly established subsidiaries namely Chenming
(Overseas) Co. Ltd. Chenming (Singapore) Co. Ltd. Qingdao Chenming Import and Export Trade Co. Ltd. Hainan
Chenming Technology Co. Ltd. Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership
(Limited Partnership) Hubei Huanggang Chenming Equity Investment Fund Management Co. Ltd. Shandong
Dingkun Asset Management Partnership (Limited Partnership) and Huanggang Chenming Paper Technology Co.
Ltd. During the reporting period a subsidiary was acquired not within the definition of business namely Shanghai
Herui Investment Co. Ltd. and a subsidiary Kunshan Tuoan Plastic Products Co. Ltd. was acquired by the Group.
During the reporting period 3 companies were reduced from the scope of consolidation. A subsidiary Shandong
Chenming Paper Group (Fuyu) Sales Co. Ltd. was absorbed into the Group. The Company disposed of 100%
equity interest in Qingdao Chenming International Logistics Co. Ltd. and 100% equity interest in Shouguang
Chenming Industrial Logistics Co. Ltd. Such companies were excluded from the scope of consolidation.
2020 ANNUAL REPORT 27
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(7) Significant change in or adjustment of the businesses products or services of the Company during the
reporting period
□ Applicable √ Not applicable
(8) Sales to major customers and major suppliers
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 4206250003.00
Total sales to top 5 customers as a percentage of the total sales for the year 13.68%
Sales to top 5 customers who are related parties as a percentage of the total sales for the
year 0.00%
Information on top 5 customers of the Company
No. Name of customer Sales (RMB)
As a percentage
of the total sales
for the year (%)
1 Customer A 1517790193.09 4.94%
2 Customer B 874517197.71 2.85%
3 Customer C 757788686.39 2.47%
4 Customer D 568959413.24 1.85%
5 Customer E 487194512.57 1.59%
Total – 4206250003.00 13.68%
Other explanation of the major customers
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED28
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(8) Sales to major customers and major suppliers (Cont’d)
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 3318628631.65
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 14.03%
Total purchases from top 5 suppliers who are related parties as a percentage of the total
purchases for the year 0.00%
Information on top 5 suppliers of the Company
No. Name of supplier Purchases (RMB)
As a percentage of
the total purchases
for the year (%)
1 Supplier A 728638276.95 3.08%
2 Supplier B 713093673.39 3.02%
3 Supplier C 712173613.55 3.01%
4 Supplier D 618918206.86 2.62%
5 Supplier E 545804860.90 2.31%
Total – 3318628631.65 14.03%
Other explanation of the major suppliers
□ Applicable √ Not applicable
3. Expenses
Unit: RMB
2020 2019
Increase/
Decrease (%) Reasons for material changes
Selling and distribution
Expenses
298246355.91 320810724.85 -7.03% Salaries and travel expenses decreased
year on year during the reporting
period.General and administrative
expenses
1025420660.39 1134725391.84 -9.63% Loss on work stoppage decreased year
on year during the reporting period.
Finance expenses 2562065063.22 2916029154.37 -12.14% Interest expenses of the Company
decreased year on year during the
reporting period.Research and development
expenditure
1274355241.49 992312956.74 28.42% The Company increased efforts in
research and development during the
reporting period.
2020 ANNUAL REPORT 29
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
4. Research and development expenditure
√ Applicable □ Not applicable
During the reporting period the Company’s technological R&D centre is carrying out its guiding principle of“optimisation and innovation leading technologies structural adjustment increasing economic benefit qualitymanagement first-class quality improving management and great achievements”. We are always guided by
customers’ needs. Improving economic benefits is our goal. We keep pushing technological innovations the
production of products with high added value technological optimisation aiming to improve the quality of our
products. In 2020 the Company obtained 76 national patents one of which was a patent of paper making
denaturation amylum representing the Company’s breakthrough in the field of papermaking denaturation amylum.We applied for special technological research cases on the provincial level vigorously. Five cases were on the list of
2020 Shandong Technological Innovation Special Cases for instance the “Technological Development of EffectiveSizing with Electrostatic Paper” case the “Technological Development of Art Paper for Advertisement” case and the“Technological Development of Art Paper for Culture”. The “Technological Development of Rime Art Paper” case
and the “Super High Bulk Art Paper for Children’s Picture Album” were honoured as the Excellent New Product of
2020 Shandong Technological Innovation Award and the First Prize of Excellent New Achievement. The Company
will continue adhering to the orientation of technological innovation. We will improve our R&D and product quality in a
sustained way aiming to take our core competence in developing the enterprise to a higher level.Research and development expenditure of the Company
2020 2019
Percentage
of change
R&D headcount 1933 1925 0.42%
Ratio of R&D personnel 15.16% 14.07% 1.09%
R&D expenditure (RMB) 1274355241.49 992312956.74 28.42%
R&D expenditure to revenue 4.15% 3.26% 0.89%
Reasons for significant change in total R&D expenditure to revenue
□ Applicable √ Not applicable
Reasons for and reasonableness of the significant change of the capitalisation rate of R&D expenditure
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED30
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
5. Cash flows
Unit: RMB
Item 2020 2019
Increase/
decrease (%)
Subtotal of cash inflows from operating activities 40142770644.64 41633562986.95 -3.58%
Subtotal of cash outflows from operating activities 28882967968.36 29400855764.01 -1.76%
Net cash flows from operating activities 11259802676.28 12232707222.94 -7.95%
Subtotal of cash inflows from investing activities 800515222.13 1135086731.00 -29.48%
Subtotal of cash outflows from investing activities 981555028.94 3160639742.95 -68.94%
Net cash flows from investing activities -181039806.81 -2025553011.95 91.06%
Subtotal of cash inflows from financing activities 31654325203.77 34920351820.10 -9.35%
Subtotal of cash outflows from financing activities 41248363106.56 44407779477.64 -7.11%
Net cash flows from financing activities -9594037902.79 -9487427657.54 -1.12%
Net increase in cash and cash equivalents 1498841936.39 508769784.89 194.60%
Explanation on main effects of material changes in relevant data year-on-year
√ Applicable □ Not applicable
Net cash flows from investing activities increased by 91.06% as compared to the corresponding period of the prior
year mainly due to the purchase of the equity interest in Nanyue Bank by the Company during the corresponding
period of the prior year.
Explanation on reasons leading to the material difference between net cash flows from operating activities during the
reporting period and net profit for the year
□ Applicable √ Not applicable
III. Analysis of non-principal operations
□ Applicable √ Not applicable
2020 ANNUAL REPORT 31
V Discussion and Analysis of Operations
IV. Analysis of assets and liabilities
1. Material changes of asset items
Particulars in relation to adjustments made to relevant items of the financial statements as at the beginning of the year
of the initial adoption of New Revenue Standard and New Leases Standard by the Company from 2020
Not applicable
Unit: RMB
As of the end of 2020 As of the beginning of 2020
Percentage
change DescriptionAmount
As a percentage
of total assets Amount
As a percentage
of total assets
Accounts receivable 1984931665.82 2.17% 2525083311.03 2.58% -0.41% Mainly due to the Company stepping up its
efforts to recover its receivables and increased
its account receivable turnover rate.Prepayments 964290512.36 1.05% 603573549.08 0.62% 0.44% Mainly due to the increase of the Company’s raw
material prepayment.Non-current assets due
within one year
4222744207.34 4.61% 6974539613.30 7.12% -2.51% Mainly due to the extension granted to certain
financial leasing customers as affected by the
COVID-19 epidemic.
Other current assets 2716918695.85 2.97% 8108707394.70 8.28% -5.31% Mainly due to continued reduction of the scale of
the financial leasing business.Long-term receivables 4658884857.95 5.09% 1200575810.95 1.23% 3.86% Mainly due to the extension granted to certain
financial leasing customers as affected by the
COVID-19 epidemic.
Investment properties 5943159568.00 6.49% 5082362293.11 5.19% 1.30% Mainly due to the transfer of Shanghai Herui’s
equity to offset the debts of the leasing
companies.
Fixed assets 37651706658.97 41.12% 34439935032.69 35.16% 5.96% Mainly due to the transfer of assets of the
Huanggang chemical pulp project.Construction in progress 179857941.83 0.20% 5476122928.95 5.59% -5.39%
Short-term borrowings 32793992957.86 35.81% 36883156014.19 37.65% -1.84% Mainly due to the active reduction of the scale of
short-term debt.
Bills payable 2998936736.34 3.27% 1515048206.00 1.55% 1.73% During the reporting period the Company
increased its payment for goods with bills.Other payables 1956715367.83 2.14% 2594249626.54 2.65% -0.51% Mainly due to the repayment of shareholders’
financial assistance during the reporting period.Non-current liabilities due
within one year
7160949615.93 7.82% 5662958920.03 5.78% 2.04% Mainly due to the medium-term notes due within
one year and the reclassification of its effect.
Bonds payable 1536877351.46 1.68% 1258270909.49 1.28% 0.39% Mainly due to the resale of the 350 million
Corporate Bonds during the reporting period.
Other non-current liabilities 789521686.07 0.86% 3042841328.86 3.11% -2.24% Mainly due to the reclassification of certain
medium-term notes to non-current liabilities
due within one year during the reporting period.Other equity instruments 5473500000.00 5.98% 7465500000.00 7.62% -1.64% Repayment of the 2 billion Perpetual Bonds
during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED32
V Discussion and Analysis of Operations
IV. Analysis of assets and liabilities (Cont’d)
2. Assets and liabilities measured at fair value
√ Applicable □ Not applicable
Unit: RMB
Item
Opening
balance
Profit or loss
from change in
fair value during
the period
Cumulative
fair value
change charged
to equity
Impairment
provided
during
the period
Increase in
purchases/
breeding during
the period
Disposal during
the period
Other
changes
Closing
balance
1. Held-for-trading financial
assets (excluding derivative
financial assets) -2777016.53 -2777016.53 195684817.15 192907800.62
2. Other non-current financial
assets 147445653.55 9464346.45 55910000.00 4000000.00 15000000.00 145910000.00
3. Consumable biological
assets measured at fair value 1541004633.42 -13329852.55 20102661.98 66312515.15 58600430.58 1535386865.44
Whether there were any material changes on the measurement attributes of major assets of the Company during the
reporting period
□ Yes √ No
3. Restriction on asset rights as at the end of the reporting period
Unit: RMB
Item
Carrying amount
as at the end of
the period Reasons for such restriction
13022652331.98 As deposits for bank acceptance bills and letters of credit
and deposit reserves etc.
96453900.31 As deposits for borrowings from Haitong International
Securities
5555551.65 As collateral for letters of guarantee and letters of credit
4929794589.62 As collateral for bank borrowings
11147836807.04 As collateral for bank borrowings and long-term payables
Monetary funds
Held-for-trading financial assets
Accounts receivable financial
Investment properties
Fixed assets
Intangible assets
1247015765.23 As collateral for bank borrowings and long-term payables
Total 30449308945.83
2020 ANNUAL REPORT 33
V Discussion and Analysis of Operations
V. Investments
1. Overview
√ Applicable □ Not applicable
Investments during the reporting period (RMB)
Investments during
the corresponding
period of prior year
(RMB) Change
1940190000.00 3601194479.24 -46.12%
2. Material equity investments during the reporting period
√ Applicable □ Not applicable
Unit: RMB
Name of investee Principal activities
Form of
investment
Investment
amount Shareholding
Source of
fund Partner(s)
Period of
investment Product type
Progress as
at the date of
balance sheet
Estimated
return
Profit or loss
from
investment
for the period
Involvement
in lawsuit
Date of
disclosure
(if any)
Disclosure index
(if any)
Kunshan Tuoan Plastic
Products Co. Ltd.Plastic products Acquisition 220000000.00 100% Self-owned
funds
Subsidiary Long-term Plastic products Completed 0.00 7770967.40 No Not applicable Not applicable
Hainan Chenming Technology
Limited
Goods procurement and
sales
Newly
established
10000000.00 100% Self-owned
funds
Subsidiary Long-term Wood products
wood pulp
machine-made
paper
Completed 0.00 214053.76 No Not applicable Not applicable
Hubei Changjiang Chenming
Huanggang Equity Investment
Fund Partnership (Limited
Partnership)
Consulting service
business related to
non-securities equity
investment activities
Newly
established
533390000.00 59.97% Self-owned
funds
Hubei Changjiang
(Huanggang)
Asset Investment
Fund Partnership
(Limited
Partnership)
Operating period
of 5 years
automatic
extension after
maturity
Privately placed Completed 0.00 – No 24 December
2020
http://www.cninfo.com.cn
Shandong Dingkun Asset
Management Partnership
(Limited Partnership)
Asset management
services for self-owned
fund investments
Newly
established
1000000000.00 99.90% Self-owned
funds
Subsidiary Long-term Asset
management
Completed 0.00 -31859598.23 No 24 December
2020
http://www.cninfo.com.cn
Shanghai Herui Investment Co.Ltd.Industrial investment Acquisition 176800000.00 100% Self-owned
funds
Subsidiary Long-term Investment
apartment
Completed 0.00 – No 5 December
2020
http://www.cninfo.com.cn
Total – – 1940190000.00 – – – – – – 0.00 -23874577.07 – – –
3. Material non-equity investments during the reporting period
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED34
V Discussion and Analysis of Operations
V. Investments (Cont’d)
4. Financial asset investment
(1) Security investments
√ Applicable □ Not applicable
Unit: RMB
Type of security
Stock
code
Abbreviation of
stock name
Initial
investment
cost
Accounting
measurement
model
Book value at
the beginning
of the
reporting
period
Profit or loss
from changes
in fair value
in the current
period
Accumulated
changes in fair
value included
in equity
Purchased
amount in
the current
period
Sold amount
in the current
period
Profit or
loss during
the reporting
period
Book value
at the end of
the reporting
period
Classification
in accounts
Source of
shareholding
Domestic and
foreign shares
09668 China Bohai
Bank
195684817.15 Measured at
fair value
0.00 -2777016.53 -2777016.53 195684817.15 0.00 -2777016.53 192907800.62 Held-for-trading
financial assets
Self-owned funds
and borrowings
Total 195684817.15 – 0.00 -2777016.53 -2777016.53 195684817.15 0.00 -2777016.53 192907800.62 – –
Disclosure date of announcement in relation
to the consideration and approval of securities
investments by the Board
20 June 2020
Disclosure date of announcement in relation
to the consideration and approval of securities
investments by the shareholders’ general
meeting (if any)
Not applicable
(2) Derivatives investments
□ Applicable √ Not applicable
The Company did not have any derivative investments during the reporting period.
5. Use of proceeds
□ Applicable √ Not applicable
The Company did not use any proceeds during the reporting period.
2020 ANNUAL REPORT 35
V Discussion and Analysis of Operations
VI. Disposal of material assets and equity interest
1. Disposal of material assets
□ Applicable √ Not applicable
The Company did not dispose any material assets during the reporting period.
2. Disposal of material equity interest
√ Applicable □ Not applicable
Counterparty(ies)
Equity interest
disposed of
Disposal
date
Transaction
consideration
(RMB’0000)
Net profit
contribution
to the
Company
from the
beginning of
the period
up to the
disposal
date
(RMB’0000)
Effect of disposal
on the Company
Net profit
contribution to
the Company
on equity
disposal as a
percentage of
total net
profit (%)
Pricing basis of
disposal of
equity interest
Related
party
transaction
or not
Relationship
with
counterparty(ies)
Relevant
asset
title fully
transferred
or not
Carried out on
schedule or
not if not
the reasons
and measures
taken by
the Company
Disclosure
date
Disclosure
index
Zhanjiang Kangyao
Timber Limited
Shouguang
Chenming
Industrial
Logistics
Co. Ltd.
29 February
2020
710 -397.07 Beneficial for
resources integration
of the Company
asset portfolio
optimisation and
concentration of
competitive edges
on principle
businesses to
improve quality and
efficiency.
0.66% Appraised value No Not related party Yes Transfer
completed
Not applicable Not applicable
Zhanjiang Kangyao
Timber Limited
Qingdao
Chenming
International
Logistics
Co. Ltd.
29 February
2020
2300 -36.61 0.32% Appraised value No Not related party Yes Transfer
completed
Not applicable Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED36
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees
√ Applicable □ Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMB
Name of company
Type of
company Principal activities
Registered
capital Total assets Net assets Revenue Operating profit Net profit
Zhanjiang Chenming
Pulp & Paper Co. Ltd.Subsidiary Production and sale
of duplex press paper
electrostatic paper
and white paper board
5550000000.00 23682487540.14 10198061649.33 11870586483.29 1324125687.68 1192007567.15
Jiangxi Chenming Paper
Co. Ltd.
Subsidiary Production and sale of
white paper board
cultural paper and light
weight paper
2448235549.05 7640903439.72 3344498934.32 3434854907.78 294479476.26 265237736.13
Shouguang Meilun Paper
Co. Ltd.
Subsidiary Production and sale of
coated paper cultural
paper household paper
and chemical pulp
3432631579.00 14925462793.85 5880335249.54 8070365747.22 227550879.88 219893721.83
Shandong Chenming
Group Finance Co. Ltd.Subsidiary Financial services 5000000000.00 8154685390.31 5348813486.25 358333247.22 283123201.10 211363966.26
2020 ANNUAL REPORT 37
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees (Cont’d)
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ Not applicable
Name of company
Methods to acquire and
dispose of subsidiaries during
the reporting period
Impact on overall production and
operation and results
Chenming (Overseas) Co. Ltd. Newly established There are few business operations and
no impact at the moment.
Chenming (Singapore) Co. Ltd. Newly established There are few business operations and
no impact at the moment.Qingdao Chenming Import and Export Trade Co. Ltd. Newly established There are few business operations and
no impact at the moment.Hainan Chenming Technology Co. Ltd. Newly established Net profit increased by RMB0.21 million.Hubei Changjiang Chenming Huanggang Equity
Investment Fund Partnership (Limited Partnership)
Newly established There are few business operations and
no impact at the moment.Hubei Huanggang Chenming Equity Investment Fund
Management Limited
Newly established There are few business operations and
no impact at the moment.Shandong Dingkun Asset Management Partnership
(Limited Partnership)
Newly established Net profit decreased by RMB31.86
million.Huanggang Chenming Paper Technology Limited Newly established There are few business operations and
no impact at the moment.Shanghai Herui Investment Co. Ltd. Acquisition There are few business operations and
no impact at the moment.Kunshan Tuoan Plastic Products Co. Ltd. Acquisition Net profit increased by RMB7.77 million.Shandong Chenming Paper Group (Fuyu) Sales
Co. Ltd.
Merger Net profit decreased by RMB0.32 million.Shouguang Chenming Industrial Logistics Co. Ltd. Transfer of 100% equity interest Net profit increased by RMB5.41 million.Qingdao Chenming International Logistics Co. Ltd. Transfer of 100% equity interest Net profit increased by RMB11.36 million.Particulars of major subsidiaries and investees
1、 For the integrated forestry pulp and paper project of Zhanjiang Chenming the gross profit margin of its main
products electrostatic paper and white paper board reached a high level showing strong profitability.
2、 Jiangxi Chenming is mainly engaged in the production and sales of white paper board and culture paper and the
profitability of white paper board has increased.
3、 Shouguang Meilun is responsible for the production and sales of coated paper and culture paper and its profitability
will further improve after its 1000000 tonne chemical pulp project commences operation.
4、 The Finance Company as the financial institution serving the Group’s companies saved financial costs for the
Company and recorded sound profitability.
SHANDONG CHENMING PAPER HOLDINGS LIMITED38
V Discussion and Analysis of Operations
VIII. Structured entities controlled by the Company
□ Applicable √ Not applicable
IX. Outlook on the future development of the Company
(i) Overview and development trend of the industry
Last year despite the unfavourable factors in macro-economy and global public health issue the Chinese
papermaking industry was able to withstand all kinds of pressure and overcame challenges thus realising steady
growth. According to the National Bureau of Statistics in 2020 the production volume of machine-make paper and
paper board in China was 127.0063 million tonnes representing a year-on-year increase of 1.48%. National-scale
enterprises realised total profit of RMB6451.610 billion representing an increase of 4.1% from last year. The supply-
side reform has gradually deepened. Low-end production capacity may actively exit the industry or passively forced
out from the industry. The industry completion has further optimised and the industry leaders had a greater influence
in the industry. The Waste Prohibition Order was implemented effectively. The optimisation of industry chain became
a national strategy. Industry leaders accelerated industry chain layout.Papermaking industry is a typical industry with high entry barriers and featured with obvious oligopoly. Looking
forward as driven by environmental protection policies the industry concentration is expected to further enhance.In addition the Waste Prohibition Order and the Plastic Restriction Order had directly and indirectly increased the
demand in upper stream paper pulp supply. In respect of overseas market the Company will create a better “combo”
through diversified market tools aiming to enhance its influence in global raw material market. In respect of domestic
market the acceleration in industry chain construction and optimisation of self-supply of raw materials to secure
stable supply will be the key focus of the industry in the future.(ii) Development strategy of the Company
2021 is the opening year of the “14th Five Year Plan”. As guided by the national key direction of “adhering to thenew development concept and building new development trend at the new development stage” the Companywill remain true to our original aspiration and develop by grasping opportunities arise. Taking “revitalising the
Chinese papermaking industry” as our mission with scientific development as main theme centring on efficiency
enhancement and focusing on pulp production and papermaking as major operation the Company will concentrate
on strengthen the industry and continue to put great efforts in the implementation of strategies driven by innovation
and development. The Company will accelerate the growth driver replacement. With transformation and upgrade
guided by green ecology the Company will fully exploit its advantages in full industry chain and adhere to the path
of quality sustainable green and low carbon development thereby offering customers with more eco-friendly qualityproducts and services. The Company will also strive to achieve the corporate mission of “developing Chenming as a
RMB100 billion enterprise with sustainable operation for a century”.
2020 ANNUAL REPORT 39
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(iii) Operation plans for 2021Stepping into a new path and get ready to set off. In 2021 the Company will develop the core value of “achievingwin-win situation with sincere operation” adhere to the management direction of “efficient management structureadjustment market exploration and strict risk control” and continue to carry forward our corporate philosophy of
“learning surpassing limits and maintaining leading position”. The Company will focus on operation management
further implement various working directions formulated fully enhance corporate management level and promote
quality development of the Company.
1. Focus on corporate management and efficiency enhancement
Adhering to the working direction of “focusing on execution for system optimisation incentive for appraisalenhancement actual effect for team building and result for management improvement” the Company will fully
enhance its management standards. Firstly the Company will focus on system implementation implement
automated operation in key procedures and formulate case study analysis for typical issues. Secondly the
Company will enhance its appraisal incentives further optimise appraisal measures highlight the performance
of key functions implement appraisal measures on key operations and motivate the work enthusiasm of
employees. The Company will also strictly implement performance-based incentive measures for cost reduction
efficiency enhancement and fight for policy and effectively mobilise the enthusiasm and creativity of works.Thirdly the Company will strengthen team building. Referencing to the advanced ways on talent recruitment of
outstanding enterprises the Company will introduce talent to its senior management and improve the overall
quality of management team. The Company will establish a professional training team which will offer accurate
effective and practical trainings for the development of the Company.
2. Focus on sales management and strive for innovation and breakthrough
Adhering to the concept of accountable to the customers the sales system will continue to implement theworking direction of “getting familiar to market operation striving for structure adjustment implementing strictcontrol over business risk and comprehensively improving management”. The Company will strengthen basic
management create innovative sales model and further increase the market share of products of the Company.
Firstly the Company will assess market trend enhance market operation adjust product portfolio and
improve the effectiveness of price rise. Secondly the Company will optimise the sales network and after-sale
service network proactive expand overseas sales channels and enhance its cooperation with core direct sale
customers thereby offering efficient quick and whole process services for customers. Thirdly the Company will
fully enhance basic management improve management system formulate sales policies in line with the actual
market condition increase control points on operational procedures and eliminate sales weaknesses. Fourthly
the Company will strengthen team building establish innovative appraisal model and implement comprehensive
“meshing” management over key markets and regions. The Company will also enhance the expertise of sales
personnel aiming to establish an efficient sales team.
SHANDONG CHENMING PAPER HOLDINGS LIMITED40
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(iii) Operation plans for 2021 (Cont’d)
3. Strengthening financial management to lower financial costsThe financial system will continue with the thorough implementation of the principles of “strict control over theuse of funds strengthening financing capabilities enhancing cost control and comprehensively improvingmanagement” as well as optimise the debt structure in an attempt to ensure high-quality and stable
operation of the Company. Firstly we will strengthen basic management promote the application of financial
management software in relation to credit and financial statements strengthen computer control and improve
our ability to analyse financial big data. Secondly our measures to optimise the financing structure include
reasonable planning of the issuance and composition of long-term and short-term bonds implementation of
equity financing projects such as convertible bonds and refinancing further efforts in reducing the scale of
financial leasing and bringing the Company’s gearing ratio down. Thirdly we will increase revenue and reduce
expenditure proactively pursue preferential policies optimise performance indicators of financing costs and
reduce financial expenditures.
4. Emphasis on production management to enhance production capability and efficiencyThe production system will continue to implement the business concepts of “stable operation greaterproduction capacity better quality and lower costs” and earnestly strive for safe and green production.
Firstly we will strengthen equipment management strictly conduct equipment inspection apply management
specifications promote the application of equipment informatisation and equipment check to give full play
to their performance. Secondly we will strengthen the management of spare parts achieve comprehensive
computer control over inventory and reduce capital occupation of spare parts and inventory. Thirdly we
will make adjustments to technology structure focus on the production of high value-added products
and comprehensively increase the pulp and paper production capacity by optimising the pulp formula and
strengthening the control measures in business operations. Fourthly we consistently pay attention to the safety
and environmental protection work and offer training and education on this topic. We will improve the business
skills of the production system team troubleshoot and deal with potential safety hazards defence the bottom
line of safety aim at zero environmental accident and effectively improve the level of production management.
5. Improving supply chain management to reinforce management in all respects
In order to improve service quality and create value the supply chain management centre will adhere to its
internal principles further strengthen supply chain management actively seek policy support strengthen
source procurement and expand business scopes. First of all we will optimise the management of the supplier
platform introduce a competitive mechanism identify outstanding suppliers to forge and improve stable and
long-term strategic cooperation with them. Furthermore we will improve the supply chain business process
strictly control capital occupation reinforce the management of the business plans share and transfer raw
materials within the Group and carry out consignment sales and other measures. Key nodes are included in
the early warning of computer control. In addition we will perform in-depth research about the futures market
actively use this instrument to optimise raw material prices prevent price risks and achieve price advantages
with the use of futures. Last but not least we will promote the construction of procurement information system
draw reference from practices of the international leading companies and build an information platform to
realises resource sharing.
2020 ANNUAL REPORT 41
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(iii) Operation plans for 2021 (Cont’d)
6. Other works commence orderly
Firstly the Company will focus on supervision and management so as to eliminate management frauds. We
will establish a strong team specialising in operation. Based on the preliminary works the Company will visit
work sites and discover any problem in a timely manner. Any incompliance will be vigorously combated. The
Company will optimise internal control procedures improve risk prevention and management system and
implement strict procedure management and procedure control. We promote standard corporate operation
through internal supervision over internal control information exchange mechanism and self-assessment
mechanism. In addition we will improve our corporate legal risk prevention mechanism and enhance procedure
supervision and significant risk control.Secondly the Company will enhance our service sense and improve service efficiency. Different administrative
departments will improve the professionalism initiative and efficiency of our service by positioning themselves
in serving the production and frontline sales. Departments will also build the awareness on serving each other
unblock cooperation channels and enhance work efficiency.Thirdly the Company will develop innovative marketing initiatives so as to enhance marketing effects. By fully
utilising new media and focusing on key areas marketing campaigns will be launched centring on the dynamic
corporate development phrasal key events and results advanced management concepts and measures
meritorious deeds recreational activities and other aspects aiming to improve the quality and standard of
marketing.(iv) Future capital requirements and source of funds
Focusing on principal operation and striving to the strategic plan on pulp and paper integration the Company
continued to strengthen its core competitiveness. Future capital requirements of the Company will mainly focus on:
the continuous investment in existing production facilities due to technology upgrade or production expansion; and
capital requirement for business expansion and daily operation. During the reporting period the phase II construction
of Huanggang Chenming was considered and approved at the 2020 fourth extraordinary meeting of the Company.The proposed total investment was RMB12.8 billion which will be partly funded by self-owned funds of the Company
as well as government guide funds policy support funds and syndicated loans.In order to meet various business development of the Company and further extend and expand the industry chain
the Company proactively expand financing channels enhance credit management implement well planned long and
short-term bond issue GDR Fund introduce and cooperate with factories and strategic investors diversify financing
channels through refinancing and other means and optimise financing structure thus providing stable financial
support for the operation and development of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED42
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(v) Risk factors likely to be faced and 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 laws and regulations
including the Policy on Papermaking Industry aiming to improve industry structure enhance product technology
and standard energy saving and emission reduction as well as eliminate outdated production capacity. With
the continuous economic development the policies on papermaking industry may further adjust in the future. In
addition the fiscal and financial policies bank interest rate import and export policy and other policies may be
adjusted in the future which will affect the operation and development of the Company to a certain extent.
Focusing on its principal operation on pulp production and papermaking the Company will strive to its
innovation-driven strategy. Centring on improving efficiency with the in-depth incorporation of smart technology
into industrial activities as main theme the Company will comprehensively optimise industrial structure and
regional layout establish coordinated efficient industry system and respond to challenges arose by leveraging
on its cost advantages thus realising steady growth in operating results. At the same time the Company will
strengthen the financial information system construction regulate financial management enhance financing
capability lower capital cost and strengthen its economic risk aversion capability.
2. Risk of intensifying market competition
As driven by industry policies environmental protection policies trade environment and other factors
papermaking enterprises commerce strategic transformation and upgrade put greater efforts in innovation and
research and development improve quality and efficiency and enhance product competitiveness resulting in
intensifying market competition.Leveraging on its vigorous management and world class equipment and technologies the Company will
continue to increase the value of Chenming brand and enhance brand influence. The Company constructed
several high-end paper production lines with diversified product structure and full range of products thus
diversifying market risk effectively and strengthening the market aversion capability of the Company. Based
on the location of production base products of the Company achieved sales in nearby areas and quick
delivery thus effectively lowering transportation cost radiating to market network and enhancing market
competitiveness.
3. Risk of price fluctuation of raw materials
Wood pulp and wood clips are the major raw materials of the Company. The market price of wood pulp
fluctuates significantly while wood clips are heavily dependent on export. If there is a significant fluctuation in
prices of raw materials in the future the product costs of the Company’s products will be affected which in
turns affect the performance of the Company.The Company strives to implement the development strategy of pulp and paper integration. At present the
Company has 3 large chemical pulp production lines in Shouguang Zhanjiang and Huanggang. Looking
forward the Company will focus on the construction of Hubei Huanggang Production Base in Central China
aiming to further optimise the industry chain of the integrated pulp and paper project of Huanggang Chenming
create the strategic layout of three major product bases for pulp and paper integration in Shandong Zhanjiang
and Huanggang fully exploit the advantages of full industry chain get rid of the restrictions brought by raw
materials on the Company and strengthen the core competitiveness of the Company.
2020 ANNUAL REPORT 43
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(v) Risk factors likely to be faced and measures to be taken (Cont’d)
4. Environmental protection policy risk
In recent years China’s environmental protection standards have become stricter. During the reporting period
China successively introduced and implemented the Law on the Prevention and Control of Environmental
Pollution by Solid Waste (revised) Management Law of Waste Disposal Permit (Draft) and other systems. A
higher emission standard is bound to increase the environmental protection costs in the industry and a high
entry standard may result in the slowdown of scale expansion.The Company always adheres to the development idea of “placing green development and environmentalprotection as its priority”. Starting from the source of production the Company widely adopts new technologies
for energy saving and emission reduction and strives to maximise its resource utilisation. Meanwhile the
Company will make greater efforts to construct environmentally friendly projects and strive to achieve its wasteemission target. At present the Company adopts the world’s most advanced “ultrafiltration membrane+reverseosmosis membrane” technology to complete the reclaimed water recycling membrane treatment project.The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking water
standards which can save fresh water every day 170000 cubic meters. At the same time the Company actively
explores the comprehensive utilisation of innovative resources and industrial recycling development models
and built three major circular economy ecological chains of “resources-products-renewable resources”.
5. Risk on financial leasing business
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
payment on time due to any reason and there are abuses on equipment or any other short-term behaviour.
Although the risk of such rental being unrecoverable is minimal the Company will also make bad debt provision
as required under its accounting policy. If such amounts cannot be recovered on time the Company may be
exposed to risk of bad debts.
Chenming Leasing has comprehensive risk prevention and control measures for the Company’s financial leasing
business with strong risk resistance and low risk of default. At present Financial Leasing Company continues
to implement the business strategy of continuous reduction with net recovery of proceeds of RMB3.6 billion
realised in 2020 which effectively put risk exposures under control.
SHANDONG CHENMING PAPER HOLDINGS LIMITED44
V Discussion and Analysis of Operations
X. Reception of research investigations communications and interviews
1. Reception of research investigations communications and interviews during the reporting period
√ Applicable □ Not applicable
Date of
reception
Site of
reception
Way of
reception
Type of
recipient Recipient
Major discussion points
and information provided
Index of the basic particulars
of the survey
1 April 2020 Meeting room of
the Company
Phone Institutions Southern Asset Management
Rongtong Fund Galaxy
AMC China Merchants Fund
Changxin Fund Dongwu
Light Engineering E Fund
Sun Life Everbright ICBC
Credit Suisse etc.
Company’s main operating
conditions business
conditions and project
progress
For details please refer to the
Investor Relations Activity
Record Sheet on
www.cninfo.com.cn
8 April 2020 Meeting room of
the Company
Phone Institutions Shenwan Hongyuan Security
Dacheng Fund Huatai
Insurance Yinhua Fund
UBS SDIC HSBC Jintrust
China Life Pension Company
Essence Fund etc.
Company’s main operating
conditions business
conditions and project
progress
For details please refer to the
Investor Relations Activity
Record Sheet on
www.cninfo.com.cn
29 September
2020
Panorama ?
Roadshow
platform
Network Individuals
institutions
Investors who participated
in the 2020 Investor Online
Collective Reception Day
of Listed Companies in
Shandong
Corporate governance
development strategy
operating status
Panorama ? Roadshow
http://rs.p5w.net/
Times of communications 3
Number of institutions communicated with 38
Number of individuals communicated with 22
Number of other communication parties 0
Tip-offs or leakages of substantial confidential information during
the communications
No
2020 ANNUAL REPORT 45
VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2020.I. Principal activities
Please refer to section IV “Business Overview” and “I. Principal operations of the Company during the Reporting Period”
and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
activities of the Company.II. Results and profit distribution
Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2020.III. Dividends
After the end of the reporting period the Board proposed to pay a final dividend for the year ended 31 December 2020 (“finaldividend”) of RMB1.85 in cash for every 10 Shares (tax inclusive) (2019: dividend of RMB1.465828 in cash for every 10
Shares (tax inclusive)) to the ordinary shareholders of the Company subject to approval of shareholders at the forthcoming
Annual General Meeting (“AGM”) of the Company held on 18 June 2021. Upon approval of shareholders of the Company at
the AGM the Company is expected to pay the final dividend on or by 18 August 2021 to shareholders whose names appear
on the register of members of the Company on 24 June 2021.In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008
where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
enterprise shareholders it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.Therefore as a PRC domestic enterprise the Company will after withholding 10% of final dividends as corporate income
tax distribute the final dividends to non-resident enterprise shareholders i.e. any shareholders who hold the Company’s
Shares in the name of non-individual shareholders including but not limited to HKSCC Nominees Limited or other
nominees trustees or holders of H Shares registered in the name of other organisations and groups.
Due to changes in the PRC tax laws and regulations according to the Announcement on the List of Fully and PartiallyInvalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation 《(關於公佈全文失效廢止﹑部份條款失效廢止的稅收規範性文件目錄的公告》) on 4 January 2011 individual Shareholders who hold the Company’s H
Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer and
Dividends from Shares (Equities) Received by Foreign Investment Enterprises Foreign Enterprises and Foreign Individuals(Guo Shui Fa [1993] No. 045) 《(關於外商投資企業﹑外國企業和外籍個人取得股票（股權）轉讓收益和股息所得稅收問題的通知》(國稅發[1993]045號)) issued by the State Administration of Taxation whilst pursuant to the letter titled Tax Arrangements
on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to the issuers on 4
July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax after the Repeal ofGuo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) 《(國家稅務總局關於國稅發
[1993]045號文件廢止後有關個人所得稅徵管問題的通知》 (國稅函[2011]348號)) it is confirmed that the overseas resident
individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong Kong are entitled to
the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the countries where
they reside and the PRC or the tax arrangements between the PRC and Hong Kong (Macau). Therefore the Company will
withhold 10% of the dividend as individual income tax unless it is otherwise specified in the relevant tax regulations and tax
agreements in which case the Company will withhold individual income tax of such dividends in accordance with the tax
rates and according to the relevant procedures as specified by the relevant regulations.
SHANDONG CHENMING PAPER HOLDINGS LIMITED46
VI Directors’ Report
IV. Closure of register of members
The register of members of the Company will be closed from 11 June 2021 (Friday) to 18 June 2021 (Friday) (both days
inclusive) during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
vote at the annual general meeting to be held on 18 June 2021 (Friday) all share transfer documents accompanied by
the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office
Computershare Hong Kong Investor Services Limited at shops 1712-1716 17th Floor Hopewell Centre 183 Queen’s Road
East Wan Chai Hong Kong for registration not later than 4:30 p.m. on 10 June 2021 (Thursday).
V. Five-year financial summary
Please refer to “IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five
financial years.VI. Donations
During the year the Company donated RMB8922077.88 (2019: RMB11947836.00) to non-profit making organisations.
VII. Subsidiaries
Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
and “XX. Matters of significant of subsidiaries of the Company” under section VII “Material Matters” for the details of
acquisition and disposal of subsidiaries by the Company during the year.VIII. Property plant and equipment
Please refer to “II. Financial Statements 1. Consolidated Balance Sheet” under section XIII “Financial Report” for the details
of changes in property plant and equipment of the Group for the year ended 31 December 2020.IX. Share capital
Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2020.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 2020 the Company’s reserves available for cash distribution and/or distribution in specie including contributedsurplus of the Company amounted to RMB10465721088.71 (2019: RMB9792126677.35) as set out in “II. FinancialStatements 1. Consolidated Balance Sheet” under section XIII “Financial Report”.
2020 ANNUAL REPORT 47
VI Directors’ Report
XII. Directors
As at 31 December 2020 the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Hu Changqing
Mr. Li Xingchun
Mr. Li Feng
2. Non-executive Directors
Mr. Han Tingde
Mr. Li Chuanxuan
3. Independent Non-executive Directors
Ms. Yin Meiqun
Mr. Yang Biao
Mr. Sun Jianfei
According to the Articles of Association of the Company all Directors including non-executive Directors have been
elected at the general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for
another term upon expiry of tenure.XIII. Directors’ service contracts
All Directors have entered into service contracts with the Company for a term from 11 June 2019 to 11 June 2022.
None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
payment of compensation other than statutory compensation.
SHANDONG CHENMING PAPER HOLDINGS LIMITED48
VI Directors’ Report
XIV. Directors and Senior Management’s remuneration and the five highest paid individuals
Details of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/and
its subsidiaries are set out in “V. Personnel of the Company” in section X “Directors Supervisors and Senior Managementand Staff” and “XII Related parties and related party transactions” in section XIII “Financial Report”.
In 2020 the Company had 23 Senior Management members in total which included Directors Supervisors and the Senior
Management. The remuneration of the Senior Management falls within the following ranges:
Range of remuneration (RMB) Number
4.8 million to 5.2 million 2
4.0 million to 4.8 million 0
3.6 million to 4.0 million 0
3.2 million to 3.6 million 1
2.8 million to 3.2 million 3
2.4 million to 2.8 million 0
2.0 million to 2.4 million 0
1.6 million to 2.0 million 1
1.2 million to 1.6 million 2
0.8 million to 1.2 million 0
Below 0.8 million 14
XV. Independent Non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for the
year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
be independent during the year.
2020 ANNUAL REPORT 49
VI Directors’ Report
XVI. Securities interests held by Directors Supervisors and Chief Executives
As at 31 December 2020 interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
held by each of the Directors Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
as follows:
Associated corporations
Name Position
Number of shares
(A shares) held as
at the end of the
reporting period
(shares)
Directors
Chen Hongguo (Note 1) Chairman 31080044
Hu Changqing Executive Director and Vice Chairman 5042857
Li Xingchun Executive Director and Vice Chairman 5000000
Li Feng Executive Director and General Manager 3906027
Han Tingde Non-executive Director –
Li Chuanxuan Non-executive Director –
Sun Jianfei Independent non-executive Director –
Yin Meiqun Independent non-executive Director –
Yang Biao Independent non-executive Director –
Supervisors
Li Kang Supervisor 149300
Pan Ailing Supervisor –
Zhang Hong Supervisor –
Li Xinggui Supervisor –
Qiu Lanju Supervisor –
Associated corporations
Name Position
Name of associated
corporations
Number of
shares held at
the beginning
of the reporting
period (shares)
Change during
the period +/-
Number of
shares held
at the end of
the reporting
period (shares)
Chen Hongguo Chairman Shouguang Henglian
Enterprise Investment
Co. Ltd. (Note 2)
231000000 – 231000000
Note 1: Save for the 31080044 A shares held personally Chen Hongguo is deemed to be interested in the 3861322 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 231000000 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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED50
VI Directors’ Report
XVI. Securities interests held by Directors Supervisors and Chief Executives (Cont’d)
Save as disclosed above as at 31 December 2020 none of the Directors Supervisors or chief executives of the Company
had any interests or short positions in the shares underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
352 of the SFO or which were required to be notified to the Company and Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
the Listing of Securities on Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 31 December 2020 none of the Directors Supervisors or chief executives or their respective spouses or children
under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
associated corporations.XVII. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2020 the following shareholders (other than the Directors Supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Name
Number of
shares held
(shares)
Approximate shareholding
as a percentage of
Total share
capital (%)
Class of
shares (%)
Chenming Holdings Co. Ltd. 457322919
A shares (L)
15.32 26.14
Chenming Holdings (Hong Kong) Limited 210717563
B shares (L)
7.06 29.83
Chenming Holdings (Hong Kong) Limited 153414000
H shares (L)
5.14 29.04
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above as at 31 December 2020 no other person had interests or short positions in the Company’s
shares or underlying shares as recorded in the register maintained under section 336 of the SFO.XVIII. Relationship with employees customers and suppliers
Please refer to “V. Personnel of the Company” under section X “Directors Supervisors and Senior Management and Staff” 2.
(8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V “Discussion and
Analysis of Operations” for details of the relationship between the Company and its employees customers and suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts in which Directors had significant
interests (either directly or indirectly) that subsisted at the end of the financial year or at any time during the reporting
period. The Company did not have any indemnity provision in favour of any Director.
2020 ANNUAL REPORT 51
VI Directors’ Report
XX. Interests in competing business
None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
likely to compete with the businesses of the Company and any of its subsidiaries.XXI. Directors’ rights to purchase shares or debentures
As considered and approved at the 2020 second extraordinary general meeting the 2020 first class meeting for holders
of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company held on
15 May 2020 the Company implemented the 2020 restricted A share incentive scheme. As considered and approved at
the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session of
the Supervisory Committee of the Company held on 29 May 2020 an aggregate of 79.6 million restricted A shares were
granted to 111 participants. In particular Mr. Chen Hongguo Mr. Hu Changqing Mr. Li Xingchun and Mr. Li Feng all being
Directors were granted 20 million shares 5 million shares 5 million shares and 3 million shares respectively.
Save for the above during the year neither was the Company nor any of its subsidiaries a party to any arrangements to
enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any
other body corporate.XXII. Preference shares
Please refer to section IX “Preference Shares” for details of the issue of Preference Shares of the Company.XXIII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed in 2020.
XXIV. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future developmentof the Company” under section V “Discussion and Analysis of Operations” for details of major risk factors of the Company.XXV. Material matters
Please refer to section VII “Material Matters” for details of material matters of the Company.XXVI. Future development
Please refer to “(I) Competition overview and development trend of the industry” “(II) Development strategy” “(III) Operatingplan for 2021” and “(IV) Future capital requirements and source of funds” of “IX. Outlook on the future development of the
Company” under section V “Discussion and Analysis of Operations” for details of future development of the Company.XXVII. Environment social and governance report and social responsibility
Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
responsibility. Please refer to the environment social and governance report as required by the Hong Kong Listing Rules
which will be issued separately by the Company before 29 June 2021.XXVIII. Purchase sale and redemption of shares
The Company and its subsidiaries did not purchase sell or redeem any listed securities of the Company during the reporting
period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED52
VI Directors’ Report
XXIX. Sufficiency of public float
During the reporting period based on the information that is publicly available to the Company and within the knowledge of
the Directors the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
Listing Rules.XXX. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2020 has been reviewed by
the Audit Committee of the Company.XXXI. Gearing ratio
As at 31 December 2020 the Company’s gearing ratio (including minority interest) was 60.87% representing a decrease of
1.29 percentage points from 62.16% for 2019.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year borrowings due after one year short-term commercial paper and medium and long-term notes and others).XXXII. Going Concern Basis
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic
development in finance forestry logistics and construction materials. It is also the first company in the paper making
industry to own a financial company. The Group has production bases in Shandong Guangdong Hubei Jiangxi Jilin and
others which deliver annual pulp and paper production capacity of over 11000000 tonnes and is a large integrated pulp
and paper enterprise in China that achieves a balance of pulp production and paper making.The Company has good sustainable profitability. In 2020 the Company achieved revenue of RMB30737 million net profit
of RMB1906 million and net cash inflows from operating activities of RMB40143 million. Meanwhile the Company always
places emphasis on the interests of and return to shareholders and has paid generous cash dividends for several years.In compiling the accounts for the year ended 31 December 2020 the Directors have chosen and thoroughly applied the
appropriate accounting policies with due and reasonable judgement and estimates having been made and prepared the
accounts on a going concern basis. The auditor of the Company has prepared the 2020 annual financial report on a going
concern basis and has issued a standard unqualified audit opinion (see Financial Report section).Therefore the Board believes the Company has the ability to continue as a going concern.XXXIII. Connected Transactions
1. The Issue and Grant of Restricted Shares under the Incentive Scheme
On 30 March 2020 the Board considered and approved the resolution in relation to the proposed adoption of the
Company’s incentive scheme. On 15 May 2020 the relevant resolution was considered and approved at the 2020
second extraordinary general meeting the 2020 first class meeting for holders of domestic-listed shares and the 2020
first class meeting for holders of overseas-listed shares of the Company. The incentive scheme was thus approved
and became effective.
On 29 May 2020 the Board granted in aggregate 79.6 million restricted ordinary A shares to 111 participants under
the incentive scheme at a price of RMB2.85 per share. The participants included the Directors of the Company
(excluding independent Directors and external Directors) senior management key technical (business) employees
and other persons who in the opinion of the Board are qualified. The restricted shares are subject to the lock-up
period and can only be unlocked for trading when the unlocking conditions under the incentive scheme are satisfied.
2020 ANNUAL REPORT 53
VI Directors’ Report
XXXIII. Connected Transactions (Cont’d)
1. The Issue and Grant of Restricted Shares under the Incentive Scheme (Cont’d)
As some of the participants are the Directors and Senior Management of the Company and its subsidiaries and
accordingly the connected persons of the Company the issue and grant of restricted shares to those connected
persons of the Company under the incentive scheme will constitute a non-exempt connected transaction of the
Company.
The Board is of the view that the incentive scheme can help the Company to further establish and improve its long-
term incentive mechanism attract and retain talented individuals fully mobilise the enthusiasm of Directors senior
management core technical (business) backbone staff and other employees of the Company bond the interests of
Shareholders the Company and core individuals together effectively help various parties to attend to the long-term
development of the Company and improve operational efficiency. It also reflects the ongoing support to the Group
from the related employees and the recognition to their contribution to the long-term growth and development of the
Group. The Board is of the view that the terms and conditions of the incentive scheme are on normal commercial
terms fair and reasonable and in the interests of the Company and the shareholders as a whole.
For details please refer to “XV. Implementation of the equity incentive plan employee shareholding plan or otheremployee incentive measure of the Company” under section VII “Material Matters” of this annual report and the
Company’s announcement dated 30 March 2020 and published on 31 March 2020 before trading hours the circular
dated 29 April 2020 the overseas regulatory announcement dated 29 May 2020 and published on 1 June 2020 before
trading hours and the overseas regulatory announcement dated 8 July 2020.
2. Acquisition of the Entire Equity Interests in Wuhan Chenming’s Shareholders Aberdeen and VNN
On 21 December 2020 the Company’s wholly-owned subsidiary Chenming (Overseas) Co. Ltd. (“ChenmingOverseas”) Yu Jianren Yu Jianlong Aberdeen Industrial Limited (“Aberdeen”) and VNN Holdings Limited (“VNN”)entered into the Equity Transfer Agreement in respect of the acquisition of the entire equity interests in Wuhan
Chenming’s shareholders Aberdeen and VNN. In particular Yu Jianren and Yu Jianlong are both natural persons of
PRC nationality while Aberdeen and VNN are both limited liability companies incorporated in the British Virgin Islands
with their business being investment holding. Pursuant to the agreement (i) Yu Jianren agreed to sell and Chenming
Overseas agreed to purchase the entire equity interest in Aberdeen at a cash consideration of RMB312.6 million; (ii)
Yu Jianlong agreed to sell and Chenming Overseas agreed to purchase the entire equity interest in VNN at a cash
consideration of RMB97.4 million.Prior to the Acquisition (i) Yu Jianren held the entire equity interest in Aberdeen and Aberdeen held 26.41% of the
equity interest in Wuhan Chenming a non-wholly-owned subsidiary of the Company; (ii) Yu Jianlong held the entire
equity interest in VNN and VNN held 8.32% of the equity interest in Wuhan Chenming; and (iii) the Company held
65.21% of the equity interest in Wuhan Chenming. After the completion of the Acquisition the Company will indirectly
own the entire equity interests in Aberdeen and VNN and the Group will own in aggregate 99.85% of the equity
interest in Wuhan Chenming. Aberdeen and VNN will become wholly-owned subsidiaries of the Company.
As Yu Jianren through its wholly-owned subsidiary Aberdeen holds 26.41% of the equity interest in Wuhan
Chenming a non-wholly-owned subsidiary of the Company before the Acquisition Aberdeen is a substantial
shareholder of Wuhan Chenming and Yu Jianren is an associate of Aberdeen. Therefore Yu Jianren is a connected
person of the Company at the subsidiary level.
SHANDONG CHENMING PAPER HOLDINGS LIMITED54
VI Directors’ Report
XXXIII. Connected Transactions (Cont’d)
2. Acquisition of the Entire Equity Interests in Wuhan Chenming’s Shareholders Aberdeen and VNN
(Cont’d)
The Board considers that the acquisition of the entire equity interests in the Target Companies by the Company
through Chenming Overseas thereby realising the acquisition of the minority interest in Wuhan Chenming will help
strengthen the Company’s operation and management of Wuhan Chenming ensure the continuous and stable
operation of Wuhan Chenming and further integrate the resources of the Group’s principal businesses which will
help enhance the Company’s profitability and comprehensive competitiveness and maximise economic benefits. The
Board considers that Equity Transfer Agreement and the terms of the Acquisition are fair and reasonable on normal
commercial terms or better and in the interests of the Company and its shareholders as a whole.
For details please refer to the Company’s announcements dated 21 December 2020 and 8 January 2021.Unless otherwise stated capitalised terms used in the section “2. Acquisition of the Entire Equity Interests in Wuhan
Chenming’s Shareholders Aberdeen and VNN” shall bear the same meanings as those defined in the announcement
dated 21 December 2020.Save as disclosed above the Company had no other connected transactions during the year.XXXIV. Major Investment Acquisition and Disposal
During the year ended 31 December 2020 the Group entered into the following major transaction agreements.
1. Entering into of Limited Partnership Agreement for the Establishment of Dingkun Asset
On 23 December 2020 Jinan Hengzhen Investment Management Co. Ltd. (as the general partner) Jiangxi
Chenming Paper Co. Ltd. (as a limited partner) and Wuhan Chenming Hanyang Paper Holdings Co. Ltd. (as a limited
partner) have entered into a partnership agreement for the establishment of Shandong Dingkun Asset Management
Partnership (Limited Partnership) (“Dingkun Asset”). After the establishment of Dingkun Asset it will become a
subsidiary of the Company and the Company will hold a total of 99.90% of subscribed capital in Dingkun Asset the
financial information of which will be consolidated into the consolidated statements of the Group. For details please
refer to the announcement of the Company dated 24 December 2020.
2. Entering into of Limited Partnership Agreement for the Establishment of Changjiang Chenming Equity
Investment Fund
On 23 December 2020 Hubei Huanggang Chenming Equity Investment Fund Management Co. Ltd. (as the general
partner) has entered into a partnership agreement with Hubei Changjiang (Huanggang) Industrial Investment
Fund Partnership (Limited Partnership) and Zhanjiang Chenming Paper Pulp Co. Ltd. (as limited partners) for the
establishment of Changjiang Chenming Equity Investment Fund. After the establishment of Changjiang Chenming
Equity Investment Fund its financial information will be consolidated into the consolidated statements of the Group.
Changjiang Chenming Equity Investment Fund focuses on investing in papermaking and related industries including
subscription of the newly-increased registered capital of Huanggang Chenming of RMB2 billion for the Huanggang
Chenming Phase II Project. For details please refer to the announcement of the Company dated 24 December 2020.
2020 ANNUAL REPORT 55
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital
Formulation implementation or adjustment of profit distribution policy for ordinary shares especially the cash dividend
during the reporting period
√ Applicable □ Not applicable
The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
of the small shareholders were fully protected as the related decision-making process and mechanism were in place
the duties of independent Directors were well-defined so that they played a role and the small shareholders were given
opportunities to sufficiently voice their opinion and make requests.Implementation of the 2019 profit distribution plan for ordinary shareholders: Based on the number of the ordinary shares as
at the dividend distribution registration date of 2984208200 shares a cash dividend of RMB1.465828 (tax inclusive) was
paid to ordinary shareholders for every 10 shares held and there was no increase of share capital from reserves. The total
cash dividend distributed amounted to RMB437433593.74. The dividend distribution was implemented and completed on
18 August 2020. For details please refer to the Dividend Adjustment and Payment of Final Dividend and Withholding and
Payment of Enterprise Income Tax for Non-resident Enterprise Shareholders published on Hong Kong Stock Exchange on 5
August 2020 and 10 August 2020 respectively and the Announcement on the Implementation of the 2019 Profit Distribution
Plan for A Shares and B Shares published on CNINFO on 11 August 2020.Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association and the resolutions of
the general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision-making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion and
make requests and were the legal interests of the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect of cash dividend policy
with adjustments and changes? Yes
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital reserves into
share capital (proposed) over the past three years (the reporting period inclusive)
(1) The 2020 profit distribution plan for ordinary shares
On 25 March 2021 the Company convened the eighth meeting of the ninth session of the Board at which the
proposed 2020 profit distribution plan was considered and approved. Based on the total number of ordinary shares
of the Company as at the end of 2020 of 2984208200 shares a cash dividend of RMB1.85 (tax inclusive) was to be
paid to ordinary shareholders for every 10 shares held. No bonus shares would be issued and there was no increase of
share capital from reserves. The cash dividend distributed to ordinary shareholders amounted to RMB552078517.00.In the event of changes in the total share capital of the Company before the dividend distribution registration date the
total profits distribution shall remain unchanged while the percentage of allocation will be adjusted accordingly.
SHANDONG CHENMING PAPER HOLDINGS LIMITED56
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
(2) The 2019 profit distribution plan for ordinary shares
On 19 June 2020 the Company convened the 2019 general meeting at which the proposed 2019 profit distribution
plan was considered and approved. Based on the total number of ordinary shares of the Company as at the end of
2019 of 2904608200 shares a cash dividend of RMB1.5 (tax inclusive) was to be paid to ordinary shareholders for
every 10 shares held. No bonus shares would be issued and there was no increase of share capital from reserves. The
cash dividend distributed to ordinary shareholders amounted to RMB435691230 (tax inclusive).
Between the disclosure and implementation of the Company’s 2019 profit distribution plan the Company carried out
the 2020 Restricted A Share Incentive Scheme pursuant to the Company issued an additional 79600000 A shares
which were listed on 15 July 2020 increasing the total ordinary share capital of the Company to 2984208200shares. In accordance with the principle of “fixed amount of cash dividends bonus shares and conversion of capitalreserves into share capital” stipulated by the Guidelines for the Standardised Operation of Companies Listed on
the Shenzhen Stock Exchange (《深圳證券交易所上市公司規範運作指引》) the Company has adjusted the amount
of dividend per share under the 2019 profit distribution plan as such: based on the latest total number of ordinary
shares of the Company of 2984208200 shares a cash dividend of RMB1.465828 (tax inclusive) was to be paid to
ordinary shareholders for every 10 shares held. The cash dividend distributed to ordinary shareholders amounted to
RMB437433593.74 (tax inclusive).
(3) The 2018 profit distribution plan for ordinary shares
On 11 June 2019 the Company convened the 2018 annual general meeting at which the 2018 profit distribution plan
was considered and approved: based on the number of the shares as at the end of 2018 of 2904608200 shares a
cash dividend of RMB2.4 (tax inclusive) was to be paid to all ordinary shareholders for every 10 shares held. The total
cash dividend distributed to ordinary shareholders amounted to RMB697105968 (tax inclusive).
Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
Unit: RMB
Year of
distribution
Amount of
cash dividends
(tax inclusive)
Net profit
attributable
to ordinary
shareholders of
the Company
in the
consolidated
financial
statements
during the year
of distribution
Amount of
cash dividend
as a percentage
of net profit
attributable
to ordinary
shareholders of
the Company
in the
consolidated
financial
statements
Amount of
cash dividends
distribution
through other
means such
as share
repurchase
Ratio of cash
Dividends
distribution
through other
means in
net profit
attributable
to ordinary
shareholders of
the Company
in the
consolidated
financial
statements
Total cash
dividend
(including
through other
means)
Total cash
dividend
(including
through other
means) as
a percentage
of net profit
attributable
to ordinary
shareholders of
the Company
in the
consolidated
financial
statements
2020 552078517.00 1712029078.52 32.25% 0.00 0.00% 552078517.00 32.25%
2019 437433593.74 1656566584.88 26.41% 0.00 0.00% 437433593.74 26.41%
2018 697105968.00 2509828858.47 27.78% 0.00 0.00% 697105968.00 27.78%
2020 ANNUAL REPORT 57
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
(3) The 2018 profit distribution plan for ordinary shares (Cont’d)
The Company made a profit and had positive retained profit available for ordinary shareholders of parent company
during the reporting period without cash dividend for ordinary shares being proposed
□ Applicable √ Not applicable
II. Profit distribution and conversion of capital reserves into share capital during this reporting
period
√ Applicable □ Not applicable
Numbers of bonus share per 10 shares (share(s)) 0
Dividend distribution per 10 shares (RMB) (tax inclusive) Cash dividend of RMB1.85 (tax inclusive) per 10 shares
to ordinary shareholders and cash dividend of RMB1.85
(tax inclusive) per 10 simulated shares converted from
Preference Shares into ordinary shares to holders of the
second and third tranches of Preference Shares
Conversion per 10 shares (share(s)) 0
Share base of the distribution proposal (shares) 2984208200 ordinary shares and 589005236 simulated
shares converted from the second and third tranches of
Preference Shares on a conversion ratio of 1 Preference
Share valued at RMB3.82; the share base of the distribution
proposal was 3573213436 shares.
Cash dividend (RMB) (tax inclusive) 661044485.66
Amount of cash dividend distribution through other means
such as share repurchase (RMB)
0
Total cash dividend including other means (RMB) 661044485.66
Distributable profits (RMB) 9999764028.74
Percentage of cash dividend (including other means) to
total profits distribution
100%
Cash dividend policy
For profit distribution of companies which are fully developed with significant capital expenditure arrangement the
percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
SHANDONG CHENMING PAPER HOLDINGS LIMITED58
VII Material Matters
II. Profit distribution and conversion of capital reserves into share capital during this reporting
period (Cont’d)
Particulars of profit distribution and conversion of capital reserves into share capital
The audited consolidated net profit attributable to shareholders of the Company for 2020 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB1712029078.52. When deducting the
interest on Perpetual Bonds of RMB171776438.36 and fixed dividend on Preference Shares of RMB214425000.00 for
2020 the distributable profit realised for 2020 amounted to RMB1325827640.16.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares based on the total ordinary share capital of 2984208200 shares and the 589005236 simulated ordinary
shares converted from the second and third tranches of Preference Shares using a conversion ratio of 1 share valued at
RMB3.82as at the end of 2020 a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to ordinary
shareholders; a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from the Preference
Shares will be distributed to holders of the second and third tranches of Preference Shares. No bonus shares will be issued
and there is no increase of share capital from reserves. A cash dividend of RMB552078517.00 will be distributed to
ordinary shareholders and a variable cash dividend of RMB108965968.66 will be distributed to holders of the second and
third tranches of Preference Shares. In other words a cash dividend of RMB4.84 (tax inclusive) per Preference Share with a
nominal value of RMB100 each will be distributed to holders of the second and third tranches of Preference Shares. In the
event of changes in the total share capital of the Company before the dividend distribution registration date the total profits
distribution shall remain unchanged while the percentage of allocation will be adjusted accordingly.
2020 ANNUAL REPORT 59
VII Material Matters
III. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers
shareholders related parties bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period
√ Applicable □ Not applicable
Undertaking
Party involved
in undertaking
Type of
undertaking Details of undertaking
Undertaking
date Term
Particulars
on the
performance
Undertaking on
shareholding structure
reformation
Undertaking made in
offering documents
or shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on
initial public offering or
refinancing
Chenming
Holdings
Co. Ltd
Non-competitive
undertaking
(1)Chenming Holdings Co. Ltd. (“Chenming Holdings”) shall not engage whether
solely jointly or by representing itself or any other persons or companies and shall
not procure its associates (as defined in The Listing Rules of Hong Kong Stock
Exchange) to engage in any business which competes with the business of the
Company and its subsidiaries (“Chenming Group” or “we”) directly or indirectly in
any country and region which our business exists (or any part of the world if in any
form of electronics business) or in any business that directly or indirectly competes
with Chenming Group’s business which we operate from time to time (including
but not limited to any business in the form of sole proprietorship joint ventures
or acquisitions or holding interests directly or indirectly in such enterprises or
by any other means); (2) in the event that Chenming Holdings is required by its
business to whether solely jointly or by representing itself or any other persons or
companies engage in business which directly or indirectly competes against the
business of Chenming Group or obtain any business opportunity which directly or
indirectly competes against the business of Chenming Group it shall endeavour
to procure that Chenming Group shall have priority to obtain the right to operate
such business or to obtain such business opportunity; (3) if Chenming Holdings is
in breach of the abovementioned undertakings it shall indemnify the Company for
any loss caused by such breach and the Company shall have the right to acquire
all businesses of Chenming Holdings which directly or indirectly compete with
the businesses of our Group at market price or cost price (whichever price is
lower); (4) Chenming Holdings shall not make use of its position as the controlling
shareholder (as defined in The Listing Rules of Hong Kong Stock Exchange) of our
Group to jeopardise the legal interests of Chenming Group and its shareholders
with other persons or companies or on their behalf.
22 May 2008 During the
period when
Chenming
Holdings
was the
major
shareholder
of the
Company
Implementing
as normal
SHANDONG CHENMING PAPER HOLDINGS LIMITED60
VII Material Matters
III. Performance of undertakings (Cont’d)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers
shareholders related parties bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Cont’d)
Undertaking
Party involved
in undertaking
Type of
undertaking Details of undertaking
Undertaking
date Term
Particulars
on the
performance
Chenming
Holdings
Co. Ltd.
Defective
properties
(1) According to the plan on defective properties of the Company Chenming Holdings
Co. Ltd. (“Chenming Holdings”) has guaranteed and undertaken that: according to
the application of the Company for defective property(ies) owned by the Company
and its holding subsidiary company which situated in the administrative area of
Shouguang city Chenming Holdings will purchase it (them) and have it(them)
being transferred to itself pursuant to the law in accordance with the result of the
related asset valuation if the Company decides to transfer and dispose of it(them)
and there is no other transferee; (2) before the Company transfers and disposes of
the defective properties pursuant to the law if the Company suffers any economic
losses due to the defects of the title (including but not limited to damages
penalties and relocation costs) Chenming Holdings will bear such economic
losses; (3) during the regulatory process taken to the defective properties of
buildings and land of subsidiaries of the Company situated outside the local areas
(outside the administrative area of Shouguang city) the economic losses such as
penalties or relocation costs imposed by competent administrative authorities to
be borne by the subsidiaries arising from defects of insufficient title documents
shall be paid pursuant to the law by Chenming Holdings after verification.
16 January
2008
During the
period when
Chenming
Holdings
was the
major
shareholder
of the
Company
Implementing
as normal
Shandong
Chenming
Paper
Holdings
Limited
Specific remedial
measures for
non-public
issuance of
Preference
Shares
In view of the impacts on dilution of current returns for ordinary shareholders
under the Preference Shares issuance and in order to implement the Notice of
the General Office of the State Council on Further Strengthening Protection of
the Lawful Rights of Small Investors in Capital Markets protect the interests of
ordinary shareholders and provide remedies for the possible dilution on current
returns as a result of Preference Shares issuance the Company has undertaken
that it will implement various measures to ensure the effective utilisation of
proceeds raised which can prevent dilution on current returns effectively thereby
enhancing future returns.
25 March 2016 9999-12-31 Implementing
as normal
Equity incentive
undertakings
Whether undertakings
performed on time
Yes
2. Description on the Company’s assets and items in meeting original profit forecast and its explanation
as there is profit forecast for assets and items of the Company and the reporting period is still within
the profit forecast period
□ Applicable √ Not applicable
2020 ANNUAL REPORT 61
VII Material Matters
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
□ Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.V. Opinions of the Board the Supervisory Committee and independent Directors (if any)
regarding the “modified auditor’s report” for the reporting period issued by the accountants
□ Applicable √ Not applicable
VI. Reason for changes in accounting policies accounting estimates and accounting methods
as compared to the financial report for the prior year
√ Applicable □ Not applicable
The Company has been implementing the Accounting Standard for Business Enterprises No. 13 promulgated by the
Ministry of Finance since 1 January 2020 for which the prospective application method is applied.VII. Reason for retrospective restatement to correct major accounting errors during the reporting
period
□ Applicable √ Not applicable
There were retrospective restatements to correct major accounting errors of the Company during the reporting period.VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable □ Not applicable
During the reporting period the scope of consolidation had 8 newly established subsidiaries namely Chenming (Overseas)
Co. Ltd. Chenming (Singapore) Co. Ltd. Qingdao Chenming Import and Export Trade Co. Ltd. Hainan Chenming
Technology Co. Ltd. Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership (Limited Partnership)
Hubei Huanggang Chenming Equity Investment Fund Management Co. Ltd. Shandong Dingkun Asset Management
Partnership (Limited Partnership) and Huanggang Chenming Paper Technology Co. Ltd. During the year one subsidiary
was consolidated without constituting business namely Shanghai Herui Investment Co. Ltd.; and one subsidiary was
incorporated via acquisition namely Kunshan Tuoan Plastic Products Co. Ltd.
