2016 Annual Report
Company code: 600618 900908 Short name of the Company: SCAC Chlor-Alkali B share Shanghai Chlor-Alkali Chemical Co., Ltd. 2016 Annual Report
Important Notice
I. The Board of Directors, the Supervisory Committee, Directors, Supervisors and senior executives of the Company ensure that the content of this Annual Report is true, accurate and integrative, not having any false statement, misleading representation or significant omission, and will take joint and several legal responsibilities for the Report.
II. All the Directors of the Company attended the Board meeting.
III. BDO China Shu Lun Pan Certified Public Accountants LLP (special ordinary partnership) issued an auditor's report with standard and unqualified opinion for the Company.
IV. Mr. Huang Dailie, the principal of the Company, Mr. Zhang Weimin, the principal in charge of accounting of the Company, and Mr. Lai Yonghua, the head of accounting department (accounting officer) declare to guarantee the truth, accuracy and integrity of the financial report carried in this Annual Report.
V. The profit distribution preplan or the common reserves capitalizing preplan during the reporting period reviewed by the board of directors
According to the 2016 annual financial audit report issued by BDO China Shu Lun Pan Certified Public Accountants LLP engaged by the Company, in 2016 the net profit of the parent company was RMB -320,466,343.92 Yuan and the undistributed profit at beginning of the year was RMB -614,936,506.51 Yuan, and the profit available for distribution at end of the year was RMB -935,402,850.43 Yuan. Therefore, the Company had no capability of cash dividend or common reserves capitalization.
VI. Risk disclaimer of forward-looking statements
√Applicable□Not applicable
The future plan or other forward looking statement included in this Report shall not constitute the Company's substantial commitment to the investors, and we remind the investors to notice to the investment risks.
2016 Annual Report
VII. Is there any non-operational fund occupation by the controlling shareholder or the related parties?
No
VIII. Does the Company provide the outward guarantees in breach of the stipulated decision-making process?
No
IX. Notice on important risks
√Applicable□Not applicable
The company has described the related potential risks in this report. Please refer to the contents concerning the risk factors that the Company may face in the future development in Section IV Discussion and Analysis of the Business.
X. Other
□Applicable√Not applicable
2016 Annual Report
Contents
Section I Paraphrase ........................................................................................................................... 4 Section II Company Profile and Main Financial indexes .................................................................... 5 Section III Summary on the Company's Business ................................................................................ 8 Section IV Discussion and Analysis of the Business .......................................................................... 11 Section V Major Events ..................................................................................................................... 34 Section VI Changes of Ordinary Shares and Particulars of Shareholders ........................................... 46 Section VII Particulars of Preferred Shares .......................................................................................... 50 Section VIII Particulars of the Directors, Supervisors, Senior Executives and Staff Members ............. 51 Section IX Company Governance ....................................................................................................... 60 Section X Particulars of theCompany’s Bonds ................................................................................. 64 Section XI Financial Report ................................................................................................................ 65 Section XII Documents For Reference 93
2016 Annual Report
Section I Paraphrase
I. Paraphrase
In this Report, except otherwise indicated, these words and expressions shall have the meanings as follows:
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|-|-|-|
|Paraphrase for generally-used expressions|||
|CSRC|means|China Securities Regulatory Commission|
|SSRB|means|Shanghai Regulatory Bureau of China Securities RegulatoryCommission|
|Huayi Group|means|Shanghai Huayi (Group) Company|
|The Company, Company, orChlor-Alkali Chemical|means|Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Sodium hydroxide|means|Molecular formula: NaOH; a strong soluble alkali. Sodiumhydroxide is easy to be solved into water, has strongalkalinity, and can supply Na+ ion. These properties make itused widely in the industries such as soap-making, textileindustry, printing and dyeing, blanching, papermaking,petroleum refining, metallurgy and other chemical industries.|
|Chlorine|means|Molecular formula: Cl2. As an important chemical rawmaterial, chlorine gas is widely used in the industries such aspapermaking, printing and dyeing, pigment, bleachingpowder, textile industry, chemical fiber, grease petroleum,rubber, plastic, pharmacy, disinfection, agricultural pesticide,metallurgy and electronic industry.|
|EDC|means|Ethylene dichloride. Achromatic or yellowish transparentliquid with specific gravity of about 1.26 and odor similar tochloroform, insoluble in water, dissolve in ethyl alcohol andethyl ether. Mainly used as the solvent for wax, fat andrubber, and also used in producing vinyl chloride andpolycarbonate.|
|EPVC, paste resin|means|Paste resin. The Company's production for paste resin mainlyadopts two processes, mixing method and seed emulsionpolymerization, and the paste resin is mainly used in theproducts such as the artificial leather, floor leather, wallpaper, toy and bottle cap.|
|TPVC|means|Special resin. The special resin produced by the Company ismainly the customer specially-used material, the medicalresin with high polymeric level such as plasma bag, infusiontube and the seal with high elasticity and the resin speciallyused for primary coating in automobiles.|
|CPVC|means|Chlorinated polyvinyl chloride. Mainly used in various pipeswith different caliber and the related fittings such as elbowand T-joint, the valve body and the wig.|
|SLIC|means|Shanghai Lianheng Isocyanate Co., Ltd|
|SBPC|means|Shanghai BASF Polyurethane Co., Ltd|

2016 Annual Report
Section II Company Profile and Main Financial indexes
I. Company information
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|Chinese name of the Company|上海氯碱化工股份有限公司|
|Short form|氯碱化工|
|English name of the Company|SHANGHAI CHLOR－ALKALI CHEMICAL CO.，LTD.|
|Abbreviation|SCAC|
|Legal representative of the Company|Mr. Huang Dailie|

II. Contact information
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|-|-|-|
||Secretary of the Board of Directors|Securities representative|
|Name|Dong Yan|Chen Lihua|
|Contact address|No. 4747 Longwu Rd., Shanghai|No. 4747 Longwu Rd., Shanghai|
|Tel.|021-23533113|021-64342640|
|Fax|021-64340817|021-64340817|
|E-mail|dy@scacc.com|chenlihua@scacc.com|

III. Basic information
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|-|-|
|Registered address of the Company|No. 4747 and 4800 Longwu Rd., Shanghai|
|Zip code of registered address|200241|
|Business address of the Company|No. 4747 Longwu Rd., Shanghai|
|Zip code of business address of the Company|200241|
|Website|www.scacc.com|
|E-mail|dshmss@scacc.com|

IV. Information disclosure and filing site
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|-|-|
|Newspapers for information disclosure selectedby the Company|China Securities News, Shanghai Securities News,Securities Post and Hong Kong Commercial Daily|
|Website appointed by China SecuritiesRegulatory Commission for carrying annualreport|www.sse.com.cn|
|Site for filing annual report|No. 4747 Longwu Rd., Shanghai|

V. The Company's share
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|-|-|-|-|
|The Company's share||||
|Type of share|Stock exchange for listingof share|Share name|Share code|
|A-share|Shanghai Stock Exchange|Chlor-Alkali Chemical|600618|
|B-share|Shanghai Stock Exchange|Chlor-Alkali B Share|900908|

VI. Other relevant information
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|-|-|-|
|Public accounting firmengaged by the Company(domestic)|Name|BDO China Shu Lun Pan Certified PublicAccountants LLP|
||Business address|4th Floor, New Huangpu Financial Plaza,No.61, East Nanjing Rd., Shanghai, China|
||Name of the accountantfor signing|Gu Xuefeng, Chen Luying|

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VII. Main accounting data and financial indexes of the last 3 years
(I) Main accounting data
Unit: Yuan Currency: RMB
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|-|-|-|-|-|
|Main accounting data|2016|2015|Increase ordecrease thansame period oflast year (%)|2014|
|Operating income|6,754,397,061.69|6,170,874,223.67|9.46|7,015,409,267.56|
|Net profit attributable toshareholders of the listedCompany|-328,091,761.80|95,615,030.34|-443.14|-592,502,499.95|
|Net profit attributable toshareholders of theCompany, afternon-recurring profit and loss|-72,743,416.16|-31,416,638.28|N.A.|-262,177,332.00|
|Net cash flow fromoperating activities|488,856,761.24|305,852,432.45|59.83|-29,059,999.83|
||At the end of2016|At the end of2015|Increase ordecrease (%)|At the end of2014|
|Net assets attributable toshareholders of the listedCompany|1,941,720,787.56|2,261,545,045.54|-14.14|2,164,655,507.39|
|Total assets|4,489,616,046.06|4,847,854,403.79|-7.39|5,754,717,626.22|

 (II) Main financial indexes
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|-|-|-|-|-|
|Main financial indexes|2016|2015|Increase or decrease than sameperiod of last year (%)|2014|
|Basic earnings per share (RMB/share)|-0.2837|0.0827|-443.05|-0.5124|
|Diluted earnings per share (RMB/share)|-0.2837|0.0827|-443.05|-0.5124|
|Basic earnings per share afternon-recurring profit and loss(RMB/share)|-0.0629|-0.0272|N.A|-0.2267|
|Return on net assets, weighted average(%)|-15.6113|4.313|Decrease by 19.92 percentagepoints|-24.4467|
|Return on net assets, weighted average,after recurrent profit and loss (%)|-3.4613|-1.4171|Decrease by 2.04 percentagepoints|-10.8175|

