It is common practice for enterprises in the retail industry such as hypermarkets, department stores, and supermarkets, as well as general retail stores, hairdressing stores, and electronic products suppliers to utilize commercial prepaid cards and coupon sales in China as an effective sales channel to attract customers and increase sales revenues. The general public is generally unaware that prepaid cards could be subject to severe legal challenges under the relevant PRC laws such as the Law on the People’s Bank of China (??????????????) (the “People’s Bank Law”) and the Regulations on the Administration of RMB (?? ???????????), which strictly prohibit use of currency substitutes. According to the People’s Bank Law, the People’s Bank of China has the authority to shut down any printing or selling of currency substitutes for circulation in the market and, in addition, may impose a fine of no more than RMB200,000 on any legal entity that prints or sells currency substitutes for circulation in the market. On January 19, 2001, the State Economic and Trade Commission and Office of Correcting Industrial Improper Practice of the State Council jointly promulgated the Emergency Notice on Prohibition of Issuing and Using Coupons (Cards) (??? ?????????(?)??? ??), which further prohibited the printing and issuance of coupon cards as currency substitutes for circulation in the PRC market.

Although it remains uncertain whether prepaid cards issued by commercial enterprises in connection with the sales of their own products will be deemed as currency substitutes in China, due to such legal uncertainty, PRC retailers who intend to list their shares on The Stock Exchange of Hong Kong (“HKEx”) are routinely questioned by the HKEx and The Securities and Futures Commission of Hong Kong (“SFC”) regarding their prepaid card activities and are also required to obtain legal opinions from PRC legal counsel in this regard and to disclose such practice as a risk factor in their prospectuses. However, there has been a shift in the position of the applicable PRC authorities following the promulgation in May 2011 of the Opinion on Regulating the Administration of Commercial Prepaid Cards (??????????? ?) (the “Administration Opinion”) which reflects that such authorities acknowledge the positive effect of prepaid cards and moreover do not prohibit commercial enterprises from issuing prepaid commercial cards themselves. On May 23, 2011, the General Office of the State Council circulated the Administration Opinion released by the People’s Bank of China, Ministry of Supervision, Ministry of Finance, Ministry of Commerce (“MOFCOM”), State Administration of Taxation, State Administration for Industry and Commerce, and Bureau of Corruption Prevention, with the primary purpose of the Administration Opinion being to standardize the administration of commercial prepaid cards, as well as to prevent money laundering, illegal cash withdrawals, tax evasion, bribery, and corruption. The following is a summary of certain key points of the Administration Opinion including the latest updates of the legislation in this regard.