During the reporting period 3 companies were reduced from the scope of consolidation: Shandong Chenming Paper Group
(Fuyu) Sales Co. Ltd. was absorbed and consolidated into the Company while Qingdao Chenming International Logistics
Co. Ltd. and Shouguang Chenming Industrial Logistics Co. Ltd. were disposed as to 100% equity interest. Accordingly
such companies were excluded from the scope of consolidation.
SHANDONG CHENMING PAPER HOLDINGS LIMITED62
VII Material Matters
IX. Engagement or dismissal of accounting firms
Current accounting firm engaged
Name of the domestic accounting firm Grant Thornton
(Special General Partnership)
Remuneration of the domestic accounting firm (RMB’0000) 330
Continued term of service of the domestic accounting firm 2
Name of certified public accountants of the domestic accounting firm Liu Jian and Jiang Lei
Continued term of service of certified public accountants of the domestic accounting firm 1
Whether to appoint another accounting firm during the period
□ Yes √ No
Particulars on recruitment of accounting firms financial consultants or sponsors for internal control and auditing purposes
√ Applicable □ Not applicable
During the year the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal control of
the Company for 2020. The Company paid RMB800000 as internal control audit fees during the period. The Company
engaged Shanghai Realize Investment Consulting Co. Ltd. as its financial advisor due to the implementation of 2020
Restricted A Share Incentive Scheme. The Company paid RMB500000 as financial advisory fees during the period.X. Suspension in trading or delisting upon publication of annual report
□ Applicable √ Not applicable
XI. Matters related to bankruptcy and reorganisation
□ Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
2020 ANNUAL REPORT 63
VII Material Matters
XII. Material litigation and arbitration
√ Applicable □ Not applicable
General information
on the litigation
(arbitration)
Amount involved
(RMB’0000)
Whether
provisions
are made Progress Trial results and impact
Enforcement
of judgment
Date of
disclosure Disclosure index
Statutory demand
and winding-up
petition
HK$389112432.44 Yes 1. The Company appealed
against the order of Justice
Harris dated 14 June 2017
on 12 July 2017. The hearing
was completed at the Court
of Appeal of the High Court
of the HKSAR on 11 May
2018. At the conclusion of the
hearing the court indicated
that a date will be set to
hand down the judgment.
On 5 August 2020 the Court
of Appeal of the High Court
of the HKSAR made the
judgment to dismiss the
appeal of the Company.
2. On 9 October 2018
the Company served
an arbitration notice to
Arjowiggins HKK2 Limited
(“HKK2”) in respect of
controversies over the joint
venture established by
the Company and HKK2
requesting HKK2 to return
the accounting books and
relevant records of the joint
venture and compensate
for the arbitration costs. On
5 August 2020 the Hong
Kong International Arbitration
Centre made the final ruling.
1. On 5 August 2020 the Court of
Appeal of the High Court of the
HKSAR made the judgment to
dismiss the appeal of the Company.
2. On 5 August 2020 the Hong
Kong International Arbitration
Centre made the final ruling as
follows: ① HKK2 is in possession
and control of the accounting
books and records of the joint
venture. ② HKK2 shall transfer the
accounting books and records of
the joint venture to the compulsory
liquidation group of the joint
venture namely the Shandong
branch of Yongtuo Certified Public
Accountants (Special General
Partnership) within 21 days
from the date of final ruling (i.e. 5
August 2020). ③ Security for costs
under the custody of Hong Kong
International Arbitration Centre
shall be returned to the Company.
④ Both parties shall split the
arbitration costs other than legal
representation and assistance fees.Not applicable 19 August 2020
and 22 August
2020
http://www.cninfo.com.cn
SHANDONG CHENMING PAPER HOLDINGS LIMITED64
VII Material Matters
XIII. Punishment and rectification
√ Applicable □ Not applicable
Name Type Reason
Investigation
and punishment
type Conclusion if any Disclosure date Disclosure index
Jiangxi Chenming
Paper Co. Ltd.Subsidiary Excessive discharge
of water pollutants
and improper
sludge disposal
Environmental
penalties
① In the second half of 2019 Nanchang Ecological Environment
Bureau conducted routine environmental inspections to Jiangxi
Chenming. As a result of excessive suspended solid concentration
at the at the main water drain of Jiangxi Chenming the
Environmental Protection Bureau imposed three administrative
penalties to Jiangxi Chenming amounting to RMB1.203 million.② Prior to June 2018 Guo XX Li XX and Tao XX undertook the
outward transportation of industrial solid waste namely sludge
produced in the course of Jiangxi Chenming’s production. Such
sludge was illegally dumped. The Intermediate People’s Court
of Nanchang Municipality Jiangxi Province held that Jiangxi
Chenming as well as the four persons involved including Pang XX
had poor legal awareness. Jiangxi Chenming was negligent in the
environmental supervision of sludge disposal and the business
undertakers failed to legally dispose of the sludge. As such Jiangxi
Chenming was fined RMB3 million for polluting the environment.
Jiangxi Chenming has completed the process of harmless sludge
disposal and ecological restoration of the dumping location in
accordance with the time schedule and passed the inspections
by relevant governmental apartments and Jiangxi Environmental
Protection Expert Acceptance Review Committee. With compliant
waste water discharge and all penalties paid Jiangxi Chenming
has resumed normal production and operation and the incident
did not have any material impact on the Company’s profit for the
period or subsequent periods.Not applicable Not applicable
Zhanjiang Chenming
Pulp & Paper
Co. Ltd.
Subsidiary Excessive discharge
of water pollutants
Environmental
penalties
During an environmental protection inspection of Zhanjiang Chenming
Zhanjiang Ecological Environment Bureau found that the rainwater
discharge outlet of the rainwater channel in the Zhanjiang Chenming
factory area had excessive discharge of water pollutants. Therefore
Zhanjiang Chenming was fined RMB1 million. As of the date of the
report the above violation has been corrected and the fine has been
paid.Not applicable Not applicable
Rectification
√ Applicable □ Not applicable
2020 ANNUAL REPORT 65
VII Material Matters
XIII. Punishment and rectification (Cont’d)
1. Rectification measures of Zhanjiang Chenming
In light of the pollution Zhanjiang Chenming thoroughly reflected its operations and immediately investigated the
cause of the incident and implemented accountability. To ensure that environmental issues are directly managed by
company leaders a member of the management was designated to specifically address environmental protection
matters which further replenished the manpower for environmental management. Zhanjiang Chenming also strictly
complied with the requirements under the Notice on Further Strengthening Environmental Management and
Protection (《關於進一步加強環境管理環境工作的通知》). It has adopted the following rectification measures:
(1) Sandbags and other means were used to prevent the outflow of water pollutants which are recycled in the
sewage treatment system and the rainwater gutter was thoroughly cleaned.
(2) Cleaning of the reservoir was immediately suspended to reconnect the sludge pipe directly to the sewage
system forfeiting recycling through the rainwater gutter.
(3) Production of the causticisation section where the green liquid tank was located was immediately shut down
to build additional cofferdam and sewage backwater pump to the tank area as well as building a valve to the
entrance where the green liquid flows to the main rainwater gutter.
(4) Repair was conducted on the recovery pump and the gate of the rainwater gutter while adding another recovery
pump at the front of the gate equipped with emergency backup sandbags.
(5) Retrospective assessment was conducted on the existing contingency plan for environmental emergencies
which has been filed.(6) Environmental management systems such as the Rain and Sewage Separation Management System (《雨污分流管理制度》) were revised to enhance training and implementation. Patrolling is arranged from time to time to
strictly prohibit production wastewater from entering the rainwater collection system. Each chief officer of the
branch factories is responsible for such tasks and an environmental management specialist is designated to
assist the chief officer in the environmental management of the branch.
(7) On 14 May 2020 a cooperation agreement was entered into with King & Wood Mallesons the legal advisor
to the Ministry of Ecology and Environment pursuant to which King & Wood Mallesons is entrusted to
comprehensively seek and locate existing environmental hazards within the Company from the perspective of
the Central Environmental Inspector and offer the most optimal solutions.
SHANDONG CHENMING PAPER HOLDINGS LIMITED66
VII Material Matters
XIII. Punishment and rectification (Cont’d)
2. Rectification measures of Jiangxi Chenming
(1) Adjusted its water treatment technique refined dosing operation increased sludge press quality and
established among others monitoring response mechanism for water quantity and water standard at the
middle water section designed to respond to changes in BTMP ingredient ratio and load. As a result Jiangxi
Chenming proved qualified on all indicators during two spontaneous sampling inspections conducted by
Nanchang Ecological Environment Bureau and the environmental monitor station as well as a scheduled
sampling inspection conducted by a third party. Based on such results Nanchang Ecological Environment
Bureau determined that the rectification for out-of-limit waste water (SS standard) of Jiangxi Chenming had
been completed.
(2) After installing 50 surface aerators at the south and north aeration tanks Jiangxi Chenming further installed 10
jet aeration devices for both tanks in order to increase dissolved oxygen and carried out in-depth technical
modifications to the aeration tanks to increase efficient jet aeration. All indicators were above-standard after
multiple sampling and monitoring.
(3) Immediately initiated harmless sludge disposal and ecological restoration of the dumping location in strict
compliance with the laws regulations and government requirements. After vigorous efforts in reducing losses
and eliminating pollution the harmless sludge disposal and ecological restoration processes have been
completed. Jiangxi Chenming has passed the inspections of relevant government departments and the joint
acceptance review committee consisting of environmental experts in Jiangxi Province and the polluted land
has been declared unpolluted after on-site inspections by environmental protection departments.
(4) Strengthened the online inspection and monitoring system and the machine-controlled early warning system;
focused on improving the quality and training of full-time environmental protection management personnel at all
levels; strictly implemented the qualification standards and education on the environmental protection laws and
regulations with regular appraisal and incentives to raise environmental awareness and sense of responsibility
across the board with strict compliance with relevant laws and regulations.XIV. Credibility of the Company its controlling shareholders and beneficial controllers
□ Applicable √ Not applicable
2020 ANNUAL REPORT 67
VII Material Matters
XV. Implementation of the equity incentive plan employee shareholding plan or other employee
incentive measure 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 Paper
Holdings Limited (Draft) and Its Summary the Resolution in Relation to the Assessment Management Measures for
the Implementation of the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings Limited
and the Resolution in Relation to the Authorisation Granted by the General Meeting to the Board to Deal with Matters
Relating to the Share Incentive Scheme of the Company. On the same date the fourth extraordinary meeting of the
ninth session of the Supervisory Committee of the Company considered and approved the above resolutions and
verified the list of proposed participants of the incentive scheme. Independent Directors of the Company issued
independent opinions on the incentive scheme.
2. On 3 April 2020 the Company announced the list of participants through the Company’s internal website for a period
from 3 April 2020 to 12 April 2020. During the period the Supervisory Committee of the Company and relevant
departments did not receive any objection against the proposed participants. The Supervisory Committee verified the
list of participants under the grant of the incentive scheme.
3. On 15 May 2020 the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming
Paper Holdings Limited (Draft) and Its Summary the Resolution in Relation to the Assessment Management Measures
for the Implementation of the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings
Limited and the Resolution in Relation to the Authorisation Granted by the General Meeting to the Board to Deal with
Matters Relating to the Share Incentive Scheme of the Company were considered and approved at the 2020 second
extraordinary general meeting the 2020 first class meeting for holders of domestic-listed shares and the 2020 first
class meeting for holders of overseas-listed shares of the Company. On 16 May 2020 the Company disclosed the
Self-Examination Report for the Trading of Shares of the Company by Insiders and Participants of the 2020 Restricted
A Share Incentive Scheme.
4. On 29 May 2020 the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive
Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants were
considered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary
meeting of the ninth session of the Supervisory Committee of the Company approving the issue of 79600000
restricted A shares to 111 participants at the price of RMB2.85 per share on 29 May 2020. The independent Directors
of the Company issued independent opinions thereon agreed that the Board shall make adjustments to the list of
proposed participants and the number of shares to be granted and considered that the participants were legally and
validly qualified and that the grant date determined was in compliance with relevant requirements.
5. On 28 June 2020 Grant Thornton issued a Capital Verification Report (Zhi Tong Yan Zi (2020) No. 371ZC00199) in
which they verified the Company’s subscription contribution status for the share incentive scheme as of 23 June 2020
and considered that:
6. On 15 July 2020 the 79600000 restricted A shares granted to the participants were listed.
For details please refer to 2020 Restricted A Share Incentive Scheme (Draft) Assessment Management Measures
for the Implementation of the 2020 Restricted A Share Incentive Scheme the Announcement on Approval of
2020 Restricted A Share Incentive Scheme by State-owned Assets Supervision and Administration Office of the
People’s Government of Shouguang City the Announcement on Grant of Restricted Shares to Participants and the
Announcement on Completion of Registration of the Grant under the 2020 Restricted A Shares Incentive Scheme
published on CNINFO on 31 March 6 May 8 May 16 May 30 May and 9 July 2020 respectively.
SHANDONG CHENMING PAPER HOLDINGS LIMITED68
VII Material Matters
XVI. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable □ Not applicable
Related party
Related party
relationship
Types of the
related party
transactions
Subject
matter of the
related party
transactions
Pricing
basis of the
related party
transaction
Related
party
transaction
price
Amount of
related party
transactions
(RMB’0000)
Percentage
as the
amount of
similar
transactions
Amount of
transactions
approved
(RMB’0000)
Whether
exceeding
approved
cap
Settlement of
related party
transactions
Market price
of available
similar
transaction
Disclosure
date Disclosure index
Jiangxi Jiuyu
Energy Co. Ltd.
Director and Senior
Management of the
Company served
as the director and
senior management
of the company
during the past
twelve months
Procurement Natural gas
heavy oil
etc.Market price Market price 25516 64.45% 60000 No Bank
acceptance
and
telegraphic
transfer
Not applicable 30 March 2020 http://www.cninfo.com.cn
Total – – 25516 – 60000 – – – – –
Particulars on refund of bulk sale None
Actual implementation during the reporting period of day-to-day related party transactions with estimated total
amounts that would take place during the period by category (if any)
None
Reason for the significant difference 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 applicable
There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
during the reporting period.
3. Related party transaction connected to joint external investment
□ Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
2020 ANNUAL REPORT 69
VII Material Matters
XVI. Significant related party transactions (Cont’d)
4. Related creditors’ rights and debts transactions
√ Applicable □ Not applicable
Were there any non-operating related creditors’ rights and debts transaction?
√ Yes □ No
Debts payable to any related party:
Related party
Relationship with
the Company Reason
Opening
balance
(RMB’0000)
Amount
increased
during the
current
period
(RMB’0000)
Amount
recovered
during the
current
period
(RMB’0000)
Interest
rate
Interest for
the current
period
(RMB’0000)
Closing
balance
(RMB’0000)
CHENMING HOLDINGS
COMPANY LIMITED
The controlling
shareholder of the
Company
Financial
support
70844.09 66030.00 136874.09 Market interest rate 756.32 0.00
Guangdong Nanyue Bank
Co. Ltd.
An associate of the
Company
Borrowing 294897.00 131666.40 254896.94 9677.43 171666.46
Effect of related debts on the operating results
and financial position of the Company
Financial support is provided by Chenming Holdings without requiring any pledge or guarantee which is a testament
to its support and confidence in the future development of the Company and helps the Company promote project
construction and satisfy its needs for working capital.
Creditor’s rights receivable from related parties
Related party
Relationship
with
the Company Reason
Were there
any
non-operating
capital
occupation
Opening
balance
(RMB’0000)
Amount
increased
during the
current
period
(RMB’0000)
Amount
recovered
during the
current
period
(RMB’0000)
Interest
rate
Interest for
the current
period
(RMB’0000)
Closing
balance
(RMB’0000)
Shouguang Meite
Environmental
Technology Co. Ltd.
A joint venture of
the Company
Financial support No 0.00 1630.72 0.00 6.00% 34.17 1630.72
Weifang Sime Darby
West Port Co. Ltd.
A joint venture of
the Company
Financial support No 6445.65 0.00 0.00 6.00% 401.96 6847.61
Effect of related creditors’ rights on the operating
results and financial position of the Company
The above creditors’ rights do not affect the ordinary operation of the Company. Moreover they have catered to the
needs for development of existing businesses of Shouguang Meite Environmental and Weifang Sime Darby West
Port and lowered the financing costs.
5. Other significant related party transactions
□ Applicable √ Not applicable
There was no other significant related party transaction of the Company during the reporting period.Market interest rate
SHANDONG CHENMING PAPER HOLDINGS LIMITED70
VII Material Matters
XVII. Material contracts and implementation
1. Custody contracting and leasing
(1) Custody
□ Applicable √ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
□ Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
□ Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
2. Significant guarantees
√ Applicable □ Not applicable
(1) Guarantees
During the reporting period the Company provided guarantee to subsidiaries and the guarantee amount
incurred was RMB7697.6500 million. The subsidiaries provided guarantee to their subsidiaries and the
guarantee amount incurred was RMB10443103 million.
As at 31 December 2020 the balance of the external guarantee provided by the Company (including the
guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)
amounted to RMB13107.0798 million representing 53.99% of the equity attributable to shareholders of the
Company as at the end of 2020.
2020 ANNUAL REPORT 71
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
There were no guarantees in violation of regulations.Unit: RMB’0000
External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries
Name of obligee
Date of the related
Announcement
disclosing the
guarantee amount
Amount of
guarantee Guarantee date
Guarantee
provided
Type of
guarantee Term
Fulfilled
or not
Guarantee
to related
parties
or not
Weifang Sime Darby
West Port Co. Ltd.
24 July 2017 17500.00 20 December 2017 12480.00 General
guarantee
10 years No No
Zhanjiang Runbao
Trading Co. Ltd.
4 December 2020 16000.00 4 December 2020 16000.00 Pledge 2 years No No
Zhanjiang Dingjin
Trading Co. Ltd.
4 December 2020 13558.19 4 December 2020 13558.19 Pledge 2 years No No
Total external guarantees approved during
the reporting period (A1)
29558.19 Total actual external guarantees during the reporting period (A2) 29558.19
Total external guarantees approved at the
end of the reporting period (A3)
47058.19 Balance of total actual guarantees at the end of the reporting period (A4) 42038.19
SHANDONG CHENMING PAPER HOLDINGS LIMITED72
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between the Company and its subsidiaries
Name of obligee
Date of the related
Announcement
disclosing the
guarantee amount
Amount of
guarantee Guarantee date
Guarantee
provided
Type of
guarantee Term
Fulfilled
or not
Guarantee
to related
parties
or not
Zhanjiang Chenming
Pulp & Paper Co. Ltd.
14 June 2018 200000.00 12 July 2019 485993.49 General
guarantee
3 years No No
Zhanjiang Chenming
Pulp & Paper Co. Ltd.
30 March 2019 1088000.00 General
guarantee
5 years No No
Zhanjiang Chenming
Pulp & Paper Co. Ltd.
27 March 2020 160000.00 General
guarantee
5 years No No
Shandong Chenming
Group Finance Co.Ltd.
30 March 2019 500000.00 General
guarantee
5 years No No
Shandong Chenming
Paper Sales Co. Ltd.
30 March 2019 600000.00 9 March 2020 120372.86 General
guarantee
5 years No No
Shandong Chenming
Financial Leasing Co.
Ltd
26 March 2015 100000.00 General
guarantee
7 years No No
Shandong Chenming
Financial Leasing Co.
Ltd
30 March 2016 300000.00 General
guarantee
7 years No No
Shanghai Chenming
Financial Leasing Co.
Ltd.
14 February 2018 50000.00 General
guarantee
3 years No No
Qingdao Chenming
Nonghai Financial
Leasing Co. Ltd.
14 February 2018 50000.00 General
guarantee
3 years No No
Guangzhou Chenming
Financial Leasing Co.
Ltd.
14 February 2018 50000.00 General
guarantee
3 years No No
Shandong Chenming
Commercial Factoring
Co. Ltd.
14 February 2018 200000.00 General
guarantee
3 years No No
Huanggang Chenming
Pulp & Paper Co. Ltd.
26 March 2015 400000.00 5 January 2017 92628.00 General
guarantee
7 years No No
Huanggang Chenming
Pulp & Paper Co. Ltd.
30 March 2016 550000.00 General
guarantee
7 years No No
Jiangxi Chenming Paper
Co. Ltd.
14 June 2018 50000.00 28 June 2019 164253.48 General
guarantee
3 years No No
Jiangxi Chenming Paper
Co. Ltd.
30 March 2019 350000.00 General
guarantee
5 years No No
Shouguang Meilun
Paper Co. Ltd.
30 March 2019 100000.00 9 July 2020 48191.77 General
guarantee
5 years No No
2020 ANNUAL REPORT 73
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between the Company and its subsidiaries
Name of obligee
Date of the related
Announcement
disclosing the
guarantee amount
Amount of
guarantee Guarantee date
Guarantee
provided
Type of
guarantee Term
Fulfilled
or not
Guarantee
to related
parties
or not
Shouguang Meilun
Paper Co. Ltd.
27 March 2020 400000.00 General
guarantee
5 years No No
Wuhan Chenming
Hanyang Paper
Holdings Co. Ltd.
18 October 2019 100000.00 6 August 2020 3000.00 General
guarantee
3 years No No
Chenming (HK) Limited 14 June 2018 250000.00 23 April 2018 42738.10 General
guarantee
3 years No No
Chenming (HK) Limited 30 March 2019 500000.00 General
guarantee
5 years No No
Shouguang Chenming
Import and Export
Trade Co. Ltd.
30 March 2019 50000.00 General
guarantee
5 years No No
Jilin Chenming Paper
Co. Ltd.
30 March 2019 150000.00 16 March 2020 2000.00 General
guarantee
5 years No No
Zhanjiang Chenming
Arboriculture
Development Co. Ltd
30 March 2019 10000.00 General
guarantee
5 years No No
Nanchang Chenming
Arboriculture
Development Co. Ltd.
27 March 2020 10000.00 General
guarantee
3 years No No
Shandong Chenming
Panels Co. Ltd.
14 June 2018 3000.00 General
guarantee
3 years No No
Shanghai Chenming
Industrial Co. Ltd
11 October 2018 400000.00 General
guarantee
3 years No No
Shanghai Chenming
Pulp & Paper Sales
Co. Ltd.
30 March 2019 300000.00 11 May 2020 1500.00 General
guarantee
5 years No No
Shanghai Hongtai Real
Estate Co. Ltd.
27 March 2020 140000.00 General
guarantee
10 years No No
Shanghai Hongtai
Property Management
Co. Ltd.
27 March 2020 10000.00 General
guarantee
5 years No No
Chenming (Overseas)
Co. Ltd.
27 March 2020 100000.00 General
guarantee
5 years No No
Chenming (Singapore)
Co. Ltd.
27 March 2020 100000.00 General
guarantee
5 years No No
Hainan Chenming
Technology Co. Ltd.
4 December 2020 40000.00 11 December 2020 38000.00 General
guarantee
3 years No No
Total amount of guarantee provided for
subsidiaries approved during the reporting
period (B1)
960000.00 Total amount of guarantee provided for subsidiaries during the reporting period
(B2)
769765.00
Total amount of guarantee provided for
subsidiaries approved as at the end of the
reporting period (B3)
7311000.00.00 Total balance of guarantee provided for subsidiaries as at the end of the
reporting period (B4)
998677.70
SHANDONG CHENMING PAPER HOLDINGS LIMITED74
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between subsidiaries
Name of obligee
Date of the related
Announcement
disclosing the
guarantee amount
Amount of
guarantee Guarantee date
Guarantee
provided
Type of
guarantee Term
Fulfilled
or not
Guarantee
to related
parties
or not
Chenming (HK) Limited 30 March 2019 200000.00 2 April 2019 165561.06 Guarantee provided 5 years No No
Chenming (HK) Limited 30 March 2019 100000.00 30 July 2019 9431.03 Guarantee provided 5 years No No
Zhanjiang Chenming Pulp &
Paper Co. Ltd.
7 August 2020 12000.00 7 August 2020 12000.00 Guarantee provided 1 year No No
Shouguang Meilun Paper
Co. Ltd.
4 December 2020 20000.00 4 December 2020 20000.00 Pledge 2 years No No
Shouguang Meilun Paper
Co. Ltd.
4 December 2020 42400.00 4 December 2020 42400.00 Pledge 3 years No No
Wuhan Chenming Hanyang
Paper Holdings Co. Ltd.
4 December 2020 3000.00 4 December 2020 600.00 Pledge 3 years No No
Huanggang Chenming Pulp
& Paper Co. Ltd.
4 December 2020 20000.00 4 December 2020 20000.00 Pledge 3 years No No
Total amount of guarantee provided for subsidiaries
approved during the reporting period (C1)
97400.00 Total amount of guarantee provided for subsidiaries during the reporting period (C2) 104431.03
Total amount of guarantee provided for subsidiaries
approved as at the end of the reporting period (C3)
397400.00 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4) 269992.09
Total amount of guarantee provided (i.e. sum of the above three guarantee amount)
Total amount of guarantee approved during the
reporting period (A1+B1+C1)
1086958.19 Total amount of guarantee during the reporting period (A2+B2+C2) 885712.41
Total amount of guarantee approved as at the end of
the reporting period (A3+B3+C3)
7755458.19 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 903754.22
The percentage of total amount of guarantee provided
(i.e. A4+B4+C4) to the net assets of the Company
1310707.98
Of which:
Balance of guarantee provided for shareholders beneficial controllers and its related parties (D) 0
Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 159872.86
Total amount of guarantee provided in excess of 50% of net assets (F) 96859.54
Sum of the above three amount of guarantee (D+E+F) 256732.40
2020 ANNUAL REPORT 75
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(2) External guarantees against the rules and regulations
□ Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during
the reporting period.
3. Entrusted cash and asset management
(1) Entrusted wealth management
□ Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
□ Applicable √ Not applicable
The Company did not have any entrusted loans during the reporting period.
4. Material contracts in day-to-day operation
□ Applicable √ Not applicable
5. Other material contracts
□ Applicable √ Not applicable
The Company did not have any other material contracts during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED76
VII Material Matters
XVIII. Fulfilment of Social Responsibility
1. Fulfilment of social responsibility
We have always been grateful for all our blessings without forgetting our aspiration. For a long time the Company
has constantly adhered to the development goal of “the industry serving the country and giving back to society”.Guided by “creating high-quality paper products and sincerely returning to society” while pursuing the maximisation
of value we insist on green development participate in public welfare activities deeply integrate social responsibility
and corporate vision as well as mission and values create greater value for stakeholders thus becoming a world-
class papermaking enterprise group that shoulders greater responsibility.Standardising the Company’s operation and protecting the rights and interests of shareholders. The Company
strictly abides by the requirements of the “Company Law” “Securities Law” “Articles of Association” and other
relevant laws and regulations improves the corporate governance structure and establishes an organisation with
shareholders’ general meeting the Board and the Supervisory Committee as power decision-making and supervision
in combination with the actual situation of the Company. The organisation and the management have clearly defined
powers and responsibilities with each performing their own duties effective checks and balances scientific decision-
making coordinated operation continuously enhance the Company’s operation management and standard operation
level and protect the legitimate rights and interests of all shareholders in a practical manner. During the reporting
period the Company adopted a combination of on-site and online voting to convene a shareholders’ general meeting
in order to ensure that all shareholders especially small and medium shareholders enjoy equal status enabling
them to effectively participate in and fully exercise their voting rights. At the same time while achieving growth and
development the Company attaches great importance to returns to investors and insists on sharing the Company’s
business development results with investors. The Company has distributed cash dividends to shareholders for
eighteen consecutive years since 2003. During the reporting period the Company implemented the 2019 profit
distribution plan and distributed cash dividends of RMB437433593.74 to ordinary shareholders and cash dividends
of RMB172676073.42 to preferred shareholders effectively safeguarding the legitimate rights and interests of all
shareholders of the Company and providing all shareholders with stable return on investments.Practicing green development and adhering to environmental protection first. The Company has been actively
practicing the concept of “turquoise waters and verdant mountains are invaluable assets”. Relying on advanced
production technology and manufacturing equipment extensive experience in waste management and a variety
of complete treatment systems the Company unswervingly embarks on a novel industrialisation path with high
technology content low resource consumption and less environmental pollution and vigorously implements a green
and low-carbon strategy to achieve a “win-win” situation between economic social and ecological benefits. The
Company took the lead in exploring black liquor resource recovery technology launched the largest alkali recycling
project in the domestic paper industry and built the first domestic medium-pressure steam generator with the
utilisation of alkali furnaces which could save 750000 tons of standard coal per annum with the alkali recovery rate
reaching 99.8%; adopted the world’s most advanced osmosis and filtration technology to recycle greywater with a
conversion rate of up to 75% or above and the standard of treated greywater is up to drinking water standard which
could save 170000 cubic meters of clean water on a daily basis. The Company insists on reduction from the source
of production and implements the “horizontally and vertically accessible” full-process control thereby achieving low
consumption with low emissions as well as recirculation with reduction. It vigorously develops circular economy
comprehensively implements clean production implements on-site 6S management and achieves the Company’s
goal of “energy saving consumption reduction pollution reduction and efficiency enhancement” becoming a
benchmark for environmentally-friendly and resource-saving enterprise. During the reporting period the Company
was awarded the honorary title of “2020 Environmental and Socially Responsible Enterprise”.
2020 ANNUAL REPORT 77
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
1. Fulfilment of social responsibility (Cont’d)
Adhering to the principle of people-orientation and promoting employee development. The Company always upholds
the “people-oriented” concept and regards the benefit of employees as the driving force and foothold of the
Company’s development. It fully implements safety production management intensifies safety production inspections
through continuous refinement of safety production standards and carries out production safety education training
and other campaigns for employees on an irregular basis in order to ensure the health and safety of employees. In
addition it builds an equal development platform for employees by establishing and improving internal regulations and
systems as well as optimising performance reward rules and implements diversified training to improve employees’
vocational skills forming a strong atmosphere of “mass entrepreneurship and innovation”. Meanwhile the Company
focuses on enriching the spare-time life of employees promotes work-life balance provides employees with living
place establishes an employee mutual aid foundation to help employees in need and enhances the sense of
happiness among staff. During the reporting period the Company organised basketball games speech contests Mid-
Autumn Festival Gala New Year’s Day Gala and other labour union activities to enrich employees’ spare time life and
enhance their sense of belonging. At the same time the Company implemented an A-share restricted stock incentive
plan to grant A shares to 111 incentive targets based on the principle of “equivalent benefits and contributions” and
realised the combination of medium to long-term incentive mechanism and talent development strategy promoting
the high-quality development of the Company.
Enthusiastic support for charity and bravely shouldering social responsibilities. While adhering to meeting social
needs with high-quality products the Company focuses on building harmonious and friendly public relations actively
engages in charity activities fulfils social responsibilities and creates social value. In recent years the Company has
actively participated in charitable projects such as “Sunrise Aid for Education” “Sunset Assistance to Elderly “ “Aidfor the Disabled” “Rehabilitation and Medical Assistance” and “Daily Donation with Compassion” as well as disasterrelief including rescue activities in the Wenchuan Earthquake Yushu Earthquake and Shouguang Flood. The Municipal
Party Committee and the municipal government of Weifang and Shouguang have successively awarded the Company
the “Most Caring Charity Enterprise” and Mr. Chen Hongguo the chairman of the Group the honorary title of the “Most
Caring Charity Person”. During the reporting period in the nationwide battle against the novel coronavirus pneumonia
Chenming Group has made contributions and donations of more than RMB13 million in total demonstrating the
great love of “heart-to-hands and mutual assistance”. And it joins hands with the People’s Education Agency and the
Chinese media to organise the charity donation activity of “sharing the fragrance of books in supporting the charity”
for the Jiangxi Sanqingshan School and fully advances the “soul casting project”.Society is the soil for cultivating the development of enterprises and enterprises cannot attain sustainable
development without the care and support of all sectors of society. The Company will always keep its mission in
mind and shoulder the responsibilities. While focusing on the main business and strengthening the industry the
Company insists on putting the protection of the rights and interests of shareholders customers and employees
and the promotion of social welfare development as the corporate value that it pursues. It continuously increases
investment in charity and public welfare and injects positive energy into economic and social development as well as
the revitalisation of the national paper industry with a strong sense of responsibility and mission.
2. Fulfilment of social responsibility regarding targeted poverty relief
The Company did not commence any work regarding targeted poverty relief.
SHANDONG CHENMING PAPER HOLDINGS LIMITED78
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters
Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
protection authority?
Yes
Name of company or subsidiary
Name of major pollutants
and specific pollutants Way of emission
Number of
emission
outlets
Distribution of
emission outlets
Emission
concentration
Pollutant emission
standards implemented Total emissions Approved total emissions
Excessive
emissions
Huanggang Chenming Pulp &
Paper Co. Ltd.Smoke Organised emission 2 Within factory area Alkali furnace: 7.13 mg/m3
Lime kiln: 5.54mg/m3
Alkali furnace: 30 mg/m3
Lime kiln: 200mg/m3
Alkali furnace: 20.21t
Lime kiln: 3.77t
Alkali furnace: 124.357 t
Lime kiln: 26.44 t
No
Sulphur dioxide Organised emission 2 Within factory area Alkali furnace: 7.03 mg/m3
Lime kiln: 54.59mg/m3
Alkali furnace: 200 mg/m3
Lime kiln: 850mg/m3
Alkali furnace: 19.03t
Lime kiln: 36.34t
Alkali furnace: 321.193 t
Lime kiln: 158.304 t
No
Nitrogen oxide Organised emission 1 Within factory area 152.14 mg/m3 200 mg/m3 463.17t 950.882 t No
COD Organised emission 1 Within factory area 53.22 mg/L 150 mg/L 369.93t 563.72t No
Ammonia nitrogen Organised emission 1 Within factory area 0.99 mg/L 14 mg/L 6.41t 40.12t No
Shandong Chenming Paper
Holdings Limited
COD Organised emission 2 Chenming Industrial Park 180mg/L 300mg/L 3279.9t 6510.74t No
Ammonia nitrogen Organised emission 2 Chenming Industrial Park 4.05mg/L 30 mg/L 78.69t 650.7t No
Sulphur dioxide Organised emission 2 Chenming Industrial Park 5.27mg/m3 35mg/m3 20.51t 163.74t No
Nitrogen oxide Organised emission 2 Chenming Industrial Park 32.65mg/m3 50mg/m3 119.07t 233.91t No
Smoke Organised emission 2 Chenming Industrial Park 0.87mg/m3 5mg/m3 3.11t 23.39t No
Shouguang Meilun Paper Co.Ltd.Sulphur dioxide Organised emission 4 Chenming Industrial Park Power plant: 8.39mg/m3
Alkali furnace: 2.19 mg/m3
Lime kiln: 5.81mg/m3
Power plant: 35mg/m3
Alkali furnace: 50 mg/m3
Lime kiln: 50 mg/m3
85.23t 423.11t No
Nitrogen oxide Organised emission 4 Chenming Industrial Park Power plant: 32.7mg/m3
Alkali furnace: 77.1 mg/m3
Lime kiln: 9.68 mg/m3
Power plant: 50mg/m3
Alkali furnace: 100 mg/m3
Lime kiln: 100 mg/m3
1059.54t 1363.59t No
Smoke Organised emission 4 Chenming Industrial Park Power plant: 0.9mg/m3
Alkali furnace: 1.55 mg/m3
Lime kiln: 1.57 mg/m3
Power plant: 5mg/m3
Alkali furnace: 10 mg/m3
Lime kiln: 10 mg/m3
23.74t 138.06t No
Wuhan Chenming Hanyang Paper
Holdings Co. Ltd.
COD Organised emission 1 East of the factory area 23mg/L 80mg/L 57.9149t 184.3t No
Ammonia nitrogen Organised emission 1 East of the factory area 1 mg/L 8 mg/L 1.8738t 17.3t No
Sulphur dioxide Organised emission 2 Within Qianneng Electric Power
factory area
130t/h furnace: 7.97 mg/m3 75t/h
furnace: 3.27mg/m3
50mg/m3 7.5779t 102.58t No
Nitrogen oxide Organised emission 2 Within Qianneng Electric Power
factory area
130t/h furnace: 74.99mg/m3 75t/h
furnace: 61.99mg/m3
100 mg/m3 73.938t 205.16t No
Smoke Organised emission 2 Within Qianneng Electric Power
factory area
130t/h furnace: 3.15mg/m3 75t/h
furnace: 2.49mg/m3
20mg/m3 3.0288t 41.032t No
Jiangxi Chenming Paper Co. Ltd. COD Organised emission 1 At the boundary of factory area 25.75mg/L 90mg/L 230.696t 1260t No
Ammonia nitrogen Organised emission 1 At the boundary of factory area 1.19mg/L 8mg/L 10.844t 112t No
Sulphur dioxide Organised emission 2 At the boundary of factory area 72.34mg/m3 200mg/m3 328.325t 806t No
Nitrogen oxide Organised emission 2 At the boundary of factory area 83.56mg/m3 200mg/m3 383.415t 806t No
Smoke Organised emission 2 At the boundary of factory area 5.94mg/m3 30mg/m3 27.311t 135t No
Jilin Chenming Paper Co. Ltd. COD Organised emission 1 At the boundary of factory area 48.02mg/l 90mg/l 200.19t 357t No
Ammonia nitrogen Organised emission 1 At the boundary of factory area 1.37mg/l 8mg/l 4.49t 34t No
Sulphur dioxide Organised emission 1 Within factory area 6.98mg/m3 100mg/m3 4.638t 97t No
Nitrogen oxide Organised emission 1 Within factory area 32.60mg/m3 100mg/m3 21.673t 213t No
Smoke Organised emission 1 Within factory area 11.76mg/m3 30mg/m3 7.82t 51.66t No
2020 ANNUAL REPORT 79
VII Material Matters
Name of company or subsidiary
Name of major pollutants
and specific pollutants Way of emission
Number of
emission
outlets
Distribution of
emission outlets
Emission
concentration
Pollutant emission
standards implemented Total emissions Approved total emissions
Excessive
emissions
Zhanjiang Chenming Pulp &
Paper Co. Ltd.
COD Organised emission 1 Within factory area 44.151mg/L 90mg/L 750.573t 1943t No
Ammonia nitrogen Organised emission 1 Within factory area 1.138mg/L 8mg/L 19.408t 43.9t No
Total phosphorus Organised emission 1 Within factory area 0.246mg/L 0.8mg/L 4.160t 21.36t No
Total nitrogen Organised emission 1 Within factory area 5.587mg/L 12mg/L 94.040t 320.4t No
Smoke Organised emission 5 Within factory area Alkali recovery: 15.786mg/m3 Power
plant 1#: 6.043mg/m3
Power plant 2#: 5.428mg/m3
Power plant 3#: 5.006mg/m3
Power plant 4#: 3.387mg/m3
Alkali recovery: 30mg/m3
1#2#3# circulating fluidised bed
boilers: 30mg/m3
4# circulating fluidised bed boilers:
10mg/m3
183.592t 196t No
Sulphur dioxide Organised emission 5 Within factory area Alkali recovery: 11.818mg/m3 Power
plant 1#: 7.507mg/m3
Power plant 2#: 6.872mg/m3
Power plant 3#: 9.564mg/m3
Power plant 4#: 3.775mg/m3
Alkali recovery: 200mg/m3
1#2#3# circulating fluidised bed
boilers: 100mg/m3
4# circulating fluidised bed boilers:
35mg/m3
190.464t 620t No
Nitrogen oxide Organised emission 5 Within factory area Alkali recovery: 153.633mg/m3
Power plant 1#: 13.608mg/m3
Power plant 2#: 18.036mg/m3
Power plant 3#: 20.734mg/m3
Power plant 4#: 18.710mg/m3
Alkali recovery: 200mg/m3
1#2#3# circulating fluidised bed
boilers: 100mg/m3
4# circulating fluidised bed boilers:
50mg/m3
1326.078t 2169.70t No
Construction and operation of facilities for pollution prevention and control
(1) The Company and its subsidiaries strictly comply with laws regulations and relevant rules regarding
environmental protection of the central and local government. The construction of projects strictly adheres to
the “three simultaneities” on environmental protection. In order to ensure pollutants are discharged strictly in
accordance with the requirements under laws and regulations and disposed properly production and operation
strictly comply with the national Law on the Prevention and Control of Environmental Pollution Law on the
Prevention and Control of Water Pollution Law on the Prevention and Control of Air Pollution Action Plan for
Prevention and Control of Water Pollution and Law on the Prevention and Control of Environmental Pollution by
Solid Waste and other laws.
(2) Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
facilities. The pre-treatment-aerobic-anaerobic-in-depth treatment technology is the major technology for water
treatment which can achieve standardised discharge of wastewater. Moreover subsidiaries are equipped with
recycling system for process effluent and reuse treated wastewater to the greatest extent in order to minimise
pollution. The Company has constructed a total of 9 water treatment plants with daily treatment capacity of
350000 m3. In addition governmental authority will regularly visit the Company to conduct comparison of
online monitoring data every quarter. All data meets the standards.XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED80
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Construction and operation of facilities for pollution prevention and control (Cont’d)
(3) Each subsidiary’s organised emission outlets are equipped with an online monitoring system for real-time
monitoring. All subsidiaries have their own power plants. Each self-owned plant has its own environmental
protection facilities for de-dusting desulphurisation and denitrification. Denitrification is conducted through
SCR or SNCR while desulphurisation is primarily conducted through gypsum desulphurisation (ammonia
desulphurisation is adopted in the self-owned plant of Jiangxi Chenming). Substantially all of the emissions
indicators are below the national and local execution standards. Other alkali recovery boilers and lime kilns are
also in compliance with the emission standards.
Environmental impact assessment of construction projects and other environmental protection administrative
licensing
The Company has strictly complied with the environmental laws and regulations all along to carry out environmental
impact assessment of construction projects. The construction projects are all subject to environmental impact
assessment. During the construction process a reasonable environmental protection project construction plan is
formulated and strictly implemented. The environmental protection facilities and the main project are designed
constructed and put into operation at the same time. At present all construction projects put into production have
obtained environmental impact assessment approvals and acceptance approvals.In June 2017 the Company and its subsidiaries completed the formalities for new discharge permits in accordance
with the Measures for the Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection
and the discharge permits of the new projects were renewed according to the environmental protection requirements
in a timely manner.
Emergency plan for emergency environmental incidents
The Company has strictly implemented emergency regulations for emergency environmental incidents and formulated
various emergency plans for emergency environmental incidents according to the technical requirements in the
“Technical Guidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the
Environmental Protection Bureau and regular emergency training and emergency drills are conducted. Emergency
measures in relation to dangerous chemicals are formulated in accordance with the environmental protection
requirements. At the same time necessary emergency supplies are provided with regular inspections and updates.
Environmental self-monitoring programme
The Company has strictly complied with self-monitoring laws and regulations and conducted self-monitoring in
accordance with the environmental protection requirements to establish and perfect the corporate environmental
management ledgers and materials. At present self-monitoring is a combination of manual monitoring and automatic
monitoring. At the same time qualified units are engaged to conduct regular monitoring. Automatically monitored
items include: total wastewater discharge (COD ammonia nitrogen flow rate total phosphorus total nitrogen and
PH); power plant alkali recovery boilers and lime kiln exhaust emissions (sulphur dioxide nitrogen oxide and smoke).Manually monitored items include: daily monitoring of COD ammonia nitrogen SS chroma PH total phosphorus
and total nitrogen indicators. Sewage and other monitoring items unorganised exhaust emission solid waste and
noise at the plant boundary are monitored on a monthly or quarterly basis by qualified units engaged in accordance
with the local environmental protection requirements in relation to each subsidiary.The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries
are published on the national key pollution source information disclosure website and the provincial key pollution
source information disclosure websites.
2020 ANNUAL REPORT 81
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Other environmental information to be disclosed
The relevant environmental protection information of the pollutant discharge permit information and the pollutant
discharge permit requirements is announced on the national sewage discharge permit management information
platform.Other environmental protection related information
Other environmental protection related information is announced on the Company’s website.XIX. Other matters of significance
√ Applicable □ Not applicable
1. Approval of registration of super & short-term commercial paper
On 16 February 2020 the super & short-term commercial paper issue of the Company was registered and approved
by the Notice of Acceptance of Registration (Zhong Shi Xie Zhu [2020] No. SCP27) of the National Association of
Financial Market Institutional Investors. The super & short-term commercial paper of the Company approved for
registration amounted to RMB7 billion and the registered amount was valid for 2 years from the issue date of the
notice and can be issued in tranches during the effective term of the registration.
For details please refer to the relevant announcement (announcement no.: 2020-005) of the Company published on
CNINFO on 17 February 2020.
2. Implementation of the 2020 restricted A shares incentive scheme
For details please refer to XV. Implementation of the equity incentive plan employee shareholding plan or other
employee incentive measure of the Company in VII Material Matters of this report.
3. Completion of implementation of the plan for the increase in shareholding of the controlling
shareholder
Due to its confidence in the Company’s future business growth and development prospects as at 9 September
2020 the implementation of the plan for the increase in shareholding of Chenming Holdings Company Limited the
Company’s controlling shareholder was completed. Chenming Holdings cumulatively increased its shareholding in
the Company by 17817434 A shares through centralised bidding on the Shenzhen Stock Exchange trading system
representing 0.6% of the Company’s total share capital. In aggregate the increase in shareholding amounted to
RMB100118100.
For details please refer to the relevant announcement (announcement no.: 2020-087) of the Company published on
CNINFO on 10 September 2020.
SHANDONG CHENMING PAPER HOLDINGS LIMITED82
VII Material Matters
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020
Announcement No. Subject matter Date of publication Publication website and index
2020-001 Announcement on Resolutions of the Seventh
Extraordinary Meeting of the Ninth Session of the
Board
8 January 2020 http://www.cninfo.com.cn
2020-002 Announcement on the Establishment of Overseas
Subsidiaries by Foreign Investment
8 January 2020 http://www.cninfo.com.cn
2020-003 Announcement on Pledge of Shareholders’ Shares 22 January 2020 http://www.cninfo.com.cn
2020-004 Announcement on External Donations to
Support the Fight Against the Novel Coronavirus
Pneumonia
8 February 2020 http://www.cninfo.com.cn
2020-005 Announcement on Approval of Registration of
Super & Short-term Commercial Paper
18 February 2020 http://www.cninfo.com.cn
2020-006 The First Indicative Announcement on the
Adjustment of the Coupon Rate of “18 Chenming
Bond 01” and Repurchase Measure for
Bondholders
19 February 2020 http://www.cninfo.com.cn
2020-007 Announcement on Resolutions of the Eighth
Extraordinary Meeting of the Ninth Session of the
Board
22 February 2020 http://www.cninfo.com.cn
2020-008 Announcement on Resolutions of the Third
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
22 February 2020 http://www.cninfo.com.cn
2020-009 Announcement on Delay in Increase of Shares of
the Company by the Controlling Shareholder
22 February 2020 http://www.cninfo.com.cn
2020-010 Notice of 2020 First Extraordinary General Meeting 22 February 2020 http://www.cninfo.com.cn
2020-011 The Second Indicative Announcement onthe Adjustment of the Coupon Rate of “18
Chenming Bond 01” and Repurchase Measure for
Bondholders
21 February 2020 http://www.cninfo.com.cn
2020-012 The Third Indicative Announcement on the
Adjustment of the Coupon Rate of “18 Chenming
Bond 01” and Repurchase Measure for
Bondholders
25 February 2020 http://www.cninfo.com.cn
2020-013 Announcement on Repurchase Report of Investor
of “18 Chenming Bond 01”
28 February 2020 http://www.cninfo.com.cn
2020-014 Announcement on the Continued Pledge of Shares
held by Shareholders
7 March 2020 http://www.cninfo.com.cn
2020-015 Announcement on the Distribution of Dividend of
Preference Share
10 March 2020 http://www.cninfo.com.cn
2020-016 Announcement on Resolution of the 2020 First
Extraordinary General Meeting
10 March 2020 http://www.cninfo.com.cn
2020-017 Announcement on Resolutions of the Fourth
Extraordinary Meeting of the Ninth Session of the
Board
28 March 2020 http://www.cninfo.com.cn
2020-018 Announcement on Resolutions of the Fourth
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
28 March 2020 http://www.cninfo.com.cn
2020 ANNUAL REPORT 83
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-019 2019 Annual Report Summary 28 March 2020 http://www.cninfo.com.cn
2020-020 Notice of 2019 Annual General Meeting 28 March 2020 http://www.cninfo.com.cn
2020-021 Announcement on Appointment of Auditor for
2020
28 March 2020 http://www.cninfo.com.cn
2020-022 Announcement on the Cancellation of Guarantee
Amount for Some Subsidiaries and the Expected
Increase in New Guarantee Amount
28 March 2020 http://www.cninfo.com.cn
2020-023 Announcement on the Estimated Day-to-day
Related Party Transactions for 2020
28 March 2020 http://www.cninfo.com.cn
2020-024 Announcement on Financial Assistance from a
Subsidiary to Its Investee
28 March 2020 http://www.cninfo.com.cn
2020-025 Supplemental Announcement on Estimated Day-
to-day Related Party Transactions for 2020
30 March 2020 http://www.cninfo.com.cn
2020-026 Announcement of Resolutions of the Ninth
Extraordinary Meeting of the Ninth Session of the
Board
31 March 2020 http://www.cninfo.com.cn
2020-027 Announcement of Resolutions of the Fourth
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
31 March 2020 http://www.cninfo.com.cn
2020-028 Notice of 2020 Second Extraordinary General
Meeting
31 March 2020 http://www.cninfo.com.cn
2020-029 Notice of 2020 First Class Meeting for Holders
of Domestic-listed Shares and 2020 First Class
Meeting for Holders of Overseas Listed Shares
31 March 2020 http://www.cninfo.com.cn
2020-030 Announcement on Public Solicitation of Voting
Rights by Independent Directors
31 March 2020 http://www.cninfo.com.cn
2020-031 Announcement on Receipt of Government
Subsidies by Subsidiaries
31 March 2020 http://www.cninfo.com.cn
2020-032 Announcement on Repurchase Report on
Bondholders of “18 Chenming Bond 01”
31 March 2020 http://www.cninfo.com.cn
2020-033 Announcement on payment of 2020 interest with
respect to the first tranche of Corporate Bonds
publicly issued to qualified investors in 2018
31 March 2020 http://www.cninfo.com.cn
2020-034 Announcement on Pledge of Shares held by
Shareholders
7 April 2020 http://www.cninfo.com.cn
2020-035 Announcement on Estimated Results for First
Quarter of 2020
14 April 2020 http://www.cninfo.com.cn
2020-036 Announcement on the Release of Pledge of
Shares held by Shareholders
15 April 2020 http://www.cninfo.com.cn
2020-037 Reply to the inquiry letter of Shenzhen Stock
Exchange Regarding Annual Report
17 April 2020 http://www.cninfo.com.cn
2020-038 2020 First Quarterly Report 21 April 2020 http://www.cninfo.com.cn
2020-039 Announcement on Result of the Issue of 2020 First
Tranche of Super & Short-term Commercial Paper
24 April 2020 http://www.cninfo.com.cn
2020-040 Announcement on Postponement of Resale of “18
Chenming Bond 01” Corporate Bonds
30 April 2020 http://www.cninfo.com.cn
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED84
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-041 Announcement on Approval of 2020 Restricted
A Share Incentive Scheme by the State-owned
Assets Supervision and Administration Bureau of
Shouguang City
6 May 2020 http://www.cninfo.com.cn
2020-042 The Explanation on the Status of Announcement
and Review Opinions of the Supervisory
Committee Regarding the List of Participants
under 2020 Restricted A Share Incentive Scheme
8 May 2020 http://www.cninfo.com.cn
2020-043 Self-Examination Report for the Trading of Shares
of the Company by Insiders and Participants of
the 2020 Restricted A Share Incentive Scheme
16 May 2020 http://www.cninfo.com.cn
2020-044 Announcement on Resolutions of 2020 Second
Extraordinary General Meeting 2020 First Class
Meeting for Holders of Domestic-listed Shares
and 2020 First Class Meeting for Holders of
Overseas Listed Shares
16 May 2020 http://www.cninfo.com.cn
2020-045 Announcement on Receipt of Government
Subsidies by Subsidiaries
28 May 2020 http://www.cninfo.com.cn
2020-046 Announcement on Resolutions of the Tenth
Extraordinary Meeting of the Ninth Session of the
Board
30 May 2020 http://www.cninfo.com.cn
2020-047 Announcement on Resolutions of the Fifth
Extraordinary Meeting of the Ninth session of the
Supervisory Committee
30 May 2020 http://www.cninfo.com.cn
2020-048 Announcement on Matters Relating to Adjustments
to the 2020 Restricted A Share Incentive Scheme
30 May 2020 http://www.cninfo.com.cn
2020-049 Announcement on Grant of Restricted Shares to
the Participants
30 May 2020 http://www.cninfo.com.cn
2020-050 Announcement on the Results of Resale of “18
Chenming Bond 01” Bonds
1 June 2020 http://www.cninfo.com.cn
2020-051 Announcement on Pledge of Shares held by
Shareholders
6 June 2020 http://www.cninfo.com.cn
2020-052 Explanation on Media Coverage of a Subsidiary 19 June 2020 http://www.cninfo.com.cn
2020-053 Announcement on Resolutions of 2019 Annual
General Meeting
20 June 2020 http://www.cninfo.com.cn
2020-054 Announcement on Resolutions of the Eleventh
Extraordinary Meeting of the Ninth Session of the
Board
20 June 2020 http://www.cninfo.com.cn
2020-055 Announcement on Estimated Securities Investment
Quota for 2020
20 June 2020 http://www.cninfo.com.cn
2020-056 Supplemental Announcement on the Poll Results
of 2020 Second Extraordinary Meeting the 2020
First Class Meeting for Holders of Domestic-listed
Shares and 2020 First Class Meeting for Holders
of Overseas-listed Shares
20 June 2020 http://www.cninfo.com.cn
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
2020 ANNUAL REPORT 85
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-057 Announcement on the Release of Pledge of
Shares held by Shareholders
1 July 2020 http://www.cninfo.com.cn
2020-058 Announcement on Receipt of Government
Subsidies
2 July 2020 http://www.cninfo.com.cn
2020-059 Announcement on the Progress of Receipt
of Environmental Protection Relocation
Compensation by a Subsidiary
3 July 2020 http://www.cninfo.com.cn
2020-060 Announcement on Receipt of Environmental
Protection Incentives by Zhanjiang Chenming
6 July 2020 http://www.cninfo.com.cn
2020-061 Announcement on Completion of Registration
of the Grant under the 2020 Restricted A Shares
Incentive Scheme
9 July 2020 http://www.cninfo.com.cn
2020-062 Announcement on the Inclusion of the Company
on the Credit Rating Watch List by a Credit Rating
Agency
9 July 2020 http://www.cninfo.com.cn
2020-063 Announcement of Resolutions of the Sixth
Extraordinary Meeting of the Ninth Session of the
Supervisory Committee
11 July 2020 http://www.cninfo.com.cn
2020-064 Announcement on Resignation of the Chairman of
the Supervisory Committee and By-election of a
Supervisor
11 July 2020 http://www.cninfo.com.cn
2020-065 Announcement on Resolutions of the Twelfth
Extraordinary Meeting of the Ninth Session of the
Board
11 July 2020 http://www.cninfo.com.cn
2020-066 Notice of 2020 Third Extraordinary General
Meeting
11 July 2020 http://www.cninfo.com.cn
2020-067 Announcement on Resolution of the Thirteenth
Extraordinary Meeting of the Ninth Session of the
Board
18 July 2020 http://www.cninfo.com.cn
2020-068 Announcement on Capital Increase and the
Introduction of a
Strategic Investor by a Holding Subsidiary
18 July 2020 http://www.cninfo.com.cn
2020-069 Announcement on the Continued Pledge of Shares
held by Shareholders
25 July 2020 http://www.cninfo.com.cn
2020-070 Announcement on Adjustment to Simulated
Conversion Price of Preference Shares
25 July 2020 http://www.cninfo.com.cn
2020-071 Announcement on Resolution of the 2020 Third
Extraordinary General Meeting
28 July 2020 http://www.cninfo.com.cn
2020-072 Announcement on the Provision of Guarantees for
Bank Loans of a Subsidiary by a Wholly-owned
Subsidiary
8 August 2020 http://www.cninfo.com.cn
2020-073 Announcement on the Distribution of Dividend for
Second Tranche of Preference Share
10 August 2020 http://www.cninfo.com.cn
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED86
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-074 Announcement on the Implementation of the
Distribution of Residual Profits of 2019 to
Preference Shareholders
11 August 2020 http://www.cninfo.com.cn
2020-075 Announcement on the Implementation of Dividend
Distribution to Holders of A Shares and B Shares
for 2019
11 August 2020 http://www.cninfo.com.cn
2020-076 2020 Interim Report Summary 11 August 2020 http://www.cninfo.com.cn
2020-077 Announcement in Respect of Resolutions of the
Sixth Meeting of the Ninth Session of the Board of
Directors
11 August 2020 http://www.cninfo.com.cn
2020-078 Announcement on Huanggang Chenming Phase II
Construction Project
11 August 2020 http://www.cninfo.com.cn
2020-079 Notice of 2020 Fourth Extraordinary General
Meeting
11 August 2020 http://www.cninfo.com.cn
2020-080 Indicative Announcement 19 August 2020 http://www.cninfo.com.cn
2020-081 Supplemental Announcement on the 2020 Interim
Report
19 August 2020 http://www.cninfo.com.cn
2020-082 Announcement on the 2020 Interest Payment of
Corporate Bonds (Phase I)
19 August 2020 http://www.cninfo.com.cn
2020-083 Supplemental Announcement in Relation to the
Progress of Litigation and Arbitration
22 August 2020 http://www.cninfo.com.cn
2020-084 Announcement on the Establishment of Weifang
Chenchuang Sub-Fund with Minmetals Trust and
the Investment in a Subsidiary
26 August 2020 http://www.cninfo.com.cn
2020-085 Poll Results Announcement of the 2020 Fourth
Extraordinary General Meeting
28 August 2020 http://www.cninfo.com.cn
2020-086 Announcement on the Continued Pledge of Shares
held by Shareholders
5 September 2020 http://www.cninfo.com.cn
2020-087 Announcement on Completion of Implementation
of the Plan for the Increase in Shareholding of the
Controlling Shareholder
10 September 2020 http://www.cninfo.com.cn
2020-088 Announcement on the Receipt of Government
Subsidy by a Subsidiary
10 September 2020 http://www.cninfo.com.cn
2020-089 Announcement on the Distribution of Dividend for
Third Tranche of Preference Share
15 September 2020 http://www.cninfo.com.cn
2020-090 Announcement on the Participation in the Online
Investors Collective Reception Day for Listed
Companies in Shandong
26 September 2020 http://www.cninfo.com.cn
2020-091 Announcement on Resolutions of the Fourteenth
Extraordinary Meeting of the Ninth Session of the
Board
30 September 2020 http://www.cninfo.com.cn
2020-092 Announcement on Capital Increase and the
Introduction of a Strategic Investor by a Holding
Subsidiary
30 September 2020 http://www.cninfo.com.cn
2020-093 Announcement on External Investment 30 September 2020 http://www.cninfo.com.cn
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
2020 ANNUAL REPORT 87
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-094 Announcement in respect of Provision of
Guarantee in Favour of a Subsidiary for Financing
13 October 2020 http://www.cninfo.com.cn
2020-095 2020 Third Quarterly Report 23 October 2020 http://www.cninfo.com.cn
2020-096 Announcement on Release of Pledge of Shares
Held by Shareholders
6 November 2020 http://www.cninfo.com.cn
2020-097 Announcement in respect of Provision of
Guarantee in Favour of a Subsidiary for Financing
6 November 2020 http://www.cninfo.com.cn
2020-098 Announcement in respect of Provision of
Guarantee in Favour of Subsidiaries by a Wholly-
owned Subsidiary
14 November 2020 http://www.cninfo.com.cn
2020-099 Announcement in respect of Provision of
Guarantee in Favour of a Subsidiary
5 December 2020 http://www.cninfo.com.cn
2020-100 Announcement on Resolutions of the Fifteenth
Extraordinary Meeting of the Ninth Session of the
Board
5 December 2020 http://www.cninfo.com.cn
2020-101 Announcement on the Acquisition of Non-
controlling Interest in a Subsidiary and External
Guarantee
5 December 2020 http://www.cninfo.com.cn
2020-102 Announcement on the Transfer of Equity to Repay
Debt
5 December 2020 http://www.cninfo.com.cn
2020-103 Announcement on External Guarantees 5 December 2020 http://www.cninfo.com.cn
2020-104 Announcement on the Issue of USD Bonds by a
Subsidiary and the Provision of Guarantee
5 December 2020 http://www.cninfo.com.cn
2020-105 Notice of 2020 Fifth Extraordinary General Meeting 5 December 2020 http://www.cninfo.com.cn
2020-106 Poll Results Announcement of the 2020 Fifth
Extraordinary General Meeting
22 December 2020 http://www.cninfo.com.cn
2020-107 Announcement on Resolutions of the Sixteenth
Extraordinary Meeting of the Ninth Session of the
Board
24 December 2020 http://www.cninfo.com.cn
2020-108 Announcement on the Cooperation to Establish
Changjiang Chenming Equity Investment Fund
and Capital Increase of a Subsidiary
24 December 2020 http://www.cninfo.com.cn
2020-109 Announcement on Investment in the Establishment
of a Limited Partnership
24 December 2020 http://www.cninfo.com.cn
XIX. Other matters of significance (Cont’d)
4. Information disclosure index for 2020 (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED88
VII Material Matters
Announcement No. Subject matter Date of publication Publication website and index
2020-110 Announcement in respect of Provision of
Guarantee in Favour of a Subsidiary by a
Subsidiary
24 December 2020 http://www.cninfo.com.cn
2020-111 Announcement on Receipt of Government
Subsidies by the Subsidiary Zhanjiang Chenming
31 December 2020 http://www.cninfo.com.cn
2020-112 Announcement on the Removal of the Company
from the Credit Rating Watch List by a Credit
Rating Agency
31 December 2020 http://www.cninfo.com.cn
XX. Matters of significant of subsidiaries of the Company
√ Applicable □ Not applicable
1. Outbound investment and establishment of overseas subsidiaries
The Resolution in relation to the Establishment of Overseas Subsidiaries through Outbound Investment was
considered and approved at the seventh extraordinary meeting of the ninth session of the Board of the Company on 7
January 2020 to propose to establish Chenming (Overseas) Co. Ltd. and Chenming (Singapore) Co. Ltd..
For details please refer to the relevant announcement (announcement no.: 2020-002) of the Company published on
CNINFO on 8 January 2020.
2. Huanggang Chenming phase II construction project with a focus on the principal activities of pulp
production and paper making
The Resolution in relation to the Huanggang Chenming Phase II Construction Project was considered and approved at
the fourth extraordinary general meeting of the Company held on 27 August 2020. The planned total investment of the
Huanggang Chenming phase II project amounts to RMB12800 million. 4 paper production lines of annual production
capacity of 1.50 million tonnes (including among other things cultural paper and white paper board and the paper
production of the project will only use self-produced pulp) are proposed to be constructed. The ancillary facilities to
be constructed include among other things a machine-made pulp production line of annual production capacity of
520000 tonnes sewage treatment system combined heat and power generation project and piers.
In order to support the construction of Huanggang Chenming phase II project and facilitate the development of the
principal activities of pulp production and paper making the Company initiated the establishment of Changjiang
Chenming Equity Investment Fund in cooperation with Hubei Changjiang (Huanggang) Industrial Investment Fund
Partnership (Limited Partnership) through the Company’s subsidiaries Zhanjiang Chenming and Hubei Huanggang
Chenming Equity Investment Fund Management Co. Ltd. to increase the capital of Huanggang Chenming by up
to RMB2000.00 million. In addition upon receipt of the above funds Huanggang Chenming shall proceed with the
capital increase of Huanggang Chenming Paper Technology Co. Ltd. its wholly-owned subsidiary for the phase II
project construction of Huanggang Chenming.
For details please refer to the relevant announcements (announcement nos.: 2020-077 2020-078 2020-085 and
2020-108) of the Company published on CNINFO on 11 August 2020 28 August 2020 and 24 December 2020.
2020 ANNUAL REPORT 89
VII Material Matters
3. Introduction of a strategic investor by Shouguang Meilun
In order to actively and prudently reduce the gearing ratio of the Company optimise the capital structure and
enhance the overall capital strength and competitiveness of the Company Shouguang Meilun a holding subsidiary of
the Company introduced Dongxing Securities Investment Co. Ltd. to achieve capital increase of RMB300 million.
Chenming GDR Fund initiated the establishment of Chenchuang Fund in cooperation with Minmetals Investment
Management Co. Ltd. Chenming (Qingdao) Asset Management Co. Ltd. and Minmetals International Trust Co. Ltd..
Chenchuang Fund intended to increase the capital of Shouguang Meilun by instalments with the entire paid-in capital
contributions and the amount of capital increase shall not exceed RMB900 million.
For details please refer to the relevant announcements (announcement nos.: 2020-068 and 2020-092) of the
Company published on CNINFO on 18 July 2020 and 30 September 2020.
SHANDONG CHENMING PAPER HOLDINGS LIMITED90
VIII Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: share
Opening balance Change during the reporting period (+/-) Closing balance
Amount Percentage New issue Bonus issue
Converted
from reserves Others Subtotal Amount Percentage
I. Restricted shares 10580524 0.36% 79600000 0 0 95800 79695800 90276324 3.03%
1. Shares held by other domestic
investors 10580524 0.36% 79600000 0 0 95800 79695800 90276324 3.03%
Of which: Shares held by domestic
natural persons 10580524 0.36% 79600000 0 0 95800 79695800 90276324 3.03%
II. Non-restricted shares 2894027676 99.64% 0 0 0 – 95800 – 95800 2893931876 96.97%
1. RMB ordinary shares 1659337160 57.13% 0 0 0 – 95800 – 95800 1659241360 55.60%
2. Domestic listed foreign shares 706385266 24.32% 0 0 0 0 0 706385266 23.67%
3. Overseas listed foreign shares 528305250 18.19% 0 0 0 0 0 528305250 17.70%
III. Total number of shares 2904608200 100.00% 79600000 0 0 0 79600000 2984208200 100.00%
The reasons for such changes
√ Applicable □ Not applicable
① According to the Practice Guidance for the Company’s Shares Held by the Directors Supervisors and Senior
Management of the Listed Companies of Shenzhen Stock Exchange during the reporting period 34925
restricted RMB ordinary shares (A shares) held by Directors and senior management who resigned became
non-restricted shares; and 130725 unrestricted RMB ordinary shares (A shares) additionally acquired by the
Company’s Directors Supervisors and senior management became restricted shares.