Notes to the main accounting data and financial indexes of the last 3 years before the end of the reporting period
□Applicable√Not applicable
VIII. Difference in accounting data under domestic and overseas accounting standards
(I) The difference between net profit and net assets attributable to shareholders of the Company between the international accounting standard and Chinese accounting standards
□Applicable√Not applicable
(II) The difference of net profit and net assets attributable to shareholders of the listed Company in the financial report synchronously disclosed according to the international accounting standards and Chinese accounting standards
□Applicable√Not applicable
(III) Explanation for differences between the international and Chinese accounting standards:
□Applicable√Not applicable
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IX. Main financial data by quarters in 2016
Unit: Yuan Currency: RMB 1st
2nd
3rd
4th
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|-|-|-|-|-|
||1st quarter(Jan.-March)|2nd quarter(Apr.-Jun.)|3rd quarter(July-Sept.)|4th quarter(Oct.-Dec.)|
|Operating income|1,121,594,645.40|1,996,947,639.96|1,902,126,376.36|1,733,728,399.97|
|Net profit attributableto shareholders of thelisted Company|9,426,009.05|2,908,167.36|-58,655,607.08|-281,770,331.13|
|Net profit attributableto shareholders of thelisted Company afterdeductingnon-recurring profitand loss|21,263,550.76|24,316,965.61|4,060,482.46|-122,384,414.99|
|Net cash flow fromoperating activities|108,726,920.00|94,418,777.05|57,693,400.75|228,017,663.44|

Note on differences between the data of the quarters and that of the period report disclosed
□Applicable√Not applicable
X. Items of non-recurring profit and loss and amounts
√Applicable□Not applicable
Unit: Yuan Currency: RMB
||||||
|-|-|-|-|-|
|Items of non-recurring profitand loss|Amount of 2016|Note (ifapplicable)|Amount of 2015|Amount of 2014|
|Profit or loss from disposal ofnon-current assets|297,935.96||257,772,690.18|1,111,822.13|
|Government subsidyattributable to profit and lossof current period, except suchgovernment subsidy closelyrelated to the Company'snormal business operation,meeting the regulation ofnational policy and enjoyedconstantly in certain quota orquantity according to a certainstandard|22,590,620.20|The rest 30% ofthe governmentsubsidy forindustrialrestructuring ofWujing Base,totally RMB15,000,000.00Yuan|41,118,941.72|5,732,560.40|
|Profit and loss on the changesin fair value of theheld-for-trading financialassets and liabilities and theinvestment yield from thedisposal of theheld-for-trading financialassets and liabilities andavailable-for-sale financialassets except the valid hedgingbusiness related to the normaloperation business of thecompany|13,928,846.49|Yield from sale ofZhongyida’sshares|||
|Other non-operating revenueand expenditure other than|2,120,604.54||3,081,055.74|6,572,403.12|

2016 Annual Report
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|-|-|-|-|-|
|above items|||||
|Other profit or loss itemsmeeting the definition ofnon-recurring profit and loss|-297,607,371.13|Compensation forpersonnelplacement andrelated loss onwork stoppagecaused byadjustment of theindustrialstructure inWujing Base|-174,731,937.80|-343,652,815.90|
|Impact of minority interests|3,119,749.28||-199,632.57|50,515.48|
|Impact of income tax|201,269.02||-9,448.67|-139,653.18|
|Total|-255,348,345.64||127,031,668.60|-330,325,167.95|

 XI. Items measured by fair value
√Applicable□Not applicable
Unit: Yuan Currency: RMB
||||||
|-|-|-|-|-|
|Item|Beginningbalance|Closing balance|Change incurrent period|Impact on the profitof current period|
|Salable financialassets|50,765,875.23|70,138,258.46|19,372,383.23|344,311.88|
|Total|50,765,875.23|70,138,258.46|19,372,383.23|344,311.88|