② On 15 July 2020 79600000 A Shares under the 2020 Restricted Share Incentive Scheme granted to the
motivated personnel were issued and listed and the company’s restricted sale of shares increased by
79600000 shares.
Approval of changes in shareholding
√ Applicable □ Not applicable
For details please refer to XV. Implementation of the equity incentive plan employee shareholding plan or other
employee incentive measure of the Company in V Material Matters.Transfer of shares arising from changes in shareholding
□ Applicable √ Not applicable
Progress of share repurchase
□ Applicable √ Not applicable
2020 ANNUAL REPORT 91
VIII Changes in Share Capital and Shareholders
I. Changes in shares (Cont’d)
1. Changes in shares (Cont’d)
Progress of decrease in the holding of repurchased shares by way of bidding
□ Applicable √ Not applicable
The effects of changes in shareholding on financial indicators such as basic earnings per share diluted earnings
per share and net assets per share attributable to ordinary shareholders of the Company for the latest year and
the latest period
□ Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be
disclosed
□ Applicable √ Not applicable
2. Changes in restricted shares
√ Applicable □ Not applicable
Unit: share
Name of shareholders
Restricted shares
at the beginning
of period
Restricted shares
increased during
the period
Restricted shares
released during
the period
Restricted shares
at the end
of period Reason for restriction Date of release from restriction
Chen Gang 139700 34925 104775 Locked-up shares of Directors
Supervisors and Senior
Management
Under relevant requirements
for shares held by Directors
Supervisors and Senior
Management
Li Dong 56250 18750 0 75000 Locked-up shares of Directors
Supervisors and Senior
Management
Under relevant requirements
for shares held by Directors
Supervisors and Senior
Management
Li Kang 0 111975 0 111975 Locked-up shares of Directors
Supervisors and Senior
Management
Under relevant requirements
for shares held by Directors
Supervisors and Senior
Management
The participants of the 2020
Restricted A Share Incentive
Scheme
0 79600000 0 79600000 Restricted share of the
participants of the Share
Incentive Scheme
Restricted shares released in
accordance with the equity
incentive plan (draft)
Total 195950 79730725 34925 79891750 － －
SHANDONG CHENMING PAPER HOLDINGS LIMITED92
VIII 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
Name of share and
its derivative Issue date
Issue price
(or interest
rate) Amount issued Listing date
Amount
approved for
listing and
trading
Last
transaction
date for
transaction Disclosure index
Date of
disclosure
Type of shares
Restricted Share under
Incentive Scheme
15 July 2020 RMB2.85
per share
79600000 15 July 2020 79600000 N/A http://www.cninfo.com.cn/ 9 July 2020
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
Resolutions including the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong
Chenming Paper Holdings Limited (Draft) and Its Summary were considered and approved at the 2020 second
extraordinary general meeting the 2020 first class meeting for holders of domestic-listed shares and the 2020 first
class meeting for holders of overseas-listed shares of the Company. On 29 May 2020 resolutions including the
Resolution in Relation to the Grant of Restricted Shares to the Participants were considered and approved at the
tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session
of the Board of Director of the Company to grant 79600000 restricted A Shares to 111 participants. The shares
were issued and listed on 15 July 2020. The total number of shares of the Company increased from 2904608200
shares to 2984208200 shares. For details please refer to XV. Implementation of the equity incentive plan employee
shareholding plan or other employee incentive measure of the Company in VII Material Matters.
3. Existing staff shares
□ Applicable √ Not applicable
2020 ANNUAL REPORT 93
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of ordinary
shareholders as at the end
of the reporting period
119948 of which
98300 were holders of
A shares 21290 were
holders of B shares and
358 were holders of H
shares
Total number of ordinary
shareholders as at the
end of the month prior to
the publication date of
this annual report
113916 of which
94363 were holders of
A shares 19210 were
holders of B shares and
343 were holders of H
shares
Total number of holders
of Preference Shares
with restored voting
right as at the end of the
reporting period
0 Total number of holders
of Preference Shares
with restored voting
right as at the end of
the month prior to the
disclosure date of the
annual report
0
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Name of shareholders Nature of shareholders
Percentage of
shareholding
Number of
shares held at
the end of the
reporting period
Changes
(increase or
decrease)
during the
Reporting
period
Number of
restricted
shares held
Number of
non-restrict
shares held Share pledged or locked-up
Status of shares Number
CHENMING HOLDINGS COMPANY LIMITED State-owned legal person 15.32% 457322919 11926791 0 457322919 Pledge 238470000
HKSCC NOMINEESLIMITED Overseas legal person 12.51% 373359125 195250 0 373359125 – –
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 12.20% 364131563 0 0 364131563 – –
CENTRAL HUIJIN ASSET MANAGEMENT LTD. State-owned legal person 2.02% 60206850 0 0 60206850 – –
HONG KONG SECURITIES CLEARING COMPANY LIMITED Overseas legal person 1.14% 34168330 20929867 0 34168330 – –
Chen Hongguo Domestic nature person 1.04% 31080044 20000000 28310033 2770011 – –
National Social Security Fund 418 Others 0.63% 18840000 15633749 0 18840000 – –
Ningbo Asia Paper Tube Carton Co. Ltd.（寧波亞洲紙管紙箱有限公司）
Domestic non-state-
owned legal person
0.62% 18400000 12419854 0 18400000 – –
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND Overseas legal person 0.50% 14771945 2156775 0 14771945 – –
VANGUARD EMERGING MARKETS STOCK INDEX FUND Overseas legal person 0.44% 13121946 209589 0 13121946 – –
Strategic investors or general legal persons who become the
top ten shareholders due to the placement of new shares
Nil
Related 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 Shouguang 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 of voting rights
Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED94
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Name of shareholders
Number of non-
restricted shares
held as at the end of
the reporting period Class of shares
Class of shares Number
CHENMING HOLDINGS COMPANY LIMITED 457322919 RMB ordinary shares 457322919
HKSCC NOMINEESLIMITED 373359125 Overseas listed
foreign shares
373359125
CHENMING HOLDINGS (HONG KONG) LIMITED 364131563 Domestic listed
foreign shares
210717563
Overseas listed
foreign shares
153414000
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 60206850 RMB ordinary shares 60206850
HONG KONG SECURITIES CLEARING
COMPANY LIMITED
34168330 RMB ordinary shares 34168330
National Social Security Fund 418 18840000 RMB ordinary shares 18840000
Ningbo Asia Paper Tube Carton Co. Ltd.（寧波亞洲紙管紙箱有限公司）
18400000 RMB ordinary shares 18400000
VANGUARD TOTAL INTERNATIONAL STOCK
INDEX FUND
14771945 Domestic listed
foreign shares
14771945
VANGUARD EMERGING MARKETS STOCK
INDEX FUND
13121946 Domestic listed
foreign shares
13121946
Basic Pension Insurance Fund 1208 Portfolio 10717400 RMB ordinary shares 10717400
Related party relationship or acting in concert
among the top ten shareholders of non –
restricted shares and between the top ten
shareholders of non-restricted shares and
the top ten shareholders
A shareholder Chenming Holdings (Hong Kong) Limited which
is an overseas legal person is a wholly-owned subsidiary of a
shareholder Shouguang Chenming Holdings Company Limited
which is a state-owned legal person. Save for the above it is not
aware that any other shareholders of tradable shares are persons
acting in concert. It is also not aware that any other shareholders
of tradable shares are related to each other.Securities margin trading of top 10 ordinary
shareholders
Chenming Holdings Company Limited held 457322919 RMB
ordinary shares of which 379522919 shares were held through
ordinary account and 77800000 shares were held through credit
guarantee security account.Ningbo Asia Paper Tube Carton Co. Ltd. held 18400000 RMB
ordinary shares of which 0 share was held through ordinary
account and 18400000 shares were held through credit guarantee
security account.
2020 ANNUAL REPORT 95
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
shareholders and top 10 shareholders of non-restricted shares of the Company
□ Yes √ No
The top 10 ordinary shareholders and top 10 shareholders of non-restricted shares.
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Name of controlling
shareholders
Legal
representative Date of establishment Enterprise code Principal business
CHENMING HOLDINGS COMPANY
LIMITED
Chen Hongguo 30 December 2005 91370783783485189Q Investment in paper making
electricity heat and arboriculture
by its own capital
Shareholdings of controlling shareholders who have
control or hold shares in other domestic or overseas
listed companies during the reporting period
Save for the Company Chenming Holdings Company Limited does not have control
over or hold any equity interest of other domestic or overseas listed companies.
Change of controlling shareholders during the reporting period
□ Applicable √ Not applicable
There was no change in the controlling shareholders of the Company during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED96
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial controller of the Company and persons acting in concert
Nature of the beneficial controller: Regional state-owned assets administration authority
Type of the beneficial controller: legal person
Name of beneficial controller
Legal
representative/
Person in charge
of the unit
Date of
establishment Enterprise code Principal business
State-owned Assets
Supervision and
Administration Bureau of
Shouguang City
N/A 1 August 1991 N/A Responsible for the
management and
capital operation of the
state-owned assets of
enterprises and business
units in Shouguang city.Shareholdings of beneficial
controller who has control
or holds shares in other
domestic or overseas listed
companies during the
reporting period
Save for the Company State-owned Assets Supervision and Administration Office
of Shouguang City is also the beneficial controller of Shandong Molong Petroleum
Machinery Co. Ltd.
2020 ANNUAL REPORT 97
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial controller of the Company and persons acting in concert (Cont’d)
Change of beneficial controller during the reporting period
□ Applicable √ Not applicable
There was no change in the beneficial owner of the Company during the reporting period.
Chart illustrating the relationship between the Company and the beneficial controller
100%
100%
15.32%
12.20%
45.21%
State-owned Assets Supervision and
Administration Commission of
Shouguang City
Shandong Shouguang Jinxin Investment
Development Holdings Group Co. Ltd.
Chenming Holdings Limited
Shandong Chenming Paper Holdings Limited
Chenming Holdings
(Hong Kong) Limited
Beneficial controller controlling the Company through trust or other asset management method
□ Applicable √ Not applicable
4. Other legal person shareholders interested in over 10% of the shares of the Company
□ Applicable √ Not applicable
5. Restrictions on decrease in shareholding by controlling shareholders beneficial controller
reorganising party and other undertaking parties
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED98
IX Preference Shares
√ Applicable □ Not applicable
I. Issue and listing of Preference Shares during the past three years at the end of the reporting
period
√ Applicable □ Not applicable
Method Issue date
Issue price
(RMB/share)
Coupon
rate
Issue size
(share) Listing date
With listing
permission
(share) Delisting date
Information of
use of proceeds
Information
of changes to
proceeds
Private 16 March 2016 100 4.36% 22500000 8 April 2016 22500000 Not applicable http://www.cninfo.com.cn Not applicable
Private 16 August 2016 100 5.17% 10000000 12 September 2016 10000000 Not applicable http://www.cninfo.com.cn Not applicable
Private 21 September 2016 100 5.17% 12500000 24 October 2016 12500000 Not applicable http://www.cninfo.com.cn Not applicable
II. Holders of Preference Shares and their shareholdings
Unit: share
Total number of holders of
Preference Shares as at the end of
the reporting period
8 Total number of holders of
Preference Shares as at the end of
the month prior to the publication date
of this annual report
8
Holders holdings more than 5% of the Preference Shares of the Company or top ten holders of Preference Shares
Name of shareholders
Nature of
shareholders
Percentage of
shareholding
Number of
shares held
at the end of
the reporting
period
Changes
(increase
or decrease)
during the
reporting
period
Number of
restricted
shares held
Number of
non-restricted
shares held Share pledged or locked-up
Status of shares Number
BEIJING YIBEN ZHONGXING INVESTMENT
MANAGEMENT CO. LTD.
Domestic non-state
owned legal person
27.78% 12500000 0 0 12500000 Pledged 12500000
BANK OF COMMUNICATIONS
INTERNATIONAL TRUST CO. LTD. – HUILI
NO.167 SINGLE CAPITAL TRUST
Others 22.44% 10100000 0 0 10100000
BANK OF COMMUNICATIONS
INTERNATIONAL TRUST CO. LTD. – HUILI
NO.136 SINGLE CAPITAL TRUST
Others 14.22% 6400000 0 0 6400000
QILU BANK CO. LTD. – QILU BANK QUANXIN
WEALTH MANAGEMENT PRODUCT SERIES
Others 13.33% 6000000 0 0 6000000
SHANGHAI SHIJIE BUSINESS CONSULTING CO.
LTD.
Domestic non-state-
owned legal person
9.20% 4140100 3140100 0 4140100
HENGFENG BANK CO. LTD. Domestic non-state-
owned legal person
8.89% 4000000 – 1000000 0 4000000
LEAD CAPITAL MANAGEMENT CO. LTD. –
LEAD CAPITAL – LI DE YING NO. 2 ASSET
MANAGEMENT PLAN
Others 2.62% 1179900 1179900 0 1179900
2020 ANNUAL REPORT 99
IX Preference Shares
Holders holdings more than 5% of the Preference Shares of the Company or top ten holders of Preference Shares
Name of shareholders
Nature of
shareholders
Percentage of
shareholding
Number of
shares held
at the end of
the reporting
period
Changes
(increase
or decrease)
during the
reporting
period
Number of
restricted
shares held
Number of
non-restricted
shares held Share pledged or locked-up
Status of shares Number
LEAD CAPITAL MANAGEMENT CO. LTD.-
LEAD CAPITAL – LI DE YING NO. 1 ASSET
MANAGEMENT PLAN
Others 1.51% 680000 680000 0 680000
Description of different requirements on other terms
of Preference Shares held other than dividend
distribution and residual property distribution
Nil
Related party relationship or acting in concert
among the top ten holders of Preference Shares
and between the top ten holders of Preference
Shares and the top ten ordinary shareholdersThe aforesaid holders of Preference Shares “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO. LTD. – HUILI NO.167 SINGLE CAPITALTRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO. LTD. – HUILI NO.136 SINGLE CAPITAL TRUST” and “LEAD CAPITAL
MANAGEMENT CO. LTD.－LEAD CAPITAL－LI DE YING NO.1 ASSET MANAGEMENT PLAN” and “LEAD CAPITAL MANAGEMENT CO. LTD.－LEAD
CAPITAL－LI DE YING NO.2 ASSET MANAGEMENT PLAN” are persons acting in concert. Save for the above it is not aware that whether the remaining
holders of Preference Shares are persons acting in concert. It is also not aware that the top ten holders of Preference Shares and the aforesaid ordinary
shareholders are related to each other.III. 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
Distributed
amount (RMB)
(tax inclusive)
Whether it is in
compliance with
the conditions
and the relevant
procedures of
distribution
Way of
dividend
payment
Whether
it was an
accumulated
dividend
Whether it
participates in
distribution of
remaining profit
17 March 2020 4.36% 98100000.00 Yes Cash No Yes
17 August 2020 5.17% 51700000.00 Yes Cash No Yes
18 August 2020 3.837246% 172676073.42 Yes Cash No Yes
21 September 2020 5.17% 64625000.00 Yes Cash No Yes
II. Holders of Preference Shares and their shareholdings (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED100
IX Preference Shares
III. Profit distribution for Preference Shares (Cont’d)
Distribution for Preference Shares of the Company for the past three years
Unit: RMB
Year of distribution
Distributed
amount
(tax inclusive)
Net profit
attributable to
shareholders of
listed company
under the
consolidated
financial
statements
for the
distribution year
Percentage
to the net profit
attributable to
shareholders of
listed company
under the
consolidated
financial
statements
Explanation on shortfall
accumulated to the next
accounting year due to
insufficient distributable
profits or portion can be
allocated to remaining profit
distribution
2020 323390968.66 1712029078.52 18.89% Chenming You 02 and
Chenming You 03 participated
in the proposal of remaining
profit distribution for
RMB108965968.66 in 2020.
2019 387101073.42 1656566584.88 23.37% Chenming You 01 Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB172676073.42 in 2019.
2018 493494767.52 2509828858.47 19.66% Chenming You 01 Chenming
You 02 and Chenming You 03
participated in the proposal of
remaining profit distribution for
RMB279069767.52 in 2018.
Any adjustment or change in profit distribution policy for preference shares
□ Yes √ No
Both earnings of the Company and retained profit of the parent company are positive during the reporting period but
without profit distribution for preference shares
□ Applicable √ Not applicable
Explanation on other matters regarding distribution for preference shares
√ Applicable □ Not applicable
Holders of Preference Shares participate in profit distribution in two portions namely the fixed dividend distributed based
on a fixed dividend rate and the distribution of retained earnings realised for the year.
2020 ANNUAL REPORT 101
IX Preference Shares
III. Profit distribution for Preference Shares (Cont’d)
1. Distribution of fixed dividend
According to the Articles of Association the Company shall distribute fixed dividends to holders of the Preference
Shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
the Preference Shares in accordance with the issuance plan under the framework and principles considered and
approved in the general meeting in respect of the Preference Shares. The general meeting of the Company has the
right to cancel part of or all of the current dividends on the Preference Shares. However when the general meeting
of the Company will consider the cancellation of part of or all of the current dividends on the Preference Shares the
Company shall inform the holders of Preference Shares at least 10 working days before the date of dividend payment
in accordance with the requirements of the related authorities.
2. Participation in the distribution of retained earnings realised for the year
Holders of Preference Shares participate in the distribution of the retained earnings through receipt of cash which
is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
according to law after receiving fixed dividends at fixed dividend rate as agreed holders of Preference Shares can
also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
basis upon distribution of relevant fixed income to holders of financial instruments such as the Preference Shares
which may be classified under equity. 50% of the retained earnings shall be distributed to holders of Preference
Shares and ordinary shareholders. Holders of Preference Shares shall participate in the distribution of the retained
earnings by receiving cash dividends and the ordinary shareholders shall participate in the distribution of the retained
earnings by receiving cash dividends or dividends on ordinary shares.IV. Repurchase or conversion
□ Applicable √ Not applicable
There was no repurchase or conversion during the reporting period.V. Resumption of voting rights of Preference Shares
1. Resumption and exercise of voting rights
□ Applicable √ Not applicable
2. Shareholders and beneficial owner involved in resumption of voting rights of Preference Shares
□ Applicable √ Not applicable
VI. Accounting policy and reasons thereof
√ Applicable □ Not applicable
Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of
Financial Instruments Accounting Standard for Business Enterprises No. 37 – Presentation of Financial Instruments and
Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment the
Preference Shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
SHANDONG CHENMING PAPER HOLDINGS LIMITED102
X Directors Supervisors and Senior Management and Staff
I. Changes in shareholding of Directors Supervisors and Senior Management
Name Position Status Gender Age
Start date
of the term
End date
of the term
Shares held
as at the
beginning of
the period
(shares)
Increase in
the number of
shares held
during the
period (shares)
Decrease in
the number of
shares held
during the
period (shares)
Other
changes
(increase or
decrease)
(shares)
Shares held
as at the
end of the
period
(shares)
Chen Hongguo Chairman In office M 56 6 September 2001 11 June 2022 11080044 0 0 20000000 31080044
Hu Changqing Vice Chairman In office M 55 23 June 2018 11 June 2022 42857 0 0 5000000 5042857
Li Xingchun Vice Chairman In office M 55 11 June 2019 11 June 2022 0 0 0 5000000 5000000
Li Feng Director In office M 47 19 June 2020 11 June 2022 906027 0 0 3000000 3906027
General manager 9 November 2019 9 November 2021
Han Tingde Director In office M 52 11 June 2019 11 June 2022 0 0 0 0 0
Li Chuanxuan Director In office M 43 11 June 2019 11 June 2022 0 0 0 0 0
Sun Jianfei Independent Director In office M 48 11 June 2019 11 June 2022 0 0 0 0 0
Yin Meiqun Independent Director In office F 50 11 June 2019 11 June 2022 0 0 0 0 0
Yang Biao Independent Director In office M 41 11 June 2019 11 June 2022 0 0 0 0 0
Li Kang Supervisor In office F 39 27 July 2020 11 June 2022 149300 0 0 0 149300
Pan Ailing Supervisor In office F 56 11 June 2019 11 June 2022 0 0 0 0 0
Zhang Hong Supervisor In office F 56 11 June 2019 11 June 2022 0 0 0 0 0
Li Xinggui Supervisor In office M 56 11 June 2019 11 June 2022 0 0 0 0 0
Qiu Lanju Supervisor In office F 47 11 June 2019 11 June 2022 0 0 0 0 0
Li Xueqin Deputy general manager In office F 55 1 September 2004 11 June 2022 861322 0 0 3000000 3861322
Geng Guanglin Deputy general manager In office M 47 11 June 2019 11 June 2022 716950 0 0 2000000 2716950
Li Weixian Deputy general manager In office M 39 6 November 2019 11 June 2022 240200 0 0 2000000 2240200
Li Zhenzhong Deputy general manager In office M 47 20 March 2011 11 June 2022 113000 0 0 2000000 2113000
Zhao Xuegang Deputy general manager In office M 48 11 June 2019 11 June 2022 0 0 0 0 0
Dong Lianming Financial controller In office M 46 12 October 2018 11 June 2022 69600 0 0 1000000 1069600
Yuan Xikun Secretary to the Board In office M 35 16 May 2018 11 June 2022 44700 0 0 300000 344700
Chu Hon Leung Hong Kong company
secretary
In office M 38 11 June 2019 11 June 2022 0 0 0 0 0
Li Dong Supervisor Resigned M 38 13 December 2016 27 July 2020 75000 0 0 0 75000
Total － － － － － － 14299000 0 0 43300000 57599000
2020 ANNUAL REPORT 103
X Directors Supervisors and Senior Management and Staff
II. Changes of Directors Supervisors and Senior Management of the Company
√ Applicable □ Not applicable
Name Position Type Date Reason
Li Feng Director General
manager
Elected 19 June 2020 Elected as a Director of the ninth session
of the Board at the 2019 annual general
meeting.Li Kang Supervisor Elected 27 July 2020 Elected as a Supervisor of the Supervisory
Committee of the Company at the third
extraordinary general meeting in 2019.
Li Dong Supervisor Resignation 27 July 2020 Resignation from the position due to
personal reasons.III. Employment
Professional background major working experiences and current duties at the Company of Directors Supervisors and the
Senior Management
1. Brief biographies of Directors
(1) Brief biographies of executive Directors
Mr. Chen Hongguo is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He is a
senior economist and holds the titles including Nationwide Light Industry Top Ten Youth Experts (全國輕工系
統十佳傑出青年崗位能手) Labour Medal on Enriching Shandong Province (山東省富民興魯勞動獎章獲得者)
Excellent Entrepreneur of Shandong Province (山東省優秀企業家) Nationwide May 1st Labor Medal (全國五一勞
動獎章獲得者) Nationwide Excellent Entrepreneur (全國優秀創業企業家) and USA RISI CEO of the Year (美國銳思”年度最佳CEO獎”). He is vice chairman of the China National Light Industry Council. He joined the Company
in 1987 and had held positions including chief officer of manufacturing section chief officer of branch factory
deputy general manager Director of the Company and the chairman of Wuhan Chenming Hanyang Paper Co.Ltd. He is currently the chairman of the Company and a Party Committee Secretary. Mr. Chen Hongguo is the
spouse of Ms. Li Xueqin a deputy general manager of the Company.Mr. Hu Changqing is a member of the Communist Party of the PRC. He holds a bachelor ‘s degree. He joined
the Company in 1988. He had held various positions in the Company such as the chief of the technological
reform department the chief officer of branch factory the deputy general manager and the Director. He is
currently a director of Chenming Holdings Company Limited and a vice chairman of the Company.Mr. Li Xingchun holds a doctorate from School of Engineering Management and Engineering at Nanjing
University and is a visiting professor of Shanghai Finance University. He has successively worked in Ctrip.com
Fuyou Securities Co. Ltd. (富友證券有限責任公司) and Western Development Holdings Co. Ltd. accumulating
more than 30 years of experience in industry securities trust and other fields. He is currently the Chairman of
Leadbank Technology Ltd. external director of Jiangxi Dacheng State-owned Assets Management Co. Ltd.director of Western Leadbank Fund Management Co. Ltd. independent director of Huadian International Power
Co. Ltd. executive director of China Mergers and Acquisitions Association vice chairman of its Shanghai
branch and vice chairman of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED104
X Directors Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(1) Brief biographies of executive Directors (Cont’d)
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the
Company in 1992 and had held different positions including the chief officer of manufacturing section and
assistant to the general manager of the Company chairman marketing director and deputy general manager
of Wuhan Chenming Hanyang Paper Holdings Co. Ltd. He is currently an executive Director and the general
manager of the Company. Mr. Li Feng is the younger brother of Ms. Li Xueqin a deputy general manager of the
Company.
(2) Brief biographies of non-executive Directors
Mr. Han Tingde graduated with a bachelor’s degree. He was the deputy general manager and the general
manager of operational department of Jinan Liaocheng and Linyi offices of Shandong Securities Co. Ltd.the deputy general manager and the general manager of operational department of Zibo and Jinan offices of
Tiantong Securities Co. Ltd. in China the general management of each of the customer service department
the brokerage headquarters and the legal affairs department as well as a deputy general manager of the retail
headquarters of Zhongtai Securities Co. Ltd. etc. He is currently a non-executive Director of the Company.Mr. Li Chuanxuan holds a doctorate in law. He is a professor at Fudan University Shanghai. From 2008 to
2012 he was a lecturer in the Law School of Fudan University. From 2012 to 2013 he was a visiting scholar
of the Law School of Columbia University in the United States focusing on the research on green finance laws
and policies. He is currently the secretary general of the Association of Shanghai Environmental Resources
Law (上海市環境資源法研究會) the director of the Association of China Environmental Resources Law (中國環
境資源法研究會) the director of the Association of Shanghai Economic Law (上海市經濟法研究會) as well as
the evaluation expert of the National Judicial Verification of Environmental Damages (國家環境損害司法鑒定).He has been selected into Shanghai Pujiang Talent Program. He has been in charge of and undertook over 10
national and provincial scientific research projects. Moreover he has participated in the drafting of several laws
and regulations of different legislatures including the Standing Committee of the National People’s Congress
the Ministry of Ecology and Environment and Shanghai National People’s Congress. He concurrently serves as
a director of Jiangsu Guanlian New Material Technology Co. Ltd. and is currently a non-executive Director of
the company.
(3) Brief biographies of independent non-executive Directors
Mr. Sun Jianfei holds a doctorate in finance. He was a lecturer at University of Nevada Reno and concurrently
served as the consultant of hedge funds such as Eagle Peak Fund LP. From August 2010 to February 2017
he was an assistant professor at Antai College of Economics & Management Shanghai Jiao Tong University.He was selected in the National Academic Leadership Talent Programme in Accounting (Standby List) (全
國學術類會計領軍（後備）人才項目) organised by the Ministry of Finance as well as the Shanghai Pujiang
Talent Programme (上海市浦江人才計劃). From February 2017 to August 2020 he was a professor at Institute
for Social and Economic Research Nanjing Audit University and a part-time professor at Antai College of
Economics & Management and Advanced Institute of Finance Shanghai Jiao Tong University. He is currently an
Associate professor of Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University independent
director of Zhejiang Yueling Co. Ltd. independent director of Nanya New Material Technology Co. Ltd.independent director of Suzhou Tianwo Technology Co. Ltd. and an independent Director of the Company.
2020 ANNUAL REPORT 105
X Directors Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(3) Brief biographies of independent non-executive Directors (Cont’d)
Mr. Yang Biao holds a doctorate in law and is currently a professor and doctoral tutor in the School of Lawof Sun Yat-sen University. He is among others one of the “Guangzhou Top Ten Young and Middle-agedJurists” an outstanding young talent in the “Guangdong Special Support Program” a selected member in the
“Double Thousand Plan” (雙千計劃) of the Ministry of Education and the Central Politics and Law Committee a
training candidate in the “Thousand-Hundred-Ten” project (千百十工程) for universities in Guangdong Province
a member of the Academy for East-Asian Tort Law (AETL) a member of the Expert Advisory Committee
to Guangdong People’s Procuratorate a supervisory member and judicial advisory expert of the Standing
Committee of Guangzhou People’s Congress and an expert certified in Major Administrative Decision-Making
and Argumentation in Guangzhou. He has served in Guangdong High People’s Court and People’s Court
of Guangzhou Huangpu District. He has also served as a supervisor of Guangzhou Chuanwen Education
Consulting Co. Ltd. a supervisor of Dongguan Rural Commercial Bank Co. Ltd. a director of Guangzhou
Zhongda Nansha Technology Innovation Industrial Park Co. Ltd. a director of Guangzhou Zhongshan University
Science Park Co. Ltd. a director of Guangzhou Zhongda Intellectual Property Service Co. Ltd. Independent
director of Guangdong Guangzhou Daily Media Co. Ltd. independent director of Guangdong Yuehai Feed
Group Co. Ltd. independent director of Qiaoyi Logistics Co. Ltd. independent director of Guangdong Tianhe
Agricultural Resources Co. Ltd.. He is currently an independent Director of the Company.
Ms. Yin Meiqun is a university professor and a certified public accountant in China. She holds a doctorate in
accounting degree. She paid academic visits to Sweden Finland Denmark and the Iowa State University in the
United States. From 1993 to 2007 she was a professor in the department of accounting at Harbin University
of Science and Technology. She is a professor of Beijing International Studies University. She is currently
a representative of the 15th Beijing Municipal People’s Congress a member of the Accounting Education
Committee of the Accounting Society of China a council member of the Accounting Society of China a
member of the IMA China Management Accounting Expert Committee and an independent director of Beijing
Life Insurance Co. Ltd. She is currently an independent Director of the Company.
2. Brief biographies of Supervisors
Ms. Li Kang is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She joined the
Company in 2001. She has successively served as the section chief deputy minister minister assistant to the general
manager of the management section of purchasing department and deputy financial controller of the Company. She
is currently a supervisor of the Company.Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She is currently a
professor of the School of Management an advisor to doctoral students the chief of the Department of Accounting
and the chief of the Investment and Financing Research Centre (投融資研究中心) in Shandong University and a
non-practising member of CICPA (Chinese Institute of Certified Public Accountants). She is also a director of the
Accounting Institute Shandong Province (山東省會計學會) a council member of Shandong Comparative Management
Association a visiting professor at Soochow University in Taiwan a visiting scholar at University of Connecticut inthe United States and a state-level candidate for the New Century Ten Million Talents Project (新世紀 “百千萬人才工程”). She is a specialist entitled to the State Council Special Allowance (國務院政府特貼專家) and a Young and
Middle-aged Expert with Outstanding Contributions in Shandong Province (山東省有突出貢獻的中青年專家). She is
the chief expert of the Major Tender Projects of National Social and Science Fund (國家社科基金重大招標課題首席專
家). She has finished various research projects at national and provincial level. She is also an Independent director of
Shandong Xinhua Medical Equipment Co. Ltd. independent director of Lutai Textile Co. Ltd. independent director
of Shandong Denghai Seed Industry Co. Ltd. director of Shandong Internet Media Group Co. Ltd. independent
director of Shandong Sanwei Petrochemical Engineering Co. Ltd. She is currently a Supervisor of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED106
X Directors Supervisors and Senior Management and Staff
III. Employment (Cont’d)
2. Brief biographies of Supervisors (Cont’d)
Ms. Zhang Hong holds a doctoral degree in Economics and is currently a professor and advisor to doctoral students
at Shandong University head of a multinational corporation research institute a non-practising member of the
Chinese Institute of Certified Public Accountants a director of China Association of International Trade a director
of Shandong Province External Trade Association and an independent director of Shandong Zhangqiu Blower Co.Ltd. an independent director of Vosges Group Co. Ltd. an independent director of China National Heavy Duty Truck
Group Jinan Truck Co. Ltd. and Cisen Pharmaceutical Co. Ltd. She is currently a Supervisor of the Company.
3. Brief biographies of Senior Management
Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the Company in
1992 and had held different positions including the chief officer of manufacturing section and assistant to the general
manager of the Company chairman marketing director and deputy general manager of Wuhan Chenming Hanyang
Paper Holdings Co. Ltd. He is currently an executive Director and the general manager of the Company. Mr. Li Feng
is the younger brother of Ms. Li Xueqin a deputy general manager of the Company.Ms. Li Xueqin is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She was successivelyawarded titles including “Model Worker in Shandong Province (山東省勞動模範) Model Worker in the Country (全國勞動模範) and Nationwide May 1st Labour Medal (全國五一勞動獎章)” and a deputy of the Tenth Eleventh Twelfth
and Thirteenth National People’s Congress. She joined the Company in 1987 and had held the positions of the chief
of audit department and deputy general manager of the Company. She has been a deputy general manager of the
Company since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo chairman of the Company.
Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and had held different positions
including the deputy manager of a Shenzhen coated paper subsidiary of the Company manager of Shandong
Chenming Paper Sales Company Limited vice chairman of a household paper company deputy marketing director
and marketing director of a sales company and vice president of a group. He is currently chairman of the financial
division and the deputy general manager of the Company
Mr. Geng Guanglin is a member of the Communist Party of the PRC. He graduated with a diploma. He joined the
Company in 1992 and had held different positions including the chief officer of manufacturing section of the Company
the deputy general manager of Chibi Chenming Paper Co. Ltd. the chairman of Wuhan Chenming Hanyang Paper
Holdings Co. Ltd. the chairman of Jilin Chenming Paper Co. Ltd. the chairman of Jiangxi Chenming Paper Co. Ltd.and a Director of the Company. He is currently the deputy general manager of the Company.Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the
Company in 1995 and had served as principal representative of the Shanghai management region of a sales company
sales manager of light weight coated cultural paper products general manager of the Sales Company. He is currently
the deputy general manager of the Company.Mr. Zhao Xuegang is a member of the Communist Party of China. He holds a postgraduate degree. He graduated
from the Economic Information Management School of Shandong Economics University and obtained a Master’s
degree in Finance from Shandong University. After joining the Company in 2017 he served as the general manager of
the Financial Leasing Company and currently serves as the deputy general manager of the Company.Mr. Dong Lianming is a member of the Communist Party of the PRC and an accountant. He holds a bachelor’s
degree. He joined the Company in 1997 and had held positions as the chief of accounting and auditing section under
the financial department of the Company the deputy chief and chief of the financial department chief accountant
of Jiangxi Chenming chief accountant of Shandong Chenming Panels and financial controller and deputy general
manager of Zhanjiang Chenming. He is currently the financial controller of the Company.
2020 ANNUAL REPORT 107
X Directors Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Mr. Yuan Xikun is a member of the Communist Party of the PRC. He holds a bachelor’s degree in management. He
joined the Company in 2010 and had held positions as the accountant for consolidated financial statements in the
financial department of the Company manager of disclosure department security affairs specialist and chief of the
security investment section. He is currently the secretary to the Board of the Company.Mr. Chu Hon Leung is a lawyer. He obtained a bachelor’s degree in business from Macquarie University Sydney
Australia and a postgraduate diploma in law from The College of Law London England. He graduated from the City
University of Hong Kong and obtained a diploma in Hong Kong law. He had been a lawyer in local and international
law firms in Hong Kong and served and an internal consultant for leading Chinese asset management companies. He
has been a practicing lawyer in Hong Kong since 2009 and currently works for Li & Partners.
Employment at the shareholder of the Company
√ Applicable □ Not applicable
Name of employee
Name of shareholder
of the Company
Position at the
shareholder of
the Company Start date of the term End date of the term
Whether receiving
any remuneration
or allowance from
the shareholder of
the Company
Chen Hongguo Chenming Holdings Company
Limited
Chairman and general
manger
22 September 2016 29 December 2023 No
Hu Changqing Chenming Holdings Company
Limited
Director 22 September 2016 29 December 2023 No
Li Xueqin Chenming Holdings Company
Limited
Director 22 September 2016 29 December 2023 No
Geng Guanglin Chenming Holdings Company
Limited
Director 22 September 2016 29 December 2023 No
Explanation of the
employment at the
shareholder of the
Company
Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED108
X Directors Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Employment at other units
√ Applicable □ Not applicable
Name of employee Name of other units
Position at
other units
Start date
of the term
End date
of the term
Whether receiving
any remuneration or
allowance from the
shareholder of the
Company
Yang Biao Guangdong Guangzhou Daily
Media Co. Ltd.Independent director 19 August 2019 19 August 2022 Yes
Guangdong Tianhe Agricultural
Means of Production Co. Ltd.Independent director 17 May 2018 16 May 2021 Yes
Sun Jianfei Nanya New Material Technology
Co. Ltd.
Independent director 1 August 2017 8 October 2023 Yes
Zhejiang Yueling Co. Ltd. Independent director 1 November 2016 6 November 2022 Yes
Suzhou Thvow Technology Co. Ltd. Independent director 8 May 2020 8 May 2023 Yes
Pan Ailing Shinva Medical Instrument Co. Ltd. Independent director 27 July 2020 27 July 2023 Yes
Lu Thai Textile Co. Ltd. Independent director 6 June 2016 10 June 2022 Yes
Shandong Xinneng Taishan
Power Generation Co. Ltd.Independent director 12 April 2019 12 April 2022 Yes
Shandong Sanwei Shihua
Engineering Company Limited
Independent director 15 May 2020 15 May 2023 Yes
Zhang Hong Shandong Zhangqiu Blower Co. Ltd. Independent director 27 March 2019 26 March 2022 Yes
Sunvim Group Co. Ltd. Independent director 15 July 2019 26 May 2023 Yes
Sinotruck Jinan Truck Co. Ltd. Independent director 28 April 2020 28 April 2023 Yes
Cisen Pharmaceutical Co. Ltd. Independent director 28 November 2017 8 December 2023 Yes
Employment at other units Nil
Sanctions against current Directors Supervisors and Senior Management of the Company and those who resigned
during the reporting period by securities regulatory authorities in the past three years
□ Applicable √ Not applicable
2020 ANNUAL REPORT 109
X Directors Supervisors and Senior Management and Staff
IV. Remuneration of Directors Supervisors and Senior Management
Decision process basis for determining the remuneration and actual payment for the remuneration of
Directors Supervisors and the Senior Management
(1) Determination basis for remuneration of Directors Supervisors and the Senior Management: The annual remuneration
of each of the executive Directors and the Senior Management of the Company was in the band of RMB0.20 million to
5.00 million and the specific amount for each of them was determined by the remuneration committee based on the
main financial indicators and operation target completed by the Company the scope of work and main responsibilities
of the Directors and Senior Management of the Company the target completion of the Directors and Senior
Management as assessed by the duty and performance appraisal system as well as business innovation capability
and profit generation ability of the Directors and the Senior Management. The annual remuneration of Supervisors
assuming specific managerial duties in the Company were determined by the general manager office of the Company
based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external
Supervisors who did not hold actual management positions in the Company. As approved by the first meetings of
the ninth session of the Board and the Supervisory Board as well as the 2019 first extraordinary general meeting
the Company paid each of the independent non-executive Directors and non-executive Directors of the Company
allowance of RMB200000 (before tax). The remuneration of external Supervisors amounted to RMB100000 (before
tax). The travel expenses for attending board meetings supervisory meetings and general meetings of the Company
and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-
executive Directors non-executive Directors and external supervisors are reimbursed as expensed.
(2) Decision process for remuneration of Directors Supervisors and Senior Management: In accordance with the relevant
policies and regulations such as the Implementation Rules Of The Remuneration And Assessment Committee
Under The Board any remuneration plan for the Company’s executive Directors proposed by the remuneration and
assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management
officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
Directors non-executive Directors and external Supervisors of the Company shall be agreed on by the Board and
then submitted to the general meeting for consideration and approval prior to implementation.
(3) The remuneration and assessment committee which was set up by the Board according to the resolution of the
general meeting is mainly responsible to formulate the standards of carry out appraisal in respect of the non-
independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and
scheme of the non-independent Directors and Senior Management of the Company and accountable to the Board.
SHANDONG CHENMING PAPER HOLDINGS LIMITED110
X Directors Supervisors and Senior Management and Staff
IV. Remuneration of Directors Supervisors and Senior Management (Cont’d)
Remuneration of Directors Supervisors and Senior Management
Unit: RMB’0000
Name Position Gender Age Status
Total
remuneration
before tax
received
from the
Company
Received
remuneration
from related
parties of the
Company
Chen Hongguo Chairman M 56 In office 499.00 No
Hu Changqing Vice Chairman M 55 In office 300.00 No
Li Xingchun Vice Chairman M 55 In office 480.00 No
Li Feng Director General manager M 47 In office 335.60 No
Han Tingde Director M 52 In office 20.00 No
Li Chuanxuan Director M 43 In office 20.00 No
Sun Jianfei Independent Director M 48 In office 20.00 No
Yin Meiqun Independent Director F 50 In office 20.00 No
Yang Biao Independent Director M 41 In office 20.00 No
Li Kang Supervisor F 39 In office 64.10 No
Pan Ailing Supervisor F 56 In office 10.00 No
Zhang Hong Supervisor F 56 In office 10.00 No
Li Xinggui Supervisor M 56 In office 20.30 No
Qiu Lanju Supervisor F 47 In office 64.10 No
Li Xueqin Deputy general manager F 55 In office 299.00 No
Geng Guanglin Deputy general manager M 47 In office 153.80 No
Li Weixian Deputy general manager M 39 In office 299.00 No
Li Zhenzhong Deputy general manager M 47 In office 181.20 No
Zhao Xuegang Deputy general manager M 48 In office 29.24 No
Dong Lianming Financial controller M 46 In office 152.00 No
Yuan Xikun Secretary to the Board M 35 In office 70.00 No
Chu Hon Leung Hong Kong company secretary M 38 In office 0 No
Li Dong Supervisor M 38 Resigned 0 Yes
2020 ANNUAL REPORT 111
X Directors Supervisors and Senior Management and Staff
IV. Remuneration of Directors Supervisors and Senior Management (Cont’d)
Directors and Senior Management of the Company granted share options as incentives during the reporting
period
√ Applicable □ Not applicable
Unit: share
Name Position
Number of
exercisable
shares
during the
reporting
period
Number of
shares
exercised
during the
reporting
period
Exercise price
of the shares
exercised
during the
reporting
period.
(RMB/share)
Market price
at the end of
the reporting
period
(RMB/share)
Number of
restricted
stocks held
at the
beginning
of the period
Number of
unlocked
shares during
the current
period
Number of
newly granted
restricted
shares during
the reporting
period
Grant price of
restricted
share
(RMB/share)
Number of
restricted
shares held
at the end
of the period
Chen Hongguo Chairman 0 0 0 6.42 0 0 20000000 2.85 20000000
Hu Changqing Vice-chairman 0 0 0 6.42 0 0 5000000 2.85 5000000
Li Xingchun Vice-chairman 0 0 0 6.42 0 0 5000000 2.85 5000000
Li Feng Director General Manager 0 0 0 6.42 0 0 3000000 2.85 3000000
Li Xueqin Deputy general manager 0 0 0 6.42 0 0 3000000 2.85 3000000
Geng Guanglin Deputy general manager 0 0 0 6.42 0 0 2000000 2.85 2000000
Li Weixian Deputy general manager 0 0 0 6.42 0 0 2000000 2.85 2000000
Li Zhenzhong Deputy general manager 0 0 0 6.42 0 0 2000000 2.85 2000000
Dong Lianming Financial controller 0 0 0 6.42 0 0 1000000 2.85 1000000
Yuan Xikun Secretary to the Board 0 0 0 6.42 0 0 300000 2.85 300000
Total － 0 0 － － 0 0 43300000 － 43300000
Note (if any) Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED112
X Directors Supervisors and Senior Management and Staff
V. Personnel of the Company
1. Number of staff specialty composition and education level
Number of staff at the Company (person) 3232
Number of staff at major subsidiaries (person) 8362
Total number of staff (person) 12752
Total number of staff receiving remuneration during the period (person) 12752
Number of retired/resigned staff the Company and its major subsidiaries are
required to compensate (person) 0
Specialty composition
Category of specialty composition Number of people (person)
Production staff 8625
Sales staff 569
Technical staff 657
Financial staff 193
Administrative staff 1571
Other staff 1137
Total 12752
Education level
Category of education level Number of people (person)
Postgraduate and above 41
Undergraduate 1083
Post-secondary 2743
Technical secondary and below 8885
Total 12752
2020 ANNUAL REPORT 113
X Directors Supervisors and Senior Management and Staff
V. Personnel of the Company (Cont’d)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries bonuses and other fringe benefits. Subject
to the relevant laws and regulations the Company adopts different standards of remuneration for different employees
which are determined based on their position skill variety performance etc. with reference to the remuneration level
in the labour market the average level of salary in the society and the corporate reference line set by the government.The Company provides various benefits to the employees including social insurance housing allowance and paid
leaves etc.
3. Training programmes
The Company attached great importance to personnel training and development work cantered on the corporate
spirit of “Learning Surpass and Leading” and the corporate employment concept of “training introducing usingand retaining people” identified talents cultivated talents exercised and developed talents in innovative practice
and built a career platform. In 2021 the training management work of the Company will focus on the overall goal of
“realising self-driving talent growth”. Through the two starting points of “talent echelon construction” and “trainingsystem construction” the Company will open up talent training and promotion channels; build all levels of talent
competency standards hierarchical and categorised training of talents; organisation of key talents compiling
excellent teaching materials; measures such as building training teams from the four dimensions of selection training
and retention to consolidate the basic skills of training management. The Company also focused on the three teams
of “cadres” “backbone” and “employees” to carry out training and management work implement rolling reserve
echelon training and focused on building the comprehensive capabilities of cadres; carry out the training of backbone
talents in the group departments and focused on improving the ability of production management personnel; focused
on job operation skills for employees prepared job descriptions formed cases promoted and copied experience and
effectively improved the training management level of the Company improved the overall quality of all employees
and promoted the high-quality development of the Company.
4. Labour outsourcing
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED114
XI Corporate Governance
I. Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law (《公司法》) Securities Law (《證券法》) Code
of Corporate Governance for Listed Companies (《上市公司治理準則》) Rules Governing Listing of Stocks on Shenzhen Stock
Exchange (《深圳證券交易所股票上市規則》) the Listing Rules of Hong Kong Stock Exchange and the related requirements
as required by CSRC and continued to improve and optimise its legal person governance structure during the reporting
period. The Company also continuously improved its internal control system and proactively carried out management works
in relation to investor relations during the reporting period so as to further improve corporate governance standards and
promote the Company’s standardised operations. As of the end of the reporting period the actual practice of corporate
governance complied with the requirements of the regulatory documents issued by the CSRC regarding the governance of
listed companies.(I) Shareholders and general meeting
The Company had established a corporate governance structure that ensured shareholders’ ability to fully exercise
their rights and enjoy equal status. Shareholders enjoyed their rights and undertook corresponding obligations in
accordance with the shares held by them. The convening and holding of general meeting of the Company were legal
and compliant and on the premise of guaranteeing the legality and effectiveness of the general meeting both on-site
voting and online voting were provided as channels to participate in such meetings. Where significant matters which
had an impact on the interests of minority investors were being considered the votes by minority investors were
counted separately for the convenience of shareholders and for the sake of making public and timely disclosures. At
the same time investors present at the general meeting could communicate with the management of the Company in
person which effectively safeguard the rights and demands of investors to participate in the Company’s management.We ensured that all investors could participate in corporate governance on an equal basis which effectively
safeguarded the legitimate interests of shareholders especially those of minority shareholders.(II) Controlling shareholder and the listed company
During the reporting period the Company remained independent of its controlling shareholder beneficial controllers
and related parties in terms of its business assets finance personnel and organisations and complied with the
relevant provisions of the China Securities Regulatory Commission on the independence of listed companies. The
controlling shareholders and beneficial controllers strictly regulated their behaviour and exercised their rights and
performed their obligations in accordance with the laws. The Company had business independence and self-operation
capability. The Board the Supervisory Committee and internal structure can operate independently.(III) Directors and the Board
The Board of the Company has a total of 9 Directors of which 3 are independent Directors. They are professionals
with professional knowledge in finance law management etc. ensuring the quality and level of decision-making
by the Board. During the reporting period all of the Directors of the Company were able to earnestly faithfully and
diligently perform their duties and powers as stipulated in the Articles of Association. The convening and holding of
Board meetings were in strict compliance with the Articles of Association and Rules of Procedure of Board Meetings
and other relevant provisions. The four special committees under the Board of the Company namely the Strategic
Committee the Audit Committee the Nomination Committee and the Remuneration and Assessment Committee
performed their duties normally and provided scientific and professional opinions for the decision-making of the
Board.
2020 ANNUAL REPORT 115
XI Corporate Governance
I. Corporate governance in practice (Cont’d)
(IV) Supervisors and the Supervisory Committee
The supervisors of the Supervisory Committee of the Company has a total of 5 supervisors including 3 shareholder
supervisors and 2 employee supervisors. The number and composition of the board of supervisors meet the
requirements of laws and regulations. The Supervisory Committee strictly followed the requirement of relevant
laws and regulations including the Companies Law the Articles of Associations and the Rules of Procedure of the
Supervisory Committee in fulfilling its duties. In the spirit of being accountable to the shareholders and the Company
the Supervisory Committee independently and effectively exercised its supervision and inspection functions. By
attending Board meetings and conducting regular inspections on the legal compliance of the Company’s operations
and finance the Supervisory Committee supervised the decision-making procedures of the Board resolutions and the
legal compliance of the Company’s operations so as to safeguard the legitimate interests of the Company and the
shareholders.(V) Information disclosure
The Company strictly enforced the relevant information disclosure regulations and fully fulfilled its information
disclosure obligations. The Company disclosed information in a timely and fair manner and ensured that the
information disclosed was true accurate and complete and did not contain false information misleading statements
or major omissions. During the reporting period the Company issued a total of more than 170 periodic reports interim
announcements and related documents through the designated information disclosure media and a total of 220
periodic reports interim announcements and related documents through the website of Hong Kong Stock Exchange
ensuring that all shareholders have fair access to company-related information and have full right to know
(VI) About prevention and control of insider information
During the reporting period the Company amended the provisions of the “Registration Management System ofPersonnel with Insider Information” to strengthen the confidentiality of insider information and improve the registration
and management of personnel with insider information. The Directors Supervisors Senior Management and other
related personnel of the Company were able to strictly observe their confidentiality obligations throughout the
preparation of periodic reports temporary announcements and the planning of major events. There was no case
where insiders use inside information to buy and sell company shares before the disclosure of material and sensitive
information that affects the stock price of the Company and there is no case where they are investigated by the
regulatory authorities.
Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
CSRC in respect of actual governance of the Company
□ Yes √ No
There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
the CSRC in respect of the actual governance of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED116
XI Corporate Governance
II. Particulars about the independence in terms of businesses personnel assets organisations
and finance from the controlling shareholder
The Company was completely separated from the controlling shareholder in terms of business personnel assets
organisations and finance. The Company had a comprehensive internal structure independent and complete businesses as
well as the capability of self-operation.
1. In terms of business: the Company had its own R&D production procurement and sales system and was completely
independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiaries
were not competitors of the Company in the same industry.
2. In terms of personnel: the Company had an independent workforce and had established independent departments
including the research and development department production department administration department finance
department procurement department and sales department. The Company had also established a comprehensive
management system with respect to labour personnel and salary. Personnel of the Company were independent of
the controlling shareholder. The Company’s Chairman was elected at the general meeting while the general manager
deputy general manager secretary to the Board chief financial officer and other senior management members all
worked at and received remuneration from the Company. They did not receive remuneration from related companies
of the controlling shareholder nor did they serve at any position therein other than a director or supervisor. The
appointment of the Company’s Directors supervisors and senior management was conducted through legal
procedures and in strict compliance with the relevant requirements of Companies Law and the Articles of Association.None of the controlling shareholders interfered with the Company’s Board or the appointment and dismissal
decisions at general meetings.
3. In terms of assets: the title relationship between the Company and the controlling shareholder was clear and the
Company’s funds assets and other resources were not illegally occupied or dominated by the controlling shareholder.
The Company’s assets were complete and possessed production equipment auxiliary production equipment patents
and other assets that were in line with its production and operation scope. The Company had complete control and
dominance over all assets.
4. In terms of organisations: the Board Supervisory Committee management and other internal organisations of the
Company operated independently. Each functional department was completely separated from the controlling
shareholder in terms of authority personnel etc. There was no subordinate relationship between the controlling
shareholder and its functional departments and the Company and its functional departments. The Company’s
independence in terms of its production operation and management was not affected by the controlling shareholder.
5. In terms of finance: the Company had its own finance department accounting and auditing system and financial
management system and was able to make independent financial decisions with a standardised financial accounting
system and financial management system for subsidiaries. None of the controlling shareholders interfered with the
Company’s finance and accounting activities. The Company had a separate account in a commercial bank and there
was no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled its
tax obligations independently in accordance with the law.III. Competition in the industry
□ Applicable √ Not applicable
2020 ANNUAL REPORT 117
XI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
Meeting Type of meeting
Attendance
rate of
investors Convening date Disclosure date Disclosure index
2020 first extraordinary general
meeting
Extraordinary general
meeting
3.41% 9 March 2020 10 March 2020 http://www.cninfo.com.cn
2020 second extraordinary
general meeting
Extraordinary general
meeting
9.03% 15 May 2020 16 May 2020 http://www.cninfo.com.cn
2020 First Class Meeting for
Holders of Domestic-listed
Shares
Class Meeting 7.74% 15 May 2020 16 May 2020 http://www.cninfo.com.cn
2020 First Class Meeting for
Holders of Overseas-listed
Shares
Class Meeting 14.94% 15 May 2020 16 May 2020 http://www.cninfo.com.cn
2019 annual general meeting Annual general meeting 29.39% 19 June 2020 20 June 2020 http://www.cninfo.com.cn
2020 third extraordinary
general meeting
Extraordinary general
meeting
29.89% 27 July 2020 28 July 2020 http://www.cninfo.com.cn
2020 fourth extraordinary
general meeting
Extraordinary general
meeting
29.78% 27 August 2020 28 August 2020 http://www.cninfo.com.cn
2020 fifth extraordinary
general meeting
Extraordinary general
meeting
24.21% 21 December 2020 22 December 2020 http://www.cninfo.com.cn
2. Extraordinary general meeting requested by holders of the Preference Shares with voting rights
restored
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED118
XI Corporate Governance
V. Performance of Independent Directors during the reporting period
1. Attendance of Independent Directors at Board meetings and general meetings
Attendance of Independent Directors at Board meetings and general meetings
Name of Independent
Directors
Number of
attendance
required for Board
meetings during
the reporting
period
Attendance at
Board meetings
in person
Attendance
at Board
meetings by
communication
Attendance
at Board
meetings
by proxy
Absence
from
Board
meetings
Absent from
Board meetings
twice in a row
(in person)
Attendance
at general
meetings
Sun Jianfei 14 0 14 0 0 No 0
Yin Meiqun 14 0 14 0 0 No 0
Yang Biao 14 0 14 0 0 No 3
None of the independent Directors was absent from the Board meeting twice in a row.
2. Objections from Independent Directors on related issues of the Company
Were there any objections on related issues of the Company from the Independent Directors?
□ Yes √ No
There was no objection on related issues of the Company from the Independent Directors during the reporting period.
2020 ANNUAL REPORT 119
XI Corporate Governance
V. Performance of Independent Directors during the reporting period (Cont’d)
3. Other details about the performance of duties by the independent Directors
Were there any suggestions from the independent Directors adopted by the Company?
√ Yes □ No
Explanation on the adoption or non-adoption with related suggestions from the independent Directors
During the reporting period the independent Directors of the Company focused on the operation of the Company
and performed their duties strictly in accordance with relevant laws and regulations and the Articles of Association.They provided a lot of valuable professional recommendations on optimising the Company’s system and decision on
daily operation. They also issued independent and fair opinion on matters arising during the reporting period which
requested opinions from Independent Directors. This helped optimise the supervisory system of the Company as well
as protecting the legal rights of the Company and all shareholders.Publication time Subject matter Opinion
21 February 2020 Independent opinions on Delay in Increase of Shares of the Company by
the Controlling Shareholder
Agreed
27 March 2020 Independent opinions on the Company’s internal control self-assessment
report particulars and independent opinions on external guarantees of
the Company independent opinions on determination of remuneration
of Directors Supervisors and senior management for 2019 independent
opinions on the use of proceeds by related parties and related party
transactions independent opinions on provision of guarantee for
comprehensive credit line of relevant subsidiaries independent
opinions on appointment of the auditor for 2020 independent opinions
on corrections of accounting errors and retrospective restatement
independent opinions on expected daily connected transactions for 2020
independent opinions on the re-election of Director independent opinions
on Financial Assistance from a Subsidiary to Its Investee and independent
opinions on provision for impairment of assets for 2019
Agreed
30 March 2020 Independent opinions on the Implementation of the 2020 Restricted A
Share Incentive Scheme of the Company
Agreed
29 May 2020 Independent opinions on Matters Relating to Adjustments to the 2020
Restricted A Share Incentive Scheme Independent opinions on Grant of
Restricted Shares to the Participants
Agreed
19 June 2020 Independent opinions on the Estimated 2020 Securities Investment Quota Agreed
17 July 2020 Independent opinions on the Capital Increase of the Holding Subsidiary
and the Introduction of Strategic Investors
Agreed
10 August 2020 Independent opinions on the use of proceeds by controlling shareholders
and other related parties and on external guarantees
Agreed
29 September 2020 Independent opinions on the Capital Increase and the Introduction of a
Strategic Investor by a Holding Subsidiary
Agreed
4 December 2020 Independent opinions on the Acquisition of Non-controlling Interest in a
Subsidiary and External Guarantee Independent opinions on the External
Guarantee under the Equity Transfer
Agreed
23 December 2020 Independent opinions on the capital increase of a subsidiary by Changjiang
Chenming Equity Investment Fund
Agreed
SHANDONG CHENMING PAPER HOLDINGS LIMITED120
XI Corporate Governance
VI. Performance of duties by special committees under the Board during the reporting period
(I) Audit Committee
1. The following major tasks were completed in 2020:
(1) it conducted pre-audit communication with external auditing institution engaged by the Company in
respect of the 2019 financial report auditing reviewed the 2019 auditor’s report and financial report which
were submitted to the Board of the Company for consideration and approval;
(2) it conducted research and review on the independence professional competence investor protection
ability and practice qualifications of Grant Thornton and agreed to propose to the Board that Grant
Thornton be appointed as the audit agency of the Company for 2020;
(3) it reviewed the 2020 first quarter report of the Company as of 31 March 2020 which was submitted to the
Board for consideration and approval;
(4) it reviewed the 2020 interim financial statements as of 30 June 2020 which were submitted to the Board
for consideration and approval;
(5) it reviewed the 2020 third quarter report of the Company as of 30 September 2020 which was submitted
to the Board for consideration and approval.
2. Auditing work conducted on the 2020 financial report of the Company is as follows:
(1) it convened a meeting to review with due consideration the 2020 auditing plan and the related information
of the Company with the auditing certified public accountants and the finance department of the
Company prior to the on-site audit and negotiated and determined the schedule of an audit of the 2020
financial statements of the Company with certified accountant of Grant Thornton which was responsible
for the Company’s auditing work during the year;
(2) with due consideration it reviewed the draft of financial statements of the Company prior to an annual
onsite audit performed by the auditing certified public accountants and issued its approval to audit;
(3) it kept in close contact with the auditor upon the annual on-site audit performed by the auditing certified
public accountants and issued a letter to the auditor to urge that they submit the auditor’s report on
schedule;
(4) it reviewed the financial statements of the Company again upon the issue of preliminary opinion on the
annual audit by the auditing certified public accountants appointed for the annual audit and considered
the financial statements of the Company to be true accurate and complete to reflect the overall position
of the Company;
(5) it reviewed the 2020 report on internal audit and self-assessment report on internal controls of the
Company as of 31 December 2020.
2020 ANNUAL REPORT 121
XI Corporate Governance
VI. Performance of duties by special committees under the Board during the reporting period
(Cont’d)
(II) Remuneration and Assessment Committee
The Remuneration and Assessment Committee under the Board of the Company were primarily responsible for
formulating the remuneration and assessment for the Directors and the Senior Management of the Company and
formulating and examining the remuneration package of the Directors and the Senior Management of the Company
and accountable to the Board. During the reporting period the Company held two meetings of the Remuneration
and Assessment Committee of the Board. The Remuneration and Assessment Committee formulated the 2019
remuneration package of the Directors and the Senior Management of the Company which was arrived at based on
the operation conditions of 2019 and assessment of the Directors and the Senior Management of the Company. The
Remuneration and Assessment Committee reviewed the 2020 A-Share Restricted Share Incentive Plan (Draft) and
2020 A-Share Restricted Share Incentive Plan Evaluation and Management Measures and submit them to the Board
for consideration.(III) Strategy Committee
The Strategy Committee conducted research on major investment decisions of the Company and made
recommendations and inspected and evaluated the implementation of related matters. At the same time the Strategy
Committee actively discussed the Company’s future long-term strategic development plan based on the Company’s
industry characteristics and development stage in combination with the Company’s production and operation
conditions providing valuable and constructive opinions for the company’s steady development.
On 10 August 2020 the Proposal for the Second Phase of Huanggang Chenming Construction Project was reviewed
and approved by the Strategy Committee for the first meeting of the Strategy Committee in 2020 and submitted to the
Board for consideration.
(IV) Nomination Committee
The nomination committee was established under the Board of the Company. Its members were composed of three
Directors of which two were independent Directors; there is one chairman which is assumed by an independent
Directors. The nomination committee is responsible for reviewing and making recommendations on Director
candidates manager candidates and other senior management personnel who need to be appointed by the Board
making recommendations to the Board on the appointment and re-appointment of Directors and on the skills and
knowledge required for Directors to serve on the Board Experience background gender and other characteristics
are considered while balancing the diversity of Directors improving the efficiency of the Board and ensuring the
benefits of the diversity of the Board. During the reporting period the first meeting of 2020 reviewed and approved
the “Regarding the by-election The Director’s Proposal” agreed that Li Feng was a candidate for the Ninth Board of
Directors and submitted it to the fourth meeting of the Ninth Board of Directors for review and approval.
SHANDONG CHENMING PAPER HOLDINGS LIMITED122
XI Corporate Governance
VII. Performance of duties by the Supervisory Committee
Were there any risks of the Company identified by the Supervisory Committee when performing its duties during the
reporting period?
□ Yes √ No
None of those issues under the supervision was objected by the Supervisory Committee during the reporting period.VIII. Assessment and incentive mechanism for the Senior Management
The senior management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted
in line with the direction of the annual major tasks and were focused on appraisals of two fixed indicators namely the
completion status of each month and the evaluation on important performance indicators. It was carried out monthly by
way of cross assessment and supervision among the related departments. The annual assessments were carried out by the
Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances
during the year including the integrated quality of Senior Management and internal training of talents.IX. Internal control
1. Particulars of material deficiencies in internal control detected during the reporting period
□ Yes √ No
During the reporting period no major defects in internal control were found.
2. Self-assessment Report on Internal Controls
Date of Disclosure of Assessment Report on Internal Controls 26 March 2021
Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cn
Percentage of Total Assets Included in Assessment to Total Assets in
Consolidated Financial Statements of the Company 99.40%
Percentage of Revenue Included in Assessment to Revenue in Consolidated
Financial Statements of the Company 99.60%
2020 ANNUAL REPORT 123
XI Corporate Governance
IX. Internal control (Cont’d)
2. Self-assessment Report on Internal Controls (Cont’d)
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Qualitative criteria ① Indicators of material deficiencies in the
internal control of financial reporting include:
ineffective control environment material loss
to and adverse impact on the Company as a
result of misconduct by Directors Supervisors
and senior management; material misstatement
of non-exceptional incidents; ineffectiveness in
supervision of internal control of the Company
by the Board or its delegated authorities and
the internal audit department.② Indicators of major deficiencies in internal
control of financial reporting include: failure
in se lec t ing and app ly ing account ing
po l ic ies in accordance wi th genera l ly
accepted accounting principles; failure to
establish procedures and control measures
to prevent corrupt practices; fai lure to
establish corresponding control mechanism
for the accounting of unusual or special
transactions or failure to implement or set
up the corresponding compensation control;
failure to reasonably ensure the truthfulness
and accuracy in the preparation of financial
s tatement as a resul t of one or more
deficiencies in the control of financial reporting
as of the end of the period.③ General deficiencies: other deficiencies in
internal control that do not constitute material
or major deficiencies.Indicators of material deficiencies in the
internal control of non-financial reporting
include: major failure as a result of the decision
making process; lack of control system or
occurrence of systematic failure in principal
activities and lack of effective compensation
control high turnover rate of mid to senior level
management and senior technical staff; failure
to address the findings of internal control
assessment in particular material deficiencies;
and other factors which 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-making process;
deficiencies in major business procedure or
system; high turnover rate of key staff; failure
to address the findings of internal control
assessment in particular major deficiencies;
and other factors 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 turnover
rate of employees; and failure to rectify general
deficiencies.Quantitative criteria General deficiencies: deviation of less than or
equal to 0.1% from the target of accounting
error/the total revenue; Major deficiencies:
deviation of 0.1% – 0.5% from the target of
accounting error/the total 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 RMB5000000;
major deficiencies: quantitative criterion
( f inancial loss) between RMB5000000
and RMB20000000; material deficiencies:
quantitative criterion (financial loss) over
RMB20000000.
Number of material deficiencies in financial reporting: (number) 0
Number of material deficiencies in non-financial reporting: (number) 0
Number of major deficiencies in financial reporting: (number) 0
Number of major deficiencies in non-financial reporting: (number) 0
SHANDONG CHENMING PAPER HOLDINGS LIMITED124
XI Corporate Governance
X. Auditor’s report on internal control
√ Applicable □ Not applicable
Auditor’s opinion contained in the Auditor’s report on internal control
We are of the opinion that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effective
internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31
December 2020.
Disclosure of Auditor’s Report on Internal Control Disclosed
Date of Disclosure of Auditor’s report on internal control 26 March 2021
Index of Auditor’s Report on Internal Control Disclosure http://www.cninfo.com.cn
Type of Opinion in Auditor’s Report on Internal Control Standard and unqualified opinion
Material deficiencies in non-financial reporting No
Any opinions of non-standardisation set out in the Auditor’s Report on Internal Control issued by accountants
□ Yes √ No
Auditor’s Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment
Report
√ Yes □ No
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited
(I) Compliance with the Code on Corporate Governance
The Company maintained high standards of corporate governance through various internal controls. The Board
reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance
standards of the Company.Save for the details set out in III Board IV Chairman and General Manager and XVII Communications with
shareholders in this section the Company had fully complied with all the principles and code provisions of the Code
on Corporate Governance as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.
(II) Securities transactions by Directors
The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions
by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate
enquiries with all Directors and Supervisors of the Company the Company was not aware of any information that
reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this
code during the reporting period.
2020 ANNUAL REPORT 125
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board
The members of the Board of the Company are elected at the general meeting and held accountable to the general
meeting and shall exercise the following functions and powers: (1) to be responsible for convening the general
meeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)
to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annual
financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan
making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the
Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for material
acquisition and repurchase of the Company’s own shares; (8) to draft plans for the merger division or dissolution or
the change of formation of the Company; (9) to decide on external investment acquisition and disposal of assets
pledge of assets matter in relation to external guarantee entrusted wealth management connected transactions
etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of the Company’s
internal management organisation; (11) to employ or dismiss the manager or secretary to the Board of the Company;
to employ or dismiss the Senior Management such as the deputy general manager(s) and personnel in charge
of financial affairs as proposed by the general manager; and to decide on their remuneration and rewards and
punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for
amending the Articles of Association; (14) to administrate matter related to information disclosure of the Company;
(15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the
Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercise
the functions and powers as conferred upon by the Articles of Association or the general meeting.The Board comprised 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: Sun
Jianfei Yin Meiqun and Yang Biao. Please refer to section X of this annual report for their brief biographies.The Board is responsible for leading and monitoring the Company and is wholly responsible for the administration and
supervision of the Company’s businesses to facilitate its success. The Executive Director or the senior management is
authorised to be responsible for the various divisions and functions and management of the processing. Directors of
the Company shall act objectively and make decisions in the interests of the Company. The management and senior
management of the Company held regular meetings with the Board to discuss the ordinary business operations
and performance of the Company and carried out the relevant decisions of the Board. The Company will arrange
independent legal advice upon the request from the Directors or any committees of the Board if the Board or any
committees of the Board consider it necessary to seek for independent professional advice.Pursuant to Code A.1.8 of the code provisions the Company should arrange appropriate insurance cover in respect
of legal action against its Directors. As at the date of this report the Company has not reached an agreement with
the original insurance company and therefore has not arranged relevant insurance cover for Directors. However the
Company is currently under negotiation with another insurance Company with respect to director liability insurance in
2021.
SHANDONG CHENMING PAPER HOLDINGS LIMITED126
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
During the reporting period the Board held 14 meetings 4 of which were regular meetings and 10 were extraordinary
meetings. None of the Directors were absent from any Board meetings.
Attendance at the relevant meetings (attention required/attended)
Name Position
Board
meetings
Audit
committee
meetings
Nomination
committee
meetings
Remuneration
and assessment
committee
meetings
Strategic
committee
meetings
General
meetings
I. Executive Directors
Chen Hongguo Chairman 14/14 N/A 1/1 N/A 1/1 8/0
Hu Changqing Vice Chairman 14/14 N/A N/A N/A 1/1 8/8
Li Xingchun Vice Chairman 14/14 N/A N/A 2/2 N/A 8/0
Li Feng Executive Director 8/8 N/A N/A N/A N/A 3/3
II. Non-executive Directors
Li Chuanxuan Director 14/14 4/4 N/A N/A N/A 8/1
Han Tingde Director 14/14 N/A N/A N/A N/A 8/1
III. Independent non-executive Directors
Sun Jianfei Independent Director 14/14 4/4 1/1 2/2 N/A 8/0
Yin Meiqun Independent Director 14/14 4/4 1/1 N/A N/A 8/0
Yang Biao Independent Director 14/14 N/A N/A 2/2 1/1 8/3
Save for those disclosed in the brief profile of Directors of the Company in this Report none of the members of the
Board had any financial business family relations or material connections with each other.
The Board held 4 regular meetings during the year each by giving a 10-day notice in advance to ensure that all
Directors could participate in discussions of matters in the agenda. Reasonable prior notification was given for the
other meetings of the Board to ensure all Directors could take time to attend.
All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governing
the Board and all applicable regulations and rules were complied with.
2020 ANNUAL REPORT 127
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
Directors’ training and professional development
All newly appointed Directors are provided with necessary orientation information with an aim to ensure that they will
have a better understanding of operations and business of the Company as well as relevant laws and regulations and
obligations under the Listing Rules.
Directors and Supervisors of the Company were arranged by the Company to attend training courses 2020 for
directors and supervisors held by China Securities Regulatory Commission Shandong; and briefing paper in respect
of amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of the Company was distributed
to all Directors and Supervisors the above of which were to ensure all Directors and Supervisors to comply with
relevant laws and sound corporate governance practice and enhance their awareness of sound corporate governance
practice.(IV) Chairman and General Manage
The chairman of the Company is Mr. Chen Hongguo and the general manager of the Company is Mr. Li Feng. Please
refer to section X of this annual report for his brief biographies.
According to the Articles of Association of the Company the chairman shall exercise the following powers: (1)
presiding over general meetings and convening and presiding over Board meetings; (2) supervising and inspecting
the implementation of the resolutions of the Board; (3) signing the shares the securities and bonds issued by the
Company; (4) signing important documents of the Board and other documents which are required to be signed by
legal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidates
for general manager for the Board; (7) exercising the special right to operate the Company in accordance with the
laws and acting for the benefits of the Company in the event of emergency situation as a result of act of God or
natural disaster and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powers
authorised by the Board.The general manager shall exercise the following powers: (1) in charge of the operation and management of the
Company and organising the implementation of the resolutions of the Board; (2) organising the implementation of
the Company’s annual business plans and investment plans; (3) drafting plans for the establishment of the internal
organisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulating
specific rules and regulations for the Company; (6) proposing the appointment or dismissal of the deputy general
manager and chief financial officer; (7) appointing or dismissing management personnel other than those required
to be appointed or dismissed by the Board; (8) proposing the wages welfare rewards and penalties of staff and to
decide the appointment or dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting of
the Board; and (10) exercising other powers conferred by the Articles of Association of the Company and the Board.
SHANDONG CHENMING PAPER HOLDINGS LIMITED128
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(V) Independent Non-executive Directors
There are three independent non-executive Directors in the Board which is in compliance with the minimum
requirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Yin Meiqun
and Sun Jianfe the independent non-executive Directors of the Company have appropriate accounting or related
financial management expertise which is compliance with the requirement of Rule 3.10 of the Hong Kong Listing
Rules. Please refer to section X of this annual report for their brief biographies. The Company has received from each
of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the
Hong Kong Listing Rules and considered all of the independent non-executive Directors to be independent during the
year.(VI) Terms of Directors
According to the Articles of Association of the Company all Directors including non-executive Directors are elected
at general meetings with a term of three years from June 2019 to June 2022. They may be re-elected for another term
upon expiry of tenure.(VII) Directors’ Responsibility for the Financial Statements
The Directors acknowledged their responsibility to prepare financial statements for each financial year which give
a true and fair view of the state of affairs of the Company. The Directors believed that the Company had adopted
and applied consistently appropriate accounting policies in preparing the financial statements in compliance with all
related accounting standards.(VIII) Board Committees
Pursuant to Code on Corporate Governance the Board has established four committees namely Audit Committee
Remuneration and Assessment Committee Strategic Committee and Nomination Committee for overseeing particular
aspects of the Company’s affairs. Each Board Committee has its own defined written terms of reference. The written
terms of reference of each Board Committee are published on websites of stock exchange and the Company.Save for requirements of Code on Corporate Governance the Company also set up Strategic Committee for
overseeing and studying long-term strategic development plan of the Company and making recommendations.
2020 ANNUAL REPORT 129
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(IX) Audit Committee
The Audit Committee of the Company comprises three members including Yin Meiqun (as the chairman) Li
Chuanxuan and Sun Jianfei. Two of them including the chairman are independent non-executive Directors. The
primary duties of the Audit Committee are serving as a communication media between internal and external audit
and the related review and supervision. Yin Meiqun and Sun Jianfei have appropriate professional qualifications or
appropriate accounting or related financial management expertise which is in compliance with the requirement of the
Hong Kong Listing Rules.The primary duties of the Audit Committee of the Company are: (1) proposing the appointment or dismissal of the
external auditor; (2) supervising the internal control system of the Company and its implementation; (3) serving as
a communication media between internal and external audit; (4) auditing the financial information of the Company
and its disclosures; (5) reviewing the financial control risk control and internal control system of the Company and
audit the significant connected transactions; (6) discussing the risk management and internal control system with
the management to ensure the management has performed its duties to establish effective systems. The discussion
should include the adequacy of resources staff qualifications and experience training programs and budget of the
accounting and financial reporting functions of the Company; (7) studying the major investigation findings on risk
management and internal control matters on its own initiative or as delegated by the Board and the management’s
response to these findings; (8) where the annual report includes statements in relation to the risk management and
internal control system of the Company reviewing such statements prior to submission to the Board for approval; and
(9) dealing with other matters as delegated by the Board.
The Audit Committee discussed with the management of the Company the accounting standards and practices
adopted by the Group and discussed and reviewed this report including the review of the financial statements of the
Group for the year ended 31 December 2020 prepared in accordance with China Accounting Standards for Business
Enterprises.
Particulars of the meetings held by the Audit Committee during the reporting period were detailed in part VI of this
section.Risk Management and Internal Control
The Board is responsible for the risk management and internal control systems and reviewing their effectiveness.Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can
only provide reasonable but not absolute assurance against material misstatement or loss.The Audit Committee (on behalf of the Board) oversees management in the design implementation and monitoring
of the risk management and internal control systems and the management has provided confirmation to the Audit
Committee (and the Board) on the effectiveness of these systems for the year ended 31 December 2020.
In respect of internal control system procedures have been designed for safeguarding assets against unauthorised
use or disposition ensuring the maintenance of proper accounting records for the provision of reliable financial
information for internal use or for publication and ensuring compliance of applicable laws rules and regulations.
SHANDONG CHENMING PAPER HOLDINGS LIMITED130
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(X) Remuneration and Assessment Committee
The Remuneration and Assessment Committee of the Company comprises three members including Yang Biao
the Chairman and other members namely Li Xingchun and Sun Jianfei. Two members including the Chairman
are independent non-executive Directors which is in compliance with Code on Corporate Governance Practices.The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal of
the Directors and managers and conducting the appraisal and studying and formulating the remuneration policy
and package of the Directors and the Senior Management of the Company. The Remuneration and Assessment
Committee is accountable to the Board.
The primary duties of the Remuneration and Assessment Committee of the Company are: (1) formulating the
remuneration plan or package based on the major scope of work duties and importance of the Directors and the
management and the remuneration level of other counterparts; (2) formulating the remuneration plan or package
which mainly includes but not limited to standards procedures and a system for performance appraisals as well
as major plans and a system for rewards and sanctions; (3) examining the performance of the Directors excluding
the independent non-executive Directors and the Senior Management and conduct annual performance appraisals
for them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with other
matters as delegated by the Board.Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period are
detailed in part VI of this section.(XI) Nomination Committee
The Nomination Committee of the Company comprises three members including Sun Jianfei (as the chairman) Chen
Hongguo and Yin Meiqun. Two of them including the chairman are independent non-executive Directors which is
in compliance with Code on Corporate Governance Practices. The Nomination Committee is primarily responsible
for selecting candidates for directors and the management of the Company determining the selection criteria and
procedure and making recommendations.The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Board
in light of the Company’s operating activities asset scale and shareholding structure; (2) studying the selection criteria
and procedure for Directors and the management and advising the Board on the same; (3) extensively identifying
qualified candidates for Directors and the management; (4) examining candidates for Director and the management
and advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision on
their employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directors
and on skills knowledge experience background gender and other characteristics required in serving as a director
taking into consideration diversity balance and efficiency of the Board and benefits thereto; (7) reviewing the Board
diversity policy revising thereon in a timely manner and making relevant disclosure in the corporate governance report
in the corresponding annual report; and (8) dealing with other matters as delegated by the Board.
2020 ANNUAL REPORT 131
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XI) Nomination Committee (Cont’d)
During the reporting period the Nomination Committee after studying the needs of the Company for new Directors
and managerial personnel and taking into consideration the Board diversity policy identified suitable candidates for
Director and managerial positions through various channels (including from the Group internally and from the human
resources market). Upon acceptance of nomination by the nominated person the Nomination Committee performed
qualification review on preliminary candidates by holding meetings review criteria include the academic qualifications
relevant experience and specialised skills of the preliminary candidates. One to two months prior to election of new
Directors the Nomination Committee submitted recommendations and relevant materials of the directorial candidates
to the Board; prior to engaging new Senior Management the Nomination Committee submitted recommendations
and relevant materials of the new Senior Management personnel to the Board.Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VI of
this section.(XII) Strategic Committee
The Company set up a Strategic Committee which comprised three members including Chen Hongguo the
Chairman and other members namely Hu Changqing and Yang Biao. The Strategic Committee is primarily
responsible for studying the long term strategic development and major investments of the Company and making
recommendations.The primary duties of the Strategic Committee are (1) conducting research and submitting proposals regarding the
long term development strategic plan; (2) conducting research and submitting proposals regarding the financing
plans for major investments which require approval from the Board as stipulated in the Articles of Association of the
Company; (3) conducting research and submitting proposals regarding major capital operations and assets operation
projects which require approval from the Board as stipulated in the Articles of Association of the Company; (4)
conducting research and submitting proposals regarding other material matters that may affect the development of
the Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other matters
as delegated by the Board.Particulars of the meetings held by the Strategic Committee during the reporting period are detailed in part VI of this
section.(XIII) Auditor
On 19 June 2020 the 2019 general meeting of the Company approved a resolution to engage Grant Thornton (Special
General Partnership) as the domestic auditor of the Company for 2020 and be responsible for domestic auditing of
the Company for 2020.(XIV) Remuneration for the Auditor
The financial statements for 2020 prepared in accordance with Accounting Standards for Business Enterprises by
the Group were audited by Grant Thornton (Special General Partnership). The Company paid the auditor in aggregate
RMB2500000 and RMB800000 in respect of financial statements audit and non-audit services in relation to internal
control for 2020 respectively.Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements of
the Group in XIII. Financial Report.
SHANDONG CHENMING PAPER HOLDINGS LIMITED132
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XV) Supervisors and Supervisory Committee
The Supervisory Committee is accountable to the shareholders. It monitors the financial position of the Company
and the performance of the Directors managers and Senior Management of the Company as to whether they are in
accordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company and the
shareholders. The Supervisory Committee comprises three shareholder representatives and two staff representatives.The shareholder representatives shall be elected and removed at a general meeting and the staff representatives shall
be elected and removed democratically by the staff of the Company.
Details of the work of the Supervisory Committee during the reporting period are set forth in part VII of this section.
(XVI) Company Secretary
During the year the company secretary confirmed that he has received relevant professional training for not less than
15 hours in accordance with Rule 3.29 of the Listing Rules.
(XVII) Communications with Shareholders
The Company considers effective communication with Shareholders is essential to enable them to have a clear
assessment of the Group’s performance as well as accountability of the Board. Principal means of communication
with Shareholders of the Company are as follows:
Information disclosure on the Company’s website
The Company endeavours to disclose all material information about the Group to all interested parties as widely and
timely as possible. The Company maintains its website at www.chenmingpaper.com where important information
about the Group’s activities and corporate matters such as annual reports and interim reports to Shareholders
announcements business development and operations corporate governance practices and other information are
available for review by Shareholders and other stakeholders.When announcements are made through the Stock Exchange the same information will be made available on the
Company’s website.
General meetings
The Company’s annual general meeting provides a useful platform for direct communication between the Board and
Shareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Save
for the annual general meeting held on 19 June 2020 by the Company five extraordinary general meetings 1 Class
Meeting for Holders of Domestically listed Shares and 1 Class Meeting for Holders of Overseas-listed Shares were
convened in 2020. The attendance record of Directors at each general meeting is set out below:
Name Directors attending general meetings in person
2020 first extraordinary general meeting Hu Changqing
2020 second extraordinary general meeting Hu Changqing Yang Biao
2020 First Class Meeting for Holders of Domestic-listed Shares Hu Changqing Yang Biao
2020 First Class Meeting for Holders of Overseas-listed Shares Hu Changqing Yang Biao
2019 annual general meeting Hu Changqing Li Chuanxuan Han Tingde
2020 third extraordinary general meeting Hu Changqing Li Feng
2020 fourth extraordinary general meeting Hu Changqing Li Feng
2020 fifth extraordinary general meeting Hu Changqing Li Feng
2020 ANNUAL REPORT 133
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders (Cont’d)
General meetings (Cont’d)
The Company’s external auditor also attended the Annual General Meeting.
Code E.1.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit
remuneration and nomination committees to attend the Annual General Meeting.Mr. Chen Hongguo the chairman of the Company and its strategy committee was absent from the annual general
meeting due to business commitments.
Code A.6.7 of the code provisions – This code provision requires independent non-executive Directors and other
non-executive Directors as equal board members should give the Board and any committees on which they serve
the benefit of their skills expertise and varied backgrounds and qualifications through regular attendance and active
participation. They should also attend general meetings and develop a balanced understanding of the views of
shareholders.Han Tingde Li Chuanxuan Sun Jianfei Yin Meiqun and Yang Biao were absent from the 2020 first extraordinary
general meeting due to business commitments.Han Tingde Li Chuanxuan Sun Jianfei and Yin Meiqun were absent from the 2020 second extraordinary general
meeting 2020 First Class Meeting for Holders of Domestic-listed Shares and 2020 First Class Meeting for Holders of
Overseas-listed Shares due to business commitments.Sun Jianfei Yin Meiqun and Yang Biao were absent from the 2019 annual general meeting due to business
commitments.Han Tingde Li Chuanxuan Sun Jianfei Yin Meiqun and Yang Biao were absent from the 2020 third extraordinary
general meeting 2020 fourth extraordinary general meeting and 2020 fifth extraordinary general meeting due to
business commitments.Voting by poll
Resolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conduct
of the poll are explained to the shareholders at the commencement of each general meeting and questions from
shareholders regarding the voting procedures are answered. The poll results are posted on the websites of the Stock
Exchange and the Company respectively on the same day.
SHANDONG CHENMING PAPER HOLDINGS LIMITED134
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders (Cont’d)
Shareholders’ right
1. Procedures for convening an extraordinary general meeting by Shareholder
Pursuant to Article 100 of the Articles of Association of the Company Shareholder(s) alone or in aggregate
holding 10% or more of the Company’s shares shall be entitled to request the Board to convene extraordinary
general meetings provided that such request shall be made in writing. The Board shall in accordance with
provisions of the laws administrative regulations and the Articles of Association furnish a written reply stating
its agreement or disagreement to the convening of an extraordinary general meeting within ten days after
receiving such proposal of the same.In the event that the Board agrees to convene an extraordinary general meeting the notice of general meeting
shall be issued within five days after the passing of the relevant resolution of the Board. Any changes in the
original request made in the notice shall require prior approval of Shareholders concerned.In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish any
reply within ten days after receiving such proposal Shareholder(s) alone or in aggregate holding 10% or more of
the Company’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary
general meeting provided that such proposal shall be made in writing.In the event that the Supervisory Committee agrees to convene an extraordinary general meeting the notice of
general meeting shall be issued within five days after receiving such request. Any changes in the original request
made in the notice shall require prior approval of Shareholders concerned.
Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shall
be deemed as failure of the Supervisory Committee to convene and preside over a general meeting and
Shareholder(s) alone or in aggregate holding 10% or more of the Company’s shares for ninety consecutive days
or more shall be entitled to convene and preside over the meeting on a unilateral basis.Pursuant to Article 101 of the Articles of Association of the Company if Shareholders determine to convene a
general meeting on their own they shall give a written notice to the Board and file the same with the local office
of CSRC at the place where the Company is located and the stock exchange for records. The shareholding
percentage of shareholders who convened shall not be lower than 10% prior to the announcement of
resolutions of the general meeting.Shareholders who convened shall submit relevant certifications to the local office of CSRC at the place where
the Company is located and the stock exchange upon the issuance of the notice of general meeting and the
announcement of resolutions of the general meeting.The Board and its secretary shall cooperate with respect to matters relating to general meetings convened
by Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholding
register. If a general meeting is convened by shareholders on their own all necessary expenses incurred shall
be borne by the Company.
2020 ANNUAL REPORT 135
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII) Communications with Shareholders (Cont’d)
Shareholders’ right (Cont’d)
2. Procedures for sending shareholders’ enquiries to the Board
Shareholders may at any time send their enquiries and concerns to the Board of the Company in writing through
the Company Secretary/Secretary to the Board whose contact details are as follows:
Secretary to the Board Hong Kong Company Secretary
Name Yuan Xikun Chu Hon Leung
Address No. 2199 East Nongsheng Road
Shouguang City Shandong Province
22/F Universal Building Central Hong Kong
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email chenmmingpaper@163.com liamchu@li-partners.com
The Company Secretary and the secretary to the Board shall forward shareholders’ enquiries and concerns
to the Board and/or relevant Board Committees of the Company where appropriate to answer shareholders’
questions.
3. Procedures for putting forward proposals of Shareholders at general meetings
Pursuant to Article 111 of the Articles of Association of the Company shareholders individually or jointly holding
over 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 may
submit extraordinary motions to the Board or the secretary to the Board ten working days before the convening
of the General Meeting. The Board or the secretary to the Board shall issue supplementary notice of the General
Meeting to announce the extraordinary motions within two working days after receiving the proposed motions.Save for provided above the Board or Secretary to the Board shall not amend proposals stated in the notice of
general meeting or add new proposals therein following the notice of general meeting has been issued.No voting or resolution shall be effected or adopted at the general meeting for proposals that have not been
stated in the notice of general meeting or that do not comply with provisions of the Articles of Association.
Extraordinary general meeting shall not resolve issues that are not contained in the notice.
Relationships with investors
The Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond to
their questions. Investors are received and visited at appropriate times to explain the Group’s business. In addition
questions received from the general public and individual shareholders are answered promptly. In all cases great care
is taken to ensure that no price-sensitive information is disclosed selectively.(XVIII) Internal Control
For details of internal control of the Company please refer to IX. Internal Control hereunder.
SHANDONG CHENMING PAPER HOLDINGS LIMITED136
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XIX) Articles of Association
On 3 December 2019 the Company amended the Articles of Association. The amendments were primarily relating to
the time for convening general meetings. Memorandum of Association and the amended version of the new Articles of
Association of the Company are available on websites of the Company and Stock Exchange.
(XX) Board Diversity
On 21 August 2013 the Company formulated policies to diversify Board members and amended the implementing
rules of the nomination committee. Pursuant to the new policies the nomination committee shall regularly review the
Board diversity policy to improve efficiency and ensure interest thereof.
Such policies are summarised as follows:
The Company recognises and embraces the benefits of having a diverse Board and sees diversity at Board level as
an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use
of differences in the talents skills regional and industry experience backgrounds genders and other qualities of the
members of the Board. These differences will be considered in determining the optimum composition of the Board
and when possible should be balanced appropriately. All appointments of the members of the Board are made on
merit and in the context of the talents skills and experience of the Board as a whole.The Nomination Committee of the Company reviews and assesses the composition of the Board and makes
recommendations to the Board on appointment of new directors of the Company. The Nomination Committee
also oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing the
composition of the Board the Nomination Committee will consider the benefits of all aspects of diversity including
without limitation those described above in order to maintain an appropriate range and balance of talents skills
experience and backgrounds on the Board. In recommending candidates for appointment to the Board the
Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits
of diversity on the Board.The composition of the Board of the Company is basically diversified. For details please refer to (III) Composition of
the Board under section XI.(XXI) Dividend policy
Based on the total ordinary share capital of 2984208200 shares and the 589005236 simulated ordinary shares
converted from the second and third tranche of Preference Shares using a conversion ratio of 1 share valued at
RMB3.82 as at the end of 2020 a cash dividend of RMB1.85 (tax inclusive) per 10 shares will be distributed to
ordinary shareholders; a cash dividend of RMB1.85 (tax inclusive) per 10 simulated ordinary shares converted from
the Preference Shares will be distributed to holders of the second and third tranche of Preference Shares. No bonus
shares will be issued and there is no increase of share capital from reserves. A cash dividend of RMB552078517.00
will be distributed to holders of ordinary shares and a variable cash dividend of RMB108965968.66 will be distributed
to holders of the second and third tranche of Preference Shares. In other words a cash dividend of RMB4.84 (tax
inclusive) per Preference Share with a nominal value of RMB100 each will be distributed to holders of the second and
third tranche of Preference Shares. If the total share capital of the company changes before the date of the equity
registration for the implementation of the equity distribution it is proposed to maintain the total distribution unchanged
and adjust the distribution ratio per share accordingly.
2020 ANNUAL REPORT 137
XII Corporate Bonds
Are there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date of
approval of annual report or overdue but not fully settled?
Yes
I. Basic information on Corporate Bonds
Name of bond Bond abbreviation Bond code Issue date Maturity date
Outstanding
amount of
the bonds
(RMB’0000) Interest rate Payment method
The public issuance of the
Corporate Bonds of Shandong
Chenming Paper Holdings
Limited to qualified investors
in 2017 (phase I)
17 Chenming
Bond 01
112570 17 August
2017
21 August
2022
9000 7.28% Interest is paid annually. The principal
amount and the last interest payment
will be paid on the maturity date.The public issuance of the
Corporate Bonds of Shandong
Chenming Paper Holdings
Limited to qualified investors
in 2018 (phase I)
18 Chenming
Bond 01
112641 29 March
2018
2 April
2023
35000 7.60% Interest is paid annually. The principal
amount and the last interest payment
will be paid on the maturity date.Stock exchange on which
Corporate Bonds are listed or
transferred
Shenzhen Stock Exchange
Investor eligibility arrangement Online subscription: Public investors with A share security account opened under China Securities Depository and Clearing Co. Ltd.Offline subscription: Institutional investors with A share security account opened under China Securities Depository and Clearing Co. Ltd.Interest payment of Corporate
Bonds during the reporting
period
The payment of interest on the bonds of 17 Chenming Bond 01 was completed on 21 August 2020. For details please refer to the
Announcement on Payment of 2020 Interest with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in
2017 as disclosed on 19 August 2020.
The payment of principal and interest for the bond repurchase portion of 18 Chenming Bond 01 was completed on 2 April 2019 and the
resale of the bonds was completed during the reporting period. The number of the resale was 3500000 and the average resale price was
RMB100 each. For details please refer to the relevant announcements as disclosed on 19 February 21 February 25 February 28 February
31 March 30 April and 1 June 2020.
Performance of relevant terms
during the reporting period
for special terms such as
issuer or investor option and
interchangeable for Corporate
Bonds (if any).
Both 17 Chenming Bond 01 and 18 Chenming Bond 01 attach with options for the issuer to adjust the coupon rate and for investors to
resell. The issuer has the right to determine the adjustment to the coupon rate for the following 3 years at the end of the second year
and the adjustment to the coupon rate for the following year as the end of the fourth year. After issuing the announcement on whether
the coupon rate of the relevant tranche of bonds will be adjusted and the range of adjustment the investors have the right to register for
reselling during the period as announced to resell all or part of the relevant tranche of bonds held to the issuer at par value.
SHANDONG CHENMING PAPER HOLDINGS LIMITED138
XII Corporate Bonds
II. Information on bond custodian and credit rating agency
Bond custodian:
Name GF Securities Co. Ltd. Office address 37th Floor Taikang
Insurance Building No.
429 Nanquan North
Road Pudong New Area
Shanghai
Contact person Xu Duwei Telephone of
contact person
021-38003800-
3700
Credit rating agency(ies) which conducted rating on Corporate Bonds during the reporting period:
Name China Chengxin Securities Rating Co. Ltd. Office address Building 6 Yinhe Soho No. 2 Nanzhugan Hutong
Chaoyangmennei Street Dongcheng District
Beijing
Reason of change procedures to be performed and impacts on interests of investors etc. in case
the bond trustee and credit rating agency engaged by the Company during the reporting period
have changed (if applicable)
No change during the reporting period.III. Use of proceeds from Corporate Bonds
Use of proceeds from Corporate Bonds and its
implementation
The use of proceeds from issuance of Corporate Bonds has strictly
completed relevant application and approval procedures. As at the
end of the reporting period the proceeds from 17 Chenming Bond
01 and 18 Chenming Bond 01 were fully used.
Balance as at the end of the year (RMB’0000) 0
Operation of special account for proceeds Special account for proceeds is used for the deposit of special
capital from bonds.Is the use of proceeds consistent with the use of
proceeds guaranteed under the prospectus proposed
use of proceeds and other agreement
Consistent
IV. Credit rating of Corporate BondsOn May 26 2020 China Chengxin International Credit Rating Co. Ltd. (China Chengxin International) issued the “Follow-upRating Report” (2020) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2017”.The credit rating of the company’s “17 Chenming Bond 01” is AA+ and the main credit rating of the company is AA+
and the rating outlook is stable. For details please refer to the company’s announcement dated 28 May 2020 on Juchao
Information Network.
On 26 May 2020 China Chengxin International issued the “Follow-up Rating Report” (2020) with Respect to the FirstTranche of Corporate Bonds Publicly Issued to Qualified Investors in 2018” which assessed the Company’s “18 Chenming
Bond 01” credit rating as AA+. The main credit rating of the Company is AA+ and the rating outlook is stable. For details
please refer to the announcement of the Company dated 28 May 2020 on Juchao Information Network.
2020 ANNUAL REPORT 139
XII Corporate Bonds
IV. Credit rating of Corporate Bonds (Cont’d)
On 3 July 2020 China Chengxin International issued the “Announcement on Putting Shandong Chenming Paper Group
Co. Ltd. Main Body and Related Debt Credit Ratings on the Watch List for Possible Downgrades” and decided to set the
company’s AA+ main credit rating and the AA+ credit ratings of “17 Chenming Bond 01” and “18 Chenming Bond 01” are
included on the watch list for possible downgrade. For details please refer to the announcement of the Company dated 9
July 2020 on Juchao Information Network.
On 30 December 2020 China Chengxin International issued the “Announcement on Removing the Credit Rating ofShandong Chenming Paper Group Co. Ltd. and Related Debts from the Watch List of Possible Downgrades and Adjustingthe Rating Outlook to Negative” and decided to maintain it The company’s subject credit rating is AA+ and the credit
ratings of “17 Chenming Bond 01” and “18 Chenming Bond 01” are maintained at AA+. The credit ratings of the above
entities and related debts are removed from the watch list for possible downgrade and the rating outlook is adjusted to
negative. For details please refer to the announcement of the Company dated 31 December 2020 on Juchao Information
Network.
V. Credit enhancement mechanism repayment plan and other repayment guarantee measures
for Corporate Bonds
There was no change in credit enhancement mechanism repayment plan and other repayment guarantee measures which
were consistent with relevant commitments as set out in the prospectuses during the reporting period.VI. Convening of meeting for bondholders during the reporting period
During the reporting period no meeting for bondholders was held.
VII. Performance of bond custodian during the reporting period
As the trustee of “17 Chenming Bond 01” and “18 Chenming Bond 01” GF Securities Co. Ltd. continued to pay close
attention to matters that have a significant impact on the rights and interests of bondholders actively performed the duties
of the trustee and safeguard the legal rights and interests of bondholders..
On 19 June 2020 GF Securities Co. Ltd. issued the “Interim Report on the Entrusted Management of Major Issues of
Corporate Bonds”; on 24 June 2020 GF Securities Co. Ltd. issued the “Fiduciary Management Affairs Annual Report
(2019) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2017” “FiduciaryManagement Affairs Annual Report (2019) with Respect to the First Tranche of Corporate Bonds Publicly Issued to QualifiedInvestors in 2018”. For details please refer to the announcement of the Company dated on the same day on Juchao
Information.
SHANDONG CHENMING PAPER HOLDINGS LIMITED140
XII Corporate Bonds
VIII. Major accounting data and financial indicators of the Company over the past two years as at
the end of the reporting period
Unit: RMB’0000
Item 2020 2019
Year-on-year
increase/decrease
in percentage
EBITDA 681034.08 689484.08 -1.23%
Current ratio 70.29% 85.30% -15.01%
Gearing ratio 71.83% 73.11% -1.28%
Quick ratio 60.23% 76.24% -16.01%
Proportion of EBITDA to total debts 12.22% 11.32% 0.90%
Interest coverage ratio 1.96 1.70 15.29%
Cash interest coverage ratio 4.71 4.56 3.29%
EBITDA interest coverage ratio 3.02 2.34 29.06%
Loans payment ratio 100.00% 100.00% 0
Interest payment ratio 100.00% 100.00% 0
Major reason for more than 30% in year-on-year change for the above accounting data and financial indicators
□ Applicable √ Not applicable
IX. Interest payment on other bonds debt and financing instruments during the reporting period
Unit: RMB
Item
Amount of
interest payment
Corporate Bonds 1036089112.24
Super & short-term commercial papers 384100500.00
Total 1420189612.24
2020 ANNUAL REPORT 141
XII Corporate Bonds
X. Bank credit obtained its use and repayment of bank loans during the reporting period
During the reporting period the Company obtained bank credit of RMB83165 million of which RMB44270 million was
utilised with RMB38895 million outstanding. The Company repaid bank loans of RMB30646 million.XI. Performance of relevant agreements or commitments under the prospectus of Corporate
Bonds during the reporting period
Nil
XII. Matters of significance during the reporting period
On 3 July 2020 China Chengxin International issued the “Announcement on Putting the Credit Rating of the Company’sMain Body and Related Debts on the Watch List for Possible Downgrades” and decided to include the Company’s AA+
main credit rating and “17 Chenming Bond 01” “18 Chenming Bond 01” AA+ was included in the watch list for possibledowngrade; on December 30 2020 the Company issued “Announcement Regarding the withdrawal of the credit ratingof corporate entities and related debts from the watch list for possible downgrade and the rating outlook is adjusted tonegative” and decided to maintain the Company’s main body credit rating at AA+ maintain the “17 Chenming Bond 01” and
“18 Chenming Bond 01” credit ratings at AA+ and withdraw the credit ratings of the above entities and related debts that
may be downgraded to watch list and upgrade the rating outlook to negative.
For details please refer to the announcement of the Company dated 9 July 2020 and 31 December 2020 on Juchao.com.
XIII. Is there any guarantor for Corporate Bonds?
□ Yes √ No
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I. Auditor’s Report
Type of auditor’s opinion
The date of the audit report signed
Name of the auditor
Reference number of the auditor’s report
Name of certified public accountants
Standard and unqualified opinions
25 March 2021
Grant Thornton (Special General Partnership)
Audit Report No. [ 371A005352 ] (2021)
Liu Jian and Jiang Lei
Text of the auditor’s report
To all shareholders of Shandong Chenming Paper Holdings Limited:
I. Auditor’s opinionWe have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter “ChenmingPaper Company”) which comprise the consolidated and company balance sheets as at 31 December 2020 the
consolidated and company income statements the consolidated and company cash flow statements and the
consolidated and company statements of changes in shareholders’ equity for 2020 and notes to the relevant financial
statements.In our opinion the accompanying financial statements were prepared in accordance with the Accounting Standards
for Business Enterprises in all material aspects and give a true and fair view of the consolidated and company financial
position of Chenming Paper Company as at 31 December 2020 and of its consolidated and company operating
results and cash flows for 2020.II. Basis of opinions
We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute of
Certified Public Accountants. Our responsibilities under those standards are further described in the responsibilities
of certified public accountants for the audit of the financial statements section of the auditor’s report. We are
independent of Chenming Paper Company in accordance with the ethical codes of Chinese certified public
accountants and we have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.III. Key audit matters
Key audit matters are those matters that in our professional judgment were of most significance in our audit of the
financial statements for the current period. These matters were addressed in the context of our audit of the financial
statements as a whole and in forming our opinion thereon we do not provide a separate opinion on these matters.(I) Share-based payments
For detailed disclosures of relevant information please see note V. 25 and note XIII of the financial statements.
1. Details
Chenming Paper Company implemented a restricted share incentive scheme in 2020. The management
fees recognised for share-based payments in 2020 amounted to RMB32486900. As the recognition
of share-based payments requires significant audit estimate by the management of Chenming Paper
Company (hereinafter the “Management”). As parameters such as the number of exercisable shares are
subject to uncertainties we have identified share-based payments as a key audit matter.
2020 ANNUAL REPORT 143
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2. Application for auditing
We have carried out the following audit procedures for the recognition of share-based payments:
(1) we inspected the approved share incentive scheme relevant board resolutions and the resolutions
of the general meetings and inspected the relevant evidence of the implementation of the share
incentive scheme;
(2) we obtained and inspected the approved share incentive scheme relevant board resolutions and
the resolutions of the general meetings inspected the evidence related to the implementation of the
share incentive scheme including but not limited the Announcement on Completion of Registration
of the Grant under the 2020 Restricted A Shares Incentive Scheme issued by Chenming Paper
Company;
(3) we inspected the Management’s basis for estimating the fair value on the date of grant under
the share incentive scheme inspected the Management’s basis for estimating the number of
exercisable shares under the share incentive scheme as at 31 December 2020 and evaluated the
reasonableness of Management’s estimation;
(4) we recalculated the expenses recognised for the share incentive scheme in 2020; and
(5) we inspected whether the Management had made sufficient disclosure of the share incentive
scheme and relevant estimation.(II) Recognition of revenue from machine-made paper
For detailed disclosures of relevant information please see note V. 27 and VII. 46 of the financial statements.
1. Details
In 2020 Chenming Paper Company real ised revenue of RMB30736518000 of which
RMB26799197500 was attributed to revenue of machine-made paper accounting for 87.19% of the
revenue. For domestic machine-made paper sales business Chenming Paper Company recognised the
revenue after the goods were delivered and signed by the customer for confirmation; for foreign machine-
made paper sales business Chenming Paper Company recognised the revenue after the goods were
loaded on board and declared.
As revenue is one of the key performance indicators of Chenming Paper Company and the revenue from
the sales of machine-made paper accounts for a relatively huge proportion of the total revenue due to its
enormous sales volume there may be potential misstatement in relation to whether revenue recognition is
accounted for in the appropriate period of the financial statements which has a significant impact on the
financial statements. Therefore we have identified recognition of revenue from machine-made paper as a
key audit matter.
2. Application for auditing
We have carried out the following audit procedures for the recognition of revenue from machine-made
paper:
(1) we identified and evaluated and tested the effectiveness of the design and operation of key internal
controls conducted by the Management related to revenue recognition;
SHANDONG CHENMING PAPER HOLDINGS LIMITED144
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(2) we conducted sampling inspections on sales contracts identified contract terms and conditions
related to the transfer of control of the goods assessed whether the timing of recognition of sales
revenue from Chenming Paper Company meets the requirements of the Accounting Standards for
Business Enterprises;
(3) we analysed revenue and gross profit by taking into account product types and identified whether
the abnormal fluctuations in the amount of revenue are reasonable in the current period;
(4) we inspected the occurrence of on-the-spot recognition of sales at the end of the inspection period
and inspected goods returns after the inspection period to determine the accuracy of revenue
recognition during the period;
(5) we collected samples from sales revenue recorded around the balance sheet date for cut-off
tests; verified delivery orders and other supporting documents to assess whether sales revenue is
recorded in the appropriate accounting period;
(6) we sought external confirmations for clients with larger sales during the period.
IV. Other information
The Management of Chenming Paper Company’ is responsible for other information. Other information includes
the information covered in the 2020 annual report of Chenming Paper Company but does not include the financial
statements and our audit report.Our audit opinions published in the financial statements do not cover other information and we do not publish any
form of assurance conclusion on other information.In conjunction with our audit of the financial statements our responsibility is to read other information during which
we consider whether there is significant inconsistency or other material misstatement of other information with the
financial statements or what we have learned during the audit.
Based on the work we have performed if we determine that there is a material misstatement of other information we
should report that fact. In this regard we have nothing to report.V. Management and management responsibility for financial statements
The Management of Chenming Paper Company is responsible for the preparation of financial statements in
accordance with the requirements of the Accounting Standards for Business Enterprises to enable them to achieve
fair reflection and to achieve the design implementation and maintenance of necessary internal controls so that the
financial statements are free of material misstatements due to fraud or errors.In the preparation of the financial statements the Management is responsible for assessing the continuing operations
capabilities of Chenming Paper Company disclosing issues related to going concern (if applicable) and applying
the going concern assumption unless the Management plans to liquidate Chenming Paper Company terminate
operations or have no other realistic options.The Management is responsible for supervising the financial reporting process of Chenming Paper Company.
2020 ANNUAL REPORT 145
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VI. Auditor’s responsibility for auditing financial statements
Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from material
misstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance is
a high level of assurance but it does not guarantee that an audit performed in accordance with auditing standards
can always discover a major misstatement when it exists. Misstatements may be caused by fraud or errors and are
generally considered to be material if it is reasonably expected that misstatements individually or in aggregate may
affect the economic decision made by users of financial statements based on the financial statements.In the process of conducting audit work in accordance with auditing standards we use professional judgment and
maintain professional suspicion. At the same time we also perform the following tasks:
(1) To identify and assess risks of material misstatement of financial statements due to fraud or errors design
and implement audit procedures to address these risks and obtain adequate and appropriate audit evidence
together perform as a basis for issuing audit opinions. Since fraud may involve collusion falsification intentional
omission misrepresentation or override of internal controls the risk of failing to detect a material misstatement
due to fraud is higher than the risk of failing to detect a material misstatement due to an error.
(2) To understand audit-related internal controls to design appropriate audit procedures.
(3) To evaluate the appropriateness of accounting policies adopted by the Management and the reasonableness of
accounting estimates and related disclosures.
(4) To conclude on the appropriateness of Management’s use of the continuing operation assumption. At the
same time according to the audit evidence obtained it may lead to conclusions as to whether there are
significant uncertainties in matters or circumstances that have significant doubts about the ability of Chenming
Paper Company to continue its operations. If we conclude that there are significant uncertainties the auditing
standards require us to request the users of the report to pay attention to the relevant disclosures in the financial
statements in the audit report; if the disclosure is not sufficient we should publish modified audit report. Our
conclusions are based on the information available as of the date of the audit report. However future events or
circumstances may cause Chenming Paper Company to not continue its operations.
(5) Evaluate the overall presentation structure and content of the financial statements and evaluate whether the
financial statements fairly reflect the relevant transactions and matters.
(6) To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities
in Chenming Paper Company to express opinions on the financial statements. We are responsible for guiding
supervising and executing group audits and take full responsibility for the audit opinion.We communicate with the Management on planned audit scope time arrangements and major audit findings
including communication of the internal control deficiencies that we identified during the audit.We also provide statements to the Management on compliance with ethical requirements related to independence
and communicate with the Management on all relationships and other matters that may reasonably be considered to
affect our independence as well as related preventive measures (if applicable).
SHANDONG CHENMING PAPER HOLDINGS LIMITED146
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From the matters we communicated with the Management we determine which matters are most important for the
audit of the financial statements for the current period and thus constitute the key audit matters. We describe these
matters in our audit report unless laws and regulations prohibit the public disclosure of these matters or in rare
cases if it is reasonably expected that the negative consequences of disclosing something in the audit report will
outweigh the benefits to the public interest we determine that the matter should not be reported in the audit report.Grant Thornton (Special General Partnership) Chinese Certified Public Accountant (Project Partner): Liu Jian
Beijing China Chinese Certified Public Accountant: Jiang Lei
25 March 2021
II. Financial Statements
The unit in the notes to the financial statements is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
31 December 2020
Unit: RMB
Item 31 December 2020 31 December 2019
CURRENT ASSETS:
Monetary funds 17759537598.98 19306529473.33
Deposit reservation for balance
Borrowings
Financial assets held for trading 192907800.62
Derivative financial assets
Bills receivable
Accounts receivable 1984931665.82 2525083311.03
Accounts receivable financing 488385666.76 442915861.70
Prepayments 964290512.36 603573549.08
Premiums receivable
Reinsurance premiums receivable
Reserves for reinsurance contract receivable
Other receivables 2417240559.46 2216654598.66
Including: Interest receivable
Dividend receivable 13000000.00
Buying back the sale of financial assets
Inventories 5135293347.82 4774430110.81
Contract assets
Assets held-for-sale
Non-current assets due within one year 4222744207.34 6974539613.30
Other current assets 2716918695.85 8108707394.70
Total current assets 35882250055.01 44952433912.61
2020 ANNUAL REPORT 147
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Item 31 December 2020 31 December 2019
NON-CURRENT ASSETS:
Loans and advances
Debt investments
Other debt investments
Long-term receivables 4658884857.95 1200575810.95
Long-term equity investments 3906158402.45 3606339023.74
Investment in other equity instruments
Other non-current financial assets 145910000.00 147445653.55
Investment property 5943159568.00 5082362293.11
Fixed assets 37651706658.97 34439935032.69
Construction in progress 179857941.83 5476122928.95
Bearer biological assets
Oil and gas assets
Right-of-use assets 205876719.75 152141882.05
Intangible assets 1774624509.33 1781061904.51
Development expenditure
Goodwill 32916531.95 5969626.57
Long-term prepaid expenses 51061485.49 48203408.71
Deferred income tax assets 1084164679.14 892442631.04
Other non-current assets 58886418.75 173875826.67
Total non-current assets 55693207773.61 53006476022.54
Total assets 91575457828.62 97958909935.15
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Item 31 December 2020 31 December 2019
CURRENT LIABILITIES:
Short-term borrowings 32793992957.86 36883156014.19
Borrowings from central bank
Loans from other banks
Financial liabilities held for trading
Derivative financial liabilities
Bills payable 2998936736.34 1515048206.00
Accounts payable 4042430732.31 4351087581.98
Advance receipts
Contract liabilities 1051147044.74 968082063.13
Financial assets sold for repurchase
Deposits from customers and interbank
Customer brokerage deposits
Securities underwriting brokerage deposits
Employee benefits payable 232376585.31 190229883.52
Taxes payable 652647840.63 311554116.73
Other payables 1956715367.83 2594249626.54
Including: Interest payable 178992959.85 208189699.15
Dividend payable
Handling charges and commission payable
Due to reinsurers
Liabilities held-for-sale
Non-current liabilities due within one year 7160949615.93 5662958920.03
Other current liabilities 157037833.35 222402500.00
Total current liabilities 51046234714.30 52698768912.12
2020 ANNUAL REPORT 149
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Item 31 December 2020 31 December 2019
NON-CURRENT LIABILITIES:
Insurance contract reserve
Long-term borrowings 8077150979.15 9140339693.56
Bonds payable 1536877351.46 1258270909.49
Including: Preference Shares
Perpetual Bonds
Lease liabilities 60271769.90 59697128.65
Long-term payables 2295309357.74 3321535538.94
Long-term employee benefits payable
Provisions 325259082.28 325259082.28
Deferred income 1637996636.51 1771013335.11
Deferred income tax liabilities 6572535.97 1411125.59
Other non-current liabilities 789521686.07 3042841328.86
Total non-current liabilities 14728959399.08 18920368142.48
Total liabilities 65775194113.38 71619137054.60
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Item 31 December 2020 31 December 2019
OWNERS’ EQUITY:
Share capital 2984208200.00 2904608200.00
Other equity instruments 5473500000.00 7465500000.00
Including: Preference Shares 4477500000.00 4477500000.00
Perpetual Bonds 996000000.00 2988000000.00
Capital reserves 5321911413.75 5086686427.30
Less: Treasury shares 226860000.00
Other comprehensive income -561686607.66 -879452135.10
Special reserves
Surplus reserves 1212009109.97 1212009109.97
General risk provisions 74122644.20 74122644.20
Retained profit 9999764028.74 9306269617.38
Total equity attributable to owners of the Company 24276968789.00 25169743863.75
Minority interest 1523294926.24 1170029016.80
Total owners’ equity 25800263715.24 26339772880.55
Total liabilities and owners’ equity 91575457828.62 97958909935.15
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
2. Balance sheet of the Company
Unit: RMB
Item 31 December 2020 31 December 2019
CURRENT ASSETS:
Monetary funds 4720330804.07 9001257324.52
Financial assets held for trading
Derivative financial assets
Bills receivable 1470720000.00 3254460000.00
Accounts receivable 694836561.24 39204670.00
Accounts receivable financing 24339933.19 189873567.14
Prepayments 1697770445.12 722472479.01
Other receivables 10637425503.02 13975590537.58
Including: Interest receivable
Dividend receivable 200000000.00
Inventories 637293495.29 696487727.53
Contract assets
Assets held-for-sale
Non-current assets due within one year 146934211.22 129546826.00
Other current assets 45764272.71 80815659.84
Total current assets 20075415225.86 28089708791.62
2020 ANNUAL REPORT 151
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Item 31 December 2020 31 December 2019
NON-CURRENT ASSETS:
Debt investments
Other debt investments
Long-term receivables 64762373.99 418750862.51
Long-term equity investments 22192108035.92 23629780317.87
Investment in other equity instruments 3000000.00
Other non-current financial assets 141910000.00 147445653.55
Investment property
Fixed assets 3984339880.51 3901007932.88
Construction in progress 80192749.46 350623821.42
Bearer biological assets
Oil and gas assets
Right-of-use assets
Intangible assets 534900368.31 446430156.00
Development expenses
Goodwill
Long-term prepaid expenses
Deferred income tax assets 418717829.13 426711909.98
Other non-current assets 110930000.00
Total non-current assets 27416931237.32 29434680654.21
Total assets 47492346463.18 57524389445.83
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Item 31 December 2020 31 December 2019
CURRENT LIABILITIES:
Short-term borrowings 10929616612.59 11601509632.09
Financial liabilities held for trading
Derivative financial liabilities
Bills payable 7603416890.27 9890041170.20
Accounts payable 812111491.23 833526295.40
Advances from customers
Contract liabilities 156487086.88 2096436345.90
Staff remuneration payables 89416732.50 71040017.13
Tax payables 147669266.97 76872851.56
Other payables 5869352883.62 6426648847.95
Including: Interest payable 97497305.56 127278083.35
Dividend payable
Liabilities held-for-sale
Non-current liabilities due within one year 2374029490.27 3695934663.30
Other current liabilities 312130833.35 932402500.00
Total current liabilities 28294231287.68 35624412323.53
2020 ANNUAL REPORT 153
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Item 31 December 2020 31 December 2019
NON-CURRENT LIABILITIES:
Long-term borrowings 1295000000.00 150692035.94
Bonds payable 439957250.00 89070000.00
Including: Preference Shares
Perpetual Bonds
Lease liabilities
Long-term payables 631776192.80 1167426124.98
Long-term employee benefits payable
Provisions 325259082.28 325259082.28
Deferred income 38017165.55 42070840.27
Deferred income tax liabilities
Other non-current liabilities 1194883344.67 2789283340.67
Total non-current liabilities 3924893035.30 4563801424.14
Total liabilities 32219124322.98 40188213747.67
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Item 31 December 2020 31 December 2019
OWNERS’ EQUITY:
Share capital 2984208200.00 2904608200.00
Other equity instruments 5473500000.00 7465500000.00
Including: Preference Shares 4477500000.00 4477500000.00
Perpetual Bonds 996000000.00 2988000000.00
Capital reserves 5124308464.42 4953557435.19
Less: Treasury shares 226860000.00
Other comprehensive income
Special reserves
Surplus reserves 1199819528.06 1199819528.06
Retained profit 718245947.72 812690534.91
Total owners’ equity 15273222140.20 17336175698.16
Total liabilities and owners’ equity 47492346463.18 57524389445.83
2020 ANNUAL REPORT 155
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3. Consolidated Income Statement
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Total revenue 30736517996.90 30395434073.35
Including: Revenue 30736517996.90 30395434073.35
Interest income
Premium earned
Handling charges and commission income
II. Total operating costs 29056210362.62 28390081416.99
Including: Operating costs 23645594186.21 22750269749.38
Finance expenses
Handling charges and commission expenses
Surrenders
Net claims paid
Net change in drawing of insurance contract reserves
Policyholder dividend expenses
Reinsurance premium expenses
Taxes and surcharges 250528855.40 275933439.81
Sales and distribution expenses 298246355.91 320810724.85
General and administrative expenses 1025420660.39 1134725391.84
Research and development expense 1274355241.49 992312956.74
Finance expenses 2562065063.22 2916029154.37
Including: Interest expenses 3125361069.00 3573865213.86
Interest income 887004185.02 836491207.55
Plus: Other income 363884128.32 561556630.51
Investment income (“-” denotes loss) 173363537.49 174000822.89
Including: Investment income from associates and joint ventures 272022434.54 -2995932.01
Derecognition of revenue of financial assets measured at
amortised cost
Exchange gains (“-” denotes loss)
Net gains from hedging exposure (“-” denotes loss)
Gain on change in fair value (“-” denotes loss) 6261281.76 26692741.61
Credit impairment loss (“-” denotes loss) -651724871.57 -1033867928.73
Loss on impairment of assets (“-” denotes loss) -13573717.76 -120991683.19
Gain on disposal of assets (“-” denotes loss) 26203497.56 -29073731.05
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Item Amount for 2020 Amount for 2019
III. Operating profit (“-” denotes loss) 1584721490.08 1583669508.40
Plus: Non-operating income 600465688.15 493393914.87
Less: Non-operating expenses 12917235.69 28584594.00
IV. Total profit (“-” denotes total loss) 2172269942.54 2048478829.27
Less: Income tax expenses 266056648.05 295180636.46
V. Net profit (“-” denotes net loss) 1906213294.49 1753298192.81
(I) Classification according to the continuity of operation
1. Net profit from continuing operations (“-” denotes net loss) 1906213294.49 1689474069.20
2. Net profit from discontinued operations (“-” denotes net loss) 63824123.61
(II) Classification according to ownership
1. Net profit attributable to shareholders of the Company 1712029078.52 1656566584.88
2. Profit or loss of minority interest 194184215.97 96731607.93
VI. Net other comprehensive income after tax 317765527.44 -142931954.09
Net other comprehensive income after tax attributable to shareholders of
the Company 317765527.44 -142931954.09
(I) Other comprehensive income not to be reclassified to profit and loss in
subsequent periods
1. Changes arising from remeasurement of defined benefit plans
2. Other comprehensive income not to be reclassified to profit or loss
under equity method
3. Changes in fair value of other equity instrument investments
4. Changes in fair value of enterprise’s own credit risk
5. Others
(II) Other comprehensive income that will be reclassified to profit and loss in
subsequent periods 317765527.44 -142931954.09
1. Other comprehensive income to be reclassified to profit or loss
under equity method
2. Changes in fair value of other debt investments
3. Amount of financial assets reclassified into other comprehensive
income
4. Provision for credit impairment losses of other debt investments
5. Cash flow hedging reserve
6. Exchange differences arising from translation of financial statements
denominated in foreign currencies 317765527.44 -142931954.09
7. Others
Net other comprehensive loss after tax attributable to non-controlling
interests
VII. Total comprehensive income 2223978821.93 1610366238.72
Total comprehensive income attributable to shareholders of the Company 2029794605.96 1513634630.79
Total comprehensive income attributable to minority interest 194184215.97 96731607.93
VIII. Earnings per share:
(I) Basic earnings per share 0.36 0.33
(II) Diluted earnings per share 0.36 0.33
For the business combination involving enterprises under common control during the reporting period the net profit
realised by the parties being absorbed before the combination was nil (the same period last year: nil).Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Dong Lianming Zhang Bo
2020 ANNUAL REPORT 157
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4. Income statement of the Company
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Revenue 8510073793.88 6914154801.19
Less: Operating costs 6899160821.06 5483419941.19
Taxes and surcharges 63211127.50 47507009.10
Sales and distribution expenses 7441664.84 10628480.40
General and administrative expenses 322407985.30 367847081.04
Research and development expense 286590211.63 292447426.29
Finance expenses 501171122.74 1437070384.94
Including: Interest expenses 1481718871.40 2275231993.88
Interest income 1057852559.80 980330079.03
Plus: Other income 59165073.44 78722787.60
Investment income (“-” denotes loss) 348093079.09 1352470766.36
Including: Investment income from associates and joint ventures 6412281.95 -11142579.41
Derecognition of revenue of financial assets measured
at amortised cost
Net gains from hedging exposure (“-” denotes loss)
Gains on changes in fair value (“-” denotes loss) 9464346.45 46445653.55
Credit impairment loss (“-” denotes loss) 42369727.64 -128688655.59
Loss on impairment of assets (“-” denotes loss) -77447218.54
Gain on disposal of assets (“-” denotes loss) 40134455.47 -30388143.09
II. Operating profit (“-” denotes loss) 929317542.90 516349668.52
Plus: Non-operating income 5225205.90 11140162.55
Less: Non-operating expenses 1891387.34 19138740.53
III. Total profit (“-” denotes total loss) 932651361.46 508351090.54
Less: Income tax expenses 7994080.85 -122850888.03
IV. Net profit (“-” denotes net loss) 924657280.61 631201978.57
(I) Net profit from continuing operations (“-” denotes net loss) 924657280.61 631201978.57
(II) Net profit from discontinued operations (“-” denotes net loss)
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Item Amount for 2020 Amount for 2019
V. Net other comprehensive loss after tax
(I) Other comprehensive loss not to be reclassified to profit or loss
1. Changes arising from remeasurement of defined benefit plans
2. Other comprehensive income not to be reclassified to profit or
loss under equity method
3. Changes in fair value of other equity instrument investments
4. Changes in fair value of enterprise’s own credit risk
5. Others
(II) Other comprehensive income to be reclassified to profit or loss
1. Other comprehensive income to be reclassified to profit or loss
under equity method
2. Changes in fair value of other debt investments
3. Amount of financial assets reclassified into other comprehensive
income
4. Provision for credit impairment losses of other debt investments
5. Cash flow hedging reserve
6. Exchange differences arising from translation of financial
statements denominated in foreign currencies
7. Others
VI. Total comprehensive income 924657280.61 631201978.57
VII. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share
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5. Consolidated cash flow statement
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 35114699022.80 34573214070.98
Net increase in deposits from customers and other peer financial
institutions
Net increase in borrowings from central bank
Net increase in borrowings from other financial institutions
Premiums received from original insurance contracts
Net cash received from reinsurance business
Net increase in deposits and investments from policyholders
Interest handling charges and commission received
Net increase in borrowings from banks and other financial institutions
Net increase in repurchase business capital
Net cash received from securities brokerage
Tax rebates received 71675835.40 111119105.01
Cash received relating to other operating activities 4956395786.44 6949229810.96
Subtotal of cash inflows from operating activities 40142770644.64 41633562986.95
Cash paid for goods and services 24341006232.03 23866695680.80
Net increase in loans and advances to customers
Net increase in deposits with central bank and other peer financial
institutions
Original insurance contract claims paid
Net increase in interbank borrowings
Interest handling charges and commissions paid
Policyholder dividend paid
Cash paid to and for employees 1421974787.06 1457717966.62
Payments of taxes and surcharges 1285210254.65 2273360732.52
Cash paid relating to other operating activities 1834776694.62 1803081384.07
Subtotal of cash outflows from operating activities 28882967968.36 29400855764.01
Net cash flows from operating activities 11259802676.28 12232707222.94
SHANDONG CHENMING PAPER HOLDINGS LIMITED160
XIII Financial Report
Item Amount for 2020 Amount for 2019
II. Cash flows from investing activities:
Cash received from investments 15000000.00 2784345.77
Cash received from investment income 26760712.33 12000000.00
Net cash received from disposal of fixed assets intangible assets and
other long-term assets 131924763.00 137211301.99
Net cash received from disposal of subsidiaries and other business
units 217547669.15 215421083.24
Cash received relating to other investing activities 409282077.65 767670000.00
Subtotal of cash inflows from investing activities 800515222.13 1135086731.00
Cash paid for purchase of fixed assets intangible assets and other
long-term assets 254202396.70 1112186863.71
Cash paid on investments 471299932.73 1947322879.24
Net increase in pledge loans
Net cash paid for acquisition of subsidiaries and other business units 256052699.51
Cash paid relating to other investing activities 101130000.00
Subtotal of cash outflows from investing activities 981555028.94 3160639742.95
Net cash flows from investing activities -181039806.81 -2025553011.95
III. Cash flows from financing activities:
Cash received from investments 952070000.00 423000000.00
Including: Cash received from subsidiaries from minority investment 725210000.00 423000000.00
Cash received from borrowings 25471909126.85 28631245817.48
Cash received relating to other financing activities 5230346076.92 5866106002.62
Subtotal of cash inflows from financing activities 31654325203.77 34920351820.10
Cash repayments of amounts borrowed 30646227554.94 30767815349.31
Cash paid for dividend and profit distribution or interest payment 3090605089.86 3530178266.59
Including: Dividend and profit paid by subsidiaries to minority
shareholders 17444349.31 19262500.00
Cash paid relating to other financing activities 7511530461.76 10109785861.74
Subtotal of cash outflows from financing activities 41248363106.56 44407779477.64
Net cash flows from financing activities -9594037902.79 -9487427657.54
IV. Effect of foreign exchange rate changes on cash and cash equivalents 14116969.70 -210956768.56
V. Net increase in cash and cash equivalents 1498841936.38 508769784.89
Plus: Balance of cash and cash equivalents as at the beginning of the
period 2890328027.41 2381558242.52
VI. Balance of cash and cash equivalents as at the end of the period 4389169963.79 2890328027.41
2020 ANNUAL REPORT 161
XIII Financial Report
6. Cash flow statement of the Company
Unit: RMB
Item Amount for 2020 Amount for 2019
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 8315495593.76 7719183653.24
Tax rebates received
Cash received relating to other operating activities 1094213214.09 1561317548.23
Subtotal of cash inflows from operating activities 9409708807.85 9280501201.47
Cash paid for goods and services 7355500996.59 3634400369.89
Cash paid to and for employees 413161984.36 496342845.44
Payments of taxes and surcharges 225151450.32 206120796.96
Cash paid relating to other operating activities 872500967.87 1113784472.34
Subtotal of cash outflows from operating activities 8866315399.14 5450648484.63
Net cash flows from operating activities 543393408.71 3829852716.84
II. Cash flows from investing activities:
Cash received from investments 1481345237.36 228794345.77
Cash received from investment income 405420123.68 1087829000.00
Net cash received from disposal of fixed assets intangible assets and
other long-term assets 104624763.00 81086086.00
Net cash received from disposal of subsidiaries and other business
units
Cash received relating to other investing activities 409282077.65
Subtotal of cash inflows from investing activities 2400672201.69 1397709431.77
Cash paid for purchase of fixed assets intangible assets and other
long-term assets 10850791.93 154820434.45
Cash paid on investments 82290000.00 1278000000.00
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities 101130000.00
Subtotal of cash outflows used in investing activities 93140791.93 1533950434.45
Net cash flows from investing activities 2307531409.76 -136241002.68
SHANDONG CHENMING PAPER HOLDINGS LIMITED162
XIII Financial Report
Item Amount for 2020 Amount for 2019
III. Cash flows from financing activities:
Cash received from investments 226860000.00
Cash received from borrowings 15865741633.57 13980360915.86
Cash received relating to other financing activities 5490509924.46 5007324754.27
Subtotal of cash inflows from financing activities 21583111558.03 18987685670.13
Cash repayments of amounts borrowed 16517425606.56 10970294184.80
Cash paid for dividend and profit distribution or interest payment 1188678703.00 1762132250.15
Cash paid relating to other financing activities 6565598116.70 10415992353.54
Subtotal of cash outflows from financing activities 24271702426.26 23148418788.49
Net cash flows from financing activities -2688590868.23 -4160733118.36
IV. Effect of foreign exchange rate changes on cash and cash equivalents 2622051.57 -4354937.11
V. Net increase in cash and cash equivalents 164956001.81 -471476341.31
Plus: Balance of cash and cash equivalents as at the beginning of the
period 136328721.71 607805063.02
VI. Balance of cash and cash equivalents as at the end of the period 301284723.52 136328721.71
2020 ANNUAL REPORT 163
XIII Financial Report
7.
C
o
ns
o
lid
at
ed
s
ta
te
m
en
t
o
f
ch
an
g
es
in
o
w
ne
rs
’ e
q
ui
ty
A
m
o
un
t
fo
r
th
e
re
p
o
rt
in
g
p
er
io
d
U
ni
t:
R
M
B
Item
2020
Equi
ty at
tribu
table
to o
wner
s of
the C
omp
any
Mino
rity i
ntere
st
Tota
l own
ers’
equi
ty
Shar
e cap
ital
Othe
r equ
ity in
strum
ents
Capi
tal re
serve
s
Less
: trea
sury
shar
es
Othe
r com
preh
ensiv
e
inco
me
Spec
ial re
serve
s
Surp
lus r
eser
ves
Gene
ral
risk p
rovis
ions
Reta
ined
prof
it
Othe
rs
Subt
otal
Prefe
renc
e Sh
ares
Perp
etua
l Bon
ds
Othe
rs
I.
Bala
nce a
s at t
he en
d of
the p
rior y
ear
2904
608
200.0
0
4477
500
000.0
0
2988
000
000.0
0
5086
686
427.3
0
-879
452
135.1
0
1212
009
109.9
7
7412
2644
.20
9306
269
617.3
8
2516
9743
863.
75
1170
029
016.8
0
2633
9772
880.
55
Plus:
Cha
nges
in ac
coun
ting
polic
ies
Corr
ectio
ns of
prio
r per
iod e
rrors
Busi
ness
com
binat
ion u
nder
com
mon
con
trol
Othe
rs
II.
Bala
nce a
s at t
he b
eginn
ing o
f the
year
2904
608
200.0
0
4477
500
000.0
0
2988
000
000.0
0
5086
686
427.3
0
-879
452
135.1
0
1212
009
109.9
7
7412
2644
.20
9306
269
617.3
8
2516
9743
863.
75
1170
029
016.8
0
2633
9772
880.
55
III.
Chan
ges i
n the
period (“-” de
note
s dec
rease
)
7960
0000
.00
-199
2000
000.
00
2352
2498
6.45
2268
6000
0.00
3177
6552
7.44
6934
9441
1.36
-892
775
074.7
5
3532
6590
9.44
-539
509
165.3
(I)
Tota
l com
preh
ensiv
e inc
ome
3177
6552
7.44
1712
029
078.5
2029
794
605.9
6
1941
8421
5.97
2223
978
821.9
(II)
Capi
tal p
aid in
and
redu
ced
by o
wner
s
7960
0000
.00
-199
2000
000.
00
2352
2498
6.45
2268
6000
0.00
-190
4035
013.
55
6461
8072
8.23
-125
7854
285.
32
1.
Ordin
ary s
hare
s pai
d by
own
ers
6461
8072
8.23
6461
8072
8.23
2.
Capi
tal p
aid b
y hol
ders
of o
ther
equit
y
instru
men
ts
-199
2000
000.