 XII. Others
□Applicable√Not applicable
Section III Summary on the Company's Business
I. Main business, operating mode and industrial status of the Company during the reporting period
II. (1) Main business: The Company mainly produces and sells sodium hydroxide, chlorine, chlorine products, polyvinyl chloride plastics resin and the products. Now the Company's annual production capacity for sodium hydroxide is 720,000 tons, for ethylene dichloride, 720,000 tons, for liquid chlorine, 600,000 tons, and for paste and special resin, 80,000 tons.
III. (2) Operating mode: The Company makes close cooperation with the international chemical magnate to establish an integrated operation mode with completed devices and pipe-line transportation in the shanghai chemical industrial park. The integrated industrial industry chain model is an interchange and sharing integrated industry chain which mainly takes the ethylene product from SECCO as the flagship product, the chlor-alkali product from the Company as the foundation, the refined chemical product such as isocyanate, polyisocyanate and polycarbonate from BASF SE, Covestro and American HUNTSMAN as the intermediate, and the refined chemical product such as the paint and the adhesive as the end-product. The structure of the specific industry chain is described as follows: the Company provides the chlorine and the sodium hydroxide as the raw materials to MDI/TDI/PC units in the park area, digest the byproduct hydrochloric acid gas and produce the dichloroethane with the ethylene as the raw material and the secondary chlorine. Therefore, the Company built 720000t sodium hydroxide unit and 720000t dichloroethane units in the shanghai chemical industrial park as the supporting facilities, all of the chlorine liquid produced is basically supplied to the downstream of the shanghai chemical industrial park. The chlorine pipeline and sodium hydroxide pipeline partition wall supply mode is adopted in the shanghai chemical industrial park to guarantee the stability and safety of the supply and zero the logistics cost.
The integrated operation mode has enhanced the Company's capability of long-term stable existing and
development and has also provided guarantee for the downstream customers to obtain stable and reliable
chlor-alkali products in long period, realizing mutual benefit and win-win. The long-term contract on 10-year's
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supply of chlorine by the downstream enterprises in the shanghai chemical industrial park to the Company became due in 2016 and the Company initiated the negotiation of the renew of the contract such as SLIC/SBPC Contract I, II and III and Covestro Contract I and II in time. Both parties of a new round of 10-year's supply and marketing contract upheld the idea of cooperation and win-win and took the growth, relevance and interaction of the industry chain into full consideration. Therefore, the profit advantages of the integrated mode of the Company continued in the shanghai chemical industrial park.
IV. (3) Description of industrial status: in 2016, the sodium hydroxide market turned round. Pushed forward by the rise of the demand in the downstream and the shortage of the output in the main sodium hydroxide production area, the operating factor of the enterprise rose and the price increased. In 2016, the output of the sodium hydroxide in China reached up to 39,450,000t, with a net increment of 720000t compared with the 2015 (a new increase of 2030000t and a cutting of outdated production capacity of 1310000t). There are totally 158 sodium hydroxide producers in china, with a decrease of 5 producers compared with the last year. Although the output of sodium hydroxide increased to a certain extent every year, the outdated production capacity was relatively large, so the overall production capacity was stable. Due to the average increase in consumption, the average industrial operating factor rose from78% in 2015 to83% in 2016 and the industrial concentration ratio increased. Affected by the factors such as the supply-side reform for cutting industrial overcapacity, the operating factor of PVC industry kept the trend of stable rise and the price increased. In 2016, the output of PVC was 23,260,000t, with a net reduction of 220,000t compared with the end of 2015 (a new increase of 890,000t and a cutting of outdated production capacity of 1,110,000t). At present, there are 75 PVC producers, with a net reduction of 6 producers compared with the end of the last year. The output of PVC had been in negative growth for 3 years. Since the overall consumption stably grew, the industrial average operating factor rose from69% in 2015 to72% in 2016 and the industrial concentration ratio rose.
V. Explanation for significant changes in prime assets of the Company during the reporting period
□Applicable√Not applicable
VI. Analysis on the core competitive power in the reporting period
√Applicable□Not applicable
1. Signed a new-round 10-years supply and marketing contracts
Through 10 years'running in the shanghai chemical industrial park by the Company, the integrated operating mode has fully demonstrated the merits of the cooperative win-win pricing mechanism. When the Company signs the long-term contract with the downstream enterprises, the pricing is based on the cost plus the reasonable profit and adjusts the changes in the price and cost of the main cost factors including electricity, salt, steam, water, labor force and industrial products. When the price of the raw material or energy rises, for example, the electricity price rises, the contract price can be adjusted according to the price formula to make efforts to eliminate the cost rise factors; with the chlorine bringing along the sodium hydroxide, in sale of the chlorine, the sodium hydroxide is also sold as per a certain ratio at the same time. The chlorine pipeline and sodium hydroxide pipeline partition wall supply mode is adopted in the shanghai chemical industrial park to guarantee the stability and safety of the supply and zero the logistics cost. It establishes the risk compensation mechanism for the execution of the contracts. In the signing of long-termcontracts，various factors were fully considered, for
2016 Annual Report
example, when the actual amount purchased of the customer is less than the amount carried in the contract, the Company will be compensated in accordance with the stipulations of the contract, thus, the risks from the execution of the contract are greatly reduced. At the same time, based on the equity of the contract, when the commodity quantity supplied by the Company to the downstream enterprises is lower than the quantity specified by the contract, the Company will also compensate the downstream enterprises to guarantee the stable supply between and by both parties. The integrated operation mode has enhanced the Company's capability of long-term stable existing and development and has also provided guarantee for the downstream customers to obtain stable and reliable chlor-alkali products in long period, realizing mutual benefit and win-win. The long-term contract on 10-year's supply of chlorine by the downstream enterprises in the shanghai chemical industrial park to the Company expired in 2016 and the Company initiated the negotiation of the renew of the contract such as SLIC/SBPC Contract I, II and III and SECCO Contract I and II in time. Both parties upheld the idea of cooperation and win-win and took the growth, relevance and interaction of the industry chain into full consideration. On Dec. 4, 2016, the company signed the Contract on Supply of Chlorine/Sodium Hydroxide with Covestro Polymer (China) Co., Ltd (the proposal of this contract was reviewed and approved by the 6th meeting of the 9th board of directors and was announced on Dec. 5, 2016) and had reached an agreement on the main clauses of the supply contract with SLIC/SBPC and it was expected that the contract would be signed in the first half year of 2017. Therefore, the Company's profitability predominance due to the integrated operating mode in the shanghai chemical industrial park can continue to exist.
2. NewR&D outcome of chlorine preparation technology, accelerating the
industrialization
In 2016, the advanced chlorine preparation process independently researched and developed by the state-level technical center of the Company, namely hydrogen chloride to chlorine through catalysis and oxidation passed the review of the experts from the industry and the university; meanwhile, the Company optimized and perfected the feasibility study report on the process package of hydrogen chloride to chlorine through catalysis and oxidation and the industrialized project, laid a solid foundation of the industrialization of the hydrogen chloride to chlorine through oxidation and accelerated the building of the circular economy industry chain in the shanghai chemical industrial park.
3. Reserving a batch of new technologyR&D outcomes
The Company independently researched and developed the chlorinated PVC by water phase process and accomplished the research and application development of low-cost chlorinated PVC resin and the formula for chlorinated PVC granular material for the particular customers in 2016, as a result, it seriated and customized the chlorinated PVC resin products.
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4. Having a powerful marketing platform
As the enterprise exporting sodium hydroxide earliest in China, the Company owns a powerful international marketing platform and import base for raw salt and this means it is of distinct advance predominance. With respect to domestic trade, the Company is at the middle and down stream of the Yangtze River, the most developed region in China, with the best consumption and logistics. In 2016, the Company established the trading company to build an integrated supply and marketing platform and achieve the “supply and marketing linkage, product linkage and the linkage of the primary business and the trade”. The establishment of the trading company is the need for achieving the industrial upgrading, transformation of growth mode and secondary innovation and upgrading of the profit mode of the company.
Section IV Discussion and Analysis of the Business
I. Discussion and Analysis on the Management
In the first year of the 13th five-year plan, the chlor-alkali industry entered the critical period of industrial restructuring and growth mode transformation. A series of changes had taken place in the industrial operation characteristics: the industrial scale expanded continuously, but the speed of growth slowed down; the industrial concentration ratio rose and the industrial layout became reasonable gradually; the market pattern changed continuously and the trading mode was diversified; the production process was continuously optimized and the energy-saving and environmental protection level was continuously improved. Viewed from the operating environment of the Company, the domestic overall economic growth speed slowed down, the traditional manufacturing industry stepped into the recession cycle, especially, the manufacturing industry of bulk commodity with severe competition entered into the period of cold winter. Although the chlor-alkali product market in the second half year of 2016 turned a little better, the overall situation in the whole year was still severe, the price of ethylene and EDC decreased greatly compared with the annual budget. Confronted with the market fluctuation and actual difficulties, the Company encompassed the strategic target of “innovation, upgrading and transformation” proposed in the 13th five-year plan, persisted in the working requirements of “adjustment and cost cutting for survival and transformation and development for the future”, focused on cost cutting and benefit increase, settlement and reemployment and going global strategy and preliminarily achieved the established operation objectives.
(I) Pushing forward the arrangement and implementation of the strategy of the Company in an all-round way
1. Accomplishing the strategic adjustment of Wujing Zone in an all-round way. According to the relevant policy against the industrial layout and industrial restructuring issued by Shanghai Municipal Government as well as the strategic planning of the Company for clustering and upgrading, the Company had implemented the adjustment of Wujing Zone since 2013, shut down the production units in Wujing Zone in order step by step and actively and stably pushed forward the reduction and reemployment of the employees in the Company. In 2016, the adjustment of Wujing Zone entered the into the closing phase, the Company shut down all of the CPVC units and the related utilities in Wujing Base and stably reduced 696 employees according to the specific proposal, indicating the strategic adjustment in Wujing Zone had accomplished in an all-round way. The success of in strategic adjustment in Wujing Zone as scheduled was an important step for the strategic development of the Company and was of milestone significance for the transformation and development of the Company.
2. Accelerating the cluster and development of the shanghai chemical industrial park. The company further transferred the production and operation center of gravity to Caojing Chemical Zone in an all-round way strengthen the industrial layout in the shanghai chemical industrial park and lay a solid foundation for the great-leap-forward development
based on the shanghai chemical industrial park in the future. (1) Quickening the progress of the projects in the
2016 Annual Report
chemical zone. Firstly, the Company independently researched and developed the chlorine hydride to chlorine through oxidation, formally launched the preparation of the feasibility study report on this project and accelerated the industrialization progress of the project of 100000t/a chlorine hydride to chloride through oxidation. Secondly, the chlorinated polyvinyl chloride project would be settled in Tianyuan Chemical Plant in the chemical zone. It was originally planned to be settled in the land for the former paste resin unit on Plot D4 in Shanghai Chemical Zone. In 2016, 3rd board meeting of 9th board of directors reviewed and approved Proposal for Alteration of the Contents Concerning 40000t/a High Performance Perchlorinated Polyvinyl Chloride Project and decided to invest in and build this project in Tianyuan Chemical Plant to further optimize the investment in this project. Now the project is being optimized continuously. (2) Strengthening the position of the important chloride supplier in the chemical zone. The Company scientifically studied and judged the demand for chloride of the downstream enterprises in the chemical zone in the coming years, did well in balance and assessment of the chloride resource in advance, dealt with the challenges from the supply of the chloride resource in time and satisfied the demand at the downstream to the utmost extent. In view that the long-term contract on supply of chloride from the downstream enterprises in the chemical zone to the Company was due in 2016, it launched the negotiation of the renew of the contracts such as SLIC/SBPC Contract I, II and III and Covestro Contract I and II. It regarded “business negotiation of major contracts” as the key management project, strengthened the negotiation with the partners and fully accelerated the negotiation process. Through many rounds of negotiation and communication between both parties, the Company signed the contract on supply of chloride/sodium hydroxide with Covestro Polymer (China) Co., Ltd on Dec. 4, 2016 (the proposal for the contract was reviewed and approved by the 6th board meeting of the 9th board of directors and was announced on Dec. 5, 2016) and it was expected the supply contract with SLIC/SBPC would be signed in the first half year of 2017. 3. Accelerating the step of "going global". In 2016, the Company took a material step in the “going global” strategy and the 5th board meeting of the 9th board of directors of the Company reviewed and approved the proposal for Investment in Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd on Oct. 28, 2016. According to the proposal, Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd would be jointly invested and incorporated as per the stock ratio of Chlor-Alkali Company40% and Junzheng Energy60% and the joint venture would plan and build the project of 200000t/a EPVC with seed emulsion process. This project would be implemented by phases and the project (phase I) planned to put 100000t into production. This joint venture accomplished the industrial and commercial registration on Jan. 10, 2017 and it was expected that it would be put into production at the end of 2017. The cooperation between Chlor-Alkali Company and Junzheng Energy could make use of the advantages in local rich resources and rely on the existing production and living facilities of Junzheng Energy to achieve the resources complementarities and upstream and downstream linkage as well as combine the advantages in technology and brand with the ones in resources and cost, as a result, it could effectively reduce the production cost and raise the product competitiveness. This project conformed to the development planning of “trying for the industrial transfer to other appropriate regions in China, relying on the more advantageous policy environment, more complete supporting facilities and cheaper cost input, strengthening the market competitiveness of the products and building the industrial zone with scale effects and competitiveness advantages” and would become an important step towards the implementation of the “going global” strategy.
(II) Optimizing the operation and management of the Company in an all-round way
1. Enhancing HSE management and ensuring safety. The Company adhered to the principle of "building the defense line firmly, holding the bottom line and consolidating the line", advocated the safety culture of "self awareness, sensitivity and working efficiently" and enhanced continuously HSE management level to provide powerful guarantee for its adjustment and development. With propaganda and implementation of the new Production Safety Law and Environmental Protection Law as the main thread, persisting in the principle that “CPC committees and governments are held accountable, officials take responsibility for workplace safety in performing their duties, and those who fail to uphold safety standards are held accountable”, strengthening the consciousness of “bottom line”, “red line” and
2016 Annual Report
“high voltage line” for safety and environmental protection and ensuring the intrinsic safety of HSE. (1) Defining the safety responsibility. Carrying out the activity of “my area in the charge of me and my work in the charge of me” and continuously improving the safety consciousness and the sense of responsibility of the employees. Implementing HSE responsibility system and signing the HSE responsibility agreement and the letter of commitment in layers, with the contract signing ratio of100%. In the context of institutional adjustment and reduction in workforce, adjusting HSE working organ in time, establishing Safety Committee of Caojing Zone and guaranteeing the implementation of HSE responsibility. (2) Strengthening safety assessment. Assessing each department and each employee every month. Preparing Detailed Rules for Assessment of Comprehensive Bonus of HSE for Employees in the Company and including the implementation of the production safety responsibility into the comprehensive management and assessment system for the employees in the company for uniform assessment. Revising Detailed Rules for Assessment of Contractors, aiming at the problems in the management of the contractor in the overhaul, studying the assessment, rewards and punishment scheme for the contractors and preparing Standard of Chlor-Alkali Company for Safety Assessment of Construction by the Contractor. (3) Implementing and urging the rectification and improvement. Aiming at some individual minor accident, formulating and launching the measures for rectification and improvement in time, strengthening the management of the key equipment and the major hazard sources, putting the management into place, contracting the management to the specific person, improving the routine patrol quality and guaranteeing the safety facilities in good condition. Amending the scheme for dumping of the chloride liquid storage tank, guaranteeing the dumping in the abnormal condition in the controllable safety state, strengthening the emergency drilling, upgrading the emergency drilling of the leakage of the chloride liquid to the height at the group level and keep the information unblocked among the related persons.
2. Flexibly adjusting the sales system. (1) Integrating the marketing system, establishing the trade company and building the efficient business platform. The establishment of the trade company was required for the industrial upgrading and the secondary innovation and upgrading of the profit mode of the Company. Through the modern marketing system more closely to the market, on one hand, it could achieve the proper linkage of the purchase and sale of the self-operating products, do well in the management of two cores including purchase and sale and improve the market competitiveness of the products; on the other hand, it would make full use of the new mechanism, motivate the spirit of struggle to expand the market so as to transform the growth mode and cultivate the new profit increase point. (2) Aiming at the market trend and optimizing the sale of the products. Firstly, optimizing the sale of EDC and acid absorbent. Viewed from the profit of the chloride per t, the loss of the acid absorbent product was less than the one of EDC product. In 2016, the Company greatly increased the sales volume of acid absorbent and optimized the sales radius as well, and expanded the market of East China all out. Compared with the annual budget, the sales volume of the acid absorbent increased 120000t and the loss was reduced by RMB 19,720,000.00 Yuan in the whole year. Secondly, optimizing the sales structure of the sodium hydroxide. In 2016, the benefit of32% alkali was better than the one of50% alkali sold at home and abroad. According to the benefit optimization principle, the Company dynamically adjusted the variety structure of the sodium hydroxide and the regional structure, produced and sold more32% alkali, increased the sales proportion in Shanghai all out, as a result, the sales proportion of32% alkali in Shanghai in 2016 increased remarkably, with an increase of7% on year-on-year basis. (3) Active communication to raise the execution rate of the contracts by the downstream enterprises. In 2016, based on the active communication with the downstream enterprises, the Company closely followed up the execution of the contracts with the downstream enterprises and raised the execution rate of the contract as much as possible to increase the profit of the Company. The quantity of chloride received by the downstream enterprises in 2016 was 599,600t, reaching a record high, with an increase of 23,000t on year-on-year basis.
3. Scientifically strengthening operation and management. (1) Deeply excavating the potential, reducing the cost and increasing the benefit. The Company strictly implemented the budget, optimized the capital structure and the sales structure, resulting in the reduction in three charges by23% on year-on-year basis. Meanwhile, with respect to the production, the Company strictly controlled the materials and energy consumption, enhanced the management,
2016 Annual Report
reduced the production fluctuation and optimized the use structure of the raw materials, as a result, the manufacturing expense fell down on year-on-year basis. (2) Adopting the flat management mode. The production system further adopted the flat management mode, simplified the management layers, quickened the rate of the information flow, improved the decision-making efficiency, implemented the refined production and achieved the remarkable improvement of the cost and operation profit with the minimum input. The main purpose of the refined production was to make the quickest response with the best quality, the lowest cost and the highest efficiency. With respect to the organizational structure, it reduced the non-direct production layer, adopted the flat production system and quickly responded to the market. The production management department was shifted to the economic operation department, Tianyuan Chemical Plant and Huasheng Chemical Plant were cancelled, sodium hydroxide unit, oxidative chlorination unit, resin unit and utilities were established and PVC plant was cancelled. Economic operation department, HSE department and arm safeguard department directly managed them, in this way, they uniformly implemented the production and operation function together with the four units.
II. Main operating status in the reporting period
In the reporting period, the Company realized the operating income of RMB 6,754,397,100Yuan, increasing by RMB 583,522,800Yuan or9.46% year on year, the gross profit of RMB -334,813,600 Yuan, decreasing by RMB 444,375,500 Yuan year on year, and the net profit attributable to shareholders of the listed Company of RMB -328,091,800 Yuan, decreasing by RMB 423,706,800 Yuan year on year. (I) Analysis of the main business
Analysis of Changes in Relevant Items in Income Statement and Cash Flow Statement Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Current periodamount|Amount in the sameperiod of last year|Change ratio (%)|
|Operating income|6,754,397,061.69|6,170,874,223.67|9.46|
|Operating cost|6,128,517,218.57|5,559,439,778.97|10.24|
|Selling cost|184,329,793.95|199,911,085.12|-7.79|
|Management expenses|480,214,277.58|402,196,032.57|19.40|
|Financial expenses|74,994,167.59|140,436,053.89|-46.60|
|Net cash flow from operating activities|488,856,761.24|305,852,432.45|59.83|
|Net cash flow from investmentactivities|-32,240,748.36|462,369,445.87|-106.97|
|Net cash flow from financing activities|-266,227,416.76|-930,062,240.97|Not applicable|
|R&D expenditure|22,218,163.42|36,893,630.81|-39.78|