00
-800
0000
.00
-200
0000
000.
00
-200
0000
000.
00
3.
Amo
unt o
f sha
re-ba
sed p
ayme
nts
reco
gnise
d in o
wner
s’ eq
uity
7960
0000
.00
1787
5102
9.23
2268
6000
0.00
3149
1029
.23
3149
1029
.23
4.
Othe
rs
6447
3957
.22
6447
3957
.22
6447
3957
.22
(III)
Profi
t dist
ribut
ion
-101
8534
667.
16
-101
8534
667.
16
-174
4434
9.31
-103
5979
016.
47
1.
Tran
sfer
to su
rplus
rese
rves
2.
Tran
sfer
to ge
nera
l risk
prov
ision
s
3.
Distr
ibutio
n to
owne
rs (o
r sha
reho
lders
)
-101
8534
667.
16
-101
8534
667.
16
-174
4434
9.31
-103
5979
016.
47
4.
Othe
rs
(IV)
Tran
sfer
withi
n ow
ners’
equ
ity
-469
654
685.4
5
-469
654
685.4
5
1.
Capi
tal (o
r sha
re ca
pital)
crea
ted o
n cap
ital
reser
ve
2.
Capi
tal (o
r sha
re ca
pital)
crea
ted o
n sur
plus
reser
ves
3.
Offse
t loss
es by
surp
lus re
serve
s
4.
Defin
ed b
enefi
t pla
n cha
nges
carr
ied
forw
ard t
o ret
ained
earn
ings
5.
Othe
r com
preh
ensiv
e inc
ome
carr
ied
forw
ard t
o ret
ained
earn
ings
6.
Othe
rs
-469
654
685.4
5
-469
654
685.4
5
(V)
Spec
ial re
serve
s
1.
With
draw
al
2.
Use
(VI)
Othe
rs
IV.
Bala
nce a
s at t
he en
d of
the p
eriod
2984
208
200.0
0
4477
500
000.0
0
9960
0000
0.00
5321
911
413.7
5
2268
6000
0.00
-561
686
607.6
6
1212
009
109.9
7
7412
2644
.20
9999
764
028.7
2427
6968
789.
00
1523
294
926.2
4
2580
0263
715.
24
SHANDONG CHENMING PAPER HOLDINGS LIMITED164
XIII Financial Report
A
m
o
un
t
fo
r
th
e
p
ri
o
r
p
er
io
d
U
ni
t:
R
M
B
Item
2019
Equi
ty at
tribu
table
to o
wner
s of
the C
omp
any
Mino
rity i
ntere
st
Tota
l own
ers’
equi
ty
Shar
e cap
ital
Othe
r equ
ity in
strum
ents
Capi
tal re
serve
s
Less
: trea
sury
shar
es
Othe
r com
preh
ensiv
e
inco
me
Spec
ial re
serve
s
Surp
lus r
eser
ves
Gene
ral
risk p
rovis
ions
Reta
ined
prof
it
Othe
rs
Subt
otal
Prefe
renc
e Sh
ares
Perp
etua
l Bon
ds
Othe
rs
I.
Bala
nce a
s at t
he en
d of
the p
rior y
ear
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
509
144
991
5.14
-736
520
181
.01
325
799
8.47
114
888
891
2.11
641
239
19.2
3
910
742
269
0.85
250
487
314
54.7
9
822
959
773.
30
258
716
912
28.0
9
Plus:
Cha
nges
in ac
coun
ting
polic
ies
Corr
ectio
ns of
prio
r per
iod e
rrors
Busi
ness
com
binat
ion u
nder
com
mon
con
trol
Othe
rs
II.
Bala
nce a
s at t
he b
eginn
ing o
f the
year
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
509
144
991
5.14
-736
520
181
.01
325
799
8.47
114
888
891
2.11
641
239
19.2
3
910
742
269
0.85
250
487
314
54.7
9
822
959
773.
30
258
716
912
28.0
9
III.
Chan
ges i
n the
period (“-” de
note
s dec
rease
)
-476
348
7.84
-142
931
954
.09
-325
799
8.47
631
201
97.8
6
999
872
4.97
198
846
926.
53
121
012
408.
96
347
069
243.
50
468
081
652.
46
(I)
Tota
l com
preh
ensiv
e inc
ome
-142
931
954
.09
165
656
658
4.88
151
363
463
0.79
712
019
58.4
9
158
483
658
9.28
(II)
Capi
tal p
aid in
and
redu
ced
by o
wner
s
-476
348
7.84
-476
348
7.84
295
129
785.
01
290
366
297.
17
1.
Ordin
ary s
hare
s pai
d by
own
ers
439
447
225.
77
439
447
225.
77
2.
Capi
tal p
aid b
y hol
ders
of o
ther
equit
y
instru
men
ts
3.
Amo
unt o
f sha
re-ba
sed p
ayme
nts
reco
gnise
d in o
wner
s’ eq
uity
4.
Othe
rs
-476
348
7.84
-476
348
7.84
-144
317
440
.76
-149
080
928
.60
(III)
Profi
t dist
ribut
ion
631
201
97.8
6
999
872
4.97
-145
771
965
8.35
-138
460
073
5.52
-192
625
00.0
0
-140
386
323
5.52
1.
Tran
sfer
to su
rplus
rese
rves
631
201
97.8
6
-631
201
97.8
6
2.
Tran
sfer
to ge
nera
l risk
prov
ision
s
999
872
4.97
-999
872
4.97
3.
Distr
ibutio
n to
owne
rs (o
r sha
reho
lders
)
-138
460
073
5.52
-138
460
073
5.52
-192
625
00.0
0
-140
386
323
5.52
4.
Othe
rs
(IV)
Tran
sfer
withi
n ow
ners’
equ
ity
-488
199
1.84
-488
199
1.84
-488
199
1.84
1.
Capi
tal (o
r sha
re ca
pital)
crea
ted o
n cap
ital
reser
ve
2.
Capi
tal (o
r sha
re ca
pital)
crea
ted o
n sur
plus
reser
ves
3.
Offse
t loss
es by
surp
lus re
serve
s
4.
Defin
ed b
enefi
t pla
n cha
nges
carr
ied
forw
ard t
o ret
ained
earn
ings
5.
Othe
r com
preh
ensiv
e inc
ome
carr
ied
forw
ard t
o ret
ained
earn
ings
6.
Othe
rs
-488
199
1.84
-488
199
1.84
-488
199
1.84
(V)
Spec
ial re
serve
s
162
399
3.37
162
399
3.37
162
399
3.37
1.
With
draw
al
162
399
3.37
162
399
3.37
162
399
3.37
2.
Use
(VI)
Othe
rs
IV.
Bala
nce a
s at t
he en
d of
the p
eriod
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
508
668
642
7.30
-879
452
135
.10
121
200
910
9.97
741
226
44.2
0
930
626
961
7.38
251
697
438
63.7
117
002
901
6.80
263
397
728
80.5
5
2020 ANNUAL REPORT 165
XIII Financial Report
8.
S
ta
te
m
en
t
o
f
ch
an
g
es
in
e
q
ui
ty
o
f
o
w
ne
rs
o
f
th
e
C
o
m
p
an
y
A
m
o
un
t
fo
r
th
e
re
p
o
rt
in
g
p
er
io
d
U
ni
t:
R
M
B
Item
202
0
Sha
re c
apit
al
Oth
er e
quit
y in
stru
men
ts
Cap
ital
rese
rves
Les
s: tr
eas
ury
sha
res
Oth
er c
omp
reh
ens
ive
inco
me
Spe
cial
res
erve
s
Sur
plus
res
erve
s
Ret
aine
d p
rofi
t
Oth
ers
Tot
al o
wne
rs’ e
quit
y
Pre
fere
nce
Sh
ares
Per
pet
ual
Bon
ds
Oth
ers
I.
Bala
nce
as
at th
e en
d of
the
prio
r ye
ar
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
495
355
743
5.19
119
981
952
8.06
812
690
534
.91
173
361
756
98.1
Plus
: Ch
ang
es i
n ac
cou
ntin
g po
licie
s
Cor
rect
ions
of p
rior
per
iod
erro
rs
Oth
ers
-56
720
0.64
-56
720
0.64
II.
Bala
nce
as
at th
e be
ginn
ing
of t
he y
ear
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
495
355
743
5.19
119
981
952
8.06
812
123
334
.27
173
356
084
97.5
2
III.
Cha
nge
s in
the
per
iod
(“ -”
den
otes
dec
reas
e)
796
000
00.0
0
-19
920
000
00.0
0
170
751
029
.23
226
860
000
.00
-93
877
386
.55
-20
623
863
57.3
2
(I)
Tot
al c
omp
rehe
nsiv
e in
com
e
924
657
280
.61
924
657
280
.61
(II)
Cap
ital
paid
in a
nd r
edu
ced
by
own
ers
796
000
00.0
0
-19
920
000
00.0
0
170
751
029
.23
226
860
000
.00
-19
685
089
70.7
1.
Ord
inar
y sh
ares
pai
d b
y ow
ners
2.
Cap
ital
paid
by
hold
ers
of o
ther
equ
ity
inst
rum
ents
-19
920
000
00.0
0
-80
000
00.0
0
-20
000
000
00.0
0
3.
Am
oun
t of
sha
re-b
ase
d p
aym
ents
reco
gnis
ed i
n ow
ners
’ eq
uity
796
000
00.0
0
178
751
029
.23
226
860
000
.00
314
910
29.2
3
4.
Oth
ers
(III)
Pro
fit d
istri
but
ion
-10
185
346
67.1
6
-10
185
346
67.1
6
1.
Tran
sfer
to s
urp
lus
rese
rves
2.
Dist
ribu
tion
to o
wne
rs (o
r sh
areh
olde
rs)
-10
185
346
67.1
6
-10
185
346
67.1
6
3.
Oth
ers
(IV)
Tran
sfer
wit
hin
own
ers’
equ
ity
1.
Cap
ital
(or s
hare
cap
ital)
cre
ated
on
cap
ital
rese
rve
2.
Cap
ital
(or s
hare
cap
ital)
cre
ated
on
surp
lus
rese
rves
3.
Offs
et lo
sse
s by
sur
plus
res
erve
s
4.
Def
ined
ben
efit
plan
cha
nge
s ca
rried
forw
ard
to r
etai
ned
ear
ning
s
5.
Oth
er c
omp
rehe
nsiv
e in
com
e ca
rried
forw
ard
to r
etai
ned
ear
ning
s
6.
Oth
ers
(V)
Spe
cial
res
erve
s
1.
Wit
hdr
awa
l
2.
Use
(VI)
Oth
ers
IV.
Bala
nce
as
at th
e en
d of
the
per
iod
298
420
820
0.00
447
750
000
0.00
996
000
000
.00
512
430
846
4.42
226
860
000
.00
119
981
952
8.06
718
245
947
.72
152
732
221
40.2
0
SHANDONG CHENMING PAPER HOLDINGS LIMITED166
XIII Financial Report
A
m
o
un
t
fo
r
th
e
p
ri
o
r
p
er
io
d
U
ni
t:
R
M
B
Item
201
9
Sha
re c
apit
al
Oth
er e
quit
y in
stru
men
ts
Cap
ital
rese
rves
Les
s: tr
eas
ury
sha
res
Oth
er c
omp
reh
ens
ive
inco
me
Spe
cial
res
erve
s
Sur
plus
res
erve
s
Ret
aine
d p
rofi
t
Oth
ers
Tot
al o
wne
rs’ e
quit
y
Pre
fere
nce
Sh
ares
Per
pet
ual
Bon
ds
Oth
ers
I.
Bala
nce
as
at th
e en
d of
the
prio
r ye
ar
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
495
355
743
5.19
113
669
933
0.20
162
920
948
9.72
180
895
744
55.1
1
Plus
: Ch
ang
es i
n ac
cou
ntin
g po
licie
s
Cor
rect
ions
of p
rior
per
iod
erro
rs
Oth
ers
II.
Bala
nce
as
at th
e be
ginn
ing
of t
he y
ear
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
495
355
743
5.19
113
669
933
0.20
162
920
948
9.72
180
895
744
55.1
1
III.
Cha
nge
s in
the
per
iod
(“ -”
den
otes
dec
reas
e)
631
201
97.8
6
-81
651
895
4.81
-75
339
875
6.95
(I)
Tot
al c
omp
rehe
nsiv
e in
com
e
631
201
978
.57
631
201
978
.57
(II )
Cap
ital
paid
in a
nd r
edu
ced
by
own
ers
1.
Ord
inar
y sh
ares
pai
d b
y ow
ners
2.
Cap
ital
paid
by
hold
ers
of o
ther
equ
ity
inst
rum
ents
3.
Am
oun
t of
sha
re-b
ase
d p
aym
ents
reco
gnis
ed i
n ow
ners
’ eq
uity
4.
Oth
ers
(II I)
Pro
fit d
istri
but
ion
631
201
97.8
6
-14
477
209
33.3
-13
846
007
35.5
2
1.
Tran
sfer
to s
urp
lus
rese
rves
631
201
97.8
6
-63
120
197
.86
2.
Dist
ribu
tion
to o
wne
rs (o
r sh
areh
olde
rs)
-13
846
007
35.5
2
-13
846
007
35.5
2
3.
Oth
ers
(IV )
Tran
sfer
wit
hin
own
ers’
equ
ity
1.
Cap
ital
(or s
hare
cap
ital)
cre
ated
on
cap
ital
rese
rve
2.
Cap
ital
(or s
hare
cap
ital)
cre
ated
on
surp
lus
rese
rves
3.
Offs
et lo
sse
s by
sur
plus
res
erve
s
4.
Def
ined
ben
efit
plan
cha
nge
s ca
rried
forw
ard
to r
etai
ned
ear
ning
s
5.
Oth
er c
omp
rehe
nsiv
e in
com
e ca
rried
forw
ard
to r
etai
ned
ear
ning
s
6.
Oth
ers
(V)
Spe
cial
res
erve
s
1.
Wit
hdr
awa
l
2.
Use
(VI )
Oth
ers
IV.
Bala
nce
as
at th
e en
d of
the
per
iod
290
460
820
0.00
447
750
000
0.00
298
800
000
0.00
495
355
743
5.19
119
981
952
8.06
812
690
534
.91
173
361
756
98.1
6
2020 ANNUAL REPORT 167
XIII Financial Report
III. General Information of the Company
1. Company overview
The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was
Shandong Shouguang Paper Mill Corporation which was changed as a joint stock company with limited liability
through offering to specific investors in May 1993. In December 1996 with approval by Lu Gai Zi [1996] No. 270)
issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committee
of the State Council the Company was changed as a joint stock company with limited liability established by share
offer.In May 1997 with approval by Zheng Wei Fa [1997] No. 26 issued by the Securities Committee of the State Council
the Company issued 115000000 domestic listed foreign shares (B shares) under public offering which were listed
and traded on Shenzhen Stock Exchange from 26 May 1997.In September 2000 with approval by Zheng Jian Gong Si Zi [2000] No. 151 issued by the China Securities Regulatory
Commission the Company issued an additional 70000000 RMB ordinary shares (A shares) which were listed and
traded on Shenzhen Stock Exchange from 20 November 2000.In June 2008 with approval by the Stock Exchange of Hong Kong Limited the Company issued 355700000 H
shares. At the same time 35570000 H shares were allocated to the National Council for Social Security Fund by
our relevant state-owned shareholder and converted into overseas listed foreign shares (H shares) for the purpose of
reducing the number of state-owned shares. The additionally issued H shares were listed and traded on Hong Kong
Stock Exchange on 18 June 2008.
As at 31 December 2020 the total share capital of the Company was changed to 2984208200 shares. For details
please refer to Note VII. 38.The Company has established a corporate governance structure comprising the general meeting the board of
directors and the supervisory committee and has human resources department information technology department
corporate management department legal department financial management department capital management
department securities investment department procurement department audit department and other departments.The Company and its subsidiaries (hereinafter referred to as the “Group”) are principally engaged in among other
things processing and sale of paper products (including machine-made paper and paper board) paper making
raw materials and machinery; generation and sale of electric power and thermal power; forestry saplings growing
processing and sale of timber; manufacturing processing and sale of wood products; and manufacturing and sale of
laminated boards and fortified wooden floorboards hotel service and equipment financial and operating leasing real
estate and property service.The financial statements and notes thereto were approved at the eighth meeting of the ninth session of the board of
directors of the Group (the “Board”) on 25 March 2021.
2. Scope of consolidation
Subsidiaries of the Group included in the scope of consolidation in 2020 totalled 76. For details please refer to
Note VII “Equity in other entities”. The scope of consolidation of the Group during the year had 10 more companiesincluded and three companies less compared to the prior year. For details please refer to Note VIII “Changes in thescope of consolidation”.
SHANDONG CHENMING PAPER HOLDINGS LIMITED168
XIII Financial Report
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
These financial statements are prepared in accordance with the accounting standards for business enterprises the
application guidelines thereof interpretations and other related rules (hereinafter referred to as “ASBEs”) promulgated
by the Ministry of Finance. In addition the Group also discloses relevant financial information in accordance withthe “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares No. 15: GeneralRequirements for Financial Reports” (revised in 2014) of the CSRC.The financial statements are presented on a going concern.The Group’s financial statements have been prepared on an accrual basis. Except for certain financial instruments and
inventories the financial statements are prepared under the historical cost convention. In the event that depreciation
of assets occurs a provision for impairment is made accordingly in accordance with the relevant regulations.
2. Going concern
No facts or circumstances comprise a material uncertainty about the Group’s going concern basis within 12 months
since the end of the reporting period.V. Significant Accounting Policies and Accounting Estimates
Specific accounting policies and accounting estimates are indicated as follows:
The Company and its subsidiaries are principally engaged in machine-made paper electricity and heat construction
materials paper making chemical products financial leasing hotel management and other operations. The Company and its
subsidiaries formulated certain specific accounting policies and accounting estimates for the transactions and matters such
as revenue recognition determination of performance progress and R&D expenses based on their actual production and
operation characteristics pursuant to the requirements under the relevant accounting standards for business enterprises.
For details please refer to this Note V. 27 “Revenue”. For the critical accounting judgments and estimates made by the
management please refer to Note V. 34 “Change of Significant accounting policies and accounting estimates”.
1. Statement of compliance with the Accounting Standards for Business Enterprises
These financial statements have been prepared in conformity with the ASBEs which truly and fully reflect the financial
position of the consolidated entity and the Group as at 31 December 2020 and relevant information such as the
operating results and cash flows of the consolidated entity and the Company for 2020.
2. Accounting period
The accounting period of the Group is from 1 January to 31 December of each calendar year.
2020 ANNUAL REPORT 169
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
3. Operating cycle
The operating cycle of the Group lasts for 12 months.
4. Functional currency
The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiaries
of the Company recognise U.S. dollar (“USD” or “US$”) Japanese yen (“JPY”) Euro (“EUR”) and South Korean
Won (“KRW”) as their respective functional currency according to the general economic environment in which these
subsidiaries operate. The Group prepares the financial statements in RMB.
5. Preparation of consolidated financial statements
(1) Scope of consolidation
The scope of consolidation of the consolidated financial statements is determined on the basis of control. The
term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns
from its involvement with the investee and the ability to use its power over the investee to affect the amount of
those returns. A subsidiary is an entity controlled by the Company (including an enterprise a separable part of
an investee a structured entity etc.).
(2) Basis for preparation of the consolidated financial statements
The consolidated financial statements are prepared by the Company based on the financial statements of the
Company and its subsidiaries and other relevant information. In preparing the consolidated financial statements
the accounting policies and accounting periods of the Company and its subsidiaries shall be consistent and
intra-company significant transactions and balances are eliminated.
A subsidiary and its business acquired through a business combination involving entities under common control
during the reporting period shall be included in the scope of the consolidation of the Company from the date
of being controlled by the ultimate controlling party and its operating results and cash flows from the date of
being controlled by the ultimate controlling party are included in the consolidated income statement and the
consolidated cash flow statement respectively.
For a subsidiary and its business acquired through a business combination involving entities not under common
control during the reporting period its income expenses and profits are included in the consolidated income
statement and cash flows are included in the consolidated cash flow statement from the acquisition date to the
end of the reporting period.The shareholders’ equity of the subsidiaries that is not attributable to the Company is presented under
shareholders’ equity in the consolidated balance sheet as minority interest. The portion of net profit or loss of
subsidiaries for the period attributable to minority interest is presented in the consolidated income statement
under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders
of a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the
subsidiary the excess amount shall be allocated against minority interest.
SHANDONG CHENMING PAPER HOLDINGS LIMITED170
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
5. Preparation of consolidated financial statements (Cont’d)
(3) Accounting treatment for loss of control over subsidiaries
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons
the remaining equity is measured at fair value on the date when the control is lost. The difference arising from
the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest
over the sun of the share of the carrying amount of net assets of the former subsidiary calculated continuously
from the purchase date based on the shareholding percentage before disposal and the goodwill is recognised
as investment income in the period when the control is lost.Other comprehensive income related to equity investment in the former subsidiary shall be transferred to current
profit or loss at the time when the control is lost except for other comprehensive income arising from changes
in net assets or net liabilities due to remeasurement of defined benefit plan by the investee.
6. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of the
Group comprise joint operations and joint ventures.
(1) Joint operations
Joint operations refer to a joint arrangement during which the Group is entitled to relevant assets and
obligations of this arrangement.The Group recognises the following items in relation to its interest in a joint operation and accounts for them in
accordance with the relevant ASBEs:
A. the assets held solely by it and assets held jointly according to its share;
B. the liabilities assumed solely by it and liabilities assumed jointly according to its share;
C. the revenue from sale of output from joint operations;
D. the revenue from sale of output from joint operations according to its share;
E. the fees solely incurred by it and fees incurred from joint operations according to its share.
(2) Joint ventures
Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this
arrangement.The Group accounts for its investments in joint ventures in accordance with the requirements relating to
accounting treatment using equity method for long-term equity investments.
2020 ANNUAL REPORT 171
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
7. Standards for recognising cash and cash equivalents
Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short-term
and highly liquid investments held by the Group which are readily convertible into known amount of cash and which
are subject to insignificant risk of value change.
8. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
The foreign currency operations of the Group are translated into the functional currency at the prevailing spot
exchange rate on the date of exchange i.e. usually the middle price of RMB exchange rate published by the
People’s Bank of China on that date in general and the same hereinafter.On the balance sheet date foreign currency monetary items shall be translated at the spot exchange rate on
the balance sheet date. The exchange difference arising from the difference between the spot exchange rate
on the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date will
be recognised in profit or loss for the period. The foreign currency non-monetary items measured at historical
cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the
transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange
rate on the date of determination of the fair value. The difference between the amounts of the functional
currency before and after the translation will be recognised in profit or loss for the period.
(2) Translation of financial statements denominated in foreign currency
When translating the financial statements denominated in foreign currency of overseas subsidiaries assets and
liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;
owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which
such items arose.Income and expenses items in the income statement are translated at the average exchange rate for the period
in which the transaction occurred.
All items in the cash flow statements shall be translated at the average exchange rate for the period in which
the cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presented
separately as the “effect of foreign exchange rate changes on cash and cash equivalents” item in the cash flow
statements.The differences arising from translation of financial statements shall be included in the “other comprehensiveincome” item in owners’ equity in the balance sheet.On disposal of foreign operations and loss of control exchange differences arising from the translation of
financial statements denominated in foreign currencies related to the disposed foreign operations which
has been included in owners’ equity in the balance sheet shall be transferred to profit or loss in whole or in
proportionate share in the period in which the disposal took place.
SHANDONG CHENMING PAPER HOLDINGS LIMITED172
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equity
instrument of another party.
(1) Recognition and derecognition of financial instruments
Financial asset or financial liability will be recognised when the Group became one of the parties under a
financial instrument contract.
Financial asset that satisfied any of the following criteria shall be derecognised:
① the contract right to receive the cash flows of the financial asset has terminated;
② the financial asset has been transferred and meets the derecognition criteria for the transfer of financial
asset as described below.
A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or
in part. If an agreement is entered between the Group (debtor) and a creditor to replace the existing financial
liabilities with new financial liabilities and the contractual terms of the new financial liabilities are substantially
different from those of the existing financial liabilities the existing financial liabilities shall be derecognised and
the new financial liabilities shall be recognised.
Conventionally traded financial assets shall be recognised and derecognised at the trading date.
(2) Classification and measurement of financial assets
The Group classifies the financial assets according to the business model for managing the financial assets and
characteristics of the contractual cash flows as follows: financial assets measured at amortised cost financial
assets measured at fair value through other comprehensive income and financial assets measured at fair value
through profit or loss.
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated
as measured at fair value through other comprehensive income:
The Group’s business model for managing such financial assets is to collect contractual cash flows;
The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.Subsequent to initial recognition such financial assets are measured at amortised cost using the effective
interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a
hedging relationship shall be recognised in profit or loss for the current period when the financial asset is
derecognised amortised using the effective interest method or with impairment recognised.
2020 ANNUAL REPORT 173
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(2) Classification and measurement of financial assets (Cont’d)
Financial assets measured at fair value through other comprehensive income
A financial asset is classified as measured at fair value through other comprehensive income if it meets both of
the following conditions and is not designated as measured at fair value through profit or loss:
The Group’s business model for managing such financial assets is achieved both by collecting collect
contractual cash flows and selling such financial assets;
The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.Subsequent to initial recognition such financial assets are subsequently measured at fair value. Interest
calculated using the effective interest method impairment losses or gains and foreign exchange gains and
losses are recognised in profit or loss for the current period and other gains or losses are recognised in
other comprehensive income. On derecognition the cumulative gain or loss previously recognised in other
comprehensive income is reclassified from other comprehensive income to profit or loss.
Financial assets measured at fair value through profit or loss
The Group classifies the financial assets other than those measured at amortised cost and measured at fair
value through other comprehensive income as financial assets measured at fair value through profit or loss.Upon initial recognition the Group irrevocably designates certain financial assets that are required to be
measured at amortised cost or at fair value through other comprehensive income as financial assets measured
at fair value through profit or loss in order to eliminate or significantly reduce accounting mismatch.Upon initial recognition such financial assets are measured at fair value. Except for those held for hedging
purposes gains or losses (including interests and dividend income) arising from such financial assets are
recognised in the profit or loss for the current period.The business model for managing financial assets refers to how the Group manages its financial assets in order
to generate cash flows. That is the Group’s business model determines whether cash flows will result from
collecting contractual cash flows selling financial assets or both. The Group determines the business model for
managing financial assets on the basis of objective facts and specific business objectives for managing financial
assets determined by key management personnel.The Group assesses the characteristics of the contractual cash flows of financial assets to determine whether
the contractual cash flows generated by the relevant financial assets on a specific date are solely payments of
principal and interest on the principal amount outstanding. The principal refers to the fair value of the financial
assets at the initial recognition. Interest includes consideration for the time value of money for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic lending
risks costs and profits. In addition the Group evaluates the contractual terms that may result in a change in the
time distribution or amount of contractual cash flows from a financial asset to determine whether it meets the
requirements of the above contractual cash flow characteristics.
SHANDONG CHENMING PAPER HOLDINGS LIMITED174
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(2) Classification and measurement of financial assets (Cont’d)
Financial assets measured at fair value through profit or loss (Cont’d)
All affected financial assets are reclassified on the first day of the first reporting period following the change
in the business model where the Group changes its business model for managing financial assets; otherwise
financial assets shall not be reclassified after initial recognition.
Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair
value through profit or loss relevant transaction costs are directly recognised in profit or loss for the current
period. For other categories of financial assets relevant transaction costs are included in the amount initially
recognised. Accounts receivable arising from sales of goods or rendering services or without significant
financing component are initially recognised based on the transaction price expected to be entitled by the
Group.
(3) Classification and measurement of financial liabilities
At initial recognition financial liabilities of the Group are classified as financial liabilities measured at fair value
through profit or loss and financial liabilities measured at amortised cost. For financial liabilities not classified
as measured at fair value through profit or loss relevant transaction costs are included in the amount initially
recognised.
Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss comprise financial liabilities held for trading
and financial liabilities designated as measured at fair value through profit or loss upon initial recognition. Such
financial liabilities are subsequently measured at fair value and the gains or losses from the change in fair value
and the dividend or interest expenses related to the financial liabilities are included in the profit or loss of the
current period.
Financial liabilities measured at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method
and the gains or losses arising from derecognition or amortisation are recognised in profit or loss for the current
period.
2020 ANNUAL REPORT 175
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(3) Classification and measurement of financial liabilities (Cont’d)
Classification between financial liabilities and equity instruments
A financial liability is a liability if:
① it has a contractual obligation to pay in cash or other financial assets to other parties.② it has a contractual obligation to exchange financial assets or financial liabilities under potential adverse
condition with other parties.③ it is a non-derivative instrument contract which will or may be settled with the entity’s own equity
instruments and the entity will deliver a variable number of its own equity instruments according to such
contract.④ it is a derivative instrument contract which will or may be settled with the entity’s own equity instruments
except for a derivative instrument contract that exchanges a fixed amount of cash or other financial asset
with a fixed number of its own equity instruments.
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities.If the Group cannot unconditionally avoid the performance of a contractual obligation by paying cash or
delivering other financial assets the contractual obligation meets the definition of financial liabilities.Where a financial instrument must or may be settled with the Group’s own equity instruments the Group’s own
equity instruments used to settle such instrument should be considered as to whether it is as a substitute for
cash or other financial assets or for the purpose of enabling the holder of the instrument to be entitled to the
remaining interest in the assets of the issuer after deducting all of its liabilities. For the former it is a financial
liability of the Group; for the latter it is the Group’s own equity instruments.
(4) Derivative financial instruments
The Group’s derivative financial instruments are mainly forward foreign exchange contracts which are initially
recognised at fair value on the date a derivative contract is entered into and are subsequently measured at
their fair value. A derivative financial instrument is recognised as an asset when the fair value is positive and as
a liability when the fair value is negative. Any gain or loss arising from changes in fair value and not complying
with the accounting requirements on hedging shall be recognised in profit or loss for current period.
(5) Fair value of financial instruments
The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 10.
SHANDONG CHENMING PAPER HOLDINGS LIMITED176
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets
The Group makes provision for impairment based on expected credit losses (ECLs) on the following items:
Financial assets measured at amortised cost;
Debt investments measured at fair value through other comprehensive income;
Measurement of ECLs
ECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Credit
losses refer to the difference between all contractual cash flows receivable according to the contract and
discounted according to the original effective interest rate and all cash flows expected to be received i.e. the
present value of all cash shortages.The Group takes into account reasonable and well-founded information such as past events current conditions
and forecasts of future economic conditions and calculates the probability-weighted amount of the present
value of the difference between the cash flows receivable from the contract and the cash flows expected to be
received weighted by the risk of default.The Group measures ECLs of financial instruments at different stages. If the credit risk of the financial instrument
did not increase significantly upon initial recognition it is at the first stage and the Group makes provision for
impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrument increased
significantly upon initial recognition but has not yet incurred credit impairment it is at the second stage and the
Group makes provision for impairment based on the lifetime ECLs of the instrument; if the financial instrument
incurred credit impairment upon initial recognition it is at the third stage and the Group makes provision for
impairment based on the lifetime ECLs of the instrument.
For financial instruments with low credit risk on the balance sheet date the Group assumes that the credit risk
did not increase significantly upon initial recognition and makes provision for impairment based on the ECLs
within the next 12 months.Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financial
instrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrument
within 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) after
the balance sheet date and is a portion of lifetime ECLs.The maximum period to be considered when estimating ECLs is the maximum contractual period over which
the Group is exposed to credit risk including renewal options.
For the financial instruments at the first and second stages and with low credit risks the Group calculates the
interest income based on the book balance and the effective interest rate before deducting the impairment
provisions. For financial instruments at the third stage interest income is calculated based on the amortised
cost after deducting impairment provisions made from the book balance and the effective interest rate.
For bills receivable accounts receivable and contract assets regardless of whether there is a significant
financing component the Group always makes provision for impairment at an amount equal to lifetime ECLs.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Measurement of ECLs (Cont’d)
When the Group is unable to assess the information of ECLs for an individual financial asset at a reasonable
cost it classifies bills receivable and accounts receivable into portfolios based on the credit risk characteristics
and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
A. Bills receivable
Bills receivable portfolio 1: Bank acceptance bills
Bills receivable portfolio 2: Commercial acceptance bills
B. Accounts receivable
Accounts receivable portfolio 1: Factoring receivables
Accounts receivable portfolio 2: Receivables from non-related party customers
Accounts receivable portfolio 3: Due from related party customers
For bills receivable classified as a portfolio the Group refers to the historical credit loss experience combined
with the current situation and the forecast of future economic conditions to calculate the ECLs based on default
risk exposure and lifetime ECL rate.
For accounts receivable classified as a portfolio the Group refers to the historical credit loss experience
combined with the current situation and the forecast of future economic conditions to prepare a comparison
table of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs.Other receivables
The Group classifies other receivables into portfolios based on credit risk characteristics and calculates the
ECLs on a portfolio basis. The basis for determining the portfolios is as follows:
Other receivables portfolio 1: Amount due from government authorities
Other receivables portfolio 2: Amount due from related parties
Other receivables portfolio 3: Other receivables
For other receivables classified as a portfolio the Group calculates the ECLs based on default risk exposure
and the ECL rate over the next 12 months or the entire lifetime.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Long-term receivables
The Group’s long-term receivables include finance lease receivables and deposits receivable.The Group classifies the finance lease receivables deposits receivable and other receivables into portfolios
based on the credit risk characteristics and calculates the ECLs on a portfolio basis. The basis for determining
the portfolios is as follows:
A. Finance lease receivables
Finance lease receivables portfolio 1: Receivables not past due
Finance lease receivables portfolio 2: Overdue receivables
B. Other long-term receivables
Other long-term receivables portfolio 1: Deposits receivable
Other long-term receivables portfolio 2: Other receivables
For deposits receivable and other receivables the Group refers to the historical credit loss experience
combined with the current situation and the forecast of future economic conditions and calculates the ECLs
based on default risk exposure and lifetime ECL rate.
Except for those of finance lease receivables and deposits receivable the ECLs of other receivables and
long-term receivables classified as a portfolio are measured based on default risk exposure and ECL rate over
the next 12 months or the entire lifetime.
Debt investments and other debt investments
For debt investments and other debt investments the Group measures the ECLs based on the nature of the
investment the types of counterparty and risk exposure and default risk exposure and ECL rate within the next
12 months or the entire lifetime.
Assessment of significant increase in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition
the Group compares the risk of default of the financial instrument at the balance sheet date with that at the date
of initial recognition to determine the relative change in risk of default within the expected lifetime of the financial
instrument.In determining whether the credit risk has increased significantly upon initial recognition the Group considers
reasonable and well-founded information including forward-looking information which can be obtained without
unnecessary extra costs or efforts. Information considered by the Group includes:
The debtor’s failure to make payments of principal and interest on their contractually due dates;
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Assessment of significant increase in credit risk (Cont’d)
An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any);
An actual or expected significant deterioration in the operating results of the debtor;
Existing or expected changes in the technological market economic or legal environment that have a significant
adverse effect on the debtor’s ability to meet its obligation to the Group.
Depending on the nature of the financial instruments the Group assesses whether there has been a significant
increase in credit risk on either an individual basis or a collective basis. When the assessment is performed on a
collective basis the financial instruments are grouped based on their common credit risk characteristics such
as past due information and credit risk ratings.The Group determines that the credit risk on a financial asset has increased significantly if it is more than 30
days past due.
Credit-impaired financial assets
At balance sheet date the Group assesses whether financial assets measured at amortised cost and debt
investments measured at fair value through other comprehensive income are credit-impaired. A financial asset
is credit-impaired when one or more events that have an adverse effect on the estimated future cash flows
of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following
observable events:
Significant financial difficulty of the issuer or debtor;
A breach of contract by the debtor such as a default or delinquency in interest or principal payments;
For economic or contractual reasons relating to the debtor’s financial difficulty the Group having granted to the
debtor a concession that would not otherwise consider;
It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
The disappearance of an active market for that financial asset because of financial difficulties of the issuer or
debtor.Presentation of provisions for ECLs
ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk upon
initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss for
the current period. For financial assets measured at amortised cost the provisions of impairment is deducted
from the carrying amount of the financial assets presented in the balance sheet; for debt investments at fair
value through other comprehensive income the Group makes provisions of impairment in other comprehensive
income without reducing the carrying amount of the financial asset.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment of financial assets (Cont’d)
Write-offs
The book balance of a financial asset is directly written off to the extent that there is no realistic prospect of
recovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutes
derecognition of such financial asset. This is generally the case when the Group determines that the debtor
does not have assets or sources of income that could generate sufficient cash flows to repay the amounts
subject to the write-off. However financial assets that are written off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.If a write-off of financial assets is later recovered the recovery is credited to profit or loss in the period in which
the recovery occurs.
(7) Transfer of financial assets
Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than the
issuer of such financial assets (the transferee).If the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee
the financial asset shall be derecognised. If the Group retains substantially all the risks and rewards of
ownership of a financial asset the financial asset shall not be derecognised.If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset it accounts for the transaction as follows: if the Group does not retain control it derecognises the
financial asset and recognises any resulting assets or liabilities; if the control over the financial asset is not
waived the relevant financial asset is recognised according to the extent of its continuing involvement in the
transferred financial asset and the relevant liability is recognised accordingly.
(8) Offset of financial assets and financial liabilities
If the Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities which
are enforceable currently and the Group plans to realise the financial assets or to clear off the financial liabilities
on a net amount basis or simultaneously the net amount of financial assets and financial liabilities shall be
presented in the balance sheet upon offsetting. Otherwise financial assets and financial liabilities are presented
separately in the balance sheet without offsetting.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Fair value measurement
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a liability
in an orderly transaction between market participants on the date of measurement.The Group measures the relevant assets or liabilities at fair value assuming that the orderly transaction of selling the
assets or transferring the liabilities is conducted in the main market of the relevant assets or liabilities; in the absence
of the main market the Group assumes that the transaction is conducted in the most advantageous market for
the relevant asset or liability. The main (or the most advantageous) market must be accessible to by the Group on
the measurement date. The Group uses assumptions that market participants would use when pricing the asset or
liability assuming that market participants act in their economic best interest.
For financial assets or financial liabilities exist in an active market fair value is determined based on the quoted
price in such market. While financial instruments do not exist in an active market the fair value is determined using
valuation techniques.
Fair value measurement for a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its best use or by selling it to another market participant that would use the
asset in its best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value and gives priority to relevant observable inputs. Unobservable inputs are used only
when relevant observable inputs are not accessible or the access to which is impracticable.
All assets and liabilities measured at fair value or disclosed in the financial statements are categorised within the fair
value hierarchy described as follows based on the lowest level input that is significant to the fair value measurement
as a whole: Level 1 inputs are available quoted prices (unadjusted) in active markets for identical assets or liabilities
at the measurement date; Level 2 inputs are inputs other than Level 1 inputs that are observable for the asset or
liability either directly or indirectly; Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis the Group
re-assess them at each balance sheet date to determine whether transfers have occurred between levels in the
hierarchy.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
11. Inventories
(1) Classification of inventories
Inventories of the Group mainly include raw materials work in progress goods in stock development products
and consumable biological assets etc.
(2) Pricing of inventories dispatched
Inventories of the Group are measured at their actual cost when obtained. Cost of raw materials goods in stock
and others will be calculated with weighted average method when being dispatched.
Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumable
biological assets without a stock are stated at historical cost at initial recognition and subsequently measured
at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current
period. The cost of self-planting self-cultivating consumable biological assets is the necessary expenses
directly attributable to such assets prior to canopy closure including borrowing costs eligible for capitalisation.Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or loss
for the current period.The cost of consumable biological assets shall at the time of harvest or disposal be carried forward at carrying
amount using the stock volume proportion method.
(3) Recognition of net realisable value of inventories and provision for inventory impairment
Net realisable value of inventories refers to the amount of the estimated price of inventories less the estimated
cost incurred upon completion estimated sales expenses and taxes and levies. The realisable value of
inventories shall be determined on the basis of definite evidence purpose of holding the inventories and effect
of after-balance-sheet-date events.
At the balance sheet date provision for inventory impairment is made when the cost is higher than the
net realisable value. The Group usually makes provision for inventory impairment based on categories of
inventories. At the balance sheet date in case the factors causing inventory impairment no longer exists the
original provision for inventory impairment shall be reversed.
(4) Inventory stock taking system
The Group implements permanent inventory system as its inventory stock taking system.
(5) Amortisation of low-value consumables and packaging materials
The low-value consumables of the Group are amortised when issued for use.Packaging materials for turnover are amortised when issued for use.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Held for sale and discontinued operations
(1) Classification and measurement of non-current assets or disposal groups held for sale
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered
principally through a sale transaction (including a non-monetary asset exchange with commercial substance)
rather than through continuing use.The aforesaid non-current asset does not include the investment property subsequently measured at fair value
the biological assets measured at the net amount of the fair value deducting the sales expense the assets
generated from remuneration financial assets deferred income tax assets and rights from insurance contract.
A disposal group is a group of assets to be disposed of together as a whole by sale or other means in a
transaction and liabilities directly associated with those assets that will be transferred in the transaction. In
certain circumstances the disposal group includes the goodwill acquired in the business combination.
A non-current asset or a disposal group is classified as held for sale if it meets all of the following conditions:
the non-current asset or disposal group is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such asset or disposal group; the sale is highly probable i.e. a
sale plan has been resolved and a firm purchase commitment has been obtained and the sale is expected to
be completed within one year. When the Group loses control of a subsidiary due to reasons such as disposal
of investment in a subsidiary regardless of whether the Group retains part of the equity investment after the
disposal when the investment in a subsidiary intended to be disposed of meets the conditions for classification
as held for sale the investment in a subsidiary is classified as held for sale as a whole in the separate financial
statements and all assets and liabilities of the subsidiary are classified as held for sale in the consolidated
financial statements.When the non-current assets or disposal groups held for sale are initially measured or remeasured at the
balance sheet date the excess of the carrying amount over the net amount of the fair value less selling
expenses is recognised as asset impairment loss. For the amount of impairment loss recognised on disposal
groups held for sale the carrying amount of the goodwill of the disposal group shall be offset against first and
then be offset against the carrying amount of non-current assets according to the proportion of the carrying
amount of non-current assets.If the net amount of the fair value of the non-current assets or disposal groups held for sale less the selling
expenses increases on the subsequent balance sheet date the amount previously written down shall be
recovered and reversed in the amount of asset impairment loss recognised after be classified as held for sale
and the reversed amount shall be included in the current profit and loss. The carrying amount of goodwill written
off shall not be reversed.Non-current assets held for sale and assets in disposal group held for sale are not depreciated or amortised.Interest and other expenses of a disposal group classified as held for sale continue to be recognised. For all
or part of an investment in an associate or a joint venture that is classified as held for sale the part of being
classified as held for sale shall cease to be accounted for using the equity method while any retained portion
(not classified as held for sale) shall continue to be accounted for using the equity method; The Group ceases to
use the equity method from the date when the Group ceases to have significant influence over an associate or a
joint venture.If a non-current asset or disposal group is classified as held for sale but subsequently no longer meets the
criteria for being classified as held for sale the Group shall cease to classify it as held for sale and measure it at
the lower of:
① he carrying amount of the asset or disposal group before being classified as held for sale is adjusted by
the depreciation amortisation or impairment that would have been recognised if the asset or disposal
group had not been classified as held for sale;
② recoverable amount.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Held for sale and discontinued operations (Cont’d)
(2) Discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as held
for sale and can be distinguished separately and meets one of the following conditions:
① The component represents a separate major line of business or geographical area of operations.② The component is part of a related plan to dispose of a separate major line of business or geographical
area of operations.③ The component is a subsidiary acquired exclusively with a view to resale.
(3) Presentation
The Group presents the non-current assets held for sale or the assets in the disposal group held for sale as
“assets held-for-sale” and the liabilities in the disposal group held for sale as “liabilities held-for-sale” in the
balance sheet.The Group presents profit or loss from continuing operations and profit or loss from discontinued operations in
the income statement. For non-current assets and disposal groups held for sale that do not meet the definition
of discontinued operation their impairment losses and reversal amounts and gains or losses are presented as
profit or loss from continuing operations. Operating profit or loss such as impairment loss and reversal amount
of discontinued operation and disposal gain or loss are presented as profit or loss from discontinued operation.
Disposal groups that are intended to be closed for use rather than for sale and meet the conditions for the
components in the definition of discontinued operations are presented as discontinued operations from the date
of cessation of use.
For the discontinued operations presented in the current period the information originally presented as
profit or loss from continuing operations in the current financial statements is re-presented as profit or loss
from discontinued operations in the comparable accounting period. If the discontinued operations no longer
meet the conditions for being classified of held-for-sale the information originally presented as profit or loss
from discontinued operations in the current financial statements shall be re-presented as profit or loss from
continuing operations in the comparable accounting period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments
Long-term equity investments include the equity investments in subsidiaries joint ventures and associates. Associates
of the Group are those investees that the Group imposes significant influence over.
(1) Determination of initial investment cost
Long-term equity investments acquired through business combinations: for a long-term equity investment
acquired through a business combination involving enterprises under common control the investment cost shall
be the absorbing party’s share of the carrying amount of the owners’ equity under the consolidated financial
statements of the ultimate controlling party on the date of combination. For a long-term equity investment
acquired through a business combination involving enterprises not under common control the investment cost
of the long-term equity investment shall be the cost of combination.Long-term equity investments acquired through other means: for a long-term equity investment acquired
by cash payment the initial investment cost shall be the purchase cost actually paid; for a long-term equity
investment acquired by issuing equity securities the initial investment cost shall be the fair value of equity
securities issued.
(2) Subsequent measurement and method for profit or loss recognition
Investments in subsidiaries shall be accounted for using the cost method. Except for the investments which
meet the conditions of holding for sale investments in associates and joint ventures shall be accounted for
using the equity method.
For a long-term equity investment accounted for using the cost method the cash dividends or profits declared
by the investees for distribution shall be recognised as investment gains and included in profit or loss for the
current period except the case of receiving the actual consideration paid for the investment or the declared but
not yet distributed cash dividends or profits which is included in the consideration.
For a long-term equity investment accounted for using the equity method where the initial investment cost
exceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date
no adjustment shall be made to the investment cost of the long-term equity investment. Where the initial
investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the
acquisition date adjustment shall be made to the carrying amount of the long-term equity investment and the
difference shall be charged to profit or loss for the current period.Under the equity method investment gain and other comprehensive income shall be recognised based on
the Company’s share of the net profits or losses and other comprehensive income made by the investee
respectively. Meanwhile the carrying amount of long-term equity investment shall be adjusted. The carrying
amount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividend
distributed by the investee. In respect of the other movement of net profit or loss other comprehensive income
and profit distribution of investee the carrying amount of long-term equity investment shall be adjusted and
included in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s net
profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of
acquisition after making appropriate adjustments thereto according to the accounting policies and accounting
periods of the Group.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and method for profit or loss recognition (Cont’d)
For additional equity investment made in order to obtain significant influence or common control over investee
without resulted in control the initial investment cost under the equity method shall be the aggregate of fair
value of previously held equity investment and additional investment cost on the date of transfer. The difference
between the fair value and carrying amount of previously held equity investment on the date of transfer and the
accumulated change in fair value originally included in other comprehensive income shall be recognised in the
profit or loss for the current period under the equity method.In the event of loss of common control or significant influence over investee due to partial disposal of equity
investment the remaining equity interest after disposal shall be accounted for according to the Accounting
Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The
difference between its fair value and carrying amount shall be included in profit or loss for the current period. In
respect of other comprehensive income recognised under previous equity investment using equity method it
shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or
liability by investee at the time when equity method was ceased to be used. Movement of other owners’ equity
related to the previous equity investment shall be transferred to profit or loss for the current period.In the event of loss of control over investee due to partial disposal of equity investment the remaining equity
interest which can apply common control or impose significant influence over the investee after disposal shall
be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using
equity method since it is obtained and adjustment was made accordingly. For the remaining equity interest
which cannot apply common control or impose significant influence over the investee after disposal it shall be
accounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement
of Financial Instruments. The difference between its fair value and carrying amount as at the date of losing
control shall be included in profit or loss for the current period.If the shareholding ratio of the Group is reduced due to the capital increase of other investors and as a result
the Company loses the control of but still can apply common control or impose significant influence over the
investee the net asset increase due to the capital increase of the investee attributable to the Company shall
be recognised according to the new shareholding ratio and the difference with the original carrying amount of
the long-term equity investment corresponding to the shareholding ratio reduction part that should be carried
forward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according to
the new shareholding ratio as if equity method is used for accounting when acquiring the investment.In respect of the transactions between the Group and its associates and joint ventures the share of unrealised
gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Group.Investment gain shall be recognised accordingly. However any unrealised loss arising from internal transactions
between the Group and an investee is not eliminated to the extent that the loss is impairment loss of the
transferred assets.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(3) Basis for determining the common control and significant influence on the investee
Common control is the contractually agreed sharing of control over an arrangement which relevant activities
of such arrangement must be decided by unanimously agreement from parties who share control. When
determining if there is any common control it should first be identified if the arrangement is controlled by
all the participants or the group consisting of the participants and then determined if the decision on the
arranged activity can be made only with the unanimous consent of the participants sharing the control. If all the
participants or a group of participants can only decide the relevant activities of certain arrangement through
concerted action it can be considered that all the participants or a group of participants share common
control on the arrangement. If there are two or more participant groups that can collectively control certain
arrangement it does not constitute common control. When determining if there is any common control the
relevant protection rights will not be taken into account.Significant influence is the power of the investor to participate in the financial and operating policy decisions
of an investee but to fail to control or joint control the formulation of such policies together with other parties.When determining if there is any significant influence on the investee the influence of the voting shares of the
investee held by the investor directly and indirectly and the potential voting rights held by the investor and
other parties which are exercisable in the current period and converted to the equity of the investee including
the warrants stock options and convertible bonds that are issued by the investee and can be converted in the
current period shall be taken into account.When the Group holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the voting shares
of the investee it is generally considered to have significant influence on the investee unless there is concrete
evidence to prove that it cannot participate in the production and operation decision-making of the investee
and cannot pose significant influence in this situation. When the Group owns less than 20% of the voting shares
of the investee it is generally considered that it has not significantly influenced on the investee unless there
is concrete evidence to prove that it can participate in the production and operation decision-making of the
investee and cannot pose significant influence in this situation.
(4) Method for impairment test and measurement of impairment provision
For the method for making impairment provision for the investment in subsidiaries associates and joint
ventures please refer to Note V. 21.
14. Investment property
Measurement of investment property
Measurement using the cost method
Depreciation or amortisation method
Investment property refers to real estate held to earn rentals or for capital appreciation or both. The investment
property of the Group includes leased land use rights land use rights held for sale after appreciation and leased
buildings.The investment property of the Group is measured initially at cost upon acquisition and subject to depreciation or
amortisation in the relevant periods according to the relevant provisions on fixed assets or intangible assets.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
14. Investment property (Cont’d)
For the method for making impairment provision for the investment property adopted cost method for subsequent
measurement please refer to Note V. 20.When an investment property is sold transferred retired or damaged the amount of proceeds on disposal of the
property net of the carrying amount and related tax and surcharges is recognised in profit or loss for the current
period.
15. Fixed assets
(1) Conditions for recognition
Fixed assets of the Group are tangible assets that are held for use in the production or supply of goods or
services for rental to others or for administrative purposes; and have a useful life of more than one accounting
year. Fixed assets are recognised only if the Company is very likely to receive economic benefits from the asset
and its cost can be measured reliably. A fixed asset of the Group shall be initially measured at actual cost when
acquired.
(2) Depreciation method
Category
Depreciation
method
Useful lives of
depreciation
(Year)
Estimated
residual value
(%)
Annual
depreciation
rate (%)
Housing and building structure Straight-line method 20-40 5-10 2.25-4.75
Machinery and equipment Straight-line method 8-20 5-10 4.50-11.88
Transportation equipment Straight-line method 5-8 5-10 11.25-19.00
Electronic equipment and others Straight-line method 5 5-10 18.00-19.00
The Group adopts the straight-line method for depreciation. Provision for depreciation will be started when the
fixed asset reaches its expected usable state and stopped when the fixed asset is derecognised or classified
as a non-current asset held for sale. Without regard to the depreciation provision the Group determines the
depreciation rate by category estimated useful lives and estimated residual value of the fixed assets. Where for
the fixed assets for which depreciation provision is made to determine the depreciation rate the accumulated
amount of the fixed asset depreciation provision that has been made shall be deducted.
(3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 21.
(4) The Group will recheck the useful lives estimated net residual value and depreciation method of the fixed
assets at the end of each year.When there is any difference between the useful lives estimate and the originally estimated value the useful
lives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual value
estimate and the originally estimated value the estimated net residual value of the fixed asset shall be adjusted.
(5) Overhaul expense
For the overhaul expense incurred by the Group during the regular inspection on the fixed assets if there is
concrete evidence to prove that it meets the fixed asset recognition condition it shall be included in the cost of
fixed asset; if it does not meet the fixed asset recognition condition it shall be included in the profit or loss for
the current period. The depreciation of fixed assets shall be continued in the intervals of the regular overhaul of
the fixed asset.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
16. Construction in progress
Construction in progress of the Group is recognised based on the actual construction cost including all necessary
expenditures incurred for construction projects capitalised borrowing costs for the construction in progress before it
has reached the working condition for its intended use and other related expenses during the construction period.
A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended
use.The method for impairment provision of construction in progress is set out in Note V. 21.
17. Materials for project
The materials for project of the Group refer to various materials prepared for construction in progress including
construction materials equipment not yet installed and tools for production.The purchased materials for project are measured at cost and the planning materials for project are transferred to
construction in progress. After the completion of the project the remaining materials for project are transferred to
inventory.The method for impairment provision of materials for project is set out in Note V. 21.The closing balance of materials for project is presented as “construction in progress” item in the balance sheet.
18. Borrowing costs
(1) Recognition principle for the capitalisation of the borrowing costs
The borrowing costs incurred by the Group directly attributable to the acquisition construction or production
of a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will be
recognised as expenses when incurred according to the incurred amount and included in the profit or loss for
the current period. When the borrowing costs meet all the following conditions capitalisation shall be started:
① The capital expenditure has been incurred which includes the expenditure incurred by paying cash
transferring non-cash assets or undertaking interest-bearing liabilities for acquiring constructing or
producing the qualifying assets;
② The borrowing costs have been incurred;
③ The acquisition construction or production activity necessary for the asset to be ready for its intended
use or sale has been started.
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18. Borrowing costs (Cont’d)
(2) Capitalisation period of borrowing costs
When a qualifying asset acquired constructed or produced by the Group is ready for its intended use or sale
the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifying asset
is ready for its intended use or sale shall be recognised as expenses when incurred according to the incurred
amount and included in the profit or loss for the current period.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition construction or
production of a qualifying asset is interrupted abnormally when the interruption is for a continuous period of
more than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruption
period.
(3) Calculation methods for capitalisation rate and capitalisation amount of the borrowing costs
Where funds are borrowed for a specific purpose the amount of interest to be capitalised shall be the actual
interest expense incurred on that borrowing for the period less any bank interest earned from depositing the
borrowed funds before being used into banks or any investment income on the temporary investment of those
funds. Where funds are borrowed for general purpose the Company shall determine the amount of interest
to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess
amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings.The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose
borrowings.
During the capitalisation period exchange differences on a specific purpose borrowing denominated in foreign
currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in
foreign currency shall be included in profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
19. Intangible assets
(1) Measurement method useful life and impairment testing
The intangible assets of the Group include land use rights software and certificates of third party right.The intangible asset is initially measured at cost and its useful life is determined upon acquisition. If the useful
life is finite the intangible asset will be amortised over the estimated useful life using the amortisation method
that can reflect the estimated realisation of the economic benefits related to the asset starting from the time
when it is available for use. If it is unable to reliably determine the estimated realisation straight-line method
shall be adopted for amortisation. The intangible assets with uncertain useful life will not be amortised.The amortisation methods for the intangible assets with finite useful life are as follows:
Type Useful life (year) Method of amortisation Remark
Land use rights 50-70 Straight-line method
Software 5-10 Straight-line method
Certificates of third party right 3 Straight-line method
The Group reviews the useful life and amortisation method of the intangible assets with finite useful life at the
end of each year. If it is different from the previous estimates the original estimates will be adjusted and will be
treated as a change in accounting estimate.If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic
benefit to the company the carrying amount of the intangible asset will be entirely transferred into the profit or
loss for the current period.The impairment method for the intangible assets is set out in Note V. 21.
20. Research and development expenditure
Research and development expenditure of the Group is divided into expenses incurred during the research phase and
expenses incurred during the development phase.
Expenses incurred during the research phase and the development phase are recognised in profit or loss in the
current period.
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21. Asset impairment
Impairment of long-term equity investments in subsidiaries associates and joint ventures investment property fixed
assets construction in progress materials for project right-of-use assets intangible assets goodwill and others
(excluding inventories deferred tax assets and financial assets) subsequently measured at cost is determined as
follows:
The Group determines if there is any indication of asset impairment as at the balance sheet date. If there is any
evidence indicating that an asset may be impaired recoverable amount shall be estimated for impairment test.Goodwill arising from business combinations intangible assets with an indefinite useful life and intangible assets not
ready for use will be tested for impairment annually regardless of whether there is any indication of impairment.The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the
future cash flows expected to be derived from the asset. The Group estimates the recoverable amount of an individual
asset. If it is not possible to estimate the recoverable amount of the individual asset the Group shall determine the
recoverable amount of the asset group to which the asset belongs. The determination of an asset group is based on
whether major cash inflows generated by the asset group are independent of the cash inflows from other assets or
asset groups.When the recoverable amount of an asset or an asset group is less than its carrying amount the carrying amount is
reduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision is
made accordingly.
For the purpose of impairment test of goodwill the carrying amount of goodwill acquired in a business combination is
allocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocate
to the related asset groups it is allocated to the combination of related asset groups. The related asset groups or
combination of asset groups are those which can benefit from the synergies of the business combination and are not
larger than the reportable segments identified by the Group.In the impairment test if there is any indication that an asset group or a combination of asset groups related to
goodwill may be impaired the Group first tests the asset group or set of asset groups excluding goodwill for
impairment calculates the recoverable amount and recognises the corresponding impairment loss. An impairment test
is then carried out on the asset group or combination of asset groups containing goodwill by comparing its carrying
amount with its recoverable amount. If the recoverable amount is lower than the carrying amount an impairment loss
is recognised for goodwill.
An impairment loss recognised shall not be reversed in a subsequent period.
22. Long-term prepaid expenses
The long-term prepaid expenses incurred by the Group shall be recognised based on the actual cost and evenly
amortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequent
accounting periods its value after amortisation shall be entirely included in the profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
23. Employee benefits
(1) Scope of employee benefits
Employee benefits are all forms of considerations or compensation given by an entity in exchange for
services rendered by employees or for the termination of employment. Employee benefits include short-term
staff remuneration post-employment benefits termination benefits and other long-term employee benefits.
Employee benefits include benefits provided to employees’ spouses children other dependants survivors of
the deceased employees or to other beneficiaries.
Employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable” in
the balance sheet respectively according to liquidity.
(2) Short-term staff remuneration
Employee wages or salaries actually incurred bonuses and social insurance contributions such as medical
insurance work injury insurance maternity insurance and housing fund contributed at the applicable
benchmarks and rates are recognised as a liability as the employees provide services with a corresponding
charge to profit or loss or included in the cost of assets where appropriate. Where the payment of liability is
expected not to be fully settled within 12 months after the end of the annual reporting period in which the
employees render the related services and the financial impact would be material these liabilities are measured
at their discounted values.
(3) Post-employment benefits
Post-employment benefit plans include defined contribution plans and defined benefit plans. A defined
contribution plan is a post-employment benefit plan under which the Group pays fixed contributions
into a separate fund and the Group has no further obligations for payment. A defined benefit plan is a
post-employment benefit plan other than a defined contribution plan.
Defined contribution plans
Defined contribution plans include basic pension insurance and unemployment insurance both of which are
operated and managed by the government authorities and are non-refundable whereas the Company has no
access nor any discretion after making contributions and hence there were not any forfeited contributions as
under paragraph 26(2) of appendix 16 of the Hong Kong Listing Rules for the financial year ended 31 December
2020. In other words the Group did not forfeit any contributions on behalf of its employees who leave the plan
prior to vesting fully in such contributions. Hence there were no such an issue whether forfeited contributions
may be used by the Group under paragraph 26(2) of appendix 16 of the Hong Kong Listing Rules for the Group.
During the accounting period in which an employee provides service the amount payable calculated according
to the defined contribution plan is recognised as a liability and included in the profit or loss for the current period
or the cost of relevant assets.
(4) Termination benefits
When the Group provides termination benefits to employees employee benefits liabilities arising from
termination benefits are recognised in profit or loss for the current period at the earlier of the following dates:
when the Group cannot revoke unilaterally compensation for dismissal due to the cancellation of labour
relationship plans and employee redundant proposals; the Group recognises cost and expenses related to
payment of compensation for dismissal and restructuring.
For the early retirement plans economic compensations before the actual retirement date were classified as
termination benefits. During the period from the date of cease of render of services to the actual retirement
date relevant wages and contribution to social insurance for the employees proposed to be paid are recognised
in profit or loss on a one-off basis. Economic compensation after the official retirement date such as normal
pension is accounted for as post-employment benefits.
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23. Employee benefits (Cont’d)
(5) Other long-term employee benefits
Other long-term employee benefits provided by the Group to employees that meet the conditions for defined
contribution plans are accounted for in accordance with the relevant provisions relating to defined contribution
plans as stated above. If the conditions for defined benefit plans are met the benefits shall accounted for inaccordance with the relevant provisions relating to defined benefit plans but the “changes arising from theremeasurement of the net liabilities or net assets of the defined benefit plans” in the relevant employee benefits
shall be included in the current profit or loss or the relevant asset cost.
24. Provisions
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as provisions:
(1) the obligation is a current obligation borne by the Group;
(2) it is likely that an outflow of economic benefits from the Group will be resulted from the performance of the
obligation; and
(3) the amount of the obligation can be reliably measured.
The provisions shall be initially measured based on the best estimate for the expenditure required for the performance
of the current obligation after taking into account relevant risks uncertainties time value of money and other
factors pertinent to the contingencies. If the time value of money has significant influence the best estimates shall
be determined after discounting the relevant future cash outflow. The Group reviews the carrying amount of the
provisions on the balance sheet date and adjust the carrying amount to reflect the current best estimates.If all or some expenses incurred for settlement of recognised provisions are expected to be borne by the third party
the compensation amount shall on a recoverable basis be recognised as asset separately and compensation
amount recognised shall not be more than the carrying amount of provisions.
25. Share-based payments and equity instruments
(1) Category of share-based payment
The Group’s share-based payment is either equity-settled or cash-settled.
(2) Fair value of equity instruments
For the existence of an active market for options and other equity instruments granted by the Group the fair
value is determined at the quoted price in the active market. For options and other equity instruments with
no active market option pricing model shall be used to estimate the fair value of the equity instruments. The
following factors shall be taken into account using option pricing models: A. the exercise price of the option B.the validity period of the option C. the current market price of the share D. the expected volatility of the share
price E. predicted dividend of the share and F. risk-free rate of the option within the validity period.
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25. Share-based payments and equity instruments (Cont’d)
(3) Recognition of vesting of equity instruments based on the best estimate
On each balance sheet date within the vesting period the estimated number of equity instruments expected
to vest is revised based on the best estimate made by the Group according to the latest available subsequent
information as to changes in the number of employees with exercisable rights. On the vesting date the final
estimated number of equity instruments expected to vest should equal the actual number of equity instruments
expected to vest.
(4) Accounting treatment of implementation modification and termination of share-based payment
Equity-settled share-based payment shall be measured at the fair value of the equity instruments granted to
employees. For those may immediately vest after the grant the fair value of equity instrument at the grant date
shall be included in the relevant costs or expenses and the capital reserve shall be increased accordingly.If the right may not be exercised until the vesting period comes to an end or until the specified performance
conditions are met within the vesting period the services obtained in the current period shall based on the
best estimate of the number of vested equity instruments be included in the relevant costs or expenses and the
capital reserve at the fair value of the equity instrument at the grant date. After the vesting period relevant costs
or expenses and total shareholders’ equity which have been recognised will not be adjusted.
Cash-settled share-based payment shall be measured in accordance with the fair value of liability calculated
and recognised based on the shares or other equity instruments undertaken by the Group. For those may
immediately vest after the grant the fair value of the liability undertaken by the Group shall on the date of the
grant be included in the relevant costs or expenses and the liabilities shall be increased accordingly. If the right
may not be exercised until the vesting period comes to an end or until the specified performance conditions are
met within the vesting period the services obtained in the current period shall based on the best estimate of
the information about the exercisable right be included in the relevant costs or expenses and the corresponding
liabilities at the fair value of the liability undertaken by the Group. For each of the balance sheet date and
settlement date before the settlement of the relevant liabilities fair value of the liabilities shall be remeasured
and the changes will be included in the profit or loss for the current period.When there are changes in Group’s share-based payment plans if the modification increases the fair value of
the equity instruments granted corresponding recognition of service increase in accordance with the increase
in the fair value of the equity instruments; if the modification increases the number of equity instruments
granted the increase in fair value of the equity instruments is recognised as a corresponding increase in service
achieved. Increase in the fair value of equity instruments refer to the difference between the fair values of the
modified date. If the modification reduces the total fair value of shares paid or not conductive to the use of other
employees share-based payment plans to modify the terms and conditions of service it will continue to be
accounted for in the accounting treatment as if the change had not occurred unless the Group cancelled some
or all of the equity instruments granted.
During the vesting period if the cancelled equity instruments (except for failure to meet the conditions of
the non-market vesting conditions) granted by the Group to cancel the equity instruments granted amount
treated as accelerated vesting of the remaining period should be recognised immediately in profit or loss while
recognising capital reserves. If employees or other parties can choose to meet non-vesting conditions but they
are not met in the vesting period the Group will treat them as cancelled equity instruments granted.
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26. Preference Shares Perpetual Bonds and other financial instruments
(1) Classification of financial liabilities and equity instruments
Financial instruments issued by the Group are classified into financial assets financial liabilities or equity
instruments on the basis of the substance of the contractual arrangements and the economic nature not only
its legal form together with the definition of financial asset financial liability and equity instruments on initial
recognition.
(2) Accounting treatment of Preference Shares Perpetual Bonds and other financial instruments
Financial instruments issued by the Group are initially recognised and measured in accordance with the
financial instrument standards; thereafter interest or dividends are accrued on each balance sheet date
and accounted for in accordance with relevant specific ASBEs i.e. to determine the accounting treatment
for interest expenditure or dividend distribution of the instrument based on the classification of the financial
instrument issued. For financial instruments classified as equity instruments their interest expenses or dividend
distributions are treated as profit distribution of the Group and their repurchases and cancellations are treated
as changes in equity; for financial instruments classified as financial liabilities their interest expenses or dividend
distribution are in principle accounted for with reference to borrowing costs and the gains or losses arising from
their repurchases or redemption are included in the profit or loss for the current period.