 1. Analysis on revenue and cost
√Applicable□Not applicable
(1). Main business divided by sector, product and area
Unit: Yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|Main business by sector|||||||
|Sector|Operating income|Operating cost|Grossprofitrate (%)|Increase ordecrease ofoperatingincomethanpreviousyear (%)|Increaseordecreaseofoperatingcost thanpreviousyear (%)|Increase or decrease ofgross profit rate thanprevious yea (%)|
|Industry|3,825,805,128.74|3,478,929,132.02|9.07|-7.84|-2.18|Decrease by 5.26percentage points|
|Construction|52,384,954.98|50,855,935.65|2.92|57.02|71.53|Decrease by 8.21percentage points|

2016 Annual Report
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Tradeincome||2,834,742,551.50|2,557,264,284.04|9.79||46.13|32.35|Increase by 9.39percentage points||
|Total||6,712,932,635.22|6,087,049,451.71|9.32||9.61|10.30|Decrease by 0.58percentage points||
|Main business by product||||||||||
|Product||Operating income|Operating cost|Grossprofitrate (%)||Increase ordecrease ofoperatingincome thanprevious year(%)|Increase ordecrease ofoperatingcost thanpreviousyear (%)||Increase or decrease ofgross profit rate thanprevious yea (%)|
|PVC||538,275,093.61|557,330,514.67|-3.54||8.76|-3.11||Increase by 12.69percentage points|
|Sodiumhydroxide||1,377,470,326.87|917,255,823.14|33.41||7.38|-2.50||Increase by 6.74percentage points|
|Chlorineproducts||2,144,285,877.31|2,005,608,343.01|6.47||-0.14|5.79||Decrease by 5.24percentage points|
|Others||2,652,901,337.43|2,606,854,770.89|1.74||20.62|23.75||Decrease by 2.48percentage points|
|Total||6,712,932,635.22|6,087,049,451.71|9.32||9.61|10.30||Decrease by 0.58percentage points|
|Main business by area||||||||||
|Area|Operating income||Operating cost||Grossprofitrate(%)|Increase ordecrease ofoperatingincome thanpreviousyear (%)|Increase ordecrease ofoperatingcost thanpreviousyear (%)||Increase or decrease ofgross profit rate thanprevious yea (%)|
|China|6,436,295,912.76||5,829,905,849.66||9.42|10.56|11.94||Decrease by 1.11percentage points|
|Othercountries|276,636,722.46||257,143,602.05||7.05|-8.75|-17.11||Increase by 9.37percentage points|
|Total|6,712,932,635.22||6,087,049,451.71||9.32|9.61|10.30||Decrease by 0.58percentage points|

 Explanation for the main business by industries, products and regions
√Applicable□Not applicable
1) The Company established the “double-core driven” business development mode and realized the shift from “production and manufacture” to“manufacture+ service trade”. The service trade has rapidly developed in the past two years, kept relatively high share in the market, quickened the transformation of the trade mode and gradually built itself a trade company with relatively strong competitiveness in purchase of the raw materials and sale of the product;
2) The Company, based on the platform of Shanghai Chemical Products Trading Market and the platform of the trade company, expanded the business in the primary products and the raw materials, further expanded the industry chain of the service trade, made use of the information and advantages in the purchase of the existing primary raw materials including ethylene and vinyl chloride and intensified the market development of the varieties such as polyethylene to gradually prompt the Company to shift to the service trade of the varieties in the related industry chain from the main single raw materials (ethylene and vinyl chloride) so as to further strengthen the discourse right of the Company in the primary products and the raw materials market. In this stage, the expansion range of polyethylene business mainly depends on the users in Zhejiang, Jiangsu, Shandong and so on.
3) Continuously making full use of the opportunity of the established ethylene tank project, actively expanding ethylene trade market and seeking for the trade partners in many ways. During this reporting period, the ethylene trade business mainly concentrates on the main consumption region of the ethylene, including Shanghai, Jiangsu and Zhejiang, therefore, the trade business of the ethylene mainly depends on the users in Zhejiang, Jiangsu and Shanghai. Considering the safety factors such as the capital, the ethylene customers of Shanghai Chlor-Alkali are selected according to the standard of stable channel, capital safety and a certain consumption;
4) Selection of settlement and trade mode: in this stage, this Company mainly concentrates on the
expansion of the market and the business varieties and guarantees the safety of the capital, as a result, as
to the trade mode, it firstly selects the downstream customers and determines the sales intent according
2016 Annual Report
to the quantity and the price, then purchases the products from the upstream suppliers at a proper price, so the form of settlement mainly adopts the payment before delivery.
(2). Analysis on production and sale
√Applicable□Not applicable
||||||||
|-|-|-|-|-|-|-|
|Main products|Output('0000tons)|Salesvolume('0000tons)|Stockbalance('0000 tons)|Increase ordecrease ofoutput thanpreviousyear (%)|Increase ordecrease ofsales volumethanpreviousyear (%)|Increase ordecrease ofstockbalance thanpreviousyear (%)|
|PVC product|6.875|7.215|0.217|-10.12|-5.98|-65.69|
|Sodium hydroxideproduct|101.358|67.981|0.928|47.36|2.61|-39.07|
|Chlorine product|140.622|144.667|3.727|-1.60|10.04|-54.20|

 In 2016, the basic chemical industry turned round, the price of the products rose, the market sale was good and the stock size of the products decreased.
(3). Cost analysis
Unit: Yuan
||||||||
|-|-|-|-|-|-|-|
|By sector|||||||
|Sector|Items of coststructure|Amount in currentperiod|Ratio intotalcost (%)|Amount in the sameperiod of last year|Ratioin total(%)|Changeratio (%)|
|Industry|Directmaterial|2,903,828,396.6|47.71|2,860,008,053.66|51.83|1.53|
||Direct labor|77,872,144.56|1.28|96,854,436.74|1.76|-19.60|
||Power|199,367,318.61|3.28|244,563,736.73|4.43|-18.48|
||Manufacturecost|297,861,272.25|4.89|355,203,896.99|6.44|-16.14|
||Total|3,478,929,132.02|57.15|3,556,630,124.12|64.45|-2.18|
|Construction|Directmaterial|1,832,355.52|0.03|2,220,503.52|0.04|-17.48|
||Direct labor|1,745,672.28|0.03|3,688,472.71|0.07|-52.67|
||Manufacturecost|47,277,907.85|0.78|23,738,840.58|0.43|99.16|
||Total|50,855,935.65|0.84|29,647,816.81|0.54|71.53|
|Trade income|Purchase cost|2,557,264,384.04|42.01|1,932,174,066.11|35.01|32.35|
|By product|||||||
|Product|Items of coststructure|Amount in currentperiod|Ratio intotalcost (%)|Amount in the sameperiod of last year|Ratioin total(%)|Changeratio (%)|
|PVC|Directmaterial|387,186,822.81|6.36|382,641,803.88|6.93|1.19|
||Direct labor|16,674,223.52|0.27|17,460,930.59|0.32|-4.51|
||Power|82,209,949.13|1.35|95,674,768.66|1.73|-14.07|
||Manufacturecost|71,259,519.21|1.17|79,451,927.95|1.44|-10.31|
||Total|557,330,514.67|9.16|575,229,431.08|10.42|-3.11|
|Sodiumhydroxide|Directmaterial|760,390,751.28|12.49|729,098,699.59|13.21|4.29|
||Direct labor|16,548,439.55|0.27|15,627,153.42|0.28|5.90|
||Power|69,768,678.75|1.15|94,463,749.19|1.71|-26.14|
||Manufacturecost|70,547,953.56|1.16|101,539,246.32|1.84|-30.52|
||Total|917,255,823.14|15.07|940,728,848.52|17.05|-2.50|
|Chlorineproduct|Directmaterial|1,792,188,346.51|29.44|1,690,759,223.40|30.64|6.00|

2016 Annual Report
|||||||
|-|-|-|-|-|-|
|Direct labor|35,580,679.00|0.58|32,201,251.85|0.58|10.49|
|Power|50,674,330.48|0.83|43,801,478.39|0.79|15.69|
|Manufacturecost|127,164,987.02|2.09|129,158,563.36|2.34|-1.54|
|Total|2,005,608,343.01|32.95|1,895,920,517.00|34.36|5.79|

 Explanation for other situation of cost analysis
□Applicable√Not applicable
(4). Main customers and main suppliers
√Applicable□Not applicable
The amount of sales of the first five customers was RMB 2,378,062,500.00 Yuan, accounting for35.19% of the annual total sales, in which the amount of sales of the related parties of the first five customers was RMB 0.00 Yuan, accounting for0% of the annual total sales.
Unit: Yuan Currency: RMB
||||||
|-|-|-|-|-|
|No.|Customer|Amount of sales|Percent in annual total sales (%)||
|1|Covestro|702,663,341.07|||
|||||10.40|
|2|Shanghai Daokuan Trade Co., Ltd|513,655,222.22|||
|||||7.60|
|3|SLIC|473,681,459.22|||
|||||7.01|
|4|BASF|350,184,633.60|||
|||||5.18|
|5|Qingdao Shengtaifeng InternationalTrade Co., Ltd|337,877,863.25|||
|||||5.00|
|Total||2,378,062,519.36||35.19|

 The amount of procurement of the first five suppliers was RMB 3,271,360,400.00 Yuan, accounting for59.79% of the annual total amount of procurement, in which the one of the related parties of the first five suppliers was RMB 0.00 Yuan, accounting for0% of the annual total amount of procurement.
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|No.|Supplier|Amount ofprocurement|Percent in annual total amountof procurement (%)|
|1|State Grid Shanghai MunicipalElectric Power Company|1,102,666,883.85|20.16|
|2|Shanghai SECCO PetrochemicalCompany Limited|864,644,799.54|15.80|
|3|Shandong Zhongxin Industry TradeCo., Ltd|746,228,292.31|13.64|
|4|Qingdao Free Trade ZoneZhongyan Trade Co., Ltd|322,971,615.38|5.90|
|5|Mitsubishi Corporation|234,848,784.08|4.29|
|Total||3,271,360,375.16|59.79|

 Other explanations
1. Covestro is an important downstream customer of the chemical zone and the Company supplies the chemical products such as sodium hydroxide and chloride liquid to it.
2. State Grid Shanghai Municipal Electric Power Company is the main electric power supplier for the Company to produce the main product sodium hydroxide.
3. Shanghai SECCO Petrochemical Company Limited is the supplier of the main raw materials for the
Company to produce the main product dichloroethane.
4. Shandong Zhongxin Industry Trade Co., Ltd is the supplier of polyethylene for the Company to
expand the market and carry out the main trade business.
2016 Annual Report
2. Expenses
√Applicable□Not applicable
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|2016|2015|Year-on-yearincrease/decrease (%)|
|Selling cost|184,329,793.95|199,911,085.12|-7.79|
|Management expenses|480,214,277.58|402,196,032.57|19.40|
|Financial expenses|74,994,167.59|140,436,053.89|-46.60|
|Income tax expense|1,713,353.49|4,672,427.26|-63.33|

Analysis of the reason for changes in the expenses:
1) The management expenses increased by19.4% year on year, mainly caused by significant increase ofemployee’s dismissal benefit than previous year.
2) The financial expenses decreased by46.6% year on year, mainly caused by the reduction in interest expenditure due to the optimization of loan portfolio and reduction in loan scale in this period.
3. R&D investment
Details ofR&D investment
√Applicable□Not applicable
Unit: Yuan
|||
|-|-|
|Expense investment in R&D in current period|17,060,292.79|
|Capitalized investment in R&D in current period|5,157,870.63|
|Total of investment in R&D|22,218,163.42|
|Ratio of total investment in R&D in the operating income (%)|0.33|
|Number of R&D personnel in the Company|210|
|Ratio of R&D personnel in total employees of the Company (%)|28.85|
|Ratio of capitalized investment in R&D (%)|23.21|

 Notes
√Applicable□Not applicable
In 2016, the Company still continued to focus on the advanced chlorine making process and new material technique to makeR&D. The main projects included “the improvement on chlorine making with hydrogen chloride catalytic oxidation”, “inner quality tracking and process improvement of chlorinated polyvinyl chloride resin” and “the development and application of the power-saving technology for electrolyzer”. For the project of “the improvement on chlorine making with hydrogen chloride catalytic oxidation”, the Company, based on the completed process package for the industrialized unit with the annual capacity of 100,000 tons, completed the optimization of the first generation of catalyst, determined the technical indexes of the catalyst and magnified the process parameter of preparation, established the enterprise standard of catalyst; the evaluation unit for the single column run of Huasheng Chemical Plant was established and the preparations for the startup was made; the research on the process of the offgas absorption liquid was made and 100000t/a industrialized process package was further perfected. For the project of “inner quality tracking and process improvement of the chlorinated polyvinyl chloride resin”, the Company conducted quality tracing for chlorinated polyvinyl chloride resin. Comprehensively considering the static thermal stability and dynamic rheological property as the quality indexes, it analyzed the fluctuation of chlorination process and the fluctuation among the batches to adjust the chloride flow and the process. Based on the follow-up and improvement of this project, the static temperature time and the quality product rate of
CPVC resin were risen to above80%; based on the continuous follow-up, the batches with the quality
defects were retained in the Company and did not come into the market. In this year, good feedback was
get from the customers on CPVC, without any quality complaint. With the stable quality, the sales
2016 Annual Report
volume rose step by step and the balance of production and marketing was achieved. As to the project of “development and application of electrolyte tank energy-saving technology”, the electrolyte tank reconstruction plan was accomplished in 2016. The operation of the unit in the condition of operation current density of 5.0KA/㎡, soda concentration of32% and tank temperature of90℃ got a very good effect. In the evaluation, the voltage of the single tank was lower than 2.98V, the power consumption of the sodium hydroxide per ton was reduced by 140KWH/sodium hydroxide per ton, the power consumption of 360000t/a unit could be reduced by 50,000,000kWh or so, as a result, based on RMB 0.6 Yuan/KWH, it could save the electricity cost of RMB 30,000,000.00 Yuan, the electric energy saved in each year was converted into about 16000t standard coal, equivalent to reduction of the emission of 40000t CO per year.
2
4. Cash flow
√Applicable□Not applicable
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|2016|2015|Difference|
|Net cash flow from operating activities|488,856,761.24|305,852,432.45|183,004,328.79|
|Net cash flow from investment activities|-32,240,748.36|462,369,445.87|-494,610,194.23|
|Net cash flow from financing activities|-266,227,416.76|-930,062,240.97|663,834,824.21|
|Net increase of cash and cash equivalents|193,630,445.62|-162,165,661.15|355,796,106.77|