For the transaction costs such as fees and commissions incurred by the Group for issuing financial instruments
if such financial instruments are classified as debt instruments and measured at amortised cost they are
included in the initial measured amount of the instruments issued; if such financial instruments are classified as
equity instruments they are deducted from equity.
27. Revenue
(1) General principles
The Group recognises revenue when it satisfies a performance obligation in the contract i.e. when the customer
obtains control of the relevant goods or services.Where a contract has two or more performance obligations the Group allocates the transaction price to each
performance obligation based on the percentage of respective unit price of goods or services guaranteed by
each performance obligation and recognises as revenue based on the transaction price that is allocated to
each performance obligation.If one of the following conditions is fulfilled the Group performs its performance obligation within a certain
period; otherwise it performs its performance obligation at a point of time:
① when the customer simultaneously receives and consumes the benefits provided by the Group when the
Group performs its obligations under the contract;
② when the customer is able to control the goods in progress in the course of performance by the Group
under the contract;
③ when the goods produced by the Group under the contract are irreplaceable and the Group has the right
to payment for performance completed to date during the whole contract term.
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27. Revenue (Cont’d)
(1) General principles (Cont’d)
For performance obligations performed within a certain period the Group recognises revenue by measuring
the progress towards complete of that performance obligation within that certain period. When the progress
of performance cannot be reasonably determined if the costs incurred by the Group are expected to
be compensated the revenue shall be recognised at the amount of costs incurred until the progress of
performance can be reasonably determined.
For performance obligation performed at a point of time the Group recognises revenue at the point of time
at which the customer obtains control of relevant goods or services. To determine whether a customer has
obtained control of goods or services the Group considers the following indications:
① the Group has the current right to receive payment for the goods which is when the customer has the
current payment obligations for the goods;
② the Group has transferred the legal title of the goods to the customer which is when the client possesses
the legal title of the goods;
③ the Group has transferred the physical possession of goods to the customer which is when the customer
obtains physical possession of the goods;
④ the Group has transferred all of the substantial risks and rewards of ownership of the goods to the
customer which is when the customer obtain all of the substantial risks and rewards of ownership of the
goods to the customer;
⑤ the customer has accepted the goods;
⑥ other information indicates that the customer has obtained control of the goods.The Group’s right to consideration in exchange for goods or services that the Group has transferred to
customers (and such right depends on factors other than passage of time) is accounted for as contract assets
and contract assets are subject to impairment based on ECLs. The Group’s unconditional right to receive
consideration from customers (only depends on passage of time) is accounted for as accounts receivable.The Group’s obligation to transfer goods or services to customers for which the Group has received or should
receive consideration from customers is accounted for as contract liabilities.
Contract assets and contract liabilities under the same contract are presented on a net basis. Where the net
amount has a debit balance it is presented in “contract assets” or “other non-current assets” according to its
liquidity. Where the net amount has a credit balance it is presented in “contract liabilities” or “other non-currentliabilities” according to its liquidity.
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27. Revenue (Cont’d)
(2) Specific methods
Specific method for revenue recognition of machine-made paper business of the Group: in terms of domestic
sales of machine-made paper revenue is recognised when goods are delivered to the customers and such
deliveries are confirmed; while in terms of overseas sales of machine-made paper revenue is recognised on the
day when goods are loaded on board and declared.Specific method for recognition of finance lease income of the Group: according to the repayment schedule the
income is recognised by instalments according to the effective interest rate.Specific method for recognition of revenue from real estate of the Group: revenue is recognised by amortising
the rental income on a straight-line basis over the lease term.
28. Government grants
A government grant is recognised when there is reasonable assurance that the grant will be received and that the
Group will comply with the conditions attaching to the grant.If a government grant is in the form of a transfer of a monetary asset it is measured at the amount received or
receivable. If a government grant is in the form of a transfer of non-monetary asset it is measured at fair value; if the
fair value cannot be obtained in a reliable way it is measured at the nominal amount of RMB1.Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset
formation are classified as government grants related to assets while the remaining government grants are classified
as government grants related to revenue.Regarding the government grant not clearly defined in the official documents and can form long-term assets the
part of government grant which can be referred to the value of the assets is classified as government grant related
to assets and the remaining part is government grant related to revenue. For the government grant that is difficult to
distinguish the entire government grant is classified as government grant related to revenue.
A government grant related to an asset shall be recognised as deferred income and evenly amortised to profit or loss
over the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue
if the grant is a compensation for related costs expenses or losses incurred the grant shall be recognised in profit
or loss for the current period; if the grant is a compensation for related costs expenses or losses to be incurred
in subsequent periods the grant shall be recognised as deferred income and recognised in profit or loss over the
periods in which the related costs expenses or losses are recognised. A government grant measured at nominal
amount is directly included in profit or loss for the current period. The Group adopts a consistent approach to the
same or similar government grants.
A government grant related to daily activities is recognised in other gains relying on the essence of economic
business; otherwise recognised in non-operating income or non-operating expenses.
For the repayment of a government grant already recognised if there is any related deferred income the repayment
shall be off set against the carrying amount of the deferred income and any excess shall be recognised in profit or
loss for the current period; otherwise the repayment shall be recognised immediately in profit or loss for the current
period.
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28. Government grants (Cont’d)
For the policy preferential interest subsidy if it is provided by the financial authority through banks it is recognised
at the amount of borrowings actually received and the borrowings costs are calculated based on the principal
of the borrowings and the policy preferential interest rate; if it is provided by the financial authority directly the
corresponding interest will be used to offset the relevant borrowing expenses.
29. Deferred income tax assets/deferred income tax liabilities
Income tax comprises current income tax expense and deferred income tax expense which are included in profit or
loss for the current period as income tax expenses except for deferred tax related to transactions or events that are
directly recognised in owners’ equity which are recognised in owners’ equity and deferred tax arising from a business
combination which is adjusted against the carrying amount of goodwill.Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base
at the balance sheet date of the Group shall be recognised as deferred income tax using the balance sheet liability
method.
All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in the
following transactions:
(1) The initial recognition of goodwill and the initial recognition of an asset or liability in a transaction which is
neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when the
transaction occurs;
(2) The taxable temporary differences associated with investments in subsidiaries associates and joint ventures
and the Group is able to control the timing of the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.The Group recognises a deferred income tax asset for the carry forward of deductible temporary differences
deductible losses and tax credits to subsequent periods to the extent that it is probable that future taxable profits
will be available against which the deductible temporary differences deductible losses and tax credits can be utilised
except for those incurred in the following transactions:
(1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or deductible
loss) when the transaction occurs;
(2) The deductible temporary differences associated with investments in subsidiaries associates and joint ventures
the corresponding deferred income tax asset is recognised when both of the following conditions are satisfied:
it is probable that the temporary difference will reverse in the foreseeable future and it is probable that taxable
profits will be available in the future against which the temporary difference can be utilised.
At the balance sheet date deferred income tax assets and deferred income tax liabilities are measured at the tax
rates that are expected to apply to the period when the asset is realised or the liability is settled and their tax effect is
reflected accordingly.
At the balance sheet date the Group reviews the carrying amount of a deferred income tax asset. If it is probable
that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be
utilised the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it
becomes probable that sufficient taxable profits will be available.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
30. Lease
(1) Identification of leases
On the beginning date of the contract the Group (as a lessee or lessor) assesses whether the customer in
the contract has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use and has the right to direct the use of the identified asset throughout the period of
use. If a contract conveys the right to control the use of an identified asset and multiple identified assets for a
period of time in exchange for consideration the Group identifies such contract is or contains a lease.
(2) The Group as lessee
On the beginning date of the lease the Group recognises right-of-use assets and lease liabilities for all leases
except for short-term lease and low-value asset lease with simplified approach.The accounting policy for right-of-use assets is set out in Note V. 31.The lease liability is initially measured at the present value of the lease payments that are not paid at the
beginning date of the lease using the interest rate implicit in the lease or the incremental borrowing rate. Lease
payments include fixed payments and in-substance fixed payments less any lease incentives receivable;
variable lease payments that are based on an index or a rate; the exercise price of a purchase option if the
lessee is reasonably certain to exercise that option; payments for terminating the lease if the lease term reflects
the lessee exercising that option of terminating; and amounts expected to be payable by the lessee under
residual value guarantees. Subsequently the interest expense on the lease liability for each period during the
lease term is calculated using a constant periodic rate of interest and is recognised in profit or loss for the
current period. Variable lease payments not included in the measurement of lease liabilities are charged to
profit or loss in the period in which they actually arise. The Group calculates the interest expense of the lease
liability for each period of the lease term based on the fixed periodic interest rate and is included in the current
profit and loss. The variable lease payments that are not included in the measurement of the lease liability are
recognised in profit or loss when incurred.
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30. Lease (Cont’d)
(2) The Group as lessee (Cont’d)
Short-term lease
Short-term leases refer to leases with a lease term of less than 12 months from the commencement date
except for those with a purchase option.Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on a
straight-line basis over the lease term.
For short-term leases the Group chooses to adopt the above simplified approach for the following types of
assets that meet the conditions of short-term lease according to the classification of leased assets.? Low-value machinery and equipment
? Transportation vehicles
Low-value asset lease
A low-value asset lease is a lease that the value of a single leased asset is below RMB2000000 when it is a
new asset.
For a low-value asset lease the Group chooses the above simplified approach based on the specific
circumstances of each lease.Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term and
either included in the cost of the related asset or charged to profit or loss for the current period.
(3) The Group as lessor
When the Group is a lessor a lease is classified as a finance lease whenever the terms of the lease transfer
substantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases are
classified as operating leases.Operating lease
Lease payments under operating leases are recognised in profit or loss on a straight-line basis over the lease
term. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease term
on the same basis as rental income and recognised in profit or loss for the current period. The variable lease
payments obtained in relation to operating leases that are not included in the lease payments are recognised in
profit or loss in the period in which they actually incurred.
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30. Lease (Cont’d)
(4) Sublease
When the Group is an intermediate lessor the sublease is classified with reference to the right-of-use assets
arising from the head lease. If the head lease is a short-term lease for which the Group adopts a simplified
approach then the Group 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 leaseback
transaction is a sale in accordance with the requirements of the Accounting Standard for Business Enterprises
No. 14 – Revenue.Where asset transfer under the sale and leaseback transactions is a sale the lessee shall measure the
right-of-use assets created by the sale and leaseback based on the portion of carrying amount of the original
assets related to right of use obtained upon leaseback and only recognise relevant profit or loss for the right
transferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicable
ASBEs and account for the lease of assets in accordance with this standard.
Where asset transfer under the sale and leaseback transactions is not a sale the lessee shall continue to
recognise the transferred assets while recognising a financial liability equal to the transfer income and account
for such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition and
Measurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial asset
equal to the transfer income and account for such asset according to the Accounting Standard for Business
Enterprises No. 22 – Recognition and Measurement of Financial Instruments.
31. Right-of-use assets
(1) Conditions for recognition of right-of-use assets
Right-of-use assets of the Group are defined as the right of underlying assets in the lease term for the Group as
a lessee.Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes
the amount of the initial measurement of lease liability; lease payments made at or before the inception of the
lease less any lease incentives enjoyed; initial direct costs incurred by the Group as lessee; costs to be incurred
in dismantling and removing the underlying assets restoring the site on which it is located or restoring the
underlying asset to the condition required by the terms and conditions of the lease incurred by the Group as
lessee. As a lessee the Group recognises and measures the costs of dismantling and restoration in accordance
with the Accounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently the lease liability
is adjusted for any remeasurement of the lease liability.
(2) Depreciation method of right-of-use assets
The Group uses the straight-line method for depreciation. Where the Group as a lessee is reasonably certain to
obtain ownership of the leased asset at the end of the lease term such asset is depreciated over the remaining
useful life of the leased asset. Where ownership of the lease assets during the lease term cannot be reasonably
determined right-of-use assets are depreciated over the lease term or the remainder of useful lives of the lease
assets whichever is shorter.
(3) For the methods of impairment test and impairment provision of right-of-use assets please refer to Note V. 21.
2020 ANNUAL REPORT 203
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
32. General risk reserves
General risk reserve is a reserve provided from net profit for the partial offset unidentified possible losses.
Adopting the principle of dynamic provisioning the Finance Company employs the standard method to quantitatively
analyse the risk situation faced by risk assets to determine the estimated potential risk value. After calculating
the potential risk value if the potential risk value is higher than the provision for impairment of assets the accrued
provision for impairment of assets will be deducted and provision for general risk will be made. If the potential risk
value is lower than the provision for impairment of assets provision for general risk will not be made.
Dynamic provisioning is a counter-cyclical provisioning method adopted by financial companies based on changes
in the macroeconomic situation as in in the upward macroeconomic cycle and when the risk asset default rate is
relatively low more provisions are made to enhance financial buffer capacity; and in the downturn macroeconomic
cycle and when the risk asset default rate is relatively high the accumulated provisions are used to absorb asset
losses.The Finance Company makes general risk provisions for assets bearing risks and losses at the end of each year the
balance of which in principle shall not be lower than 1.5% of the closing balance of risk assets. The risk provision
made by factoring companies shall not be lower than 1% of the closing balance of the financial factoring business.
Based on changes in the macroeconomic situation and with reference to non-performing corporate loans
non-performing loan ratio provision coverage ratio for non-performing loans loan provision ratio standard risk
factor and the requirement of general risk provision as a percentage of risk assets the Ministry of Finance makes
adjustments to the scope of risk assets for general risk provisions standard risk factor and the requirement of
general risk provision as a percentage of risk assets as appropriate. The Finance Company shall make adjustments
accordingly according to the requirements of the Ministry of Finance.Provisions for general risk are insufficient in principle the company shall not engage in after-tax profit distribution.
As considered and approved by the board of directors and general meeting of the Finance Company such provisions
may be used to offset losses but not for dividends. For special reasons as approved by the Board and the general
meeting general risk reserves may be reclassified into undistributed profits.
SHANDONG CHENMING PAPER HOLDINGS LIMITED204
XIII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Critical accounting judgments and estimates
The Group gives continuous assessment on among other things the reasonable expectations of future events and
the critical accounting estimates and key assumptions adopted according to its historical experience and other
factors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks of
the carrying amount of assets and liabilities for the next financial year are listed as follows:
Classification of financial assets
Significant judgements involved in determining the classification of financial assets include the analysis of business
models and contractual cash flow characteristics.
Factors considered by the Group in determining the business model for a group of financial assets include how the
asset’s performance is evaluated and reported to key management personnel how risks are assessed and managed
and how the relevant management personnel are compensated.When the Group assesses whether the contractual cash flows of the financial assets are consistent with basic lending
arrangements the main judgements are described as below: whether the principal amount may change over the life of
the financial asset (for example if there are repayments of principal); whether the interest includes only consideration
for the time value of money credit risk other basic lending risks and a profit margin and cost. For example whether
the amount repaid in advance reflects only the outstanding principal and interest thereon as well as reasonable
compensation paid for early termination of the contract.Measurement of the ECLs of accounts receivable
The Group calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accounts
receivable and determines the ECL rate based on default probability and default loss rate. When determining the ECL
rate the Group adjusts its historical data by referring to information such as historical credit loss experience as well
as current situation and forward-looking information. When considering the forward-looking information indicators
used by the Group include the risk of economic downturn external market environment technology environment and
changes in customers. The assumptions relating to the ECL calculation are monitored and reviewed by the Group on
a regularly basis.
Deferred income tax assets
Deferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilised. Significant management judgement is required to determine
the amount of deferred income tax assets that can be recognised based upon the likely timing and level of future
taxable profits together with future tax planning strategies.Share-based payments
When calculating the liabilities and expenses related to the equity incentive plan the management of the Company is
required to make judgments and estimates on issues such as the turnover rate and vesting conditions. Differences in
the judgments and estimates will have a material effect on the financial statements.Impairment of goodwill
The Group assesses the impairment of goodwill at least annually which requires estimates on the use value of asset
groups allocated with goodwill. When estimating use value the Group is required to estimate the future cash flow
from such asset groups while selecting the appropriate discount rate to calculate the present value of future cash
flow.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
33. Critical accounting judgments and estimates (Cont’d)
Impairment of goodwill (Cont’d)
Depreciation
The Group uses the straight-line method for depreciation within the estimated useful lives of fixed assets after taking
into account their residue value. The Group regularly reviews the expected useful lives to determine the amount of
depreciation accounted for each reporting period. Expected useful life is determined based on historical experience
of similar assets and the estimated technical changes. Depreciation expenses for future periods will be adjusted
accordingly in the event of significant changes in previous estimates.
34. Changes in significant accounting policies and estimates
(1) Changes in significant accounting policies
① Accounting Standards for Business Enterprises Interpretation No. 13
In December 2019 the Ministry of Finance issued the Accounting Standards for Business Enterprises
Interpretation No. 13 (Cai Kuai [2019] No. 21) (hereinafter referred to as the “Interpretation No. 13”).The Interpretation No. 13 modified the three factors constituting a business specified the determining
conditions for businesses and introduced “concentration test” for purchasers in business combinations
under common control when determining whether the operating activities or asset portfolio acquired
constitutes a business.The Interpretation No. 13 clarified that the related parties of an enterprise include the associates and joint
ventures of other common member units including parent companies and subsidiaries of the group as
well as the associates and joint ventures of investors in joint control of the enterprise.The Interpretation No. 13 came into effect on 1 January 2020. The Group has applied the prospective
application method for the accounting treatment of the above change in accounting policies.The application of Interpretation No. 13 did not have any material effect on the financial position operating
results or related party disclosure of the Group.② In June 2019 the Ministry of Finance issued the Notice on Provisions on Accounting Treatment of Covid-
19-related Rent Concessions (Cai Kuai [2020] No. 10) (關於印發《新冠肺炎疫情相關租金減讓會計處理規定》的通知（財會〔2020〕10號)). Under such accounting treatment a simplified approach may be applied forthe Covid-19-related rent concessions.The Group did not apply the simplified approach under the notice. As such the notice did not have any
material effect on the financial position or operating results of the Group.
(2) Changes in significant accounting estimates
The Group did not have any changes 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 Revenue Standard and the New Leases Standard in 2020
Not applicable
(4) Reason for retrospective adjustment to the comparative data in the prior period due to the first adoption of
the New Revenue Standard and the New Leases Standard in 2020
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED206
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VI. Taxation
1. Main tax types and tax rates
Tax type Tax base Tax rate (%)
Value added tax (VAT) Taxable income 13/9/6
Urban maintenance and construction tax Turnover tax payable 7
Enterprise income tax (EIT) Taxable income 25
Property tax Rental income and property price 1.2/12
Disclosure of taxable entities subject to different EIT tax rates
Name of taxable entity EIT tax rate (%)
Shandong Chenming Paper Holdings Limited 15
Shouguang Meilun Paper Co. Ltd. 15
Jilin Chenming Paper Co. Ltd. 15
Jiangxi Chenming Paper Co. Ltd. 15
Zhanjiang Chenming Pulp & Paper Co. Ltd. 15
Wuhan Chenming Hanyang Paper Holdings Co. Ltd. 15
Huanggang Chenming Pulp & Paper Co. Ltd. 15
Kunshan Tuoan Plastic Products Co. Ltd. 15
Shouguang Shun Da Customs Declaration Co Ltd. 10
Qingdao Chenming Pulp & Paper Electronic Commodity Spot Trading Co. Ltd. 10
Zhanjiang Chenming Arboriculture Development Co. Ltd. Exempt from EIT
Nanchang Chenming Arboriculture Development Co. Ltd. Exempt from EIT
Chenming Arboriculture Co. Ltd. Exempt from EIT
Yangjiang Chenming Arboriculture Development Co. Ltd. Exempt from EIT
2. Tax incentives
(1) Enterprise income tax
On 16 August 2018 the Group received a high and new technology enterprise certificate with a certification
number of GR201837000311. Pursuant to the requirements under the Law of the People’s Republic of China on
Enterprise Income Tax and the relevant policies the Group is subject to a corporate income tax rate of 15% of
taxable income and is entitled to the preferential treatment from 2018 to 2020.Shouguang Meilun Paper Co. Ltd. a subsidiary of the Group received a high and new technology enterprise
certificate with a certification number of GR201837000455 on 16 August 2018. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Shouguang
Meilun is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the preferential
treatment from 2018 to 2020.Jilin Chenming Paper Co. Ltd. a subsidiary of the Group received a high and new technology enterprise
certificate with a certification number of GR201922000658 on 2 September 2019. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Jilin
Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the
preferential treatment from 2019 to 2021.
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VI. Taxation (Cont’d)
2. Tax incentives (Cont’d)
(1) Enterprise income tax (Cont’d)
Jiangxi Chenming Paper Co. Ltd. a subsidiary of the Group received a high and new technology enterprise
certificate with a certification number of GR201936002184 on 3 December 2019. Pursuant to the requirements
under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Jiangxi
Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the
preferential treatment from 2019 to 2021.Zhanjiang Chenming Pulp & Paper Co. Ltd. a subsidiary of the Group received a high and new technology
enterprise certificate with a certification number of GR20184400547 on 28 November 2018. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies Zhanjiang Chenming is subject to an enterprise income tax rate of 15% of taxable income and is
entitled to the preferential treatment from 2018 to 2020.Wuhan Chenming Hanyang Paper Holdings Co. Ltd. a subsidiary of the Group received a high and new
technology enterprise certificate with a certification number of GR202042001502 on 1 December 2020. Pursuant
to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies Wuhan Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled
to the preferential treatment from 2020 to 2022.Huanggang Chenming Pulp & Paper Co. Ltd. a subsidiary of the Group received a high and new technology
enterprise certificate with a certification number of GR202042001471 on 1 December 2020. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies Huanggang Chenming is subject to an enterprise income tax rate of 15% of taxable income and is
entitled to the preferential treatment from 2020 to 2022.Kunshan Tuoan Plastic Products Co. Ltd. a subsidiary of the Group received a high and new technology
enterprise certificate with a certification number of GR202032004526 on 2 December 2020. Pursuant to the
requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant
policies Kunshan Tuoan is subject to an enterprise income tax rate of 15% of taxable income and is entitled to
the preferential treatment from 2020 to 2022.Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Tax
and Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on Enterprise
Income Tax Zhanjiang Chenming Arboriculture Development Co. Ltd. Yangjiang Chenming Arboriculture
Development Co. Ltd. Nanchang Chenming Arboriculture Development Co. Ltd. and Chenming Arboriculture
Co. Ltd. which are the subsidiaries of the Group have completed the filings for EIT reduction for exemption
from EIT.Shouguang Shun Da Customs Declaration Co Ltd. and Qingdao Chenming Pulp & Paper Electronic Commodity
Spot Trading Co. Ltd. which are subsidiaries of the Group are small and micro enterprises. Pursuant to the
Notice on Implementing the Inclusive Tax Deduction and Exemption Policies for Micro and Small Enterprises (Cai
Shui [2019] No. 13) the annual taxable income of a small low-profit enterprise that is more than RMB1 million
but not exceeding RMB3 million shall be included in its taxable income at a reduced rate of 50% with the
applicable enterprise income tax rate of 10%.
SHANDONG CHENMING PAPER HOLDINGS LIMITED208
XIII Financial Report
VI. Taxation (Cont’d)
2. Tax incentives (Cont’d)
(1) Enterprise income tax (Cont’d)
Guangdong Chenming Panels Co. Ltd. a subsidiary of the Group meets the requirements of Rule 99 of the
Regulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax (Decree
No. 512 of the State Council of the People’s Republic of China) and the Notice of the Ministry of Finance and
the State Taxation Administration on Issues Concerning the Implementation of the Catalogue of Preferential
Tax Treatments for Comprehensive Resource Utilisation Enterprises (Cai Shui [2008] No. 47): since 1 January
2008 for enterprises that derive income from the products listed in the Catalogue which are in line with related
national or industry standards by making use of the resources listed in the Catalogue as the main raw materials
taxable income will be calculated at a reduced rate of 90% of the total revenue for that year. To be entitled
to the above tax benefits the ratio of the resources listed in the Catalogue and the raw materials used for the
product shall be consistent with the required technical standards stated in the Catalogue.
(2) Value-added Tax (“VAT”)
Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax Zhanjiang
Chenming Arboriculture Development Co. Ltd. Yangjiang Chenming Arboriculture Development Co. Ltd.
Nanchang Chenming Arboriculture Development Co. Ltd. and Chenming Arboriculture Co. Ltd. which are
subsidiaries of the Group are exempt from VAT and have completed the filings for VAT reduction for exemption
from VAT.Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78) taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Zhanjiang Chenming New-style Wall Materials
Co. Ltd. a subsidiary of the Company produces products applying raw materials containing more than 30% of
fly ash. It belongs to a company that uses pollutants for production and is therefore subject to the immediate
VAT refund policy in 2019.
Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use
of Resources (Cai Shui [2015] No. 78) taxpayers who sell self-produced products and services applying
integrated use of resources may enjoy the immediate VAT refund policy. Shandong Chenming Panels Co. Ltd.a subsidiary of the Group produces products applying integrated use of resources and is therefore subject to
the immediate VAT refund policy in 2019.Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78) taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Shouguang Chenming Cement Co. Limited a
subsidiary of the Company produces products applying integrated use of resources and is therefore subject to
the immediate VAT refund policy in 2019.Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of
Resources (Cai Shui [2015] No. 78) taxpayers who sell self-produced products and services applying integrated
use of resources may enjoy the immediate VAT refund policy. Guangdong Chenming Panels Co. Ltd. a
subsidiary of the Company produces products applying integrated use of resources and is therefore subject to
the immediate VAT refund policy in 2020.
2020 ANNUAL REPORT 209
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VII. Notes to items of the consolidated financial statements
1. Monetary funds
Unit: RMB
Item Closing balance Opening balance
Treasury cash 2161684.57 2418131.86
Bank deposit 4387725487.05 2965127198.70
Other monetary funds 13369650427.36 16338984142.77
Total 17759537598.98 19306529473.33
Of which: Total deposits in overseas banks 229837092.53 405881189.78
Other explanation
① Other monetary funds of RMB9078202110.72 were the guarantee deposit for the application for bank acceptance with the banks by
the Group;
② Other monetary funds of RMB1782633856.06 were the guarantee deposit for the application for letter of credit with the banks by the
Group;
③ Other monetary funds of RMB1959246666.67 were the guarantee deposit for the application for guarantees with the banks by the
Group;
④ Other monetary funds of RMB50000000.00 were the guarantee deposit for the application for loans with the banks by the Group;
⑤ Other monetary funds of RMB141670000.00 were the Group’s statutory reserve deposits at the People’s Bank of China;
⑥ Other monetary funds of RMB10899698.53 were locked-up due to litigations resulting in restriction on the use of that account’s
balance;
⑦ Bank deposit included interest receivable of RMB717207.83 and other monetary funds included interest receivable of
RMB346998095.38.
2. Financial assets held for trading
Unit: RMB
Item Closing balance Opening balance
Financial assets measured at fair value through profit or loss 192907800.62
Or which:
Investment in debt instruments
Investment equity instruments 192907800.62
Total 192907800.62
Other explanation:
Financial assets held for trading were shares of Bohai Bank subscribed by the Group. For details of restricted ownership please refer to note
VII. 63.
SHANDONG CHENMING PAPER HOLDINGS LIMITED210
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Category
Closing balance Opening balance
Book balance Bad debt provision Carrying amount Book balance Bad debt provision Carrying amount
Amount Percentage Amount ECL rate Amount Percentage Amount ECL rate
Accounts receivable assessed
individually for impairment 338943643.26 13.70% 338943643.26 100.00% 117277135.48 3.81% 117277135.48 100.00%
Of which:
Accounts receivable assessed
collectively for impairment 2135216813.32 86.30% 150285147.50 7.04% 1984931665.82 2960085058.36 96.19% 435001747.33 14.70% 2525083311.03
Of which:
Due from related party customers 2000017.96 0.08% 87306.27 4.37% 1912711.69 2008185.60 0.07% 61132.79 3.04% 1947052.81
Receivables from non-related
party customers 1815359418.67 73.37% 97096893.56 5.35% 1718262525.11 2202548603.03 71.57% 307333600.84 13.95% 1895215002.19
Factoring receivables 317857376.69 12.85% 53100947.67 16.71% 264756429.02 755528269.73 24.55% 127607013.70 16.89% 627921256.03
Total 2474160456.58 100.00% 489228790.76 19.77% 1984931665.82 3077362193.84 100.00% 552278882.81 17.95% 2525083311.03
2020 ANNUAL REPORT 211
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VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable by category (Cont’d)
Items assessed collectively for impairment: Due from related party customers
Unit: RMB
Closing balance
Name Book balance
Provision for
bad debts ECL rate
Within 1 year 2000017.96 87306.27 4.37%
Total 2000017.96 87306.27 4.37%
Items assessed collectively for impairment: Receivables from non-related party customers
Unit: RMB
Closing balance
Name Book balance
Provision for
bad debts ECL rate
Within 1 year 1660479726.06 21400551.31 1.29%
1-2 years 48566847.64 12188852.33 25.10%
2-3 years 54156967.00 21851050.46 40.35%
Over 3 years 52155877.97 41656439.46 79.87%
Total 1815359418.67 97096893.56 5.35%
Items assessed collectively for impairment: Factoring receivables
Unit: RMB
Closing balance
Name Book balance
Provision for
bad debts ECL rate
Within 1 year 25548333.33 2554833.33 10.00%
1-2 years 267626380.93 45496484.76 17.00%
2-3 years 24682662.43 5049629.58 20.46%
Total 317857376.69 53100947.67 16.71%
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VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable by category (Cont’d)
If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs please
disclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable □ Not applicable
Disclosure by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 1822584474.74 2440760038.21
1 to 2 years 379812071.80 397312284.08
2 to 3 years 87426356.99 70484233.21
Over 3 years 184337553.05 168805638.34
Total 2474160456.58 3077362193.84
(2) Provision recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Category Opening balance Provision
Recovery
or reversal Written off Others Closing balance
Provision for bad debt 552278882.81 237262669.97 300285138.80 27623.22 489228790.76
Total 552278882.81 237262669.97 300285138.80 27623.22 489228790.76
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VII. Notes to items of the consolidated financial statements (Cont’d)
3. Accounts receivable (Cont’d)
(3) Top five accounts receivable based on closing balance of debtors
Unit: RMB
Name of entity
Closing balance
of the accounts
receivable
Percentage to
closing balance
of the total
accounts
receivable
Closing balance
of bad debt
provision
Customer 1 148138960.00 5.99% 14813896.00
Customer 2 119885303.24 4.84% 846868.40
Customer 3 107218333.33 4.33% 21443666.67
Customer 4 100887437.12 4.08% 712667.69
Customer 5 55101035.00 2.23% 389233.07
Total 531231068.69 21.47% 38206331.83
4. Accounts receivable financing
Unit: RMB
Item Closing balance Opening balance
Bills receivable 488385666.76 442915861.70
Total 488385666.76 442915861.70
Changes (increase or decrease) during the period and change in fair value of accounts receivable financing
□ Applicable √ Not applicable
If the provision for impairment of accounts receivable financing is made in accordance with the general model of
ECLs please disclose the information about provision for impairment with reference to the way of disclosure of other
receivables:
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED214
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VII. Notes to items of the consolidated financial statements (Cont’d)
5. Prepayments
(1) Disclosure of prepayments stated according to ageing analysis
Unit: RMB
Closing balance Opening balance
Ageing Amount Percentage Amount Percentage
Within 1 year 871877663.55 90.42% 528554005.66 87.57%
1-2 years 92412848.81 9.58% 75019543.42 12.43%
Total 964290512.36 100% 603573549.08 100%
(2) Top five prepayments according to closing balance of prepaid parties
Top five prepayments according to closing balance of prepaid parties for the period amounted to
RMB470067160.71 which accounted for 48.75% of the closing balance of the total accounts payable.
Name of entity
Closing balance of
the prepayments
Percentage of the
closing balance
of the total
prepayments
Customer 1 123727868.43 12.83%
Customer 2 113846592.74 11.81%
Customer 3 99901540.92 10.36%
Customer 4 70400984.10 7.30%
Customer 5 62190174.52 6.45%
Total 470067160.71 48.75%
2020 ANNUAL REPORT 215
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables
Unit: RMB
Item Closing balance Opening balance
Dividend receivables 13000000.00
Other receivables 2417240559.46 2203654598.66
Total 2417240559.46 2216654598.66
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMB
Item (or investee) Closing balance Opening balance
Weifang Xingxing United Chemical Co. Ltd. 13000000.00
Total 13000000.00
(2) Other receivables
1) Other payables by nature
Unit: RMB
Nature
Closing book
balance
Opening book
balance
Open credit 2675531581.63 2502722227.16
Guarantee deposit 11732998.24 29529247.78
Advances 19351237.29
Insurance premium 636635.53 21618.27
Reserve and borrowings 43437509.57 20877056.54
Others 229207636.15 126503088.52
Total 2960546361.12 2699004475.56
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision
Unit: RMB
Closing bad debt provision at phase 1:
Category
Book
balance
Expected credit
loss rate (%)
for the next
12 months
Bad debt
provision
Carrying
amount Reason
Bad debt provision assessed individually
Interests receivable
Dividends receivable
Bad debt provision assessed collectively 837977005.60 16.78% 140645700.07 697331305.53
Amount due from government agencies 19397119.49 87.75% 17021162.41 2375957.08
Amount due from related parties 84783327.98 22.54% 19108203.65 65675124.33
Other receivables 733796558.13 14.24% 104516334.01 629280224.12
Total 837977005.60 16.78% 140645700.07 697331305.53
As at the end of the period the Company did not have interest receivables dividends receivables and
other receivables in phase 2.
As at the end of the period closing bad debt provision at phase 3:
Category
Book
balance
Expected credit
loss rate (%)
over the
entire life
Bad debt
provision
Carrying
amount Reason
Bad debt provision assessed individually 2122569355.52 18.97% 402660101.59 1719909253.93
Total 2122569355.52 18.97% 402660101.59 1719909253.93
Changes in carrying book balances with significant changes in loss provision for the year
□ Applicable √ Not applicable
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision (Cont’d)
Disclosed by ageing
Unit: RMB
Ageing Closing balance Open balance
Within 1 year (including 1 year) 1356457308.62 1601285972.69
1-2 years 813310977.70 920980164.23
2-3 years 634042365.77 82752788.66
Over 3 years 156735709.03 93985549.98
Total 2960546361.12 2699004475.56
3) Provision recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Category Opening balance Provision
Recovery
or reversal Written off Others Closing balance
Bad debt provision 495349876.90 297534832.25 249578907.49 543305801.66
Total 495349876.90 297534832.25 249578907.49 543305801.66
SHANDONG CHENMING PAPER HOLDINGS LIMITED218
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VII. Notes to items of the consolidated financial statements (Cont’d)
6. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
4) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors
for the year was RMB2404457100.41 which accounted for 81.22% of the closing balance of the
total accounts receivable. The closing balance of corresponding bad debt provision amounted to
RMB288609478.55.
Unit: RMB
Name of entity Closing balance
Percentage to
closing balance of
other receivables
Closing balance of
bad debt provision
Customer 1 690000000.00 23.31% 69000000.00
Customer 2 542000000.00 18.31% 54200000.00
Customer 3 480000000.00 16.21% 48823536.82
Customer 4 473402316.85 15.99% 94680463.37
Customer 5 219054783.56 7.40% 21905478.36
Total 2404457100.41 81.22% 288609478.55
7. Inventories
Whether the Company needs to comply with the disclosure requirements for real estate industries
No
(1) Categories of inventories
Unit: RMB
Closing balance Opening balance
Item Book balance
Impairment provision
for inventories or
performance costs Carrying amount Book balance
Impairment provision
for inventories or
performance costs Carrying amount
Raw materials 1712610505.63 20535018.69 1692075486.94 1972197240.93 21269429.01 1950927811.92
Work-in-process products 128761554.31 128761554.31 81382693.49 81382693.49
Goods in stock 1464455062.79 1464455062.79 886102819.24 886102819.24
Consumable biological assets 1535386865.44 1535386865.44 1541004633.42 1541004633.42
Developing products 314614378.34 314614378.34 315012152.74 315012152.74
Total 5155828366.51 20535018.69 5135293347.82 4795699539.82 21269429.01 4774430110.81
2020 ANNUAL REPORT 219
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
7. Inventories (Cont’d)
(2) Impairment provision for inventories or performance costs
Unit: RMB
Increase during the period Decrease during the period
Item Opening balance Provision Others Reversal or transfer Others Closing balance
Raw materials 21269429.01 734410.32 20535018.69
Total 21269429.01 734410.32 20535018.69
Item
Basis for recognition of net realisable value/
residual consideration with future cost
Reversal or transfer during the period
Reason for impairment provision for inventories/
performance costs
Raw materials Full amount impairment of spare parts
with long-term storage ageing
Reversal of impairment provision for inventories for
sale of impaired spare parts during the period
(3) Changes in consumable biological assets
Unit: RMB
Increase during
the period Decrease during the period
Item Opening balance
Increase
in breeding
Decrease
in fair value
Decrease
in sales Closing balance
Consumable biological assets
measured at fair value 1541004633.42 66312515.15 13329852.55 58600430.58 1535386865.44
Total 1541004633.42 66312515.15 13329852.55 58600430.58 1535386865.44
8. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 4222744207.34 6974539613.30
Total 4222744207.34 6974539613.30
SHANDONG CHENMING PAPER HOLDINGS LIMITED220
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
9. Other current assets
Unit: RMB
Item Closing balance Opening balance
Input tax amount to be deducted 1041552455.22 1431298632.04
Prepaid tax 53146519.47 56778563.04
Receivables under financial lease due within one year 601364577.40 5229125471.51
Factoring receivables due within one year 596856928.35 1008707988.47
Prepaid expenses 329739882.81 366080343.71
Other payments 94258332.60
Others 16716395.93
Total 2716918695.85 8108707394.70
10. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMB
Closing balance Opening balance
Item Book balance Bad debt provision Carrying amount Book balance Bad debt provision Carrying amount Discount rate range
Finance lease payments 9963461389.49 1103339754.72 8860121634.77 8144589680.94 182532601.30 7962057079.64 4%-12%
Less: Unrealised financing income 351498895.63 351498895.63 462276887.88 462276887.88
Less: long-term receivables due
within one year 4624874317.67 585446099.51 4039428218.16 7004375494.85 159382707.55 6844992787.30
Subtotal 4987088176.19 517893655.21 4469194520.98 677937298.21 23149893.75 654787404.46
Deposit for finance lease 412239088.74 412239088.74 734530650.26 734530650.26
Less: Unrealised financing income 39232762.59 39232762.59 59195417.77 59195417.77
Less: non-current assets due within
one year 183315989.18 183315989.18 129546826.00 129546826.00
Subtotal 189690336.97 189690336.97 545788406.49 545788406.49
Total 5176778513.16 517893655.21 4658884857.95 1223725704.70 23149893.75 1200575810.95 –
2020 ANNUAL REPORT 221
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
10. Long-term receivables (Cont’d)
(1) Particulars of long-term receivables (Cont’d)
Particulars of bad debt provision
Unit: RMB
Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
Category Amount Percentage Amount
Expected
credit loss
rate (%) Carrying amount Amount Percentage Amount
Expected
credit loss
rate (%) Carrying amount
Accounts receivable assessed
individually for impairment 4839015749.92 93.48% 516412930.95 10.67% 4322602818.97 174135402.70 14.23% 20025571.31 11.50% 154109831.39
Of which:
Financial leasing 4839015749.92 93.48% 516412930.95 10.67% 4322602818.97 174135402.70 14.23% 20025571.31 11.50% 154109831.39
Accounts receivable assessed
collectively for impairment 337762763.24 6.52% 1480724.26 0.44% 336282038.98 1049590302.00 85.77% 3124322.44 0.30% 1046465979.56
Of which:
Receivables not past due 148072426.27 2.86% 1480724.26 1.00% 146591702.01 503801895.51 41.17% 3124322.44 0.62% 500677573.07
Overdue receivables
Deposits receivable 189690336.97 3.66% 189690336.97 545788406.49 44.60% 545788406.49
Total 5176778513.16 100% 517893655.21 10.00% 4658884857.95 1223725704.70 100% 23149893.75 1.89% 1200575810.95
Accounts receivable assessed collectively for impairment:
Collectively assessed item: receivables from unrelated party customers
Closing balance
Book
balance
Bad debt
provision
Expected credit
loss rate (%)
Within 1 year
1 – 2 years 52304926.34 523049.26 1.00%
2 – 3 years 95767499.93 957675.00 1.00%
Total 148072426.27 1480724.26 1.00%
SHANDONG CHENMING PAPER HOLDINGS LIMITED222
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
10. Long-term receivables (Cont’d)
(1) Particulars of long-term receivables (Cont’d)
Collectively assessed item: Deposits receivable
Closing balance
Book
balance
Bad debt
provision
Expected credit
loss rate (%)
Within 1 year 35500000.00
1 to 2 years 19073080.05
2 to 3 years 100917256.92
Over 3 years 34200000.00
Total 189690336.97
Changes in carrying book balances with significant changes in loss provision for the year
□ Applicable √ Not applicable
(2) Provision recovery or reversal of bad debt provision for the period
The bad debt provision for the period amounted to RMB494743761.46.
2020 ANNUAL REPORT 223
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
11. Long-term equity investments
Unit: RMB
Change for the period
Investee
Opening balance
(carrying amount)
Additional
contribution
Withdrawn
contribution
Investment
gain or loss
recognised under
equity method
Adjustment
of other
comprehensive
income
Other
change in
equity interest
Distribution of
cash dividend
or profit declared
Impairment
provision Others
Closing balance
(carrying amount)
Closing
balance of
impairment
provision
I. Joint venture
Shouguang Chenming Huisen New-style
Construction Materials Co. Ltd. 3789667.61 2356074.42 1200000.00 4945742.03
Weifang Sime Darby West Port Co. Ltd. 89726671.76 -7783164.84 81943506.92
Shouguang Meite Environmental
Technology Co. Ltd. 5880000.00 11916800.00 -709607.56 17087192.44
Weifang Chenrong New and Old Kinetic
Energy Conversion Equity Investment
Fund Partnership (Limited Partnership) 158000000.00 42000000.00 -294363.72 199705636.28
Weifang Xingxing United Chemical Co.Ltd. 93816557.39 -1942172.27 91874385.12
Subtotal 351212896.76 53916800.00 -8373233.97 1200000.00 395556462.79
II. Associates
Jiangxi Jiangbao Media Colour Printing
Co. Ltd. 0.00
Zhuhai Dechen New Third Board Equity
Investment Fund Company (Limited
Partnership 52412989.91 -11330.29 52401659.62
Ningbo Kaichen Huamei Equity Investment
Fund Partnership (Limited Partnership) 199528847.52 -978921.25 198549926.27
Jiangxi Chenming Port Co. Ltd. 1690359.66 -379774.01 1310585.65
Chenming (Qingdao) Asset Management
Co. Ltd. 8669491.17 5060.01 8674551.18
Goldtrust Futures Co. Ltd. 192732957.71 -3366026.12 189366931.59
Guangdong Nanyue Bank Co. Ltd. 2800091481.01 285126660.17 -12359143.50 12560712.33 3060298285.35
Subtotal 3255126126.98 280395668.51 -12359143.50 12560712.33 3510601939.66
Total 3606339023.74 53916800.00 272022434.54 -12359143.50 13760712.33 3906158402.45
12. Other non-current financial assets
Unit: RMB
Item Closing balance Opening balance
Investment in debt instruments 4000000.00
Investment in equity instruments 141910000.00 147445653.55
Total 145910000.00 147445653.55
SHANDONG CHENMING PAPER HOLDINGS LIMITED224
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
13. Investment property
(1) Investment property under the cost method
√ Applicable □ Not applicable
Unit: RMB
Item
Housing and
building structure Land use rights
Construction
in progress Total
I. Original carrying amount
1. Opening balance 5433710034.39 5433710034.39
2. Increase during the period 1014473350.39 1014473350.39
(1) Purchase 10709541.67 10709541.67
(2) Transferred from inventories\fixed
assets\construction in progress 286758670.97 286758670.97
(3) Additions arising from business
combinations 717005137.75 717005137.75
3. Decrease during the period 1961190.00 1961190.00
(1) Disposal 1961190.00 1961190.00
(2) Other transfer
4. Closing balance 6446222194.78 6446222194.78
II. Accumulated depreciation and
accumulated amortisation
1. Opening balance 351347741.28 351347741.28
2. Increase during the period 152198763.17 152198763.17
(1) Provision or amortisation 150933704.07 150933704.07
(2) Additions arising from business
combinations 1265059.10 1265059.10
3. Decrease during the period 483877.67 483877.67
(1) Disposal 483877.67 483877.67
(2) Other transfer
4. Closing balance 503062626.78 503062626.78
III. Provision for impairment
1. Opening balance
2. Decrease during the period
(1) Provision
3. Decrease during the period
(1) Disposal
(2) Other transfer
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 5943159568.00 5943159568.00
2. Opening carrying amount 5082362293.11 5082362293.11
2020 ANNUAL REPORT 225
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
14. Fixed assets
Unit: RMB
Item Closing balance Opening balance
Fixed assets 37651706658.97 34439935032.69
Total 37651706658.97 34439935032.69
(1) Particulars of fixed assets
Unit: RMB
Item
Housing and building
structure
Machinery and
equipment Vehicles
Electronic equipment
and others Total
I. Original carrying amount:
1. Opening balance 9941580880.78 39482080460.52 351029607.21 398368057.18 50173059005.69
2. Increase during the period 1159957423.18 4626304659.86 4810188.60 59287107.33 5850359378.97
(1) Acquisition 89321894.44 36225041.18 3469077.34 50844608.77 179860621.73
(2) Transferred from
construction in progress 1024945310.08 4522259167.24 793318.17 5547997795.49
(3) Additions arising from
business combinations 45690218.66 67820451.44 1341111.26 7649180.39 122500961.75
3. Decrease during the period 460878257.31 15966928.92 47223131.15 1194063.10 525262380.48
(1) Disposal or retirement 174119586.34 15966928.92 47223131.15 1194063.10 238503709.51
(2) Transfer to investment
property 286758670.97 286758670.97
4. Closing balance 10640660046.65 44092418191.46 308616664.66 456461101.41 55498156004.18
II. Accumulated depreciation
1. Opening balance 1796330000.77 13297091535.53 188896834.23 257770900.14 15540089270.67
2. Increase during the period 287122672.66 1840044300.88 24266346.27 19855731.97 2171289051.78
(1) Provision 273654601.31 1796694649.00 23311255.85 15686743.12 2109347249.28
(2) Additions arising from
business combinations 13468071.35 43349651.88 955090.42 4168988.85 61941802.50
3. Decrease during the period 27629344.79 11245005.10 31125130.36 863988.17 70863468.42
(1) Disposal or retirement 27629344.79 11245005.10 31125130.36 863988.17 70863468.42
4. Closing balance 2055823328.64 15125890831.31 182038050.14 276762643.94 17640514854.03
III. Provision for impairment
1. Opening balance 27808852.79 157777407.54 13889.13 7434552.87 193034702.33
2. Increase during the period 13409318.95 681.05 13410000.00
(1) Provision 13409318.95 681.05 13410000.00
3. Decrease during the period 510211.15 510211.15
(1) Disposal or retirement 510211.15 510211.15
4. Closing balance 27808852.79 170676515.34 13889.13 7435233.92 205934491.18
IV. Carrying amount
1. Closing carrying amount 8557027865.22 28795850844.81 126564725.39 172263223.55 37651706658.97
2. Opening carrying amount 8117442027.22 26027211517.45 162118883.85 133162604.17 34439935032.69
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VII. Notes to items of the consolidated financial statements (Cont’d)
14. Fixed assets (Cont’d)
(2) Particulars of temporarily idle fixed assets
Unit: RMB
Item
Original carrying
amount
Accumulated
depreciation
Provision for
impairment Carrying amount Remark
Housing and building
structure 83342314.23 23592451.29 3103215.82 56646647.12
Machinery and equipment 1034606835.60 525012703.51 165810094.18 343784037.91
Transportation equipment 12200.00 10980.00 1220.00
Electronic equipment and
others 1086525.74 975604.67 7868.32 103052.75
Total 1119047875.57 549591739.47 168921178.32 400534957.78
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMB
Item Carrying amount
Reason for not yet
obtaining property
right certificates
Housing and building structure (Zhanjiang Chenming Pulp
& Paper Co. Ltd.) 1111166398.82 Under application
Housing and building structure (Huanggang Chenming
Pulp & Paper Co. Ltd.) 535764603.22 Under application
Housing and building structure (Shouguang Meilun Paper
Co. Ltd.) 455610370.30 Under application
Housing and building structure (Jilin Chenming Paper Co.Ltd.) 390201069.69 Under application
Housing and building structure (Jiangxi Chenming Paper
Co. Ltd.) 211164032.89 Under application
Housing and building structure (Shandong Chenming
Paper Holdings Limited) 117902833.18 Under application
Housing and building structure (Wuhan Chenming
Hanyang Paper Holdings Co. Ltd.) 79389207.27 Under application
Housing and building structure (Chengdu Chenming
Culture Communication Co. Ltd.) 13289619.14 Under application
2020 ANNUAL REPORT 227
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
15. Construction in progress
Unit: RMB
Item Closing balance Opening balance
Construction in progress 171178595.73 5467321406.80
Materials for project 8679346.10 8801522.15
Total 179857941.83 5476122928.95
(1) Particulars of construction in progress
Unit: RMB
Closing balance Opening balance
Item Book balance
Impairment
provision Carrying amount Book balance
Impairment
provision Carrying amount
High-end cultural paper (Meilun) 179056842.38 179056842.38
Huanggang Chenming
integrated forestry pulp and
paper project 4601844646.27 4601844646.27
Biomass power generation
project 193548348.79 193548348.79
Membrane treatment project
(Zhanjiang Chenming) 25833751.07 25833751.07
Technological modification
project 59209256.24 59209256.24 67088127.35 67088127.35
Upgrading and renovation of
back pressure unit of captive
power plant 263626439.57 263626439.57
Fly ash cement ceramsite
production project 54246139.19 54246139.19 51767628.00 51767628.00
Light calcium carbonate project
(Meilun) 13836002.27 13836002.27 288205.15 288205.15
Others 73575656.20 29688458.17 43887198.03 113792158.63 29524740.41 84267418.22
Total 200867053.90 29688458.17 171178595.73 5496846147.21 29524740.41 5467321406.80
SHANDONG CHENMING PAPER HOLDINGS LIMITED228
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VII. Notes to items of the consolidated financial statements (Cont’d)
15. Construction in progress (Cont’d)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Project name
Budget
(RMB0000) Opening balance
Increase during
the period
Transfer to fixed
asset during
the period
Other
deductions
during the
period
Closing
balance
Accumulated
Investment
to budget
Construction
in progress
Accumulated
capitalised
interest
Of which:
capitalised
interest
amount during
the period
Capitalisation
rate of the
interest
amount for
the period Source of fund
Upgrading and renovation of back pressure unit
of captive power plant (Shandong Chenming)
27400.00 263626439.57 21178256.31 284804695.88 0.00 96.95% 100.00 2652039.64 1830034.66 5.35% Self-owned funds
and borrowings
New cultural paper machine (Shouguang Meilun) 376102.00 179056842.38 72431388.46 251488230.84 0.00 95.37% 100.00 Self-owned funds
and borrowings
Forestry-pulp-paper project (Huanggang
Chenming)
500000.00 4601844646.27 121933422.99 4723778069.26 0.00 94.80% 100.00 241118047.00 17272974.15 5.94% Self-owned funds
and borrowings
Biomass power generation project (Huanggang
Chenming)
20000.00 193548348.79 4419515.45 197967864.24 0.00 98.98% 100.00 Self-owned funds
and borrowings
Total 923502.00 5238076277.01 219962583.21 5458038860.22 – – 243770086.64 19103008.81 11.29% –
(3) Particulars of provision for construction in progress impairment
Unit: RMB
Item
Amount for
the period
Reason for
the provision
Differentiated viscose and spinning and chemical project 126359.27 Project change
Huanggang Chenming northern district natural gas project 37358.49 Project change
Total 163717.76 –
(4) Materials for project
Unit: RMB
Closing balance Opening balance
Item Book balance
Impairment
provision
Carrying
amount Book balance
Impairment
provision
Carrying
amount
Special materials 8679346.10 8679346.10 8801522.15 8801522.15
Total 8679346.10 8679346.10 8801522.15 8801522.15
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VII. Notes to items of the consolidated financial statements (Cont’d)
16. Right-of-use assets
Unit: RMB
Item Land use rights
Housing and
building structure Total
I. Original carrying amount
1. Opening balance 163334964.90 163334964.90
2. Increase during the period 55766425.37 5571378.54 61337803.91
(1) Lease 55766425.37 5571378.54 61337803.91
3. Decrease during the period
4. Closing balance 219101390.27 5571378.54 224672768.81
II. Accumulated depreciation
1. Opening balance 11193082.85 11193082.85
2. Increase during the period 7355907.95 247058.26 7602966.21
(1) Provision 7355907.95 247058.26 7602966.21
3. Decrease during the period
4. Closing balance 18548990.80 247058.26 18796049.06
III. Provision for impairment
1. Opening balance
2. Increase during the period
3. Decrease during the period
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 200552399.47 5324320.28 205876719.75
2. Opening carrying amount 152141882.05 152141882.05
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VII. Notes to items of the consolidated financial statements (Cont’d)
17. Intangible assets
(1) Particulars of intangible assets
Unit: RMB
Item Land use rights Patents
Unpatented
technology Software
Certificates of
third party right Total
I. Original carrying amount
1. Opening balance 2181863551.51 20682183.44 15908674.87 2218454409.82
2. Increase during the period 117065481.72 27358613.05 891779.81 145315874.58
(1) Acquisition 101130000.00 519053.10 101649053.10
(2) Internal research and
development
(3) Additions arising from
business combinations 15935481.72 27358613.05 372726.71 43666821.48
3. Decrease during the period 107209008.00 107209008.00
(1) Disposal 107209008.00 107209008.00
4. Closing balance 2191720025.23 27358613.05 21573963.25 15908674.87 2256561276.40
II. Accumulated amortisation
1. Opening balance 411294258.75 19091821.06 7006425.50 437392505.31
2. Increase during the period 46526592.72 911953.77 1470131.84 5298404.52 54207082.85
(1) Provision 43072342.03 1320348.90 5298404.52 49691095.45
(2) Business combinations 3454250.69 911953.77 149782.94 4515987.40
3. Decrease during the period 9662821.09 9662821.09
(1) Disposal 9662821.09 9662821.09
4. Closing balance 448158030.38 911953.77 20561952.90 12304830.02 481936767.07
III. Impairment provision
1. Opening balance
2. Increase during the period
(1) Provision
3. Decrease during the period
(1) Disposal
4. Closing balance
IV. Carrying amount
1. Closing carrying amount 1743561994.85 26446659.28 1012010.35 3603844.85 1774624509.33
2. Opening carrying amount 1770569292.76 1590362.38 8902249.37 1781061904.51
Explanation:
(1) For details of restricted ownership please refer to note VII. 63.
(2) Certificates of third party right refer to enterprise emission rights with the expiry date ranging between 14 September 2018 and
13 September 2021.
2020 ANNUAL REPORT 231
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VII. Notes to items of the consolidated financial statements (Cont’d)
18. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Increase during
the period
Decrease during
the period
Name of investee or event
generating goodwill
Opening
balance
Arising from
business
combinations Disposal Closing balance
Shandong Chenming Panels Co.Ltd. 5969626.57 5969626.57
Jilin Chenming Paper Co. Ltd. 14314160.60 14314160.60
Kunshan Tuoan Plastic Products
Co. Ltd. 26946905.38 26946905.38
Total 20283787.17 26946905.38 47230692.55
(2) Provision for impairment of goodwill
Unit: RMB
Increase during
the period
Decrease during
the period
Name of investee or event
generating goodwill
Opening
balance Provision Disposal
Closing
balance
Jilin Chenming Paper Co. Ltd. 14314160.60 14314160.60
Total 14314160.60 14314160.60
Explanation: The Company assessed the recoverable amount of goodwill and determined that the goodwill related to the Company’s
panel and plastic business was not impaired. With the category of the principal activities as the basis for determining
the reporting segments the Company regards Shandong Chenming Panels Co. Ltd. and Kunshan Tuoan Plastic
Products Co. Ltd. as two separate asset groups. Their recoverable amount is determined based on the present value
of the estimated future cash flows. Future cash flows are determined based on the financial budget for 2021 to 2025 as
approved by the management and adopt 7.28% as the discount rate which is the interest rate of the 5-year bonds issued
by the Company in 2018. The cash flows for more than 5 years are calculated based on the growth rate of 5%. Other key
assumptions used in estimating future cash flows include the estimated sales and gross profit based on the performance
of such asset group in the past and the expectation to market development by the management. The management
believes that any reasonable change in the above assumptions will not result in the total book value of the asset group
Shandong Chenming Panels Co. Ltd. and the asset group Kunshan Tuoan Plastic Products Co. Ltd. exceeding its
recoverable amount.
SHANDONG CHENMING PAPER HOLDINGS LIMITED232
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
19. Long-term prepaid expenses
Unit: RMB
Item
Opening
balance
Increase during
the period
Amortisation
during the
period
Other
deductions
Closing
balance
Woodland expenses 9642224.60 605796.00 9036428.60
Others 38561184.11 5774110.26 2310237.48 42025056.89
Total 48203408.71 5774110.26 2916033.48 51061485.49
20. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB
Closing balance Opening balance
Item
Deductible
temporary
difference
Deferred income
tax assets
Deductible
temporary
difference
Deferred income
tax assets
Provision for impairment of
assets 2210402262.82 509732949.61 1791356735.71 417688820.31
Unrealised profit arising from
intra-group transactions 205628008.40 51407002.10 164089227.26 41022306.82
Deductible loss 2445427000.05 400915339.22 2243481924.83 344125106.67
Outstanding payables 538679932.17 88774034.53 446580396.87 68163018.91
Deferred income 127445713.46 21358762.71 116165951.14 21443378.33
Debt reconstructing 47906363.94 11976590.97
Total 5575489280.84 1084164679.14 4761674235.81 892442631.04
(2) Deferred income tax liabilities before offsetting
Unit: RMB
Closing balance Opening balance
Item
Taxable
temporary
differences
Deferred
income tax
liabilities
Taxable
temporary
differences
Deferred
income tax
liabilities
Asset valuation increment
from business combinations
involving entities not under
common control 43816906.47 6572535.97
Debt reconstructing 5644502.36 1411125.59
Total 43816906.47 6572535.97 5644502.36 1411125.59
2020 ANNUAL REPORT 233
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
20. Deferred income tax assets/deferred income tax liabilities (Cont’d)
(3) The breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary difference 59564220.72 352057221.14
Deductible loss 776900858.71 521737724.53
Total 836465079.43 873794945.67
(4) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMB
Year Closing amount Opening amount Remark
2020 674989.71
2021 66234527.65 185647.61
2022 187801057.21 11628813.14
2023 138151854.93 164859774.53
2024 108619258.72 344388499.54
2025 276094160.20
Total 776900858.71 521737724.53 –
SHANDONG CHENMING PAPER HOLDINGS LIMITED234
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
21. Other non-current assets
Unit: RMB
Closing balance Opening balance
Item Book balance
Impairment
provision
Carrying
amount Book balance
Impairment
provision
Carrying
amount
Prepayments for land
transfer fees 101130000.00 101130000.00
Prepayments for
engineering and
equipment 58886418.75 58886418.75 62945826.67 62945826.67
Prepayments for
properties 9800000.00 9800000.00
Total 58886418.75 58886418.75 173875826.67 173875826.67
22. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Mortgage borrowings 279524407.05 859312833.51
Pledged borrowings 35075833.33 180000000.00
Guaranteed borrowings 7536960272.39 7082088423.98
Credit borrowings 8189875845.09 7174060275.17
Discounted borrowings 16752556600.00 21587694481.53
Total 32793992957.86 36883156014.19
Explanation of the classification of short-term borrowings:
① For classification and amount of mortgage borrowing and mortgage borrowing please see 1. Monetary funds and 63. Assets
with restricted ownerships or right to use in Note VII;
② For classification and amount of pledged borrowing and mortgage borrowing please see notes in relation please see 1.
Monetary funds and 63. Assets with restricted ownerships or right to use in Note VII;
③ Overdue short-term borrowings: total outstanding accounts payable as at the end of the year amounted to RMB0.00.
2020 ANNUAL REPORT 235
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
23. Bills payable
Unit: RMB
Item Closing balance Opening balance
Commercial acceptance bills 984661462.19 625325798.18
Bank acceptance bills 2014275274.15 889722407.82
Total 2998936736.34 1515048206.00
Total outstanding bills payable as at the end of the period amounted to RMB0.00.
24. Accounts payable
(1) Particulars of accounts payable
Unit: RMB
Item Closing balance Opening balance
Loans 3416069031.99 3393786063.51
Payment for engineering 139679646.76 408694349.00
Payment for equipment 260995383.02 312292221.48
Others 225686670.54 236314947.99
Total 4042430732.31 4351087581.98
(2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
BEIJING GUODIAN FUTONG SCIENCE AND DEVELOPMENT CO. LTD. 46122225.40 Quality guarantee
deposit
OMYA HAIMING (NANCHANG) CHEMICAL CO. LTD. 16000000.00 Quality guarantee
deposit
CHINA ENERGY ENGINEERING GROUP GUANGZHOU ELECTRIC
POWER DESIGN INSTITUTE CO. LTD.
14128415.00 Quality guarantee
deposit
ZHEJIANG JNDIA PIPELINE INDUSTRY CO. LTD. 10556896.91 Quality guarantee
deposit
GUANGXI CONSTRUCTION ENGINEERING GROUP NO.1
INSTALLATION CO.LTD.
10551074.40 Quality guarantee
deposit
Total 97358611.71 –-
SHANDONG CHENMING PAPER HOLDINGS LIMITED236
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
25. Contract liabilities
Unit: RMB
Item Closing balance Opening balance
Advance loans 1051147044.74 968082063.13
Total 1051147044.74 968082063.13
26. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance
I. Short-term remuneration 189006380.72 1296897761.88 1254154559.51 231749583.09
II. Retirement benefit plan-defined
contribution scheme 1223502.80 166575509.35 167172009.93 627002.22
III. Termination benefits 648217.62 648217.62
Total 190229883.52 1464121488.85 1421974787.06 232376585.31
(2) Particulars of short-term remuneration
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance
1. Salaries bonuses allowance and subsidies 120634999.88 1044444322.93 994436561.07 170642761.74
2. Staff welfare 49985551.24 49985551.24
3. Social insurance premium 1871932.30 81044996.18 82331320.75 585607.73
Of which: Medical insurance premium 840248.82 74898536.86 75163371.97 575413.71
Work-related injury insurance
premium 23069.88 3288764.35 3308295.63 3538.60
Maternity insurance premium 1008613.60 2857694.97 3859653.15 6655.42
4. Housing provident funds 8856543.62 95606990.68 96464622.92 7998911.38
5. Union funds and workers’ education 35831023.93 25395902.46 30452086.91 30774839.48
6. Other short-term remuneration 21811880.99 419998.39 484416.62 21747462.76
Total 189006380.72 1296897761.88 1254154559.51 231749583.09
2020 ANNUAL REPORT 237
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
26. Staff remuneration payables (Cont’d)
(3) Defined contribution plan
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance
Basic pension insurance premiums 1033762.42 160480797.91 160954876.73 559683.60
Unemployment insurance premiums 189740.38 6094711.44 6217133.20 67318.62
Total 1223502.80 166575509.35 167172009.93 627002.22
27. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 294438467.26 81745671.90
Enterprise income tax 274637537.42 166389232.03
Individual income tax 41648852.90 29565363.87
Urban maintenance and construction tax 10137043.67 5844684.79
Land use tax 7522959.20 8206677.02
Property tax 9232558.17 8239300.78
Educational surcharges and others 8112168.27 6850900.34
Land appreciation tax 2024028.20
Environmental Protection Tax 2263933.52
Resource tax 255.00
Stamp duty 2630037.02 4712286.00
Total 652647840.63 311554116.73
SHANDONG CHENMING PAPER HOLDINGS LIMITED238
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
28. Other payables
Unit: RMB
Item Closing balance Opening balance
Interest payable 178992959.85 208189699.15
Other payables 1777722407.98 2386059927.39
Total 1956715367.83 2594249626.54
(1) Interest payable
Unit: RMB
Item Closing balance Opening balance
Interest on Corporate Bonds 17401472.25 103432934.98
Interest on borrowings 81495654.29 27960930.86
Interest on medium-term notes 80095833.31 76795833.31
Total 178992959.85 208189699.15
(2) Other payables
1) Other payables by nature
Unit: RMB
Item Closing balance Opening balance
Open credit 625546672.65 1287822732.06
Deposit 259341777.01 451756402.26
Accrued expenses 525268287.87 506095837.14
The obligation to repurchase shares under the share
incentive scheme 226860000.00
Others 140705670.45 140384955.93
Total 1777722407.98 2386059927.39
2020 ANNUAL REPORT 239
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
28. Other payables (Cont’d)
(2) Other payables (Cont’d)
2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Reasons
NINE DRAGONS DAWEI HOLDINGS CO. LTD. 30000000.00 Deposit
STATE-OWNED SHOUGUANG QINGSHUIPO FARM 8800000.00 Open credit
WUHAN TIANRUI PAPER CO. LTD. 7341708.00 Deposit
SHOUGUANG LONGYUAN PAPER COATING
CO. LTD. 4500000.00 Deposit
NANJING BAIJU RENEWABLE RESOURCES
CO. LTD. 4020000.00 Deposit
Total 57004704.17 —
29. Non-current liabilities due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 2935835697.30 2520582051.43
Bonds payable due within one year 899122500.00
Long-term payables due within one year 1621095530.96 2238647651.02
Lease liabilities due within one year 4606717.58 4606717.58
Other non-current liabilities due within one year 2599411670.09
Total 7160949615.93 5662958920.03
30. Other current liabilities
Unit: RMB
Item Closing balance Opening balance
Short-term bonds payable 157037833.35 222402500.00
Total 157037833.35 222402500.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED240
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
30. Other current liabilities (Cont’d)
Increase/decrease in short-term bonds payable:
Unit: RMB
Name of
commercial paper Par value Date of issue Term Amount Opening balance
Issue
during
the period
Interest at
par value
Amortisation
of premium/
discount
Redemption
during
the period Closing balance
2019 fourth tranche of
super & short-term
commercial paper 300000000.00 2019-4-30 270 days 299550000.00 52915000.00 52915000.00
2019 fifth tranche of
super & short-term
commercial paper 300000000.00 2019-5-24 270 days 299550000.00 11605000.00 1627500.00 50000.00 13282500.00
2019 sixth tranche of
super & short-term
commercial paper 300000000.00 2019-7-31 270 days 299550000.00 157882500.00 4777500.00 150000.00 162810000.00
2020 first tranche of
super & short-term
commercial paper 300000000.00 2020-4-22 270 days 299550000.00 299550000.00 12130833.35 450000.00 155093000.00 157037833.35
Total 1200000000.00 — — 1198200000.00 222402500.00 299550000.00 18535833.35 650000.00 384100500.00 157037833.35
31. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledge borrowings 74823068.83
Secured borrowings 4618249057.65 5110291847.19
Guarantee borrowings 4319737618.80 5695114793.03
Credit borrowings 2075000000.00 780692035.94
Less: long-term borrowings due within 1 year 2935835697.30 2520582051.43
Total 8077150979.15 9140339693.56
Explanation of the classification of long-term borrowings:
For classification and amount of mortgage borrowing and mortgage borrowing please see 1. Monetary funds and 63. Assets with
restricted ownerships or right to use in Note VII.