 Notes:
1) The increase in net cash flow from operating activities was mainly caused by the great drop of the stock in trade in this period, resulting in the increase in the net cash flow from the operating activities on year-on-year basis;
2) The decrease in cash flow from investing activities is mainly caused by the decrease in the cash inflow due to no equity transfer and sale of buildings in current period.
3) The decrease in net cash flow from financing activities is mainly because the loan returned was smaller than the outflow of funds in current period.
(II) Note on significant changes in the profit caused by non-main business
√Applicable□Not applicable
The main reasons for the loss of the Company during the reporting period: 1. Provision for impairment. The provision for impairment of the fixed assets in this period was totally RMB 203,833,414.81 Yuan, among which: (1) the amount of provision for impairment of paste resin unit in this year was RMB 142,123,801.94 Yuan. The reason for the provision: A. The Company planned to build the 40000t/a CPVC project, but the original site, namely Plot D4 in the chemical zone was located at No. 168 Yinhe Road Shanghai Chemical Zone and was adjusted in the planning since the chemical zone carried out the overall planning of the plot at the north of Central River in the park. Now it is approved for the record according to Opinion for Record of Shanghai Municipal Enterprise Investment Project by Shanghai Chemical Zone Management Committee (Project record No.: HHGB[2014] 26). Shanghai Municipal Bureau of Planning, Land and Resources issued the approval for Releasing Decision about Notice on Requirements on Planning and Design of Construction Project of 40000t/a PVC Project by Water Phase Process (HGTZHXF[2016] No. 9) and the site of this project was reselected at Plot B3 of the chemical zone (the location of paste resin unit) (the alteration of the site selection of this project was announced in the resolutions of the
3rd
board meeting of the
9th
board of directors). After the new site of this project was determined, the Company launched the previous work such as application of the project for record, environmental impact evaluation, safety evaluation and energy evaluation. B. The Company signed a joint venture agreement with Ordos Junzheng Energy Chemical Co., Ltd on Dec. 15, 2016 (the investment was announced in the resolutions of the
5th
board meeting of the
9th
board of directors) to jointly invest in Mengxi Industry Zone, Ordos City, Inner Mongolia, China to establish Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd to produce EPVC products based on the local geological
advantages and 100000t/a EPVC unit technology of the company. In addition, the Company signed the
contract on technical license with Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd, which
stipulated that Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd used EPVC technology in the
2016 Annual Report
manner of exclusive license, as a result, the production and development of the original paste resin unit of the company was restricted. Based on the above-mentioned reasons, considering the high energy consumption cost and the strict requirements on the environmental protection in Shanghai City, the management of the Company decided to carry out the depreciation test of the paste resin unit. By Dec. 31, 2016, the Company, according to Data of Research Report on Paste Resin Industry in 2017, in combination with the actual conditions of the Company, based on the net amount of the new cash flow of the Company in the coming five years, provided RMB 142,123,801.94 Yuan as the provision for impairment for the paste resin unit.
(2) The amount of provision for the impairment in Wujing Zone in this year was RMB 49,675,281.43 Yuan. The adjustment of the industrial structure of the Company in Wujing Zone entered into the final stage (the shutdown in Wujing Zone was announced in the resolutions of the
5th
board meeting of the 9th board of directors), the overall production of the Company was entirely transferred to Shanghai Chemical Zone, Wujing Zone was cleaned up in an all-round way and the production of the last production unit was terminated in this period, so the provision for impairment of this unit and the auxiliary facilities in this year was RMB 49,675,281.43 Yuan.
(3)The amount of provision for impairment of F2 electrolyte tank in this year was RMB 11,481,274.95 Yuan, the reasons for provision: with the cleaning-up of Wujing Zone of the Company in an all-round way, the electrolyte tank in the former F2 unit was confronted with the cleaning-up, as a result, according to the assessed value of the electrolyte tank confirmed by the Company by Dec. 31, 2016, the amount of provision for impairment, totally RMB 11,481,274.95 Yuan was made.
2. Employee termination benefits expenditures. Due to the implementation of permanent parking scheme in Wujing Base and current arrangement of adjustment progress, a large number of employees terminated labor contract with the company in batches, and the actually diversion expense incurred was RMB 125,000,000Yuan, the termination benefits withheld was RMB 131,000,000Yuan, and the personnel diversion cost incurred in current period was totally RMB 256,000,000Yuam.
(III) Analysis on assets and liabilities
√Applicable□Not applicable
1. Status of Assets and Liabilities
Unit: Yuan
||||||||
|-|-|-|-|-|-|-|
|Item|Closing balanceof current period|Ratio intotalassets(%)|Closing balanceof previous period|Ratio intotalassets(%)|Changeratio (%)|Remark|
|Monetaryfund|433,999,695.91|9.67|240,425,945.13|4.96|80.51|Capital recoveryin current period isbetter|
|Notesreceivable|448,822,006.32|10.00|336,221,352.79|6.94|33.49|Increase in notesreceivable of thenew subsidiaryNew MaterialsTrading Company|
|Advancepayments|50,056,591.51|1.11|136,446,799.31|2.81|-63.31|Decrease inadvance projectpayments anddynamic paymentin current period|
|Otherreceivables|762,159.00|0.02|3,561,716.78|0.07|-78.60|Collection ofimprest fund|
|Inventory|159,466,728.86|3.55|384,885,265.71|7.94|-58.57|Falling inventoriesof EDC product|
|Projectunderconstruction|97,570,414.69|2.17|305,408,986.91|6.30|-68.05|Carrying forwardthe fixed assetsafter thecompletion ofproject|
|Engineering|37,478.63|0.00|1,381,336.82|0.03|-97.29|Special materials|

2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
|material||||||requisition|
|Developmentexpenditure|17,364,046.98|0.39|30,247,277.15|0.62|-42.59|Carrying forwardintangible assetsand fixed assetsafter thecompletion ofproject|
|Long-termfees to beapportioned|15,196,164.92|0.34|23,460,981.73|0.48|-35.23|Increase inamortization ofcurrent period|
|Short-termloans|1,256,000,000.00|27.98|620,000,000.00|12.79|102.58|Optimized theloan structure andincreasedshort-term loansand reducedlong-termpayables|
|Employees’salarypayable|131,471,648.00|2.93|780,802.00|0.02|16,738.03|Increase indismissal benefitappropriated inthis period|
|Tax payable|80,270,216.68|1.79|14,824,741.55|0.31|441.46|Increase in unpaidVAT of currentperiod|
|Otherpayables|88,814,552.29|1.98|441,394,365.43|9.10|-79.88|Return the loan ofRMB 350,000,000Yuan for HuayiGroup|
|Long-termpayables|170,000,000.00|3.79|645,000,000.00|13.30|-73.64|Return the loan ofRMB 475,000,000Yuan for HuayiGroup|

2. Restriction of main assets by the end of report period
√Applicable□Not applicable
Unit: Yuan Currency: RMB Item Final book value Reason of restriction
Fixed assets 5,008,538.28 Mortgage
Intangible assets 1,314,847.65 Mortgage
Total 6,323,385.93
3. Other information
□Applicable√Not applicable
(IV) Analysis on operational information of the industry
√Applicable□Not applicable
In the first year of “the
13th
five-year plan”, the chlor-alkali industry entered the key period of structure adjustment and pattern transformation. The industry operation characteristics experienced a series of changes: continuous expansion of industry size with slower growth; enhanced
industrial concentration degree and gradually reasonable industrial layout; changing market pattern and
diversified trade mode; continuous optimization of production process and constant improvement of
energy conservation and environmental protection level. In recent years, affected by the pulling effect of
2016 Annual Report
national economy growth and investment, as the basic material, there are many new expansion projects constructed and put into operation every year in chlor-alkali industry. However, along with the intensifying market competition of the industry, although the production capacity of chlor-alkali industry is increasing, the backward and old production units will be gradually eliminated from the market, which is the new characteristic of chlor-alkali production capacity growth.
2016 Annual Report
Business information analysis of chemical industry
1 Basic information of the industry
(1). Industry policy and changes
√Applicable□Not applicable
Targeted policy during “the
13th
five-year plan” of the state:
①Establish and improve the market access and exit mechanism to optimize the industrial layout
②Optimize material and technical route to promote the adjustment of product structure
③Utilize independent innovation and technical progress to promote the transformation and upgrading of chlor-alkali industry
④Strengthen ecological environmental protection construction to promote the green development of the industry
⑤Further deepen the circular economy development mode
⑥Strengthen the coordinated development of productive service industry
⑦Strengthen the information construction to promote the manufacturing level of transitional industries⑧Implement responsible care for the industry, and enhance the health, security and environmental system management.
(2). Basic information of main industry segments and industry status of the Company
√Applicable□Not applicable
The caustic soda production capacity of our country reached 39,450,000t in 2016, with a net increase of 720,000t (new increase of 2,030,000t and exit of 1,310,000t) compared with that at the end of 2015. There were totally 158 caustic soda production enterprises in China, decreased by 5 enterprises compared with last year. There is certain increment in caustic soda every year, but the exit production capacity is large, and the overall production capacity is stable; due to the average increase in consumption, the average operating rate of the industry increases from74% in 2013 to83% in current period, and the number of production enterprises reduces from 176 in 2013 to 158 in current period, and the industrial concentration ratio has been improved. PVC production capacity in 2016 was 23,260,000t, decreased by 220,000t (new increase of 890,000t and exit of 1,110,000t) compared with that at the end of 2015. At present, there are 75 PVC production enterprise, decreased by 6 compared with that at the end of last year. Although the PVC production capacity is negative growth for three consecutive years, the average operating rate of the industry increases from62% in 2013 to72% in current period, and the number of production enterprises reduces from 93 in 2013 to 75 in current period, and the industrial concentration ratio has been improved.
The Company is mainly engaged in the manufacturing and sales of caustic soda, chlorine and chlorine products as well as polyvinyl chloride plastic resin and products. As the main products of the Company, the production capacity of caustic soda reaches 720,000t, dichloroethane reaches 720,000t, liquid chlorine reaches 600,000t and paste and special resin reaches 80,000t. Currently, the production capacity of special resin unit of the Company is 20,000t/a, and the Company is one of the largest special resin suppliers in east China. The Company has obvious advantages in the fields of professionalR&D and product technology, and is thus an influential enterprise in the industry.
2 Product and production
(1). Main operating mode
√Applicable□Not applicable
The Company has integrated the marketing resources, actively pursued the transformation of marketing mode, focused on the overall stable operation of the chemical industrial area, firstly ensured the stable supply of chlorine resources in chemical industrial area, optimized the regional structure and built differentiated marketing mode.
Caustic soda: internal and external integration operating mode, in combination of the production operation conditions and domestic and foreign instant market situation, reasonable distribution of internal and external sales proportion based on the principle of benefit priority, optimizing domestic regional structure and improving the profitability of products;
PVC: relying on the special resin base, the Company actively implements differentiated marketing strategy and adhere to the development of domestic high-end resin market to satisfy thecustomers’ differentiated service requirements, and has maintained the dominant status in domestic high-end resin market;
2016 Annual Report
Chlorine products: firstly putting MDI, TDI and similar production enterprises into operation as the support in the downstream of chemical industrial area, with the rest mainly solvent market and PVC market, to effectively reduce the product stock and sales cost.
Main conditions of operation mode adjustment in report period
□Applicable√Not applicable
(2). Main products
√Applicable□Not applicable
||||||
|-|-|-|-|-|
|Product|Industry segment|Main upstream rawmaterials|Main downstreamapplication field|Main price affectingfactors|
|Causticsoda|Chlor-alkali|Industrial salt|Dye printing, papermaking|Market supply anddemand|
|PVC|Chlor-alkali|Vinyl chloride|Leatheret, wallpaper, tools|Market supply anddemand|
|Chlorineproducts|Chlor-alkali|Industrial salt,ethylene|Solvent, PVC|Market supply anddemand|