For classification and amount of pledged borrowing and mortgage borrowing please see notes in relation please see 1. Monetary funds
and 63. Assets with restricted ownerships or right to use in Note VII.
2020 ANNUAL REPORT 241
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
32. Bonds payable
(1) Bonds payable
Unit: RMB
Item Closing balance Opening balance
17 Chenming Bond 01- Chenming Group 89957250.00 89070000.00
18 Chenming Bond 01- Chenming Group 350000000.00
Chenming USD Bonds 1096920101.46 1169200909.49
Total 1536877351.46 1258270909.49
(2) Increase/decrease in bonds payable (excluding other financial instruments such as Preference Shares and
Perpetual Bonds classified as financial liabilities)
Unit: RMB
Bond name Par value Date of issue Term Amount Opening balance
Issue during
the period
Interest at
par value
Amortisation
of premium/
discount
Redemption
during the period
Changes
in foreign
exchange
gains and
losses Closing balance
17 Chenming
Bond
01-Chenming
Group 1200000000.00 2017/8/22 5年 1198200000.00 89070000.00 6552000.00 887250.00 6552000.00 89957250.00
18 Chenming
Bond
01- Chenming
Group 350000000.00 2018/4/2 5年 350000000.00 899122500.00 350000000.00 25480000.00 924602500.00 350000000.00
Chenming
USD Bonds 1137120600.00 2019/8/6 2.6年 1125276863.46 1169200909.49 104934612.24 3588560.35 104934612.24 -75869368.38 1096920101.46
Total 2687120600.00 – – 2673476863.46 2157393409.49 350000000.00 136966612.24 4475810.35 1036089112.24 -75869368.38 1536877351.46
Less: payable due
within one year 899122500.00
Total 2687120600.00 1258270909.49 350000000.00 136966612.24 4475810.35 1036089112.24 -75869368.38 1536877351.46
33. Lease liabilities
Unit: RMB
Item Closing balance Opening balance
Lease payments payable 85933149.45 90539867.03
Less: Unrecognised financing expenses 21054661.97 26236020.80
Less: Lease liabilities due within one year 4606717.58 4606717.58
Total 60271769.90 59697128.65
SHANDONG CHENMING PAPER HOLDINGS LIMITED242
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
34. Long-term payables
Unit: RMB
Item Closing balance Opening balance
Long-term payables 2295309357.74 3321535538.94
Total 2295309357.74 3321535538.94
(1) By nature
Unit: RMB
Item Closing balance Opening balance
Retention for the financial leasing operations 64196192.92 160190103.51
China Development Bank Special funds 517500000.00 595000000.00
Contributions by other partners 34210000.00
Financial leasing 3300498695.78 4804993086.45
Subtotal 3916404888.70 5560183189.96
Less: Long-term payables due within 1 year 1621095530.96 2238647651.02
Total 2295309357.74 3321535538.94
Other explanations:
Contributions by other partners refer to the contributions made by other partners to the Company’s special structured entity namely
Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) and such contributions are
reclassified as financial liabilities on a consolidation basis.
35. Provisions
Unit: RMB
Item Closing balance Opening balance Reason
Pending litigation 325259082.28 325259082.28
Losses from
Arjo’s lawsuit
Total 325259082.28 325259082.28 —
Other explanations including the explanations on significant assumptions and estimation related to significant provision:
In February 2017 Arjowiggins HKK2 Limited (“HKK2 Company”) submitted a H share winding-up petition to Hong Kong High Court due to a
joint venture dispute which required a compensation for economic loss of RMB167 million and interest thereon and legal costs of USD3.54
million and arbitration fee of HK$3.3 million and interest thereon to HKK2. The Company made provision of RMB320 million for such pending
litigation in 2017. On 5 August 2020 Hong Kong High Court rejected the Group’s appeal. The Group is seeking ways of appeal again to
safeguard the lawful rights and interests of the Company and the investor community.
2020 ANNUAL REPORT 243
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
36. Deferred income
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance Reason
Government grants 1771013335.11 27420000.00 160436698.60 1637996636.51 Financial provision
Total 1771013335.11 27420000.00 160436698.60 1637996636.51 —
Items in respect of government grants:
Unit: RMB
Item Opening balance
New grants
during
the period
Include in
non-operating
income for
the period
Include in
other income
for the period
Amount
charged
against cost
expenses Other changes Closing balance
Asset-related/
income-related
Project fund for
National Key
Technology
Research and
Development
Program 1452525.00 0.00 0.00 164700.00 0.00 0.00 1287825.00 Asset-related
Sewage treatment
and water
conservation
transformation
project 63274136.71 0.00 0.00 3673020.38 0.00 0.00 59601116.33 Asset-related
Huanggang
forestry-pulp-
paper project 681564072.66 0.00 0.00 28398506.40 0.00 0.00 653165566.26 Asset-related
Zhanjiang
forestry-pulp-
paper project 67047201.50 0.00 0.00 12145971.39 0.00 0.00 54901230.11 Asset-related
Industrial
logistics park
reconstruction
compensation 51960000.00 0.00 0.00 0.00 0.00 51960000.00 0.00 Asset-related
Financial subsidies
for technical
transformation
project 168182448.80 0.00 0.00 12496307.72 0.00 0.00 155686141.08 Asset-related
Funding for
environmental
protection 700228305.19 27420000.00 0.00 50008737.63 0.00 0.00 677639567.56 Asset-related
Others 37304645.25 1589455.08 35715190.17 Asset-related
Total 1771013335.11 27420000.00 0.00 108476698.60 0.00 51960000.00 1637996636.51
SHANDONG CHENMING PAPER HOLDINGS LIMITED244
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
37. Other non-current liabilities
Unit: RMB
Item Closing balance Opening balance
Medium-term notes 789521686.07 3042841328.86
Total 789521686.07 3042841328.86
38. Share capital
Unit: RMB
Increase/decrease during the year (+/-)
Opening balance New issue Bonus issue
Shares
converted
from reserves Others Subtotal Closing balance
Total number of shares 2904608200.00 79600000.00 0.00 0.00 0.00 79600000.00 2984208200.00
39. Other equity instruments
(1) Preference Shares Perpetual Bonds and other financial instruments outstanding at the end of the period
Outstanding
financial
instruments
Year of
issuance
Accounting
classification
Dividend
or interest
rate
Issue
price Issue size Amount (RMB)
Maturity date or
renewal status
Condition
for
conversion Conversion
17 Lu Chenming
MTN001 2017
Equity
instrument 6.80% 100.00 10000000.00 1000000000.00
No defined
maturity date None
Non-
convertible
Chenming You 01 2016
Equity
instrument 4.36% 100.00 22500000.00 2250000000.00
No defined
maturity date None
Non-
convertible
Chenming You 02 2016
Equity
instrument 5.17% 100.00 10000000.00 1000000000.00
No defined
maturity date None
Non-
convertible
Chenming You 03 2016
Equity
instrument 5.17% 100.00 12500000.00 1250000000.00
No defined
maturity date None
Non-
convertible
Total 5500000000.00
2020 ANNUAL REPORT 245
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
39. Other equity instruments (Cont’d)
(2) Changes in Preference Shares Perpetual Bonds and other financial instruments outstanding at the end of
the period
Unit: RMB
Beginning of the period Increase during the period Decrease during the period End of the period
Outstanding financial
instruments Number Carrying amount Number Carrying amount Number Carrying amount Number Carrying amount
17 Lu Chenming
MTN001 10000000.00 996000000.00 10000000.00 996000000.00
17 Lu Chenming
MTN002 20000000.00 1992000000.00 20000000.00 1992000000.00
Chenming You 01 22500000.00 2238750000.00 22500000.00 2238750000.00
Chenming You 02 10000000.00 999000000.00 10000000.00 999000000.00
Chenming You 03 12500000.00 1239750000.00 12500000.00 1239750000.00
Total 75000000.00 7465500000.00 20000000.00 1992000000.00 55000000.00 5473500000.00
Changes (increase or decrease) in other equity instruments during the period the reasons for such changes and the basis for relevant
accounting treatment:
① The Company issued medium-term notes amounting to RMB3000 million on 12 July and 28 September 2017 at a coupon rate
of 6.80% and 6.30% respectively. The proceeds net of issue costs amounted to RMB2988.00 million. On 28 September 2020
The Company exercised the option to redeem medium-term notes amounting to RMB2000 million.The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of redemption by
the Company. The interest rate of the bills is determined by the basic interest rate + the initial interest rate + 300BP. It has the
feature of capped interest rates and the capped interest rate does not exceed the average interest rate level of the same type
of instruments in the same industry in the same period; The Company has the right to defer any payment of interest. The right
of redemption of the notes is vested in the Company so that it is up to the Company to decide whether to redeem or not; the
priority of repayment of the principal and interest of medium-term notes for the period is the same as other outstanding debt
financing instruments of the issuers in the event of winding up because there is low probability of bankruptcy that the Company
will not be liable for contractual obligations to deliver cash or other financial assets expected.
Based on the above the notes do not contain any term giving rise to any contractual obligation to deliver cash or other financial
assets to any other entity or to exchange any financial asset or financial liability with any other entity under potential adverse
circumstances. Consequently they are eligible to be recognised and accounted for as equity instruments and included under
other equity instruments.② The Company non-publicly issued Preference Shares amounting to RMB4500 million on 17 March 17 August and 22 September
2016 respectively. The proceeds net of issue costs amounted to RMB4477.50 million.
SHANDONG CHENMING PAPER HOLDINGS LIMITED246
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
39. Other equity instruments (Cont’d)
(2) Changes in Preference Shares Perpetual Bonds and other financial instruments outstanding at the end of
the period (Cont’d)
Holders of Preference Shares participate in profit distribution in two portions namely the fixed dividend distributed based on a fixed
dividend rate and the distribution of retained earnings realised for the year.
Distribution of fixed dividend
According to the Articles of Association the Company shall distribute fixed dividends to holders of the Preference Shares at fixed
dividend rate if there are distributable profits after making good losses and the contribution to reserve fund according to law. The
Board is authorised by the general meeting to declare and pay all dividends on the Preference Shares in accordance with the issuance
plan under the framework and principles considered and approved in the general meeting in respect of the Preference Shares. The
general meeting of the Company has the right to cancel part of or all of the current dividends on the Preference Shares. However when
the general meeting of the Company considers the cancellation of part of or all of the current dividends on the Preference Shares
the Company shall inform the shareholders of Preference Shares at least 10 working days before the date of dividend payment in
accordance with the requirements of the related authorities.Participation in the distribution of retained earnings realised for the year
Holders of Preference Shares participate in the distribution of the retained earnings through receipt of cash which is non-cumulative
and non-deferrable. In the event of making good losses and the contribution to reserve fund according to law after receiving fixed
dividends at fixed dividend rate as agreed holders of Preference Shares can also participate in the distribution of the retained earnings
for the year in proportion. Specific terms are as follows: the retained earnings for the year arises from net profit attributable to owners
of the parent company on a consolidated basis upon distribution of relevant fixed income to holders of financial instruments such as
the Preference Shares which may be classified under equity. 50% of the retained earnings shall be distributed to holders of Preference
Shares and ordinary shareholders. Holders of Preference Shares shall participate in the distribution of the retained earnings by receiving
cash dividends and the ordinary shareholders shall participate in the distribution of the retained earnings by receiving cash dividends or
dividends on ordinary shares.
Based on the above the Preference Shares do not contain any term giving rise to any contractual obligation to deliver cash or other
financial assets to any other entity or to exchange any financial asset or financial liability with any other entity under potential adverse
circumstances. Consequently they were accounted for as other equity instruments – Preference Shares.
2020 ANNUAL REPORT 247
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
40. Capital reserves
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance
Capital premium
(share premium) 4416363920.09 215164804.37 12426743.15 4619101981.31
Other capital reserves 670322507.21 32486925.23 702809432.44
Total 5086686427.30 247651729.60 12426743.15 5321911413.75
Other explanations including changes (increase or decrease) during the period and reasons for such changes: During the year
① the Group implemented a share incentive scheme and issued additional restricted shares to its participants with an increase of capital
reserves of RMB146264104.00;
② the Group recognised the management fees during the vesting period for the share-based payments with an increase of capital reserves
of RMB32486925.23;
③ the Group repaid equity-settled Perpetual Bonds with a decrease of capital reserves of RMB8000000.00;
④ a capital increase of Shouguang Meilun Paper Co. Ltd. a subsidiary of the Group was contributed on the part of another
investor which causing a decrease in the Company’s shareholding without a loss of control and an increase of capital reserves of
RMB44819271.77;
⑤ the Group acquired the non-controlling interests of a subsidiary Wuhan Chenming Hanyang Paper Holdings Co. Ltd. with a decrease
of capital reserves of RMB4426743.15;
⑥ the Group acquired the non-controlling interests of a subsidiary Jiangxi Chenming Paper Co. Ltd. with an increase of capital reserves
of RMB24081428.60.
41. Treasury shares
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance
Share incentive 0.00 226860000.00 0.00 226860000.00
Total 0.00 226860000.00 0.00 226860000.00
Other explanations including changes (increase or decrease) during the period and reasons for such changes:
During the year the Company issued additional 79600000 A shares by implementing the share incentive scheme and recognised treasury
shares for the obligation to repurchase.
SHANDONG CHENMING PAPER HOLDINGS LIMITED248
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
42. Other comprehensive income
Unit: RMB
During the period
Item Opening balance
Incurred
before
income tax
for the period
Less: Transferred
from other
comprehensive
income in prior
periods to
profit or loss
during the period
Less: Transferred
from other
comprehensive
income in prior
periods to
retained
earnings
during the period
Less:
Income tax
expenses
Attributable to
parent company
after tax
Attributable to
minority
shareholders
after tax Closing balance
I. Other comprehensive income
that cannot be reclassified to
profit or loss in subsequent
periods
II. Other comprehensive income
that will be reclassified to
profit and loss in subsequent
periods -879452135.10 317765527.44 317765527.44 -561686607.66
Including: O ther
comprehensive
income that may
be reclassified
to profit and loss
under the equity
method -12359143.50 -12359143.50 -12359143.50
Translation differences
of financial statements
denominated in foreign
currency -879452135.10 330124670.94 330124670.94 -549327464.16
Total other comprehensive
income -879452135.10 317765527.44 317765527.44 -561686607.66
43. Surplus reserves
Unit: RMB
Item Opening balance
Increase during
the period
Decrease during
the period Closing balance
Statutory surplus reserves 1212009109.97 1212009109.97
Total 1212009109.97 1212009109.97
2020 ANNUAL REPORT 249
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
44. General risk reserves
Unit: RMB
Item Closing balance Opening balance
Decrease during
the period Closing balance
General risk reserves 74122644.20 74122644.20
Total 74122644.20 74122644.20
45. Retained profit
Unit: RMB
Item The period The prior period
Retained profit as at the end of the prior year before adjustment 9306269617.38 9107422690.85
Retained profit as at the beginning of the year after adjustment 9306269617.38 9107422690.85
Plus: Ne t profit for year attributable to shareholders of the parent
company 1712029078.52 1656566584.88
Less: Transfer of statutory surplus reserves 63120197.86
Transfer of general risk reserves 9998724.97
Ordinary dividend payable 437433593.74 697105968.00
Perpetual Bonds interest payable 194000000.00 194000000.00
Preferred shares interest payable 387101073.42 493494767.52
Ordinary dividend converted into share capital
Retained profit as at the end of the period 9999764028.74 9306269617.38
46. Revenue and operating costs
Unit: RMB
Amount for the year Amount for the prior year
Item Revenue Operating costs Revenue Operating costs
Principal activities 30047258084.97 23046708818.72 29591962733.76 22182591005.20
Other activities 689259911.93 598885367.49 803471339.59 567678744.18
Total 30736517996.90 23645594186.21 30395434073.35 22750269749.38
Whether the lower of the audited net profit before or after deducting extraordinary gains or losses is a negative
number
□ Yes √ No
SHANDONG CHENMING PAPER HOLDINGS LIMITED250
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
46. Revenue and operating costs (Cont’d)
Information related to revenue:
Unit: RMB
Category of contract
Machine-made
paper segment
Financial
segment Real estate Others Total
Type of goods 29021523071.50 964291738.17 106560951.52 644142235.71 30736517996.90
Including:
Machine-made paper 26799197492.54 26799197492.54
Financial leasing 935121026.20 935121026.20
Electricity and steam 195367954.91 195367954.91
Construction materials 419138839.41 419138839.41
Paper chemicals 144274657.39 144274657.39
Others 1882682966.66 29170711.97 106560951.52 225003396.30 2243418026.45
By geographical area 29021523071.50 964291738.17 106560951.52 644142235.71 30736517996.90
Including:
Domestic 25968365122.36 964291738.17 106560951.52 644142235.71 27683360047.76
Overseas 3053157949.14 3053157949.14
By the timing of delivery 29021523071.50 999978255.73 70874433.96 644142235.71 30736517996.90
Including:
Goods (at a point in time) 29011763488.80 641375975.70 29653139464.50
Services (within a certain
period) 9759582.70 999978255.73 70874433.96 2766260.01 1083378532.40
Breakdown of revenue from principal activities
① By industry
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
Machine-made paper 26799197492.54 21227455753.49 25911568864.47 20423499344.65
Financial leasing 935121026.20 127620095.42 1815459714.28 119934602.87
Paper chemicals 144274657.39 124475985.43 126550115.28 112807283.45
Electricity and steam 195367954.91 130435496.35 143725243.14 114507240.78
Construction materials 419138839.41 358729667.72 311264909.38 254581603.21
Others 2243418026.46 1676877187.80 2086865226.79 1724939674.42
Total 30736517996.91 23645594186.21 30395434073.35 22750269749.38
2020 ANNUAL REPORT 251
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
46. Revenue and operating costs (Cont’d)
② Machine-made paper by main product type
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
White paper board 7900414595.22 5764493788.34 6908899578.15 6047977623.29
Duplex press paper 6880399009.21 5658261879.44 7728877039.07 6009833104.71
Coated paper 4134523188.76 3253634912.22 3779487348.44 2875206350.48
Electrostatic paper 4052403877.82 3196464794.41 3270064358.54 2416568414.13
Anti-sticking raw paper 1118932774.91 868748128.10 1238578315.18 888415814.55
Household paper 531378922.70 502581030.04 620993038.46 534388532.97
Others 2181145123.92 1983271220.94 2364669186.63 1651109504.52
Total 26799197492.54 21227455753.49 25911568864.47 20423499344.65
③ Machine-made paper by geographical segment
Amount for the year Amount for the prior year
Name of industry Revenue Costs Revenue Costs
Mainland China 27683360047.76 21069825079.51 26788134394.76 19471104162.68
Other countries and regions 3053157949.14 2575769106.70 3607299678.59 3279165586.70
Total 30736517996.90 23645594186.21 30395434073.35 22750269749.38
④ Revenue from top 5 customers
Period
Total revenue from
top 5 customers
Percentage of the total revenue
in the same period (%)
2020 4206250003.00 13.68%
2019 3193575635.94 10.51%
SHANDONG CHENMING PAPER HOLDINGS LIMITED252
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
47. Taxes and surcharges
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Urban maintenance and construction tax 52280034.26 68851026.86
Educational surcharges 22418855.28 30207914.38
Resource tax 10367209.74 11038459.80
Property tax 68375017.95 70397206.93
Land use tax 29847867.46 34686247.44
Vehicle and vessel tax 125784.05 112050.62
Stamp duty 31389172.39 26151364.68
Local education surcharges 9679449.17 18602695.08
Water engineering funds 2683161.08 2576414.28
Land appreciation tax 2681494.52 701320.66
Others 20680809.50 12608739.08
Total 250528855.40 275933439.81
48. Selling and distribution expenses
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Wages 122235622.89 143945947.37
Depreciation expenses 12008055.46 12421773.86
Office expenses 3071737.33 4737474.20
Travel expenses 18618459.51 31547133.82
Selling commissions 27552636.35 8642790.19
Rental expenses 6714594.29 10481463.36
Hospitality expenses 55229939.72 66310236.64
Warehouse expenses 1108765.35 7548664.33
Others 51706545.01 35175241.08
Total 298246355.91 320810724.85
2020 ANNUAL REPORT 253
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
49. General and administrative expenses
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Wages and surcharges 320742683.51 336234528.59
Welfare expenses 64686363.40 51837962.58
Depreciation expenses 153853014.06 146845808.97
Amortisation of intangible assets and long-term expenses 44383804.21 48927936.41
Production interruption loss 94624006.41 146340924.01
Repair cost and consumption of materials 23829844.68 49131088.84
Audit fees 5668334.66 6131215.01
Travel expenses 16069151.86 23656024.87
Business hospitality expenses 87331837.47 101735867.20
Waste disposal expenses 9862736.52 8621732.91
Insurance premium 29822263.59 27737182.97
Office expenses 3759121.11 13277878.29
Others 170787498.91 174247241.19
Total 1025420660.39 1134725391.84
50. R&D expenses
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Installation expenses 1885550.14 880370.71
Depreciation expenses 62483794.25 47736244.65
Consumption of materials 875193790.53 656418640.23
Travel expenses 25245.51 163071.13
Wages and surcharges 148290430.65 136792729.52
Welfare expenses 4551325.39 3484889.21
Housing provident funds 9489172.29 4647016.68
Insurance premium 20343290.79 12437428.25
Union funds 779789.00 104485.65
Utilities 147453048.82 126993184.82
Other expenses 3859804.12 2654895.89
Total 1274355241.49 992312956.74
SHANDONG CHENMING PAPER HOLDINGS LIMITED254
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
51. Finance expenses
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Interest expenses 3144464077.81 3780373270.56
Less: capitalised interest amount 19103008.81 206508056.70
interest income 887004185.02 836491207.55
Foreign exchange gains and losses -27516846.19 -78262003.10
Bank charges and others 351225025.43 256917151.16
Total 2562065063.22 2916029154.37
52. Other income
Unit: RMB
Source of other income
Amount for
the period
Amount for
the prior period
Government grants – amortised deferred income included in profit or loss 108476698.60 91384862.50
Government grants – directly included in profit or loss 255407429.72 470171768.01
Total 363884128.32 561556630.51
53. Investment income
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Income from long-term equity investments accounted for using the
equity method 272022434.54 -2995932.01
Investment gain on disposal of long-term equity investments 16778042.01 176212409.13
Investment gain on disposal of other non-current financial assets 784345.77
Gains or losses on credit assignment -93431738.91
Investment gain debt reconstructuring -22005200.15
Total 173363537.49 174000822.89
2020 ANNUAL REPORT 255
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
54. Gain on change in fair value
Unit: RMB
Source of gain on change in fair value
Amount for
the period
Amount for
the prior period
Financial assets held for trading 10126787.86
Other non-current financial assets 9464346.45 46445653.55
Gain on change in fair value of consumable biological assets measured
at fair value -13329852.55 -19752911.94
Total 6261281.76 26692741.61
55. Credit impairment loss
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Bad debt loss of other receivables -47955924.76 -280868224.23
Bad debt loss of other payments -16633823.40
Bad debt loss of bills receivable 63022468.83 -173401791.27
Loss on debt restructuring impairment -55792548.82
Bad debt loss of financial lease payments -650157592.24 -523805364.41
Total -651724871.57 -1033867928.73
56. Loss on impairment of assets
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Loss on inventory impairment and impairment loss of performance
costs of contracts 61394424.83
Loss on long-term equity investments impairment -5994545.96
Loss on fixed asset impairment -13410000.00 -170552917.47
Loss on construction in progress impairment -163717.76 -5838644.59
Total -13573717.76 -120991683.19
SHANDONG CHENMING PAPER HOLDINGS LIMITED256
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
57. Asset disposal income
Unit: RMB
Source of asset disposal income
Amount for
the period
Amount for the
prior period
Gain on disposal of fixed assets (“-” denotes loss) 17450629.19 -29073731.05
Gain on disposal of intangible assets (“-” denotes loss) 8752868.37
Total 26203497.56 -29073731.05
58. Non-operating income
Unit: RMB
Item
Amount for
the period
Amount for
the prior period
Amount included in
extraordinary gains
or losses for
the period
government subsidy 577140958.93 86353174.56 577140958.93
Non-current assets damage and scrap profits 879060.70 1360844.76 879060.70
Unpaid debt 7086812.20 9170357.94 7086812.20
Fine income 1811183.88 3244945.04 1811183.88
Adjustment in equity book value 364597001.77
Others 13547672.44 28667590.80 13547672.44
Total 600465688.15 493393914.87 600465688.15
Government grants included in profit or loss for the period:
Unit: RMB
Grants item
Amount for
the period
Amount for the
prior period
Asset-related/
income-related
Grant income 43750958.93 44810674.56 Income-related
Relocation subsidy 533390000.00 Income-related
Inviting investments 41542500.00 Income-related
Total 577140958.93 86353174.56
2020 ANNUAL REPORT 257
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
59. Non-operating expenses
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Amounts included in
extraordinary gains
or losses for
the period
Donation 8922077.88 11947836.00 8922077.88
Loss on disposal of non-current assets 2178029.29 12610269.22 2178029.29
Others 1817128.52 4026488.78 1817128.52
Total 12917235.69 28584594.00 12917235.69
60. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Income tax expenses for the period 457778696.15 564800047.60
Deferred income tax expenses -191722048.10 -269619411.14
Total 266056648.05 295180636.46
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMB
Item Amount for the period
Total profit 2172269942.54
Income tax expenses calculated at statutory/applicable tax rates 325840491.38
Effect of different tax rates applicable to subsidiaries -33940524.87
Effect of adjustments for income tax for prior periods 26378994.07
Effect of income not subject to tax -199768992.13
Non-deductible costs expenses and losses 35054244.88
Effect of utilisation of previously unrecognised deductible loss on deferred income tax
assets -15434485.73
Effect of current unrecognised deductible temporary difference or deductible loss
arising from deferred tax income assets 268062142.88
Profit and loss of joint ventures and associates accounted for using the equity method 40803365.18
The effect of tax rate changes on the opening balance of deferred income tax -14899281.39
Tax effect of R & D fee deduction (listed with “-”) -136939306.22
The pre-tax deduction of the interest on Perpetual Bonds accounted as equity -29100000.00
Income tax expense 266056648.05
SHANDONG CHENMING PAPER HOLDINGS LIMITED258
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VII. Notes to items of the consolidated financial statements (Cont’d)
61. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Default penalty and fine 21312403.81 31483669.33
Finance expenses – Interest income 380426195.87 301405794.11
Income-related government grants 792045853.85 502905296.95
Open credit and other income 200271888.17 228147969.26
Net proceedings from the financial leasing business 3562339444.74 5885287081.31
Total 4956395786.44 6949229810.96
(2) Cash paid relating to other operating activities
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Financial institutions charge 244065319.39 249130994.84
Business hospitality expenses 114049421.75 134787611.84
Travel expenses 34480991.74 55277692.76
Office expenses 25301574.10 21976874.36
Transportation expenses 1098519658.39 1035450908.40
Leasing expenses 11613158.79 14283881.89
Waste disposal expenses 18878944.13 18686112.18
Insurance premium 30058435.52 19412563.18
Repair expenses 30764539.64 54630753.25
Cargo handling charges 36441851.25 37988391.76
Intermediary service expenses 49981129.73 43965039.03
Donation 8922077.88 11947836.00
Others 131699592.31 105542724.58
Total 1834776694.62 1803081384.07
2020 ANNUAL REPORT 259
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
61. Items on statements of cash flow (Cont’d)
(3) Cash received relating to other investing activities
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Recovery of consideration for equity transfer 409282077.65 767670000.00
Total 409282077.65 767670000.00
(4) Cash paid relating to other investing activities
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Prepayments for land 101130000.00
Total 101130000.00
(5) Cash received relating to other financing activities
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Short-term commercial paper 814457000.00 3081090437.86
Equipment leaseback 900000000.00 1717600000.00
Deposit for finance lease 362299603.12
Financial support from shareholders 332440865.27
Net recovery of guarantee deposit 3153589473.80 734974699.49
Total 5230346076.92 5866106002.62
SHANDONG CHENMING PAPER HOLDINGS LIMITED260
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
61. Items on statements of cash flow (Cont’d)
(6) Cash paid relating to other financing activities
Unit: RMB
Item
Amount for
the period
Amount for the
prior period
Repayment of short-term commercial paper and MTN 2190000000.00 5070000000.00
Repayment of bonds 900000000.00 1182150000.00
Repayment of equipment leaseback 2568988488.34 3155141094.22
Payment of Preference Shares dividend 387101073.42 493494767.52
Payment of Perpetual Bonds interest 194000000.00 194000000.00
Repayment of financial support from shareholders 708440900.00
Security deposit for financial leasing 35500000.00 15000000.00
Payment of equity in China Development Bank funds 77500000.00
Acquisition of non-controlling interests 450000000.00
Total 7511530461.76 10109785861.74
2020 ANNUAL REPORT 261
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
62. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB
Supplementary information
Amount for
the period
Amount for the
prior period
1. Reconciliation of net profit as cash flows from operating activities: – –
Net profit 1906213294.49 1753298192.81
Plus: Provision for impairment of assets 665298589.33 1154859611.92
Depreciation of fixed assets consumption of oil and gas assets
depreciation of bearer biological assets 2267883919.56 1853139090.52
Depreciation of right-of-use assets
Amortisation of intangible assets 49691095.45 53100846.01
Amortisation of long-term prepaid expenses 2916033.48 7433030.41
Loss on disposal of fixed assets intangible assets and other long-term
assets (“-” denotes gain) 1298968.59 30173140.18
Loss on scrapped fixed assets (“-” denotes gain) -26203497.56 1361320.41
Loss on changes in fair value (“-” denotes gain) -6261281.76 -26692741.61
Finance expenses (“-” denotes gain) 2139908266.82 3073865213.86
Investment loss (“-” denotes gain) -173363537.49 -538597824.66
Decrease in deferred income tax assets (“-” denotes increase) -191722048.10 -288568932.42
Increase in deferred income tax liabilities (“-” denotes decrease) 5161410.38 1411125.59
Decrease in inventories (“-” denotes increase) -360128826.69 2122985295.71
Decrease in operating receivables (“-” denotes increase) 5956184790.79 7690318930.21
Increase in operating payables (“-” denotes decrease) -977074501.01 -4655379076.00
Others
Net cash flows from operating activities 11259802676.28 12232707222.94
2. Major investing and financing activities not involving cash settlements: – –
Capital converted from debts
Convertible bonds of the Company due within one year
Finance leases of fixed assets
3. Net change in cash and cash equivalents: – –
Closing balance of cash 4389169963.79 2890328027.41
Less: Opening balance of cash 2890328027.41 2381558242.52
Plus: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 1498841936.38 508769784.89
SHANDONG CHENMING PAPER HOLDINGS LIMITED262
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
62. Supplementary information on cash flow statement (Cont’d)
(2) Net cash received from disposal of subsidiaries during the current period
Unit: RMB
Amount
Cash or cash equivalents received from disposal of subsidiaries during the period 16100000.00
Of which: –
Shouguang Chenming Industrial Logistics Co. Ltd. 7100000.00
Qingdao Chenming International Logistics Co. Ltd. 9000000.00
Less: Cash and cash equivalents held by the company on the date in the event that the
control is lost 262330.85
Of which: –
Shouguang Chenming Industrial Logistics Co. Ltd. 259575.02
Qingdao Chenming International Logistics Co. Ltd. 2755.83
Plus: Cash or cash equivalents received from disposal of subsidiaries during previous
periods 201710000.00
Of which: –
Haicheng Haiming Mining Co. Ltd. 200000000.00
Wuxi Songling Paper Co. Ltd. 1710000.00
Net cash received from disposal of subsidiaries 217547669.15
(3) Cash and cash equivalents composition
Unit: RMB
Item Closing balance Opening balance
I. Cash 4389169963.79 2890328027.41
Of which: Treasury cash 2161684.57 2418131.86
Bank deposit that can be used for payment at any time 4387008279.22 2887909895.55
Other monetary funds that can be used for payment at any time
Deposit at central bank deposit that can be used for payment
Amount due from banks
Amount due to banks
II. Cash equivalents
Of which: Bond investment with maturity within 3 months
III. Balance of cash and cash equivalent at end of period 4389169963.79 2890328027.41
Of which: Restricted cash and cash equivalents used by the
Company or subsidiaries within the Group
2020 ANNUAL REPORT 263
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
63. Assets with restricted ownerships or right to use
Unit: RMB
Item Closing carrying amount Reason for such restrictions
Monetary funds 13022652331.98 As guarantee deposits for bank acceptance bills
and letter of credit and deposit reserves
Financial instruments held for trading 96453900.31 As deposits for borrowings from Haitong
International Securities
Fixed assets 11147836807.04 As collateral for bank borrowings and long-term
payables
Intangible assets 1247015765.23 As collateral for bank borrowings and long-term
payables
Accounts receivable financing 5555551.65 As collateral for letters of guarantee and letters of
credit
Investment property 4929794589.62 As collateral for bank borrowings
Total 30449308945.83 –
Other explanation:
As at 31 December 2020 50% of the carrying amount of the financial assets held for trading were pledged as collateral for short-term
borrowings amounting to RMB91317302.08 housing building structure and equipment with the carrying amount of RMB11147836807.04
(31 December 2019: carrying amount of RMB10573696190.50) were pledged as collateral for intangible assets with the carrying amount of
RMB1247015765.23 (31 December 2019: carrying amount of RMB880676428.58) and investment properties with the carrying amount of
RMB4929794589.62 (31 December 2019: carrying amount of RMB4519487976.25) was pledged as collateral for long-term borrowings with
the carrying amount of RMB4618249057.65 (31 December 2019: carrying amount of RMB5110291847.19) and short-term borrowings with
the carrying amount of RMB35075833.33 (31 December 2019: carrying amount of RMB180000000.00).
SHANDONG CHENMING PAPER HOLDINGS LIMITED264
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
64. Foreign currency items
(1) Foreign currency items
Unit: RMB
Item
Closing foreign
currency balance Exchange rate
Closing balance
in RMB
Monetary funds – – 260827412.73
Of which: USD 37907361.33 6.5249 247341741.93
EUR 1307111.72 8.0250 10489571.54
HKD 3504687.95 0.8416 2949685.57
JPY 396.93 0.0632 25.10
GBP 5217.89 8.8903 46388.59
Accounts receivables – – 124901686.09
Of which: USD 14186526.37 6.5249 92565665.92
EUR 2931746.89 8.0250 23527268.79
HKD
JPY 139299629.64 0.0632 8808751.38
Long-term borrowings – – 1273181079.15
Of which: USD 195126527.48 6.5249 1273181079.15
Non-current liabilities due within one year 1857654097.30
Of which: USD 284702309.20 6.5249 1857654097.30
Accounts payable – – 282733309.14
Of which: USD 39704203.29 6.5249 259065956.03
EUR 2949202.88 8.0250 23667353.11
Bonds payable – – 1096920101.46
Of which: USD 168112936.82 6.5249 1096920101.46
Short-term borrowings – – 1277882459.09
Of which: USD 181851853.21 6.5249 1186565157.01
HKD 108499242.05 0.8416 91317302.08
Other receivables – – 9262356.02
Of which: USD 1161607.35 6.5249 7579371.80
EUR 209717.66 8.0250 1682984.22
Other payables – – 3081392.95
Of which: USD
EUR 383911.16 8.0250 3080887.06
JPY 8000.03 0.0632 505.89
2020 ANNUAL REPORT 265
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
64. Foreign currency items (Cont’d)
(2) Explanation on overseas operating entities (including major overseas operating entities) which shall disclose
their overseas principal places of business functional currency and basis. Reasons shall be disclosed if
there is any change in the functional currency.
√ Applicable □ Not applicable
No. Name of subsidiary
Principal place of
business
Place of
incorporation
Functional
currency
1 Chenming GmbH Hamburg Germany Hamburg Germany EUR
2 Chenming Paper Korea Co. Ltd. Seoul Korea Seoul Korea KRW
3 Chenming International Co. Ltd. Los Angeles USA Los Angeles USA USD
4 Chenming Paper Japan Co. Ltd. Tokyo Japan Tokyo Japan JPY
5 Chenming Paper United States Co. Ltd. Los Angeles USA Los Angeles USA USD
6 Chenming (Overseas) Limited Hong Kong China Hong Kong China USD
7 Chenming (Singapore) Limited Singapore Singapore USD
8 Chenming (HK) Limited Hong Kong China Hong Kong China USD
SHANDONG CHENMING PAPER HOLDINGS LIMITED266
XIII Financial Report
VII. Notes to items of the consolidated financial statements (Cont’d)
65. Government grants
(1) General information of government grants
Unit: RMB
Type Amount Reporting item
Amount included
in the current
profit and loss
Project Funding for National Key
Technology Research and
Development Program 164700.00 Other income 164700.00
Subsidy for the improvement in
environmental monitoring 20000.00 Non-operating income 20000.00
Subsidy for the provincial champion
of a certain manufacturing field 800000.00 Non-operating income 800000.00
Sewage treatment and water
conservation transformation
project 1192682.88 Other income 1192682.88
Zhanjiang forestry-pulp-paper
project 12145971.39 Other income 12145971.39
Enterprise reform and development
subsidies 107578937.51
Other income and non-
operating income 107578937.51
Financial subsidies for technical
transformation project 101984107.72 Other income 101984107.72
Funding for environmental
protection 80048967.41 Other income 80048967.41
Funding for R&D 564000.00 Other income 564000.00
Subsidy for technological innovation
by enterprise 100000.00 Other income 100000.00
Refund of VAT upon assessment 1846849.03 Other income 1846849.03
Subsidy for foreign trade 211200.00 Other income 211200.00
Subsidy for top-notch talents 400000.00 Non-operating income 400000.00
Subsidy for equipment technologies 115400.00 Other income 115400.00
Subsidy for inviting investments 6306806.25
Other income and non-
operating income 6306806.25
Employment stabilisation subsidies 4856411.21
Other income and non-
operating income 4856411.21
Subsidies for social insurance 486607.82
Other income and non-
operating income 486607.82
Subsidies for R&D 2469900.00 Other income 2469900.00
Subsidies for financing 130000.00 Other income 130000.00
Refund of tax 71675835.40 Other income 71675835.40
Financial discount 3753300.60 Financial expenses 3753300.60
Subsidies for the pandemic 1495150.00
Other income and non-
operating income 1495150.00
Subsidies for forestation 6316370.50 Other income 6316370.50
Others 540115190.13
Other income and non-
operating income 540115190.13
Total 944778387.85 944778387.85
(2) The condition of the refund of government grants
□Applicable √ Not applicable
2020 ANNUAL REPORT 267
XIII Financial Report
VIII. Change in scope of consolidation
1. Business combination not under common control
(1) Business combination not under common control during the current period
Unit: RMB
Acquiree
Date of acquiring
the shareholding
Consideration
for acquiring the
shareholding
Shareholding
ratio acquired
The way of
acquiring the
shareholding Acquisition date
The basis for
determining the
date of acquisition
The income of
acquiree from the
date of acquisition
to the end of
the period
The net profit of
acquiree from
the date of
acquisition to
the end of the
period
Kunshan Tuoan Plastic Products Co. Ltd. 31 August 2020 220000000.00 100.00% Acquisition 31 August 2020
Acquisition of
control 126970053.68 7770967.40
(2) Cost of combination and goodwill
Unit: RMB
Cost of combination
– Cash 220000000.00
Total cost of combination 220000000.00
Less: the interest in the fair value of the identifiable net assets acquired 193053094.62
Amount of goodwill/cost of combination being less than the interest in the fair value of
the identifiable net assets acquired 26946905.38
SHANDONG CHENMING PAPER HOLDINGS LIMITED268
XIII Financial Report
VIII. Change in scope of consolidation (Cont’d)
1. Business combination not under common control (Cont’d)
(3) Acquiree’s identifiable assets or liabilities as at the acquisition date
Unit: RMB
Fair value as at
the acquisition date
Carrying amount
as at the
acquisition date
Monetary funds 3970890.87 4341878.49
Accounts receivable 22802767.21 23484179.31
Inventories 87355065.38 81634148.00
Fixed assets 61642451.22 43478433.59
Intangible assets 40181103.63 12532077.88
Prepayments 913954.62 913954.62
Other receivables 121051049.75 121051049.75
Other current assets 92948.20 348349.39
Long-term prepaid expenses 211858.41 210619.47
Accounts payable 58760177.22 58760177.22
Deferred income tax liabilities 6871956.51
Short-term borrowings 49800000.00 49800000.00
Employee benefits payable 2358660.55 2358660.55
Taxes payable -5828397.35 -5828397.35
Other payables 5845173.43 5845173.43
Other current liabilities 2161424.31 2161424.31
Long-term payables 25200000.00 25200000.00
Net assets 193053094.62 149697652.34
Net assets acquired 193053094.62 149697652.34
2020 ANNUAL REPORT 269
XIII Financial Report
VIII. Change in scope of consolidation (Cont’d)
2. Disposal of subsidiaries
Whether there is loss of control over subsidiaries on a single disposal
√ Yes □ No
Unit: RMB
Name of
subsidiary
Consideration of
disposal of equity
interest
Shareholding of
disposal of
equity interest
Way of disposal
of equity
interest
Time of loss
of control
Basis for
determining the
time of loss
of control
Difference
between
consideration
and share of net
assets of relevant
subsidiary as per
consolidated
financial
statements
Remaining
shareholding
as of the date
of loss of control
Carrying amount
of remaining
shareholding
as of the date
of loss of control
Fair value of
remaining
shareholding
as of the date
of loss of control
Gain or loss in
fair value of
remaining
shareholding
Determination
and key
assumption of
fair value of
remaining
shareholding
as of the date
of loss of control
Relevant other
comprehensive
income of
former
subsidiary
transferred to
profit or loss
Qingdao
Chenming
International
Logistics
Co. Ltd. 23000000.00 100.00% Transfer 29 February 2020 Without control 11364811.86 0.00% 0.00 0.00 0.00 0.00
Shouguang
Chenming
Industrial
Logistics
Co. Ltd. 7100000.00 100.00% Transfer 29 February 2020 Without control 5413230.15 0.00% 0.00 0.00 0.00 0.00
Other explanation:
Whether there was disposal of the investment in a subsidiary in stages through multiple transactions and loss of
control during the period
□ Yes √ No
3. Others
During the year the scope of consolidation had 8 newly established subsidiaries namely Chenming (Overseas) Co.
Ltd. Chenming (Singapore) Co. Ltd. Qingdao Chenming Import and Export Trade Co. Ltd. Hainan Chenming
Technology Co. Ltd. Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership (Limited
Partnership) Hubei Huanggang Chenming Equity Investment Fund Management Co. Ltd. Shandong Dingkun Asset
Management Partnership (Limited Partnership) and Huanggang Chenming Paper Technology Co. Ltd. During the
year a subsidiary was acquired not within the definition of business namely Shanghai Herui Investment Co. Ltd. and
a subsidiary Shandong Chenming Paper Group (Fuyu) Sales Co. Ltd. was absorbed into the Group. Please refer to
Note IX. 1. Interest in subsidiaries for details.
SHANDONG CHENMING PAPER HOLDINGS LIMITED270
XIII Financial Report
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Name of subsidiary
Principle place
of business
Place of
incorporation
Nature of
business
Type of
legal person
Shareholding
Acquisition
Issued debt
securities
Issued share
capitalDirect Indirect
Zhanjiang Chenming Pulp
& Paper Co. Ltd.Zhanjiang Zhanjiang Paper making For-profit
corporation
100.00% Establishment 0 0
Shouguang Meilun Paper
Co. Ltd.
Shouguang Shouguang Paper making For-profit
corporation
87.3965% Establishment 0 0
Jilin Chenming Paper Co.Ltd.Jilin Jilin Paper making For-profit
corporation
100.00% Acquisition 0 0
Huanggang Chenming
Pulp & Paper Co. Ltd.Huanggang Huanggang Pulp production For-profit
corporation
100.00% Establishment 0 0
Shandong Chenming
Paper Sales Co. Ltd.Shouguang Shouguang Sales of paper
product
For-profit
corporation
100.00% Establishment 0 0
Shouguang Chenming
Import and Export
Trade Co. Ltd.Shouguang Shouguang Trading For-profit
corporation
100.00% Establishment 0 0
Jiangxi Chenming Supply
Chain Management
Co. Ltd.
Jiangxi Jiangxi Trading For-profit
corporation
70.00% Establishment 0 0
Chenming GmbH Germany Germany Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Shouguang Chenming
Papermaking Machine
Co. Ltd.
Shouguang Shouguang Machinery
manufacturing
For-profit
corporation
100.00% Establishment 0 0
Shouguang Hongxiang
Printing and Packaging
Co. Ltd.
Shouguang Shouguang Printing and
packaging
For-profit
corporation
100.00% Acquisition 0 0
Shouguang Chenming
Modern Logistic Co.Ltd.Shouguang Shouguang Transportation For-profit
corporation
100.00% Establishment 0 0
Jinan Chenming Paper
Sales Co. Ltd.Jinan Jinan Investment
Management/
Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Huanggang Chenming
Arboriculture
Development Co. Ltd.
Huanggang Huanggang Arboriculture For-profit
corporation
100.00% Establishment 0 0
Chenming Arboriculture
Co. Ltd.
Wuhan Wuhan Arboriculture For-profit
corporation
100.00% Establishment 0 0
Chenming Paper Korea
Co. Ltd.
Korea Korea Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Shandong Chenming
Power Supply Holdings
Co. Ltd.
Shouguang Shouguang Power For-profit
corporation
100.00% Establishment 0 0
2020 ANNUAL REPORT 271
XIII Financial Report
Name of subsidiary
Principle place
of business
Place of
incorporation
Nature of
business
Type of
legal person
Shareholding
Acquisition
Issued debt
securities
Issued share
capitalDirect Indirect
Shouguang Shun Da
Customs Declaration
Co Ltd.
Shouguang Shouguang Customs
declaration
For-profit
corporation
100.00% Establishment 0 0
Shanghai Chenming
Industry Co. Ltd.Shanghai Shanghai Property
investment and
management
For-profit
corporation
100.00% Establishment 0 0
Shandong Chenming
Group Finance Co. Ltd.Jinan Jinan Finance For-profit
corporation
80.00% 20.00% Establishment 0 0
Jiangxi Chenming Paper
Co. Ltd.
Nanchang Nanchang Paper making For-profit
corporation
42.46% 47.49% Establishment 0 0
Shouguang Chenming Art
Paper Co. Ltd.Shouguang Shouguang Paper making For-profit
corporation
75.00% Establishment 0 0
Hailaer Chenming Paper
Co. Ltd.
Hailaer Hailaer Paper making For-profit
corporation
75.00% Establishment 0 0
Shandong Grand View
Hotel Co. Ltd.Shouguang Shouguang Catering For-profit
corporation
70.00% Establishment 0 0
Wuhan Chenming
Hanyang Paper
Holdings Co. Ltd
Wuhan Wuhan Paper making For-profit
corporation
65.205% 34.64% Establishment 0 0
Chengdu Chenming
Culture Communication
Co. Ltd
Chengdu Chengdu Marketing For-profit
corporation
100.00% Establishment 0 0
Shandong Chenming
Financial Leasing Co.
Ltd.Jinan Jinan Financial leasing For-profit
corporation
100.00% Establishment 0 0
Qingdao Chenming
Nonghai Financial
Leasing Co. Ltd
Qingdao Qingdao Financial leasing For-profit
corporation
100.00% Establishment 0 0
Chenming (HK) Limited Hong Kong Hong Kong Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Shouguang Hongyi
Decorative Packaging
Co. Ltd.
Shouguang Shouguang Packaging For-profit
corporation
100.00% Merger and
acquisition
0 0
Shouguang Xinyuan Coal
Co. Ltd.
Shouguang Shouguang Coal For-profit
corporation
100.00% Merger and
acquisition
0 0
Shouguang City Run
Sheng Wasted Paper
Recycle Co. Ltd.Shouguang Shouguang Purchase and sale
of waste
For-profit
corporation
100.00% Merger and
acquisition
0 0
Shouguang Wei Yuan
Logistics Company
Limited
Shouguang Shouguang Logistics For-profit
corporation
100.00% Merger and
acquisition
0 0
Shandong Chenming
Panels Co. Ltd. S
Shouguang Shouguang Panels For-profit
corporation
100.00% Merger and
acquisition
0 0
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED272
XIII Financial Report
Name of subsidiary
Principle place
of business
Place of
incorporation
Nature of
business
Type of
legal person
Shareholding
Acquisition
Issued debt
securities
Issued share
capitalDirect Indirect
Shandong Chenming Floor
Board Co. Ltd.
Shouguang Shouguang Floor Board For-profit
corporation
100.00% Merger and
acquisition
0 0
Shouguang Chenming
Cement Co. Limited
Shouguang Shouguang Cement For-profit
corporation
100.00% Establishment 0 0
Wuhan Chenming
Qianneng Electric
Power Co. Ltd.Wuhan Wuhan Thermal power For-profit
corporation
51.00% Establishment 0 0
Shandong Chenming
Investment Limited
Jinan Jinan Investment For-profit
corporation
100.00% Establishment 0 0
Japan Chenming Paper
Co. Ltd.
Japan Japan Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Chenming International
Co. Ltd.
the United States the United States Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Zhanjiang Chenming
Arboriculture
Development Co. Ltd.
Zhanjiang Zhanjiang Arboriculture For-profit
corporation
100.00% Establishment 0 0
Yangjiang Chenming
Arboriculture
Development Co. Ltd.
Yangjiang Yangjiang Arboriculture For-profit
corporation
100.00% Establishment 0 0
Nanchang Chenming
Arboriculture
Development Co. Ltd.
Nanchang Nanchang Arboriculture For-profit
corporation
100.00% Establishment 0 0
Guangdong Huirui
Investment Co. Ltd.Zhanjiang Zhanjiang Investment For-profit
corporation
100.00% Establishment 0 0
Zhanjiang Chenming New-
style Wall Materials Co.Ltd
Zhanjiang Zhanjiang Wall materials For-profit
corporation
100.00% Establishment 0 0
Jilin Chenming New-style
Wall Materials Co. Ltd
Jilin Jilin Wall materials For-profit
corporation
100.00% Establishment 0 0
Jilin Chenming Logistics
Co. Ltd.
Jilin Jilin Logistics For-profit
corporation
100.00% Establishment 0 0
Jiangxi Chenming
Logistics Co. Ltd.Nanchang Nanchang Logistics For-profit
corporation
100.00% Establishment 0 0
Fuyu Chenming Paper Co.
Ltd.
Fuyu Fuyu Paper making For-profit
corporation
100.00% Establishment 0 0
Zhanjiang Meilun Pulp &
Paper Co. Ltd.Zhanjiang Zhanjiang Paper making For-profit
corporation
100.00% Establishment 0 0
Shanghai Chenming
Financial Leasing Co.
Ltd.Shanghai Shanghai Financial leasing For-profit
corporation
100.00% Establishment 0 0
Guangzhou Chenming
Financial Leasing Co.
Ltd.Guangzhou Guangzhou Financial leasing For-profit
corporation
100.00% Establishment 0 0
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
2020 ANNUAL REPORT 273
XIII Financial Report
Name of subsidiary
Principle place
of business
Place of
incorporation
Nature of
business
Type of
legal person
Shareholding
Acquisition
Issued debt
securities
Issued share
capitalDirect Indirect
Shanghai Hongtai Real
Estate Co. Ltd.
Shanghai Shanghai Real estate For-profit
corporation
100.00% Merger and
acquisition
0 0
Shanghai Hongtai Property
Management Co. Ltd.Shanghai Shanghai Arboriculture For-profit
corporation
100.00% Merger and
acquisition
0 0
Shandong Chenming
Commercial Factoring
Co. Ltd
Jinan Jinan Business factoring For-profit
corporation
100.00% Establishment 0 0
Guangzhou Chenming
Commercial Factoring
Co. Ltd.
Guangzhou Guangzhou Business factoring For-profit
corporation
51.00% Establishment 0 0
Qingdao Chenming Pulp
& Paper Electronic
Commodity Spot
Trading Co. Ltd.Qingdao Qingdao Trading For-profit
corporation
30.00% 70.00% Establishment 0 0
Shandong Chenming
Coated Paper Sales
Co. Ltd
Shouguang Shouguang Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Zhanjiang Chenming Port
Co. Ltd.
Zhanjiang Zhanjiang Port For-profit
corporation
100.00% Establishment 0 0
Beijing Chenming Financial
Leasing Co. Ltd.
Beijing Beijing Financial leasing For-profit
corporation
100.00% Establishment 0 0
Chenming Paper United
States Co. Ltd.the United States the United States Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Guangdong Chenming
Panels Co. Ltd.Guangdong Guangdong Panels For-profit
corporation
100.00% Establishment 0 0
Shanghai Chenming Pulp
& Paper Sales Co. Ltd.Shanghai Shanghai Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Meilun (BVI) Limited Cayman Cayman Commerce For-profit
corporation
100.00% Establishment 0 0
Weifang Chenming Growth
Driver Replacement
Equity Investment Fund
Partnership (Limited
Partnership)
Weifang Weifang Fund For-profit
corporation
79.00% Establishment 0 0
Nanjing Chenming Culture
Communication Co.
Ltd.Nanjing Nanjing Marketing For-profit
corporation
100.00% Establishment 0 0
Chenming (Overseas) Co.
Ltd.Hong Kong Hong Kong Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Chenming (Singapore) Co.
Ltd.Singapore Singapore Paper product
trading
For-profit
corporation
100.00% Establishment 0 0
Kunshan Tuoan Plastic
Products Co. Ltd.Kunshan Kunshan Rubber and plastic For-profit
corporation
100.00% Merger and
acquisition
0 0
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED274
XIII Financial Report
Name of subsidiary
Principle place
of business
Place of
incorporation
Nature of
business
Type of
legal person
Shareholding
Acquisition
Issued debt
securities
Issued share
capitalDirect Indirect
Hubei Changjiang
Chenming Huanggang
Equity Investment Fund
Partnership (Limited
Partnership)
Huanggang Huanggang Fund For-profit
corporation
59.97% Establishment 0 0
Hainan Chenming
Technology Co. Ltd.Haikou Haikou Wholesale and
retail
For-profit
corporation
100.00% Establishment 0 0
Qingdao Chenming Import
and Export Trade Co.Ltd.Qingdao Qingdao Trading For-profit
corporation
100.00% Establishment 0 0
Shanghai Herui Investment
Co. Ltd.
Shanghai Shanghai Business services For-profit
corporation
100.00% Merger and
acquisition
0 0
Hubei Huanggang
Chenming Equity
Investment Fund
Management Co. Ltd.Huanggang Huanggang Capital market
services
For-profit
corporation
60.00% Establishment 0 0
Shandong Dingkun
Asset Management
Partnership (Limited
Partnership)
Shouguang Shouguang Business services For-profit
corporation
99.90% Establishment 0 0
Huanggang Chenming
Paper Technology Co.Ltd.Huanggang Huanggang Paper making For-profit
corporation
100.00% Establishment 0 0
Huanggang Chenming
Port Co. Ltd.Huanggang Huanggang Port services For-profit
corporation
51.00% Establishment 0 0
(2) Major non-wholly owned subsidiaries
Unit: RMB
Name of subsidiary Minority interest
Gain or loss
attributable to
minority interest
during the period
Dividend to
minority interest
declared during
the period
Closing balance
of minority
interest
Wuhan Chenming Hanyang Paper
Holdings Co. Ltd. 0.15% 134972455.36 1096519.70
Shouguang Chenming Art Paper Co.Ltd. 25.00% 383946.72 98750186.78
Shouguang Meilun Paper Co. Ltd. 12.6035% 24854458.98 746482412.98
Jiangxi Chenming Paper Co. Ltd. 10.05% 44431564.61 17444349.31 347455281.83
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
2020 ANNUAL REPORT 275
XIII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Closing balance Opening balance
Name of subsidiary Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities
Wuhan Chenming Hanyang
Paper Holdings Co. Ltd. 734208419.79 1351736457.46 2085944877.25 1314519046.29 43365094.68 1357884140.97 242300843.28 1042530549.73 1284831393.01 854628918.19 84521086.15 939150004.94
Shouguang Chenming Art
Paper Co. Ltd. 210008389.30 531396869.27 741405258.57 346404511.49 346404511.49 651004033.69 573204378.67 1224208412.36 830743452.16 830743452.16
Shouguang Meilun Paper
Co. Ltd. 3954358701.82 10971104092.03 14925462793.85 7816696759.19 1228430785.12 9045127544.31 5071137194.65 11453663652.73 16524800847.38 10013297488.59 1186061831.08 11199359319.67
Jiangxi Chenming Paper
Co. Ltd. 2898786538.59 4742116901.13 7640903439.72 2918424625.58 1377979879.82 4296404505.40 5176446285.48 3845100253.80 9021546539.28 4643403573.27 1194736398.81 5838139972.08
Unit: RMB
Amount for the period Amount for the prior period
Name of subsidiary Revenue Net profit
Total
comprehensive
income
Cash flows from
operating activities Revenue Net profit
Total
comprehensive
income
Cash flows from
operating activities
Wuhan Chenming Hanyang
Paper Holdings Co. Ltd. 906791287.88 382379348.21 382379348.21 57915078.59 1282969981.66 71445390.72 71445390.72 104514705.53
Shouguang Chenming Art Paper
Co. Ltd. 642697593.98 1535786.88 1535786.88 -345949577.00 765841628.21 68355698.51 68355698.51 -66098414.48
Shouguang Meilun Paper Co. Ltd. 8070365747.22 219893721.83 219893721.83 1505697902.65 5199154922.05 199184684.14 199184684.14 1510148358.58
Jiangxi Chenming Paper Co. Ltd. 3434854907.78 265237736.13 265237736.13 1352811772.58 3257505575.39 285914254.01 285914254.01 800733878.52
SHANDONG CHENMING PAPER HOLDINGS LIMITED276
XIII Financial Report
IX. Interest in other entities (Cont’d)
2. Transaction changing shareholding in but not causing to loss of control over subsidiaries
(1) Changing in shareholding in subsidiaries
The Group previously held 100% of equity interest in Shouguang Meilun Paper Co. Ltd. In December 2019 the
Company entered the capital increase and share expansion agreement among Weifang Chenrong Growth Driver
Replacement Equity Investment Fund Partnership (Limited Partnership) and Shouguang Meilun Paper Co. Ltd..Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) made
a unilateral capital injection into Shouguang Meilun Paper Co. Ltd. Upon completion of the capital increase its
equity interest in Shouguang Meilun Paper Co. Ltd.. was 8% by Weifang Chenrong Growth Driver Replacement
Equity Investment Fund Partnership (Limited Partnership) and the transaction did not result in the loss of our
control of Shouguang Meilun Paper Co. Ltd. As of 31 December 2019 the implementation of this agreement
was completed and the capital increase was RMB415 million. The transaction resulted in an increase in minority
interest of RMB431.44 million and a decrease in capital reserves of RMB16.44 million.
In December 2020 the Group acquired additional 34.64% equity interest in Wuhan Chenming Hanyang Paper
Holdings Co. Ltd. In December 2020 the Group acquired additional 6.70% equity interest in Jiangxi Chenming
Paper Co. Ltd. A capital increase of Shouguang Meilun Paper Co. Ltd. a subsidiary of the Group was
contributed on the part of Dongxing Securities Investment Co. Ltd. Upon completion of the capital increase
Dongxing Securities Investment Co. Ltd. acquired 5% equity interest in Shouguang Meilun Paper Co. Ltd. and
the transaction did not result in the loss of the Group’s control over Shouguang Meilun Paper Co. Ltd.
(2) Effect of acquiring minority interests on minority interest and equity attributable to the owners of the parent
company
Unit: RMB
Wuhan Chenming
Hanyang Paper
Holdings Co. Ltd.Jiangxi Chenming
Paper Co. Ltd.
– Cash 250000000.00 200000000.00
Less: share of net assets in subsidiaries based on shares
acquired/disposed 245573256.85 224081428.60
Difference 4426743.15 -24081428.60
Of which: capital reserve adjustment 4426743.15 -24081428.60
(3) Effect of capital increased contributed on the part of another shareholder on minority interests and equity
attributable to the owners of the parent company
Unit: RMB
Item
Shouguang Meilun
Paper Co. Ltd.Share of net assets of the Group before the capital increase 4987609644.29
Amount of capital increase 300000000.00
Share of net assets of the Group after the capital increase 5000228916.06
Difference -12619271.77
Of which: capital reserve adjustment -12619271.77
2020 ANNUAL REPORT 277
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IX. Interest in other entities (Cont’d)
3. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Name of joint venture and
associate
Principle
place of
business
Principle
place of
incorporation
Nature of
business
Shareholding
Accounting methodDirect Indirect
Weifang Senda Meixi Port Co.Ltd. Weifang Weifang
Port
construction 50.00%
Equity
method
Ningbo Kaichen Huamei Equity
Investment Fund Partnership
(Limited Partnership) Ningbo Ningbo
Investment
management 40.00%
Equity
method
Weifang Xingxing United
Chemical Co. Ltd. Weifang Weifang Chemical 50.00%
Equity
method
Zhuhai Dechen New Third Board
Equity Investment Fund
Company (Limited Partnership) Zhuhai Zhuhai
Investment
management 50.00%
Equity
method
Goldtrust Futures Co. Ltd. Changsha Changsha Futures 35.43%
Equity
method
Weifang Chenrong Growth
Driver Replacement Equity
Investment Fund Partnership
(Limited Partnership) Weifang Weifang
Investment
management 44.44%
Equity
method
Guangdong Nanyue Bank Co.Ltd. Guangdong Guangdong Bank 16.62%
Equity
method
SHANDONG CHENMING PAPER HOLDINGS LIMITED278
XIII Financial Report
IX. Interest in other entities (Cont’d)
3. Interest in joint arrangements or associates (Cont’d)
(2) Key financial information of major joint ventures
Unit: RMB
Closing balance/
Amount for the period
Opening balance/
Amount for the prior period
Weifang Sime
Darby West Port
Co. Ltd.
Weifang Xingxing
United Chemical
Co. Ltd.
Weifang Sime
Darby West Port
Co. Ltd.
Weifang Xingxing
United Chemical
Co. Ltd.
Current assets 11717494.06 118868385.80 26890506.23 94334994.14
Of which: Cash and cash equivalents 5739139.97 37588664.71 8299040.10 25959739.14
Non-current assets 526006172.67 24644081.09 543566206.60 32100379.42
Total assets 537723666.73 143512466.89 570456712.83 126435373.56
Current liabilities 17876446.30 26318294.93 16216196.08 27927549.31
Non-current liabilities 370515018.03 22662556.59 389517611.14
Total liabilities 388391464.33 48980851.52 405733807.22 27927549.31
Equity interest attributable to shareholders
of the parent company 149332202.40 94531615.37 164722905.61 98507824.25
Share of net assets based on shareholding 74666101.20 47265807.69 82361452.81 49253912.13
– Unrealised profit arising from intra-group
transactions 7277405.72 44608577.43 7365218.95 44562645.26
Carrying amount of investment in joint
ventures 81943506.92 91874385.12 89726671.76 93816557.39
Revenue 56243755.61 1596938.76 29834105.08 132763766.49
Finance expenses 21875452.03 -733877.86 20667999.05 -394709.39
Income tax expenses 4706185.72
Net profit -15604782.40 -3183622.90 -26827919.17 14118557.12
Total comprehensive income -15604782.40 -3183622.90 -26827919.17 14118557.12
Dividend received from joint ventures during
the year 23000000.00
2020 ANNUAL REPORT 279
XIII Financial Report
IX. Interest in other entities (Cont’d)
3. Interest in joint arrangements or associates (Cont’d)
(3) Key financial information of major associates
Unit: RMB
Closing balance/Amount for the period Opening balance/Amount for the prior period
Ningbo Kaichen Huamei
Equity Investment Fund
Partnership (Limited
Partnership)
Zhuhai Dechen New Third
Board Equity Investment
Fund Company (Limited
Partnership)
Goldtrust Futures
Co. Ltd.
Weifang Chenrong Growth
Driver Replacement
Equity Investment Fund
Partnership (Limited
Partnership
Guangdong Nanyue
Bank Co. Ltd.
Ningbo Kaichen Huamei
Equity Investment Fund
Partnership (Limited
Partnership)
Zhuhai Dechen New
Third Board Equity
Investment Fund
Company (Limited
Partnership)
Goldtrust Futures
Co. Ltd.
Weifang Chenrong
Growth Driver
Replacement Equity
Investment Fund
Partnership (Limited
Partnership
Guangdong Nanyue
Bank Co. Ltd.
Current assets 24928544.79 5788211.20 764236547.83 281.95 70627194227.70 43709912.78 5810979.79 514865137.33 8000250.00 43993240945.90
Non-current assets 171877206.00 99020108.00 18545737.98 450000000.00 169970138147.42 154450006.00 99020000.00 13965721.72 407000000.00 162549835269.08
Total assets 196805750.79 104808319.20 782782285.81 450000281.95 240597332375.12 198159918.78 104830979.79 528830859.05 415000250.00 206543076214.98
Current liabilities 19749.95 5000.00 544534428.24 15000.00 197253124440.72 21826.94 5000.00 281568856.43 8000000.00 172504238508.02
Non-current liabilities 32169041.10 24930860850.46 30000000.00 17098918091.65
Total liabilities 19749.95 5000.00 576703469.34 15000.00 222183985291.18 21826.94 5000.00 311568856.43 8000000.00 189603156599.67
Net assets 196786000.84 104803319.20 206078816.47 449985281.95 18413347083.94 198138091.84 104825979.79 217262002.62 407000250.00 16847722509.11
Share of net assets based on shareholding 78714400.34 52401659.62 73013724.68 199973459.30 3060298285.35 79255236.74 52412989.90 76975927.53 180870911.10 2800091481.01
– Goodwill 104073292.25 104073292.25
– Others 119835525.93 12279914.66 -267823.00 120273610.78 11683737.93 -22870911.10
Carrying amount of investment in joint ventures 198549926.27 52401659.62 189366931.59 199705636.28 3060298285.35 199528847.52 52412989.90 192732957.71 158000000.00 2800091481.01
Revenue 49996217.01 1232673.27 4849150132.82 48222356.65 11008440467.50
Net profit -2447303.13 -22660.59 -9500497.09 -14968.05 1539105400.52 -154058.98 318344.37 329683.17 250.00 1634495792.15
Total comprehensive income -2447303.13 -22660.59 -9500497.09 -14968.05 1539105400.52 -154058.98 318344.37 329683.17 250.00 1634495792.15
(4) Summary financial information of non-major joint ventures and associates
Unit: RMB
Closing balance/
Amount for the period
Opening balance/
Amount for the prior period
Joint ventures: – –
Total carrying amount of investment 22032934.47 9669667.61
Total amount of the following items based on
shareholding – –
– Net profit 1646466.86 2216832.82
– Total comprehensive income 1646466.86 2216832.82
Associates: – –
Total carrying amount of investment 9985136.83 10359850.83
Total amount of the following items based on
shareholding – –
– Net profit -374714.00 -494921.70
– Total comprehensive income -374714.00 -494921.70
SHANDONG CHENMING PAPER HOLDINGS LIMITED280
XIII Financial Report
X. Risk relating to financial instruments
Main financial instruments of the Group include monetary funds bills receivable accounts receivable other receivables
non-current assets due within one year other current assets other non-current financial assets long-term receivables
short-term borrowings accounts payable other payables short-term borrowings non-current liabilities due within one year
long-term borrowings bonds payable and Long-term payables. Details of financial instruments refer to related notes. The
risks associated with these financial instruments and the risk management policies adopted by the Company to mitigate
these risks are described below. The management of the Company manages and monitors these exposures to ensure that
the above risks are controlled in a limited extent.
1. Risk management goals and policies
The Group aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverse
effects on the Group’s financial performance from financial risk. Based on such objectives the Group’s risk
management policies are established to identify and analyse the risks faced by the Group to set appropriate risk
limits and devise corresponding internal control procedures and to monitor risks faced by the Group. Such risk
management policies and internal control systems are reviewed regularly to adapt to changes in market conditions
and the Group’s activities. The internal audit department of the Group undertakes both regular and ad-hoc reviews of
risk management controls and procedures.Risks associated with the financial instrument of the Group mainly include credit risk liquidity risk market risk (including
exchange rate risk interest rate risk and commodity price risk).The board of directors is responsible to plan and establish the Group’s risk management structure make risk
management policies and related guidelines and supervise the implementation of risk management. The Group has
already made risk management risks to identify and analyse risks that the Group face. These policies mentioned
specific risks covering market credit risk and liquidity risk etc. The Group regularly assesses market environment and
the operation of the Group changes to determine if to make alteration to risk management policy and systems. The
Group’s risk management is implemented by Risk Management Committee according to the approval of the board of
directors. The Risk Management Committee works closely with other business department of the Group to identify
evaluating and avoiding certain risks. The Group’s internal audit department will audit the risk management control
and procedures regularly and report the result to audit committee of the Group.The Group spreads risks through diverse investment and business lines and through making risk management policy
to reduce risks of single industry specific area and counterpart.
(1) Credit risks
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty.
The Group manages credit risk based category. Credit risks mainly arose from bank deposit bills receivable
accounts receivable other receivables and long-term receivables etc.The Group’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listed
banks. The Group anticipated that the bank deposit does not have significant credit risk.
For bill receivable accounts receivables other receivables and long-term receivables the Group set related
policies to control exposure of credit risks. The Group evaluate client’s credit quality and set related credit
period based on the client’s financial status credit records and other factors such as current market situation
etc. The Group keep monitor the client’s credit record and for client with deteriorate credit records the Group
will ensure the credit risk is under control in whole by means of written notice of payment collection shorten or
cancel credit period.
2020 ANNUAL REPORT 281
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(1) Credit risks (Cont’d)
The Group’s debtor spread over different industry and area. The Group continued to assess the credit evaluation
to receivables and purchase credit guarantee insurance if necessary.The biggest credit risk exposure of the Group is the carrying amount of each financial asset in the balance
sheet. The Group did not provide financial guarantee which resulted in credit risks.The amount of top 5 accounts receivable of the Group accounted for 21.47% (2019: 29.05%) of the Group’s
total accounts receivables. The amount of top 5 other receivable of the Group accounted for 81.22% (2019:
87.09%) of the Group’s total other receivables.
(2) Liquidity risk
Liquidity risk refers to the risks that the Group will not be able to meet its obligations associated with its financial
liabilities that are settled by delivering cash or other financial assets.To manage the liquidity risk the Group monitors and maintains a level of cash and cash equivalents to finance
the Group’s operations and mitigate the effects of fluctuations in cash flows. The management of the Group
monitors the usage of bank borrowings and ensures compliance with the borrowing agreements. In the
meantime we obtain commitments from major financial institutions to provide sufficient standby funds to meet
short-term and long-term funding needs.Operating cash was generated from capital and bank and other borrowings. As of 31 December 2020 the
Group’s unused bank loan credit is RMB38894.7823 million (31 December 2019: 34072.1416 million).
SHANDONG CHENMING PAPER HOLDINGS LIMITED282
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(2) Liquidity risk (Cont’d)
As at the end of the period the financial assets and financial liabilities of the Group are analysed by their
maturity date as below at their undiscounted contractual cash flows (in ten thousand RMB):
2020.12.31
Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total
Financial assets:
Monetary funds 1775953.76 1775953.76
Accounts receivable 247416.05 247416.05
Accounts receivable
financing 48838.57 48838.57
Other receivables 296054.64 296054.64
Long-term receivables 452285.93 61971.92 3420.00 517677.85
Other current assets 271691.87 271691.87
Non-current assets due
within one year 422274.42 422274.42
Total financial assets 3062229.31 452285.93 61971.92 3420.00 3579907.16
Financial liabilities:
Short-term borrowings 3279399.30 3279399.30
Bills payable 299893.67 299893.67
Accounts payable 404243.07 404243.07
Other payables 177772.24 177772.24
Non-current liabilities due
within one year 716094.96 716094.96
Other current liabilities 15703.78 15703.78
Long-term borrowings 258446.95 203956.69 10909.00 334402.46 807715.10
Bonds payable 153687.74 153687.74
Lease liabilities 443.29 472.83 5111.06 6027.18
Long-term payables 148649.69 64102.65 16778.59 229530.93
Total financial liabilities and
contingent liabilities 4893107.02 561227.67 268532.17 32798.65 334402.46 6090067.97
2020 ANNUAL REPORT 283
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(2) Liquidity risk (Cont’d)
As at the beginning of the period the financial assets and financial liabilities of the Group at the reporting date
are analysed by their maturity date as below at their undiscounted contractual cash flows (in ten thousand
RMB):
2019.12.31
Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total
Financial assets:
Monetary funds 1906656.98 1906656.98
Accounts receivable 307736.22 307736.22
Accounts receivable
financing 44291.59 44291.59
Other receivables 270183.01 270183.01
Long-term receivables 17413.54 23488.20 81470.83 122372.57
Other current assets 808452.56 808452.56
Non-current assets due
within one year 697303.80 697303.80
Total financial assets 4034624.16 17413.54 23488.20 81470.83 4156996.73
Financial liabilities:
Short-term borrowings 3688315.60 3688315.60
Bills payable 151504.82 151504.82
Accounts payable 435108.76 435108.76
Other payables 238605.99 238605.99
Non-current liabilities due
within one year 566295.89 566295.89
Other current liabilities 22240.25 22240.25
Long-term borrowings 521440.85 117319.88 86672.98 188600.26 914033.97
Bonds payable 116920.09 8907.00 125827.09
Lease liabilities 457.07 443.29 472.83 7220.12 8593.31
Long-term payables 64272.98 96887.59 83321.65 87671.33 332153.55
Total financial liabilities and
contingent liabilities 5102071.31 703090.99 223557.76 170467.46 283491.71 6482679.23
The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from the
carrying amount of the line items of the balance sheet.
Financial guarantees issued do not represent the amount to be paid.
SHANDONG CHENMING PAPER HOLDINGS LIMITED284
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(3) Market risk
Market risk includes interest rate risk and currency risk refers to the risk that the fair value or future cash flow of
a financial instrument will be fluctuated due to the changes in market price.Interest risk
Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated
due to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument and
unrecognised financial instrument (e.g. loan commitments).The Group’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowing
and bonds payable. Financial liabilities issued at floating rate expose the Group to cash flow interest rate risk.
Financial liabilities issued at fixed rate expose the Group to fair value interest rate risk. The Group determines
the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market
conditions and to maintain an appropriate combination of financial instruments at fixed rate and floating rate
through regular reviews and monitors.The Group’s finance department continuously monitors the interest rate position of the Group. The Group did
not enter into any interest rate hedging arrangements. But the management is responsible to monitor the risks
of interest rate and consider to hedge significant interest risk if necessary. Increase in interest rates will increase
the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate
interest-bearing borrowings and therefore could have a material adverse effect on the Group’s financial result.The management will make adjustments with reference to the latest market conditions. These adjustments may
include enter into interest swap agreement to mitigate its exposure to the interest rate risk.Interest bearing financial instrument held by the Group are as follows (in ten thousand RMB):
Item
Balance for
the year
Balance for
the prior year
Financial instrument with fixed interest rate
Financial liabilities
Of which: Short-term borrowings 3279399.30 3688315.60
Long-term borrowings 807715.10 914033.97
Bonds payable 153687.74 125827.09
Total 4240802.14 4728176.66
Financial instrument with float interest rate
Financial assets
Of which: Monetary funds 438700.83 288790.99
Total 438700.83 288790.99
2020 ANNUAL REPORT 285
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(3) Market risk (Cont’d)
The financial instruments held by the Group at the reporting date expose the Group to fair value interest rate
risk. This sensitivity analysis as above has been determined assuming that the change in interest rates had
occurred at the reporting date and arisen from the recalculation of the above financial instrument issued at new
interest rates. The non-derivative tools issued at floating interest rate held by the Group at the reporting date
expose the Group to cash flow interest rate risk. The effect to the net profit and shareholder’s equity illustrated
in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interest expenses
or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.
Exchange rate risk
Exchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuated
due to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that are
denominated in a currency other than the functional currency in which they are measured.The principal business of the Group is situated within the PRC and is denominated in RMB. However
foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currency
transactions as recognised by the Group (assets and liabilities in foreign currencies and foreign currency
transactions are mainly denominated in US dollar Japanese yen South Korean Won and Euro).The following table details the financial assets and liabilities held by the Group which denominated in foreign
currencies and amounted to RMB as at 31 December 2020 are as follows (in RMB ten thousands):
Liabilities denominated
in foreign currency
Asset denominated in
foreign currency
Item
As at the
end of
the period
As at the
beginning of
the period
As at the
end of
the period
As at the
beginning of
the period
USD 589167.11 453753.14 36393.34 147730.57
EUR 2692.09 9890.43 4547.15 5131.53
HKD 9131.73 3150.80 294.97 63.69
KRW
YEN 0.05 880.88 941.18
GBP 4.64 1.86
Total 600990.98 466794.37 42120.98 153868.83
The Company closely monitors the impact of exchange rate changes on the Company’s foreign exchange
risk. The Company has not taken any measures to avoid foreign exchange risks. However the management is
responsible for monitoring exchange rate risks and will consider hedging significant exchange rate risks when
necessary.
SHANDONG CHENMING PAPER HOLDINGS LIMITED286
XIII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Risk management goals and policies (Cont’d)
(3) Market risk (Cont’d)
With other variables unchanged the after-tax effect of the possible reasonable changes in the exchange rate of
foreign currency to RMB on the current profit and loss of the Group is as follows (in RMB ten thousands):
Increase (decrease) in after-tax profits Balance for the year Balance for the prior year
Increase in exchange rate of USD 5% -22154.09 5% -15301.13
Decrease in exchange rate of USD -5% 22154.09 -5% 15301.13
Increase in exchange rate of Euro 5% 92.75 5% -237.95
Decrease in exchange rate of Euro -5% -92.75 -5% 237.95
2. Capital management
The objective of the Group’s capital risk management is to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.In order to maintain or adjust the capital structure the Group may adjust the number of dividends paid to
shareholders return capital to shareholders issue new shares or disposes assets to reduce its liabilities.The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by total
capital. As at 31 December 2020 the Group’s gearing ratio is 71.83% (31 December 2019: 73.11%).XI. Fair value
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMB
Fair value as at the end of the period
Item Level 1 Level 2 Level 3 Total
I. Continuous measurement of fair value – – – –
(I) Financial liabilities held for trading 192907800.62 192907800.62
1. Equity instrument investments 192907800.62 192907800.62
(II) Biological assets 1535386865.44 1535386865.44
1. Consumable biological assets 1535386865.44 1535386865.44
(III) Accounts receivable financing 488385666.76 488385666.76
(IV) Other non-current financial assets 145910000.00 145910000.00
Total assets continuously measured at
fair value 192907800.62 2169682532.20 2362590332.82
II. Non-continuous measurement of fair value – – – –
2020 ANNUAL REPORT 287
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XI. Fair value (Cont’d)
2. Quantitative Information About Significant Unobservable Inputs Used in the Level 3 Fair Value
Measurement that Are Significant
Unit: RMB
Item
Fair value as at the
end of the period Valuation techniques Unobservable inputs Range
Equity instrument investments:
Shandong Hongqiao Venture Capital Co. Ltd. 90910000.00 Cost method
Consumable biological assets:
Forestry 1535386865.44 Replacement cost
method
Cost per mu for the first year of
Eucalyptus
806.00(ton/RMB)
Cost per mu for the first year of
Pines
592.00(ton/RMB)
Roll back method of
market price
Unit price per ton of Eucalyptus
wood
575.00(ton/RMB)
Unit price per ton of wet pine 430.00(ton/RMB)
Unit price per ton of Chinese fir 800.00(ton/RMB)
XII. Related parties and related party transactions
1. Parent company of the Company
Name of parent company
Place of
incorporation Business nature Registered capital
Shareholding of the
parent company
in the Company
Voting right of the
parent company in
the Company
Chenming Holdings Co. Ltd. Shouguang Investment in manufacture of paper electricity
steam and arboriculture
1238787700 27.53% 27.53%
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office.
2. Subsidiaries of the Company
For subsidiaries of the Company please refer to Note IX. 1.
SHANDONG CHENMING PAPER HOLDINGS LIMITED288
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
3. Joint ventures and associates of the Company
For details of joint ventures or associates please refer to Note IX. 3.
Balance of related party transaction between the Company and its joint ventures or associates during the period or
prior periods are as follows:
Name of joint ventures or associates Relation
Shouguang Meite Environmental Technology Co. Ltd. A joint venture of the Group
Weifang Xingxing United Chemical Co. Ltd. A joint venture of the Group
Shouguang Chenming Huisen New-style Construction
Materials Co. Ltd. A joint venture of the Group
Jiangxi Jiangbao Media Colour Printing Co. Ltd. An associate of the Group
Chenming (Qingdao) Asset Management Co. Ltd. An associate of the Group
Jiangxi Chenming Port Co. Ltd. An associate of the Group
Weifang Sime Darby West Port Co. Ltd. A joint venture of the Group
Guangdong Nanyue Bank Co. Ltd. An associate of the Group
4. Other related parties
Name of other related parties Relation
Shandong Shouguang Jinxin Investment Development
Holdings Group Co. Ltd.Shareholder of the Company’s largest shareholder
Shouguang Henglian Enterprise Investment Limited Shareholder of the Company’s largest shareholder
Shouguang Ruifeng Enterprise Investment Limited Shareholder of the Company’s largest shareholder
Chenming Holdings (Hong Kong) Limited Subsidiary of the Company’s largest shareholder
Zhanjiang Chenming Real Estate Co. Ltd. Subsidiary of the Company’s largest shareholder
Qingdao Hongji Weiye Investment Co. Ltd. Subsidiary of the Company’s largest shareholder
Shouguang Hengying Real Estate Co. Ltd. Subsidiary of the Company’s largest shareholder
Shouguang Hengtai Enterprise Investment Co. Ltd. A company invested by the Directors and senior
management of the Company
Shouguang Huixin Construction Materials Co. Ltd. A company invested by the Directors and senior
management of the Company
Shouguang Chenming Guangyuan Real Property Co.Ltd. and its subsidiaries
A company invested by the Directors and senior
management of the Company
Qingdao Chenming Nonghai Investment Co. Ltd. and its
subsidiaries
A company invested by the Directors and senior
management of the Company
Nanchang Chenjian New-style Wall Materials Co. Ltd. A company invested by the Directors and senior
management of the Company
Shouguang Hengde Real Estate Co. Ltd. A company invested by the Directors and senior
management of the Company
Zhejiang Huaming Investment Management Co. Ltd.and its subsidiaries
Directors and senior management served by the
Company’s Directors
Hebei Chenming Zhongjin Real Estate Development Co.Ltd. and its subsidiaries
Directors served by the Company’s Supervisors and
senior management
Wuhan Chenming Zhongjin Real Estate Co. Ltd. and its
subsidiaries
Directors served by the Company’s Supervisors
Wuhan Rongsheng Zhongjin Development and
Investment Co. Ltd. and its subsidiaries
Directors served by the Company’s Supervisors
2020 ANNUAL REPORT 289
XIII Financial Report
Name of other related parties Relation
Qingzhou Chenming Denaturation Amylum Co. Ltd. Investee of the Company
Lide Technology Co. Ltd. Investee of the Company
Jiangxi Jiuyu Energy Co. Ltd. and its subsidiaries Directors and senior management served by the
Company’s Directors in the past twelve months
Chen Hongguo Hu Changqing Li Xingchun Li Feng Li
Xueqin Geng Guanglin Li Weixian Li Zhenzhong Li
Feng Chen Gang Dong Lianming and Yuan Xikun
Key management personnel
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
related party
transaction
Amount for
the reporting
period
Transaction
facility
approved
Whether the
Transaction
facility is
exceeded
Amount for the
prior period
Jiangxi Jiuyu Energy Co.Ltd.Procurement of natural
gas and heavy oil etc.
255158150.43 600000000.00 No 381124206.33
Weifang Xingxing United
Chemical Co. Ltd.
Procurement of
hydrogen peroxide
etc.
80638768.49
Lide Technology Co. Ltd. Service expense 3240300.00 No
Table on sales of goods/providing of services
Unit: RMB
Related party
Details of related party
transaction
Amount for the
reporting period
Amount for the
prior period
Shouguang Chenming Huisen New-
style Construction Materials Co.Ltd.Sales of electricity and
steam
8668152.00 7064454.19
Shouguang Huixin Construction
Materials Co. Ltd.Sales of cement coal oil
etc.
4662205.59 13402439.72
Related party transactions regarding purchase and sale of goods and provision and receipt of services
XII. Related parties and related party transactions (Cont’d)
4. Other related parties (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED290
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee
The Company as guarantor
Unit: RMB
Guarantor Party being guaranteed
Amount under
guarantee
Starting date
of guarantee
Expiry date
of Guarantee
Whether
performance
of guarantee
is completed
Shandong Chenming Paper Holdings
Limited
Weifang Sime Darby West Port
Co. Ltd. 124800000.00 2017/12/20 2027/12/20 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 119405670.00 2018/4/23 2021/4/7 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 68511450.00 2018/5/4 2021/4/6 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 43064340.00 2018/5/17 2021/5/5 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 131150490.00 2019/4/30 2022/4/22 No
Shandong Chenming Paper Holdings
Limited Chenming (HK) Limited 65249000.00 2020/6/2 2021/5/30 No
Shandong Chenming Paper Holdings
Limited
Hainan Chenming Technology
Co. Ltd. 300000000.00 2020/12/11 2021/3/10 No
Shandong Chenming Paper Holdings
Limited
Hainan Chenming Technology
Co. Ltd. 80000000.00 2020/12/18 2021/3/17 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 43690000.00 2017/1/5 2021/3/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 43690000.00 2017/1/5 2021/6/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 3900000.00 2017/1/5 2021/9/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 36260000.00 2017/2/3 2021/9/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 40160000.00 2017/2/3 2021/12/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 40160000.00 2017/2/3 2022/3/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 33420000.00 2017/2/3 2022/6/26 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 200000000.00 2020/10/22 2021/10/21 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 300000000.00 2020/12/23 2021/12/23 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 20000000.00 2020/3/23 2021/3/22 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 96942436.11 2020/4/14 2021/4/13 No
2020 ANNUAL REPORT 291
XIII Financial Report
Guarantor Party being guaranteed
Amount under
guarantee
Starting date
of guarantee
Expiry date
of Guarantee
Whether
performance
of guarantee
is completed
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 30000000.00 2020/6/9 2021/6/8 No
Shandong Chenming Paper Holdings
Limited
Huanggang Chenming Pulp &
Paper Co. Ltd. 38057563.89 2020/6/19 2021/6/18 No
Shandong Chenming Paper Holdings
Limited Jilin Chenming Paper Co. Ltd. 20000000.00 2020/3/16 2021/2/26 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 200000000.00 2019/6/28 2022/6/27 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 300000000.00 2019/7/1 2022/6/27 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 85000000.00 2019/10/23 2022/6/27 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 114750000.00 2019/11/22 2022/6/27 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 26800000.00 2020/2/14 2021/2/13 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 60000000.00 2020/2/24 2021/2/23 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 99000000.00 2020/3/3 2021/3/2 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 49500000.00 2020/3/19 2021/3/19 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 150000000.00 2020/3/20 2021/3/19 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 90000000.00 2020/3/27 2021/3/26 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 100000000.00 2020/4/10 2021/4/9 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 70000000.00 2020/4/15 2021/4/14 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 73000000.00 2020/5/27 2021/5/26 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 13433306.20 2020/9/4 2021/3/3 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 24403126.00 2020/10/29 2021/4/14 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 11648409.40 2020/12/7 2021/6/5 No
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 150000000.00 2020/12/18 2021/12/17 No
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED292
XIII Financial Report
Guarantor Party being guaranteed
Amount under
guarantee
Starting date
of guarantee
Expiry date
of Guarantee
Whether
performance
of guarantee
is completed
Shandong Chenming Paper Holdings
Limited
Jiangxi Chenming Paper Co.Ltd. 25000000.00 2020/12/21 2021/5/28 No
Shandong Chenming Paper Holdings
Limited
Shandong Chenming Paper
Sales Co. Ltd. 253272043.36 2020/3/9 2021/3/4 No
Shandong Chenming Paper Holdings
Limited
Shandong Chenming Paper
Sales Co. Ltd. 60000000.00 2020/3/31 2021/1/22 No
Shandong Chenming Paper Holdings
Limited
Shandong Chenming Paper
Sales Co. Ltd. 420456575.63 2020/5/6 2021/5/2 No
Shandong Chenming Paper Holdings
Limited
Shandong Chenming Paper
Sales Co. Ltd. 100000000.00 2020/6/10 2021/6/7 No
Shandong Chenming Paper Holdings
Limited
Shandong Chenming Paper
Sales Co. Ltd. 270000000.00 2020/6/16 2021/1/22 No
Shandong Chenming Paper Holdings
Limited
Shandong Chenming Paper
Sales Co. Ltd. 100000000.00 2020/7/15 2021/7/12 No
Shandong Chenming Paper Holdings
Limited
Shanghai Chenming Pulp &
Paper Sales Co. Ltd. 5000000.00 2020/5/11 2021/5/10 No
Shandong Chenming Paper Holdings
Limited
Shanghai Chenming Pulp &
Paper Sales Co. Ltd. 10000000.00 2020/12/23 2021/12/23 No
Shandong Chenming Paper Holdings
Limited
Shouguang Meilun Paper Co.Ltd. 124976460.75 2020/7/9 2021/7/9 No
Shandong Chenming Paper Holdings
Limited
Shouguang Meilun Paper Co.Ltd. 124663481.19 2020/9/22 2021/3/22 No
Shandong Chenming Paper Holdings
Limited
Shouguang Meilun Paper Co.Ltd. 100000000.00 2020/9/29 2021/9/29 No
Shandong Chenming Paper Holdings
Limited
Shouguang Meilun Paper Co.Ltd. 132277786.95 2020/12/7 2021/6/5 No
Shandong Chenming Paper Holdings
Limited
Wuhan Chenming Hanyang
Paper Holdings Co. Ltd. 30000000.00 2020/8/6 2021/6/23 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 200000000.00 2019/7/12 2021/7/12 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 140000000.00 2019/12/4 2021/12/3 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 645965100.00 2019/12/27 2022/12/27 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 100000000.00 2020/1/14 2021/1/13 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 125000000.00 2020/1/21 2021/1/21 No
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
2020 ANNUAL REPORT 293
XIII Financial Report
Guarantor Party being guaranteed
Amount under
guarantee
Starting date
of guarantee
Expiry date
of Guarantee
Whether
performance
of guarantee
is completed
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 100000000.00 2020/2/11 2021/2/10 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 50000000.00 2020/2/18 2021/2/12 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 100000000.00 2020/2/19 2021/2/18 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 326245000.00 2020/2/26 2021/2/25 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 300000000.00 2020/2/29 2021/2/28 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 30000000.00 2020/3/13 2021/3/10 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 70000000.00 2020/3/13 2021/3/12 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 35234460.00 2020/3/25 2021/3/24 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 100000000.00 2020/3/25 2021/3/25 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 50000000.00 2020/3/27 2021/3/22 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 29362050.00 2020/5/21 2021/5/18 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 58071610.00 2020/7/1 2021/6/25 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 99000000.00 2020/7/16 2021/1/12 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 90000000.00 2020/8/6 2021/2/2 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 200000000.00 2020/8/14 2021/3/9 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 50000000.00 2020/8/18 2021/8/12 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 89000000.00 2020/9/15 2021/9/14 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 99600000.00 2020/9/16 2021/3/15 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 110000000.00 2020/10/16 2021/10/15 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 80000000.00 2020/10/16 2023/10/15 No
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED294
XIII Financial Report
Guarantor Party being guaranteed
Amount under
guarantee
Starting date
of guarantee
Expiry date
of Guarantee
Whether
performance
of guarantee
is completed
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 80000000.00 2020/10/19 2022/10/13 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 30000000.00 2020/11/4 2021/11/3 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 45674300.00 2020/11/5 2021/10/13 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 90000000.00 2020/11/6 2021/5/5 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 90000000.00 2020/11/6 2021/5/5 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 115000000.00 2020/11/11 2023/11/10 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 90000000.00 2020/11/12 2021/11/11 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 90000000.00 2020/11/16 2021/11/15 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 51500000.00 2020/11/18 2021/5/12 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 166668000.00 2020/11/18 2021/11/17 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 30000000.00 2020/12/1 2021/11/30 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 190989910.80 2020/12/4 2021/3/4 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 200000000.00 2020/12/4 2021/12/3 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 100000000.00 2020/12/10 2023/12/9 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 50000000.00 2020/12/18 2021/12/17 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 100000000.00 2020/12/18 2021/12/17 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 32624500.00 2020/12/24 2021/12/17 No
Shandong Chenming Paper Holdings
Limited
Zhanjiang Chenming Pulp &
Paper Co. Ltd. 30000000.00 2020/12/31 2021/1/4 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 241967137.90 2018/8/8 2021/5/25 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 241967137.90 2018/8/8 2021/5/25 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 232286440.00 2018/9/4 2021/6/21 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 232286440.00 2018/9/6 2021/6/21 No
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
2020 ANNUAL REPORT 295
XIII Financial Report
Guarantor Party being guaranteed
Amount under
guarantee
Starting date
of guarantee
Expiry date
of Guarantee
Whether
performance
of guarantee
is completed
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 97873500.00 2019/3/28 2021/6/16 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 97873500.00 2019/3/28 2022/1/7 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 192060431.50 2019/4/2 2021/6/10 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 192060431.50 2019/4/2 2022/1/6 No
Zhanjiang Chenming Pulp & Paper Co. Ltd. Chenming (HK) Limited 127235550.00 2019/7/19 2021/6/19 No
Jiangxi Chenming Paper Co. Ltd. Chenming (HK) Limited 87132862.11 2020/3/19 2021/3/9 No
Jiangxi Chenming Paper Co. Ltd. Chenming (HK) Limited 7177390.00 2020/11/18 2021/3/9 No
Shandong Chenming Financial Leasing Co.Ltd.Zhanjiang Chenming Pulp &
Paper Co. Ltd.
120000000.00 2020/8/5 2021/8/5 No
Shanghai Herui Investment Co. Ltd. Shouguang Meilun Paper Co.Ltd.
200000000.00 2020/12/4 2022/6/27 No
Shanghai Herui Investment Co. Ltd. Shouguang Meilun Paper Co.Ltd.
424000000.00 2020/12/4 2023/10/30 No
Shanghai Herui Investment Co. Ltd. Wuhan Chenming Hanyang
Paper Holdings Co. Ltd.
6000000.00 2020/12/4 2023/10/30 No
Shanghai Herui Investment Co. Ltd. Huanggang Chenming Pulp &
Paper Co. Ltd.
200000000.00 2020/12/4 2023/10/30 No
Total 12811497891.19
(3) Related party lending and borrowing
Unit: RMB
Related party Borrowing amount Starting date Expiry date Description
Borrowing
Chenming Holdings Co. Ltd. 660300000.00 1 January 2020 31 December 2020
Guangdong Nanyue Bank Co. Ltd. 1316664000.00 18 September 2020 28 December 2021
Lending
Shouguang Meite Environmental Technology
Co. Ltd. 16307200.00 29 June 2020 24 December 2024
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED296
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(4) Interests of related party lending and borrowing
Unit: RMB
Related party
Details of related
party transaction
Amount during
the year
Amount during
the prior year
Weifang Sime Darby West Port Co. Ltd. Interest income 4019600.00 4052621.83
Shouguang Meite Environmental
Technology Co. Ltd. Interest income 341680.26
Guangdong Nanyue Bank Co. Ltd. Interest expenses 96774311.73
Chenming Holdings Co. Ltd. Interest expenses 7563200.00 27905072.21
(5) Remuneration of key management staff
Unit: RMB’ 0000
Item
Amount during
the year
Amount during
the prior year
Remuneration of key management staff 3067.34 3057.25
(6) Other related party transactions
① Distribution band of remuneration of key management staff
Band of annual remuneration
Amount during
the year
(RMB’0000)
Amount during
the prior year
(RMB’0000)
Total 3067.34 3057.25
Of which: (number of staff in each band of amount)
RMB4.80-5.20 million 2 2
RMB3.60-4.00 million
RMB3.20-3.60 million 1
RMB2.80-3.20 million 3 1
RMB2.40-2.80 million 0 1
RMB2.00-2.40 million 0 2
RMB1.60-2.00 million 1 3
RMB1.20-1.60 million 2
RMB0.80-1.20 million 2
Below RMB0.80 million 14 21
2020 ANNUAL REPORT 297
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(6) Other related party transactions (Cont’d)
② Breakdown of remuneration of key management staff
Amount during the year (RMB’0000)
Key management staff
Basic annual
remuneration
Social welfare
contribution
Payments of
housing funds
Total
(RMB’0000)
Yin Meiqun 20.00 20.00
Yang Biao 20.00 20.00
Sun Jianfei 20.00 20.00
Sub-total of independent non-executive
Directors 60.00 60.00
Li Chuanxuan 20.00 20.00
Han Tingde 20.00 20.00
Sub-total of non-executive Directors 40.00 40.00
Chen Hongguo 492.22 5.43 1.35 499.00
Hu Changqing 294.73 3.06 2.21 300.00
Li Xingchun 480.00 480.00
Li Feng 328.82 5.43 1.35 335.60
Sub-total of executive Directors 1595.77 13.92 4.91 1614.60
Li Kang 57.32 5.43 1.35 64.10
Pan Ailing 10.00 10.00
Zhang Hong 10.00 10.00
Li Xinggui 15.58 3.84 0.88 20.30
Qiu Lanju 58.88 4.25 0.97 64.10
Total of Supervisor 151.78 13.52 3.20 168.50
Sub-total of other senior management
members 1142.84 32.88 8.52 1184.24
Total 2990.39 60.32 16.63 3067.34
SHANDONG CHENMING PAPER HOLDINGS LIMITED298
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(6) Other related party transactions (Cont’d)
② Breakdown of remuneration of key management staff (Cont’d)
Amount during the prior year (RMB’0000)
Key management staff
Basic annual
remuneration
Social welfare
contribution
Payments of
housing funds
Total
(RMB’0000)
Yin Meiqun 11.67 11.67
Yang Biao 11.67 11.67
Sun Jianfe 11.67 11.67
Pan Ailing 11.20 11.20
Huang Le 5.37 5.37
Liang Fu 5.37 5.37
Wang Fengrong 5.37 5.37
Sub-total of independent non-executive
Directors 62.32 62.32
Li Chuanxuan 11.67 11.67
Han Tingde 11.67 11.67
Yang Guihua 5.37 5.37
Zhang Hong 11.20 11.20
Sub-total of non-executive Directors 39.91 39.91
Chen Hongguo 488.20 7.1 3.7 499.00
Hu Zhangqing 288.90 11.10 3.90 303.90
Li Xingchun 499.00 499.00
Geng Guanglin 151.60 7.10 3.70 162.40
Li Feng 176.00 7.10 3.70 186.80
Chen Gang 86.70 6.50 3.50 96.70
Sub-total of executive Directors 1690.40 38.90 18.50 1747.80
Pan Ailing Reflected in the aforementioned independent non-executive Directors
Zhang Hong Reflected in the aforementioned non-executive Directors
Li Xinggui 17.10 5.30 2.00 24.40
Qiu Lanju 20.70 4.20 2.00 26.90
Li Dong 0 0
Sun Yinghua 7.30 3.60 2.50 13.40
Zhang Xiaofeng 1.12 1.12
Total of Supervisor 46.22 13.10 6.50 65.82
Sub-total of other senior management
members 1068.90 45.20 27.30 1141.40
Total 2907.75 97.20 52.30 3057.25
2020 ANNUAL REPORT 299
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(6) Other related party transactions (Cont’d)
③ The 5 highest paid individuals of the Company during the year comprised of 4 directors and 1 other senior
management member of the Company. The remuneration band of the 1 senior management member was
RMB2.40-2.80 million.
A. Remuneration of the five highest paid individuals
Item
Amounts during
the year (in ten
thousand RMB)
Amounts during
the prior year (in ten
thousand RMB)
Basic annual remuneration 1887.99 1751.10
Provident fund 6.26 15.00
Social welfare contribution 19.35 32.40
Total 1913.60 1798.5 0
B. Distribution band of remuneration of the five highest paid individuals
Band of annual remuneration
Number of
individuals
during the year
Number of
individuals
during the
prior year
RMB4.80-5.20 million 2 2
RMB3.20-3.60 million 1
RMB2.80-3.20 million 2 1
RMB2.40-2.80 million 0 1
RMB2.00-2.40 million 1
RMB1.60-2.00 million
RMB1.20-1.60 million
④ For the financial year ended 31 December 2020 no other bonuses which are discretionary or are based
on the Company’s the Group’s or any member of the Group’s performance were paid to or receivable by
the five highest paid individuals and no other emoluments were paid by the Company to the directors of
the Company and the 5 highest paid individuals as an inducement to join or upon joining the Company or
as compensation for loss of office. None of the directors waived any emoluments during the year.
SHANDONG CHENMING PAPER HOLDINGS LIMITED300
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB
Closing balance Opening balance
Item Related party Book balance Bad debt Book balance Bad debt
Prepayments Shouguang Hengyuan Energy Co.Ltd.
6829643.97 20179937.87
Other receivables Shouguang Hengyuan Energy Co.Ltd.
10000000.00 757910.97
Accounts
receivable
Shouguang Chenming Huisen
New-style Construction Materials
Co. Ltd.
2000017.96 87306.27 2008185.60 61132.76
Prepayments Jiangxi Jiuyu Energy Co. Ltd. 9354736.54 15358225.83
Other receivables Weifang Sime Darby West Port
Co. Ltd.
68476127.98 19038071.06 64889583.26 5151661.58
Other receivables Shouguang Meite Environmental
Technology Co. Ltd.
16307200.00 70132.59
(2) Accounts payable
Unit: RMB
Item Related party Closing balance Opening balance
Accounts payable Weifang Xingxing United Chemical
Co. Ltd.
26905494.34 26905494.34
Other payables Chenming Holdings Co. Ltd. 708440865.27
Other payables Weifang Xingxing United Chemical
Co. Ltd.
16860000.00
Accounts payable Jiangxi Jiuyu Energy Co. Ltd. 2141855.60 3054956.65
Other non-current liabilities Guangdong Nanyue Bank Co. Ltd. 400000000.00 400000000.00
2020 ANNUAL REPORT 301
XIII Financial Report
XII. Related parties and related party transactions (Cont’d)
6. Related party accounts receivable and accounts payable (Cont’d)
(3) Deposits with related parties
Unit: RMB
Item Related party Closing balance Opening balance
Bank deposit Guangdong Nanyue Bank Co. Ltd. 655073601.28 85668.46
Other monetary funds Guangdong Nanyue Bank Co. Ltd. 724668000.00 2414668000.00
(4) Loans from related parties
Unit: RMB
Item Related party Closing balance Opening balance
Short-term borrowings Guangdong Nanyue Bank Co. Ltd. 1716664600.00 2948970000.00
XIII. Share-based payment
1. General information of share-based payment
√ Applicable □ Not applicable
Unit: RMB
Total equity instruments of the Company granted during the period 79600000.00
Total exercised equity instruments of the Company during the period 0.00
Total invalid equity instruments of the Company during the period 0.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED302
XIII Financial Report
XIII. Share-based payment (Cont’d)
2. Equity-settled share-based payment
√ Applicable □ Not applicable
Unit: RMB
The method of determining the fair value of equity instrument on the grant date Ex-right price of grant of share
Basis for determining the quantity of exercisable equity instruments See explanation for details
Reasons for significant difference between the current estimate and previous
estimate None
Accumulated amount of equity-settled share-based payment included in the
capital reserve 32486925.23
Total amount of equity-settled share-based payment recognised in the current
period 32486925.23
Other explanation
On 29 May 2020 the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive
Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants were
considered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary
meeting of the ninth session of the Supervisory Committee of the Company. It is determined that the grant date would
be 29 May 2020 and the fair value of the restricted shares was the ex-rights price of the shares on the grant date.
The Restricted Shares to be granted under the Incentive Scheme were “granted once and unlocked in batches”. For
the period commencing from the first trading day after expiry of the 24-month period from the date on which the
registration of the grant of the Restricted Shares is completed and ending on the last trading day of the 36-month
period from the date on which the registration of the grant of the Restricted Shares is completed 40% of the
Restricted Shares will be unlocked; for the period commencing from the first trading day after expiry of the 36-month
period from the date on which the registration of the grant of the Restricted Shares is completed and ending on the
last trading day of the 48-month period from the date on which the registration of the grant of the Restricted Shares
is completed 30% of the Restricted Shares will be unlocked; for the period commencing from the first trading day
after expiry of the 48-month period from the date on which the registration of the grant of the Restricted Shares is
completed and ending on the last trading day of the 60-month period from the date on which the registration of the
grant of the Restricted Shares is completed 30% of the Restricted Shares will be unlocked. Meanwhile during the
three accounting years from 2021 to 2023 the Restricted Shares granted under the Incentive Scheme shall be subject
to annual performance appraisal for unlocking. (for details of specific performance evaluation conditions please refer
to the announcement of the Company). At each balance sheet date during the vesting period the Company based
on the latest information such as the latest update on the change in the number of entitled employees will make best
estimates to adjust the expected number of equity instruments that can be vested. As at the exercise date the final
estimated number of exercisable equity instruments should equal the actual number of exercisable equity instruments.
2020 ANNUAL REPORT 303
XIII Financial Report
XIV. Undertaking and contingency
1. Significant commitments
(1) Capital commitment
Unit: RMB
Capital commitments contracted for but not yet necessary to
be recognised on the balance sheet Closing balance Opening balance
Commitments in relation to acquisition and construction of
long-term assets 236106766.83 260421348.84
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 Arjowiggins HKK2 Limited (“HKK2”) jointly established
ArjoWiggins Chenming Specialty Paper Co. Ltd. in Shouguang Shandong Province which is engaged in
the production of special paper decoration paper and draft paper. However such company experienced
poor management due to financial crisis. Hence such company was forced to dissolve in October 2008.In October 2012 HKK2 submitted for arbitration application to Hong Kong International Arbitration Centre
Hong Kong Special Administration of PRC on the ground of default of the joint venture agreement by the
Company. In November 2015 Hong Kong International Arbitration Centre announced arbitration result
stating that the Company should compensate HKK2 with economic loss of RMB167 million arbitration fee
of HK$3.30 million and legal fee of USD3.54 million together with interest thereon calculated at 8% per
annum. In October 2016 the Company received a statutory demand stating that if the Company fails to
perform the arbitration results within 21 days the liquidation application on H shares of the Company will
be submitted. Subsequently HKK2 submitted H shares liquidation application to the arbitration centre.In November 2016 the Company submitted application to the Court of First Instance of the High Courtof 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 injunction
received by the Group. In the same month the Group received the liquidation application submitted by
the defendant to the High Court of Hong Kong which alleged that the Group should compensate the
defendant with economic loss of RMB167 million legal fee of USD3.54 million and arbitration fee of
HK$3.30 million together with interest thereon due to failure in compliance of the arbitration results.
In 2017 the Group made provision of RMB325259082.28 for the pending litigation.
Relevant appeal hearing of the Group on 15 July 2017 was completed in the Hong Kong High Court
Appeal Court on the morning of 11 May 2018. At the end of the hearing the court had instructed that
another sentence be adjudicated.
On 5 August 2020 the Court of Appeal of the High Court of Hong Kong made a judgment and rejected
our Company’s appeal request. The Company is seeking ways to re-appeal to protect the legal rights and
interests of the Company and investors. However as of 31 December 2020 the estimated loss was still
uncertain. Therefore the estimated liability must still be listed in the balance sheet.
As of 31 December 2020 the Group had no other contingencies that should be disclosed.
SHANDONG CHENMING PAPER HOLDINGS LIMITED304
XIII Financial Report
XV. Post-balance sheet event
1. Significant non-adjusting events
Unit: RMB
Item Content
Effect to financial positions
and operating results
Reason for not reliably
estimated
Redemption of Preference
Shares
Redemption of the first
tranche of Preference
Shares
Reduction of other
equity instruments by
RMB2238.75 million
and reduction of capital
reserves by RMB11.25
million
Conversion of B shares to
H shares
Conversion of B shares in
issue to H shares
No impact on financial
position and operating
results of the Company
2. Profit distribution
Unit: RMB
Profits or dividends declared upon consideration and approval 661044485.66
3. Description of other events after the balance sheet date
As of 25 March 2021 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 Group’s internal organisational structure management requirements and internal reporting
system the Group’s operating business is divided into 5 reporting segments. These report segments are
determined based on the financial information required by the company’s daily internal management. The
management of the Group regularly evaluates the operating results of these reporting segments to determine
the allocation of resources to them and evaluate their performance.The Group’s reporting segments include:
(1) Machine paper segment which is responsible for production and sales of machine paper;
(2) Financial services segment which provides financial services;
(3) Investment real estate 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 standards
adopted by each segment when reporting to management. These accounting policies and measurement basis
are consistent with the accounting policies and measurement basis used in preparing the financial statements.
2020 ANNUAL REPORT 305
XIII Financial Report
XVI. Other material matters (Cont’d)
1. Segment information (Cont’d)
(2) Financial Information of Reporting Segment
Unit: RMB
Item
Machine-made
paper
Financial
Services
Investment
real estate Others
Inter-segment
offset Total
Revenue 29206314400.24 1303678561.03 151740341.85 1031966112.04 957181418.26 30736517996.90
Of which: revenue from external transactions 29021523071.50 964291738.17 106560951.52 644142235.71 – 30736517996.90
Revenue from inter-segment transactions 184791328.74 339386822.86 45179390.33 387823876.33 957181418.26 –
Of which: Revenue from principal activities 28594757850.60 1296660729.91 112314230.97 1010794035.98 967268762.49 30047258084.97
Operating costs 22470534868.13 814315100.61 148685628.57 886839688.41 674781099.51 23645594186.21
Of which: Costs of principal activities 21844528171.28 809063515.98 148685628.57 880444724.37 636013221.48 23046708818.72
Operating expenses 284006730.90 3323648.60 3882243.08 28268491.44 21234758.11 298246355.91
Operating profit/(loss) 3892491894.59 305864065.35 -235657128.38 53729771.94 2431707113.42 1584721490.08
Total assets 85124126091.25 20946044723.43 6523946950.46 7476608772.00 28495268708.52 91575457828.62
Total liabilities 61104154700.00 12593437439.88 4242547284.17 3226363801.40 15391309112.07 65775194113.38
2. Government grants
(1) Government subsidies included in deferred income will be subsequently measured using the gross method
Unit: RMB
Item of subsidies Type Closing balance
New subsidy amount
for the period
Amount transferred
to profit or loss for
the period Other movements Closing balance
Presentable items
transferred to
profit or loss
Asset-related/
revenue-related
Project Funding for National
Key Technology Research
and Development Program
Financial
appropriation 1452525.00 164700.00 1287825.00 Other income Asset-related
Sewage treatment and
water conservation
transformation project
Financial
appropriation 63274136.71 3673020.38 59601116.33 Other income Asset-related
Huanggang forestry-pulp-
paper project
Financial
appropriation 681564072.66 28398506.40 653165566.26 Other income Asset-related
Zhanjiang forestry-pulp-paper
project
Financial
appropriation 67047201.50 12145971.39 54901230.11 Other income Asset-related
Industrial logistics
park reconstruction
compensation
Financial
appropriation 51960000.00 51960000.00 Investment income Asset-related
Financial subsidies for
technical transformation
project
Financial
appropriation 168182448.80 12496307.72 155686141.08 Other income Asset-related
Funding for environmental
protection
Financial
appropriation 700228305.19 27420000.00 50008737.63 677639567.56 Other income Asset-related
Others
Financial
appropriation 37304645.25 1589455.08 35715190.17 Other income Asset-related
Total 1771013335.11 27420000.00 108476698.60 51960000.00 1637996636.51
SHANDONG CHENMING PAPER HOLDINGS LIMITED306
XIII Financial Report
XVI. Other material matters (Cont’d)
2. Government grants (Cont’d)
(2) Government subsidies calculated into the current profit and loss using the total method
Unit: RMB
Subsidy Item Type
Amount credited to profit
or loss for the prior period
Amount credited to profit
or loss for the period
Presentable items
included in profit or loss
Asset-related/
revenue-related
Project Funding for National Key Technology
Research and Development Program
Financial
appropriation
164700.00 164700.00 Other income Asset-related
Environmental Monitoring and Monitoring
Capability Improvement Subsidies
Financial
appropriation
20000.00 Non-operating income Revenue-related
Provincial manufacturing individual championship
subsidy
Financial
appropriation
800000.00 Non-operating income Revenue-related
Sewage treatment and water conservation
transformation project
Financial
appropriation
1192682.88 1192682.88 Other income Asset-related
Zhanjiang forestry-pulp-paper project Financial
appropriation
4094632.92 12145971.39 Other income Asset-related
Industrial logistics park reconstruction
compensation
Financial
appropriation
4705900.00 Other income Revenue-related
Enterprise reform and development subsidies Financial
appropriation
31070010.00 107578937.51 Other income and non-
operating income
Revenue-related
Financial subsidies for technical transformation
project
Financial
appropriation
110054807.72 101984107.72 Other income Asset-related and revenue-
related
Funding for environmental protection Financial
appropriation
49361843.85 72505645.88 Other income Asset-related
Huanggang pulp-forestry-paper project Financial
appropriation
7543321.53 Other revenue Asset-related
Research and development grants Financial
appropriation
74923512.88 564000.00 Other income Revenue-related
Enterprise technology innovation subsidies Financial
appropriation
100000.00 Other income Revenue-related
Immediate VAT refund Financial
appropriation
1217058.15 1846849.03 Other income Revenue-related
Subsidies for foreign trade projects Financial
appropriation
211200.00 Other income Revenue-related
Leading talent subsidy Financial
appropriation
400000.00 Non-operating income Revenue-related
Equipment technology subsidies Financial
appropriation
115400.00 Other income Revenue-related
Investment promotion subsidy Financial
appropriation
41542500.00 6306806.25 Other income and non-
operating income
Revenue-related
Job stabilisation subsidy Financial
appropriation
4856411.21 Other income and non-
operating income
Revenue-related
Social security subsidies Financial
appropriation
486607.82 Other income and non-
operating income
Revenue-related
R&D subsidy Financial
appropriation
2469900.00 Other income Revenue-related
Financing subsidy Financial
appropriation
130000.00 Other income Revenue-related
Tax return Financial
appropriation
80382428.92 71675835.40 Other income Revenue-related
Government awards Financial
appropriation
228000000.00 Other income Revenue-related
Financial discount Financial
appropriation
22364612.22 3753300.60 Finance expenses Revenue-related
Pandemic subsidy Financial
appropriation
1495150.00 Other income and non-
operating income
Revenue-related
Afforestation subsidy Financial
appropriation
3891820.00 6316370.50 Other income Revenue-related
Others Financial
appropriation
17307907.75 540115190.13 Other income and non-
operating income
Revenue-related
Total 670274417.29 944778387.85
2020 ANNUAL REPORT 307
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XVI. Other material matters (Cont’d)
3. Net Current Assets and Total Assets less Current Liabilities
(1) Net current assets
Unit: RMB’0000
Closing balance Opening balance
Current assets 3588225.01 4495243.39
Less: Current liabilities 5104623.47 5269876.89
Net current assets -1516398.46 -774633.50
(2) Total assets less current liabilities
Unit: RMB’0000
Closing balance Opening balance
Total assets 9157545.78 9795890.99
Less: Current liabilities 5104623.47 5269876.89
Total assets less current liabilities 4052922.31 4526014.10
XVII. Major Item Notes of the Parent Company’s Financial Statements
1. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening Balance
Book balance Bad debt provision Carrying value Book balance Bad debt provision Carrying value
Type Amount Percentage Amount ECL rate Amount Percentage Amount ECL rate
Accounts receivable assessed
individually for impairment 778063.57 1.73% 778063.57 100.00%
Of which:
Accounts receivable assessed
collectively for impairment 698032192.53 100.00% 3195631.29 0.46% 694836561.24 44083258.79 98.27% 4878588.79 11.07% 39204670.00
Of which:
Accounts receivable from related
party customers 692218139.26 99.17% 692218139.26 31427654.36 70.06% 157138.27 0.50% 31270516.09
Accounts receivable from non-
related party customers 5814053.27 0.83% 3195631.29 54.96% 2618421.98 12655604.43 28.21% 4721450.52 37.31% 7934153.91
Total 698032192.53 100.00% 3195631.29 0.46% 694836561.24 44861322.36 100.00% 5656652.36 12.61% 39204670.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED308
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
1. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable by category (Cont’d)
Accounts receivable assessed collectively for impairment: Accounts receivable from related party customers
Unit: RMB
Ageing
Closing balance
Book balance Bad debt provision ECL rate
Within 1 year 692218139.26
Total 692218139.26 –-
Accounts receivable assessed collectively for impairment: Accounts receivable from non-related party
customers
Unit: RMB
Ageing
Closing balance
Book balance Bad debt provision Percentage
Within 1 year 2811232.10 192810.12 6.86%
1-2 years
2-3 years
Over 3 years 3002821.17 3002821.17 100.00%
Total 5814053.27 3195631.29 54.96%
If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs please
disclose the information about bad debt provision with reference to the way of disclosure of other receivables:
√ Applicable □ Not applicable
By ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year 695029371.36 40358501.19
1 to 2 years
2 to 3 years
Over 3 years 3002821.17 4502821.17
Subtotal 698032192.53 44861322.36
2020 ANNUAL REPORT 309
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
1. Accounts receivable (Cont’d)
(2) Provision recovery or reversal of bad debt provision for the period
Provision of bad debt provision for the period:
Unit: RMB
Changes in the period
Category
Opening
balance
Closing
balance Provision
Recovery or
reversal Write-off Others
Bad debt
provision 5656652.36 5516556.84 7977577.91 3195631.29
Total 5656652.36 5516556.84 7977577.91 3195631.29
(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 the
period was RMB696640739.26 which accounted for 99.80% of the closing balance of the total accounts
receivable. The closing balance of corresponding bad debt provision amounted to RMB3106147.59.
2. Bill receivable
Unit: RMB
Closing balance Open balance
Bill type Book balance Bad debt provision Book value Book balance Bad debt provision Book value
Bank acceptance bill 553050000.00 553050000.00 2230000000.00 2230000000.00
Commercial acceptance
draft 917670000.00 917670000.00 1024460000.00 1024460000.00
Total 1470720000.00 1470720000.00 3254460000.00 3254460000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED310
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
2. Bill receivable (Cont’d)
(1) Bills receivable endorsed or discounted at the end of the period but not yet due
Unit: RMB
Type
Amount
derecognised
at the end of
the period
Amount not
derecognised
at the end of
the period
Bank acceptance bill 553000000.00
Commercial acceptance draft 917670000.00
Total 1470670000.00
3. Other receivables
Unit: RMB
Item Closing balance Opening balance
Dividend receivables 200000000.00
Other receivables 10437425503.02 13975590537.58
Total 10637425503.02 13975590537.58
(1) Dividends receivable
1) Classification of dividends receivable
Unit: RMB
Item (or investee) Closing balance Opening balance
Shandong Chenming Group Finance Co. Ltd. 200000000.00
Total 200000000.00
2020 ANNUAL REPORT 311
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XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
3. Other receivables (Cont’d)
(2) Other receivables
1) Other payables by nature
Unit: RMB
Nature
Closing book
balance
Opening book
balance
Open credit 10482693848.05 14082545251.05
Guarantee deposit 7421297.60 5454233.36
Advances 526752.62
Insurance premium 291708.31 13979.13
Reserve and borrowings 6971976.60 8089922.34
Others 95539178.66 74361611.85
Total 10592918009.22 14170991750.35
2) Particulars of bad debt provision
Closing bad debt provision at phase 1:
Unit: RMB
Category
Book
balance
Expected credit
loss rate (%)
for the next
12 months
Bad debt
provision
Carrying
amount Reason
Bad debt provision assessed
individually
Interests receivable
Dividends receivable
Bad debt provision assessed
collectively 10527835552.61 0.86% 90410049.59 10437425503.02
Amount due from government
agencies 15283836.32 99.72% 15241735.75 42100.57
Amount due from related parties 9987186523.95 0.19% 19038071.05 9968148452.90
Other receivables 525365192.34 10.68% 56130242.79 469234949.55
Total 10527835552.61 0.86% 90410049.59 10437425503.02
SHANDONG CHENMING PAPER HOLDINGS LIMITED312
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
3. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
2) Particulars of bad debt provision (Cont’d)
As at the end of the period closing bad debt provision at phase 3:
Unit: RMB
Category
Book
balance
Expected credit
loss rate (%)
for the next
12 months
Bad debt
provision
Carrying
amount Reason
Shouguang Paper Mill No.2 1500000.00 100.00% 1500000.00 Overdue for a
prolonged
period and
unlikely to be
recovered.
Arjo Wiggins Chenming Specialty
Paper Co. Ltd.
1290901.12 100.00% 1290901.12 Overdue for a
prolonged
period and
unlikely to be
recovered.
71 entities including Qingdao
Jieneng Qilunji Group Co. Ltd.(青島捷能汽輪機集團股份
有限公司)
62291555.49 100.00% 62291555.49 Recovery
subject to
uncertainties
Total 65082456.61 100.00% 65082456.61
Changes in carrying book balances with significant changes in loss provision for the period
□ Applicable √ Not applicable
Disclosed by ageing
Unit: RMB
Ageing Closing balance Opening balance
Within 1 year (including 1 year) 10315335710.07 10816421382.30
1-2 years 190920767.76 3307579124.71
2-3 years 40248068.73 6172674.00
Over 3 years 46413462.66 40818569.34
Total 10592918009.22 14170991750.35
2020 ANNUAL REPORT 313
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XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
3. Other receivables (Cont’d)
(2) Other receivables (Cont’d)
3) Provision recovery or reversal of bad debt provision for the period
Bad debt provision for the period:
Unit: RMB
Changes in the period
Category Opening balance Provision
Recovery
or reversal Written off Others Closing balance
Bad debt provision 195401212.77 37652222.16 77560928.73 155492506.20
Total 195401212.77 37652222.16 77560928.73 155492506.20
4) Top five other receivables according to closing balance of debtors
The total amount of the Company’s top five accounts receivable based on closing balance of debtors for
the period was RMB6707802935.77 which accounted for 63.32% of the closing balance of the total
accounts receivable. The closing balance of corresponding bad debt provision amounted to RMB0.00.
SHANDONG CHENMING PAPER HOLDINGS LIMITED314
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
4. Long-term equity investments
Unit: RMB
Closing balance Opening balance
Item Book balance Impairment provision Book value Book balance Impairment provision Book value
Investment in subsidiaries 21845592649.90 21845592649.90 23275652649.90 23275652649.90
Investment in joint ventures and
associates 352509931.98 5994545.96 346515386.02 360122213.93 5994545.96 354127667.97
Total 22198102581.88 5994545.96 22192108035.92 23635774863.83 5994545.96 23629780317.87
(1) Investment in subsidiaries
Unit: RMB
Change for the period
Investee
Opening balance
(Book value)
Additional
contribution
Withdrawn
contribution
Impairment
provision Others
Closing balance
(Book value)
Closing balance
of impairment
provision
Chenming Paper Korea Co. Ltd. 6143400.00 6143400.00
Chenming GmbH 4083235.00 4083235.00
Shandong Chenming Paper Group (Fuyu) Sales Co. Ltd. 1000000.00 1000000.00
Hailaer Chenming Paper Co. Ltd. 12000000.00 12000000.00
Huanggang Chenming Pulp & Paper Co. Ltd. 2250000000.00 50000000.00 2300000000.00
Huanggang Chenming Arboriculture Development Co. Ltd. 70000000.00 70000000.00
Jilin Chenming Paper Co. Ltd. 1501350000.00 1501350000.00
Jinan Chenming Investment Management Co. Ltd. 100000000.00 100000000.00
Jiangxi Chenming Paper Co. Ltd. 822867646.40 822867646.40
Shandong Chenming Power Supply Holdings Co. Ltd. 157810117.43 157810117.43
Wuhan Chenming Hanyang Paper Holdings Co. Ltd. 264493210.21 264493210.21
Shandong Grand View Hotel Co. Ltd. 80500000.00 80500000.00
Zhanjiang Chenming Pulp & Paper Co. Ltd. 5055000000.00 27500000.00 5082500000.00
Shouguang Chenming Modern Logistic Co. Ltd. 10000000.00 10000000.00
Shouguang Chenming Art Paper Co. Ltd. 113616063.80 113616063.80
Shouguang Meilun Paper Co. Ltd. 4449441979.31 4449441979.31
Shouguang Shun Da Customs Declaration Co Ltd. 1500000.00 1500000.00
Shandong Chenming Paper Sales Co. Ltd. 762641208.20 762641208.20
Shouguang Chenming Import and Export Trade Co. Ltd. 250000000.00 250000000.00
Shouguang Chenming Papermaking Machine Co. Ltd. 2000000.00 2000000.00
Shouguang Chenming Industrial Logistics Co. Ltd. 10000000.00 10000000.00
Shouguang Chenming Hongxin Packaging Co. Ltd. 3730000.00 3730000.00
Shandong Chenming Group Finance Co. Ltd. 4000000000.00 4000000000.00
Chenming Arboriculture Co. Ltd. 45000000.00 45000000.00
Shanghai Chenming Industry Co. Ltd. 3000000000.00 3000000000.00
Chenming (HK) Limited 118067989.55 118067989.55
Chenming Paper United States Co. Ltd. 6407800.00 6407800.00
Shandong Coated Paper Sales Co. Ltd. 20000000.00 20000000.00
Weifang Chenming Growth Driver Replacement Equity
Investment Fund Partnership (Limited Partnership) 158000000.00 4790000.00 162790000.00
Total 23275652649.90 82290000.00 1512350000.00 21845592649.90
2020 ANNUAL REPORT 315
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
4. Long-term equity investments (Cont’d)
(2) Investment in associates and joint ventures
Unit: RMB
Change for the period
Investee
Opening balance
(book value)
Additional
contribution
Withdrawn
contribution
Investment gain
or loss
recognised
under equity
method
Adjustment of
other
comprehensive
income
Other change in
equity interest
Distribution of
cash dividend
or profit
declared
Impairment
provision Others
Closing balance
(book value)
Closing balance
of impairment
provision
I. Associates
Jiangxi Jiangbao Media Colour Printing Co. Ltd.Zhuhai Dechen New Third Board Equity
Investment Fund Company (Limited
Partnership) 52412989.91 -11330.29 52401659.62
Ningbo Kaichen Huamei Equity Investment Fund
Partnership (Limited Partnership) 199528847.52 -978921.25 198549926.27
Chenming (Qingdao) Asset Management Co.
Ltd. 8669491.17 5060.01 8674551.18
Xuchang Chenming Paper Co. Ltd. 5994545.96
Subtotal 260611328.60 -985191.53 259626137.07 5994545.96
II. Joint ventures
Shouguang Chenming Huisen New-style
Construction Materials Co. Ltd. 3789667.61 2356074.42 1200000.00 4945742.03
Weifang Sime Darby West Port Co. Ltd. 89726671.76 -7783164.84 81943506.92
Subtotal 93516339.37 -5427090.42 1200000.00 86889248.95
Total 354127667.97 -6412281.95 1200000.00 346515386.02 5994545.96
SHANDONG CHENMING PAPER HOLDINGS LIMITED316
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
5. Revenue and operating costs
Unit: RMB
Amount for the period Amount for the prior period
Item Revenue Operating costs Revenue Operating costs
Principal activities 6881284099.00 5528211060.91 5832105007.21 4489117606.27
Other activities 1628789694.88 1370949760.15 1082049793.98 994302334.92
Total 8510073793.88 6899160821.06 6914154801.19 5483419941.19
Information related to performance of contractual obligations:
The Group’s performance obligations of machine-made paper are usually fulfilled within one year. The Group adopted
advance receipts or provides accounting periods according to different customers. As the main responsible person
the Group directly conducts sales generally at the same time as the goods are delivered or the goods are delivered
to the destination designated by the customer the control of the goods is transferred to the customer and the Group
obtained the unconditional right to receive payment.Information related to the transaction price allocated to residual performance obligations:
At the end of the Reporting Period the amount of revenue where contracts were signed but unfulfilled or with
uncompleted performance obligation is RMB156487086.88 and RMB156487086.88 is expected to be recognised
in 2021.
2020 ANNUAL REPORT 317
XIII Financial Report
XVII. Major Item Notes of the Parent Company’s Financial Statements (Cont’d)
6. Investment income
Unit: RMB
Item
Amounts during
the period
Amounts during
the prior period
Income from long-term equity investments accounted for using the cost
method 604220123.68 1085829000.00
Income from long-term equity investments accounted for using the
equity method -6412281.95 -11142579.41
Investment gain on disposal of long-term equity investments -249714762.64 277000000.00
Investment gain on disposal financial assets measured at fair value
through profit or loss 784345.77
Total 348093079.09 1352470766.36
SHANDONG CHENMING PAPER HOLDINGS LIMITED318
XIII Financial Report
XIIX. Supplementary information
1. Breakdown of extraordinary gains or losses for the current period
√ Applicable □ Not applicable
Unit: RMB
Item Amount Remark
Profit or loss from disposal of non-current assets -51477216.37
Government grants (except for the government grants closely related
to the normal operation of the Company and granted constantly at
a fixed amount or quantity in accordance with a certain standard
based on state policies) accounted for in profit or loss for the
current period 943720129.34
Profit or loss from debt restructuring -14942498.74
Except for effective hedging business conducted in the ordinary
course of business of the Company gain or loss arising from the
change in fair value of financial assets held for trading derivative
financial assets financial liabilities held for trading and derivative
financial liabilities as well as investment gains from disposal
of financial assets held for trading derivative financial assets
financial liabilities held for trading derivative financial liabilities
and other debt investments 21166216.02
Other gain or loss items within the definition of extraordinary gain or
loss 8582997.62
Other profit or loss items consistent with the definition of
extraordinary items
Losses from abnormal suspension of operation -24567901.71
Consumable biological assets subsequently measured at fair value -13329852.55
Less: Effect of income tax 120949832.54
Effect of minority interest 155276771.30
Total 592925269.77 –-
The Company defines non-recurring profit and loss according to the definition in Explanatory Announcement No.
1 on Information Disclosure of Companies Offering Their Securities to the Public – Non-recurring Profit and Loss
and classifies non-recurring profit and loss listed in Explanatory Announcement No. 1 on Information Disclosure of
Companies Offering Their Securities to the Public – Non-recurring Profit and Loss as nonrecurring profit and loss
please explain the reason.
□ Applicable √ Not applicable
2020 ANNUAL REPORT 319
XIII Financial Report
XIIX. Supplementary information (Cont’d)
2. Return on net assets and earnings per share
Earnings per share
Profit for the reporting period
Rate of return on net assets
on weighted average basis Basic (RMB per share) Diluted (RMB per share)
Net profit attributable to ordinary shareholders of the Company 5.84% 0.36 0.36
Net profit after extraordinary gains or losses attributable to ordinary
shareholders of the Company 2.50% 0.15 0.15
When calculating financial indicators such as earnings per share and rate of return on weighted average net assets
the interest on Perpetual Bonds of RMB171776438.36 the dividends on Preference Shares of RMB387101073.42
declared to be distributed and the cash dividends of RMB116679908.80 attributable to the shareholders of restricted
shares expected to be unlocked in the future among the dividends distributed during the reporting 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
SHANDONG CHENMING PAPER HOLDINGS LIMITED320
XIV Documents Available for Inspection
I. The financial statements signed and sealed by the legal representative financial representative and head of the financial
department of the Company;
II. The original copy of the auditor’s report which is sealed by the accounting firm and signed and sealed by the certified public
accountant;
III. The original copies of the documents and announcements of the Company disclosed in the designated newspaper and on
the website as approved by the CSRC during the reporting period;
IV. The annual report disclosed on the website of The Stock Exchange of Hong Kong Limited;
V. Other related information.The Board of Shandong Chenming Paper Holdings Limited
25 March 2021
沪公网安备31011802005267号