(3).R&D innovation
√Applicable□Not applicable
TheR&D and development of Company continued to adhere to the main line of advanced chlorine production process and polymer new material technology in 2016. The main research projects include “hydrogen chloride catalytic oxidation to chlorine process technology development”, “dichloroethane oxychlorination to tetrachlorethylene amplification technology research”, “development and application research on customized CPVC resin”, “solution-method vinyl polymer technology exploration and mPOE product development” etc.
“Hydrogen chloride catalytic oxidation to chlorine process technology development” project has completed the optimization of first generation catalyst in multi-channel small testing apparatus and drafted the first generation of catalyst standards, and the catalyst has been used stably for over 6000h; in the meanwhile, constructed the single tube test device in chemical area and put into operation, established the analytical method for components of offgas absorption liquid; on the basis of process package of completed 100,000t/a industrial unit, cooperated with domestic and foreign specialized companies to improve the process package and improved the FSR of industrialized projects.
As for the “dichloroethane oxychlorination to tetrachlorethylene amplification technology research” project, on the basis of preliminary exploration of process conditions, raw material ratio and analytical method, carried out amplification process research through industry-university-research mode, and established oxidative chlorination test amplification unit in colleges and universities, which has entered experimental stage.
As for “development and application research on customized CPVC resin” project, carried out quality tracing and assessment of CPVC resin and optimized the production process and technology to improve the quality of CPVC resin; in the meanwhile, carried out the research on low-cost and high-performance CPVC mixture formulation, reduced the formulation cost of tubs and pipes through matching adjustment of auxiliary stabilizer system, lubrication system and filling system; developed high-flow and creep-resistant special aggregate used for all vanadium redox flow battery for specific customers, which is in specimen evaluation stage.
“Solution-method vinyl polymer technology exploration and mPOE product development” is the prospective project for exploiting POE new material market, through the implementation of the project, the Company masters the rules of ethylene solution polymerization process, prepares POE product in conformity with technical indicators, determines the tentative metallocene catalyst and opens up the refining process of POE product.
(4). Production process and flow
√Applicable□Not applicable
2016 Annual Report
Caustic
soda:
Secondary refined
20% alkali
20% alkali
brine
makeup tank
Finished product
storage tank
Electrolysis 32% alkali
cooler
32% alkali
Finished product
Alkali storage tank
50% alkali
Evaporator
50% alkali Finished product
cooler storage tank
Liquid chlorine
Process water Refrigerated Concentrated
water sulphuric acid
Secondary
|||
|-|-|
||Wet chlorine|
|Electrolysis||

 drier
Liquid chlorine storage tank Hydrochloric
acid:
Chlorine
Hydrochloric Hydrochloric Offgas
Cooler
acid furnace acid absorber absorber
Hydrogen
31% hydrochloric acid
Hydrochloric 31% hydrochloric acid storage acid
tank Storage tank in
tank farm
2016 Annual Report
Dichloroethane:
Recycle
gas
compressor
Hydrogen
20% alkali
chloride
Liquid-vap Crude EDC
|||
|-|-|
|Ethylene|Oxychlorinationreactor|

Oxygen
Refined EDC
Storage EDC EDC refining EDC refining
tank in tank refining3# 2# tower 1# tower
farm tower
Emulsion method PVC paste
resin:
Chemicals
Recovery
Chemicals preparation
Polymerization Drying Package
Seed emulsion
Suspension method PVC special
resin:
Chemicals
Recovery
Chemicals Polymerization Stripping Drying Package
preparation
(5). Production capacity and work condition
√Applicable□Not applicable
||||
|-|-|-|
|Main plant area or project|Designed capacity|Capacity utilization (%)|
|Caustic soda|720,000t|98.98|
|Dichloroethane|720,000t|56.67|
|Liquid chlorine|600,000t|100.10|
|Paste PVC|60,000t|83.37|
|Special PVC|20,000t|92.24|

Increase or decrease in production capacity
□Applicable√Not applicable
2016 Annual Report
Adjustment of production line and capacity structure optimization
□Applicable√Not applicable
Abnormal shutdown
□Applicable√Not applicable
3 Raw materials purchase
(1). Basic information about main raw materials
√Applicable□Not applicable
||||||
|-|-|-|-|-|
|Raw material|Purchase mode|Amountpurchased|Pricechanges|Influence of price fluctuation onoperating cost|
|Ethylene|Long-term contract|1,190,000t|Rise|The influence of purchase price is indirect proportion to operating cost, thehigher the purchase cost, the higher theoperating shall be and vice versa.|
|Salt|Combination oflong-term andshort-term contract,and combination ofimport and domesticpurchase|1,090,000t|Drop|The influence of purchase price is indirect proportion to operating cost, thehigher the purchase cost, the higher theoperating shall be and vice versa.|
|Vinylchloride|Combination oflong-term andshort-term contract,and combination ofimport and domesticpurchase|68,900t|Rise|The influence of purchase price is indirect proportion to operating cost, thehigher the purchase cost, the higher theoperating shall be and vice versa.|

(2). Countermeasures for price fluctuation risk of raw materials
Basic information about holding derivatives and other financial products
□Applicable√Not applicable
Main information about the adoption of periodic reserves and other means
□Applicable√Not applicable
4 Particulars about product sales
(1). Sales model
√Applicable□Not applicable
The sales territories of caustic soda and EDC and other main products of the Company include Shanghai, Jiangsu, Zhejiang and south regions, adopting the mode combining direct selling and distribution. (2). Basic information about main business of the Company divided by industry segments
√Applicable□Not applicable
Unit: Yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|Industrysegment|Operatingincome|Operating cost|Grossprofit(%)|Increase ordecrease inoperatingincome overpreviousyear (%)|Increaseordecreaseinoperatingcost overpreviousyear (%)|Increaseordecreasein grossprofitoverpreviousyear (%)|
|Industry|3,825,805,128.74|3,478,929,132.02|9.07|-7.84|-2.18|-5.26|
|Construction industry|52,384,954.98|50,855,935.65|2.92|57.02|71.53|-8.21|
|Trade|2,834,742,551.50|2,557,264,384.04|9.79|46.13|32.35|9.39|

2016 Annual Report
||
|-|
|income|

Pricing strategy and price changes of main products
√Applicable□Not applicable
||
|-|
|Pricing policy: the market price of product shall be adjusted timely according to real-time market|
|conditions, the changes of raw materials price and supply-demand relations.|
|Caustic soda: the caustic sola supplied to the downstream of chemical industrial area is contract|
|pricing, and the price is relatively stable, the overall price of products sold on market was stable in the|
|first half year and caustic soda was persistent overheating since August in the second half of year,|
|mainly because that some chlor-alkali enterprises were forced to limit production or even stop|
|production due to environmental protection reasons; the maximum downstream alumina market of|
|caustic soda turned better and the caustic soda demand was strong.|
|PVC: after nearly 5 years’ silence on the market, PVC eventually showed new condition in 2016.|
|The price began to rise in the middle of June, reached the peak in November and then became stable.|
|The main reason was that the reform effect of supply side of industrial capacity transfer gradually|
|appeared, furthermore, the limited production of calcium carbide for environmental reasons and better|
|export promoted PVC quotation to be better.|
|Chlorine product: the chlorine product supplied to the downstream of chemical industrial area|
|belonged to contract price and the price was relatively stable, but the price of chlorine product sold on|
|the market changed significantly, in excessive supply status for a long term, and the price dropped|
|greatly compared with 2015.|

(3). Basic information about main business of the Company divided by sales channel
√Applicable□Not applicable
Unit: 10,000Yuan Unit: RMB
||||
|-|-|-|
|Sales channel|Operating income|Year-on-year increase or decreasein operating income (%)|
|China|6,436,295,912.76|10.56|
|Other countries|276,636,722.46|-8.75|

 Description of accounting policy
□Applicable√Not applicable
(4). Basic information about joint product, byproduct, semi-finished product, waste material and waste-heat utilization product
√Applicable□Not applicable
||||||
|-|-|-|-|-|
|Other outputproducts|Production inreport period|Pricingmethod|Main targetcustomers|Proportion of salesof main targetcustomer (%)|
|Recycled materialof Tianyuan Plant|1634.48|Market price|Shanghai SitaijiPlastic Cement Co.,Ltd|30|
|Sulfuric acid usedfor fertilizer|11385.82|Market price|Shanghai ChengtangIndustrial Co., Ltd|100|
|Solvent ethylenedichloride|3927.16|Market price|Wuxi YangshiChemical Co., Ltd|29|
|Sodiummonophosphate forwastewatertreatment|17371.81|Market price|Shanghai YuanyuanChemical Co., Ltd|39|
|Lye forneutralization|48.98|Market price|Shanghai LingtuoChemical Co., Ltd|100|

Situation description
□Applicable√Not applicable
2016 Annual Report
5 Environmental Protection and Security
(1). Basic information about major safety production accidents of the Company in report period□Applicable√Not applicable
(2). Basic information about environmental input of the Company during report period
√Applicable□Not applicable
Unit:
104Yuan
Currency: RMB
|||
|-|-|
|Investment in environmental protection|Proportion of invested fund in operating income(%)|
|3,892.28|0.58|

 Basic information about major environmental violations in report period
□Applicable√Not applicable
(3). Other information
□Applicable√Not applicable
(V) Analysis on investment status
1. General analysis on the equity investments in outside entities
√Applicable□Not applicable
1. General analysis on the equity investments in outside entities
Unit:
104Yuan
Currency: RMB
||||
|-|-|-|
|Closingbalance|Beginningbalance|Increment ordecrement|
|36,521.56|28,885.54|7,636.02|
|45,320.96|42,407.82|2,913.14|
|7,013.83|5,076.59|1,937.24|
|38,307.13|37,331.23|975.90|

Analysis on the reason for change in equity:
1) Long-term equity investment increased by26.44% year on year, mainly due to the investment income in Huntsman confirmed in current period.
2) The Available-for-sale financial assets measured at fair value increased by38.16% year on year, mainly because that the Bank of Shanghai which was measured at cost was transferred to measured at fair value in current period
(1) Significant equity investment
√Applicable□Not applicable
1. The Company deliberated and passed the proposal on Investment in Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd. on the
5th
board meeting of the
9th
Board of Directors on Oct. 28, 2016, and jointly set up Inner Mongolia Junzheng Tianyuan Chemical Co., Ltd. according to the proportion of shares, i.e.40% for chlor-alkali company and60% for Junzheng energy; joint venture corporation planned and constructed 200,000t/a seed emulsion polymerization paste resin project. The project has been implemented in phases, and the production capacity of phase I is intended to be 100,000t. The joint venture corporation completed business registration on Jan. 10, 2017, the fund of 4,000,000Yuan for Phase I was fully invested on Jan. 24, 2017, and Phase I is predicated to be put into operation at the end
of 2017.
||
|-|
|2. The Company participated in capital increase and expansion MDI project of Shanghai Huntsman|
|Polyurethane Co., Ltd. and Shanghai Lianheng Isocyanate Co., Ltd in 2014. The contributions are as|
|follows: participation in the project of Shanghai Huntsman Polyurethane Co., Ltd. with the total|

2016 Annual Report
||
|-|
|contributions of 36,571,851.75Yuan in 2014 and the contributions of 16,244,815.25Yuan in 2017,|
|totally 52,816,667Yuan by now. Participated in the expansion project of Shanghai Lianheng Isocyanate|
|Co., Ltd, with the total contributions of 39,135,000Yuan in 2014, 40,466,400Yuan in 2015 and|
|18,316,800Yuan in 2016, totally 97,918,200Yuan by now.|

(2) Significant non-equity investment
√Applicable□Not applicable
40,000t/a high-performance chlorinated polyvinyl chloride project got the EIA approval issued by Shanghai Environmental Protection Bureau on Feb. 28, 2017.
(3) Financial assets measured at fair value
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
|StockNameHuayi Groupshare|Initialinvestmentcost690,000.00|Ending bookvalue|Profit orloss inreportingperiod15,015.00|Change inowner's equityin thereportingperiod|Accountingsubject|
|||1,921,920.00||-590,947.50|Available-for-sale financial assets|
|3F|360,000.00|7,482,736.80||-1,117,551.60|Available-for-sale financial assets|
|ShanghaiPetrochemical|900,000.00|2,898,000.00||-13,500.00|Available-for-sale financial assets|
|ZYD|1,272,952.61|16,234,320.00|45,000.00|-1 1 ,6 48,154.46|Available-for-sale financial assets|
|ShenwanHongyuan|1,250,000.00|14,850,000.00|264,000.00|10,200,300.00|Available-for-sale financial assets|
|Oriental Pearl|86,967.00|2,026,331.10|20,296.88|-951,636.40|Available-for-sale financial assets|
|HaitaiDevelopment|20,000.00|297,200.00||9,000.00|Available-for-sale financial assets|
|Bank ofShanghai|7,307,758.85|24,427,750.56||12,839,993.78|Available-for-sale financial assets|
||11,887,678.46|70,138,258.46|344,311.88|8,727,503.82|/|

(VI) Sales of important assets and equities
□Applicable√Not applicable
(VII) Analysis on main controlled companies and participated companies
√Applicable□Not applicable
1) Operating performance of main controlled companies
Unit:
104Yuan
Currency: RMB
||||||
|-|-|-|-|-|
|Company name|Business nature|Registeredcapital|Assetsvolume|Net profit|
|Shanghai Chlor-Alkali NewMaterials Trading Co., Ltd.|Trade|5,000|21,032.45|60.86|
|Shanghai Jinyuan Tap Water Co.,|Tap water|900|1,429.48|85.50|

2016 Annual Report
Ltd.
||||||
|-|-|-|-|-|
|Shanghai Chlor-Alkali machineryCo., Ltd.|Maintenance ofpetrochemicaldevices andengineeringconstruction|3,000|2,743.33|-1,345.17|
|Shanghai Ruisheng Enterprise Co.Ltd.|Trade|500|6,837.85|340.03|
|Shanghai Luwei Plastics Co., Ltd.|Production ofCPVC tubing andpipe fittings|5,000|1,480.03|-1,905.73|

 2) Influence of the net profit of the controlled subsidiary or the income of the participated subsidiary on the Company's net profit
Unit:
104Yuan
Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|Company name|Businessnature|Main productsor service|Mainbusinessincome|Mainbusinessprofit|Net profit|Investmentincomecontributed bythe participatedcompany|
|ShanghaiChlor-AlkaliNew MaterialsTrading Co., Ltd.|Trade|Chemical rawmaterials andproduct sales|25,295.30|1,611.35|60.86|60.86|
|ShanghaiRuishengEnterprise Co.Ltd.|Trade|Chemical rawmaterials andproduct sales|249,549.75|948.94|340.03|340.03|
|ShanghaiChlor-AlkaliMachinery Co.,Ltd.|Industry|Machinemanufacturing|9,546.30|1,037.27|-1,345.17|-1,120.93|
|ShanghaiJinyuan TapWater Co., Ltd.|Industry|Tap water|810.03|411.77|85.50|66.50|
|Shanghai LuweiPlastics Co., Ltd.|Chemicalproductionand sale|Production ofCPVC tubingand pipefittings|271.46|-122.69|-1,905.73|-1,334.01|
|ShanghaiHuntsmanPolyurethaneCo., Ltd.|Chemicalproductionand sale|MDI refiningand polymer|307,342.25|47,305.05|32,451.87|9,735.56|

 Notes:
The data of Shanghai Huntsman Polyurethane Co., Ltd. in 2016 is the list of relevant data in DSB (S) Z (17) No. P00165 Audit Report issued by Deloitte Touche Tohmatsu CPA Ltd. (special general partnership) for Shanghai Huntsman Polyurethane Co., Ltd.
(VIII) Particular about structured entity controlled by the Company
□Applicable√Not applicable
III. Discussion and analysis on the Company's future development
(I) Industrial pattern and trend
√Applicable□Not applicable
2016 Annual Report
In the first year of the
13th
five-year plan, the chlor-alkali industry entered the critical period of industrial restructuring and growth mode transformation. A series of changes had taken place in the industrial operation characteristics: the industrial scale expanded continuously, but the speed of growth slowed down; the industrial concentration ratio rose and the industrial layout became reasonable gradually; the market pattern changed continuously and the trading mode was diversified; the production process was continuously optimized and the energy-saving and environmental protection level was continuously improved. There are still many contradictions and urgent problems in the industry, for example, overcapacity problem still exists, product homogenized competition is intense, the competitiveness of high-end product is poor, the technological innovation capacity should be further enhanced, “zombie enterprises” drags down the industrial development, which should be overall solved during the
“13th
Five-year Plan”.
During the
“13th
five-year plan”, along with the steady progress in new urbanization, the demand of caustic soda on end product market will maintain rapid growth. The urbanization rate of China will exceed60% in 2020, and the new urbanization and consumption upgrading will greatly pull the construction investment in infrastructure and supporting facilities and promote the demand increase in building materials, household appliances, clothing and articles for daily use, and then will pull the continuous increase in the demand of caustic soda product.China’s annual export volume of caustic soda was about 2,000,000t , basically covering the 64 countries of “the belt and road”. China has always been the net exporter of caustic soda, the main export flow direction is basically in line with the countries covered by “the belt and road”. Along with the development of economic construction of the countries belong to “the belt and road”, the demand on caustic soda will further increase, so the export volume of domestic caustic soda towards the countries of “the belt and road” will continue to be high. In the coming years, the demand on caustic soda products of Europe, India, Australia and Southeast Asia will continue to grow, therefore, the main future export regions of caustic soda will still be these countries, and the export volume will keep increasing at the same time.
(II) Development strategy of the Company
√Applicable□Not applicable
Strategic thinking of the Company: based on the main battlefield, determined to go out, developing new business.
Based on the main battlefield—— take the main battlefield of chemical industrial zone as the support to optimize the operation capacity of units in service, raise the intrinsic safety degree of units through technological innovation and management innovation to create high-end products and improve the added value of products, so as to consolidate the main battlefield position of chemical industrial zone and lay the foundation for innovative development of the Company.
Determined to goout—— implement the strategy of “going out from the chlor-alkali industry, going out from Shanghai and going out from China”, to deepen the cooperation with well-known companies both at home and abroad and to explore the optimum allocation of production factors and the best combination of market, take advantage of corporate brand, management and other intangible assets to improve the core competitiveness of the Company.
Developing newbusiness—— take “innovation, upgrading and transformation” as the main line to change the single structure of main products and to promote the Company to transfer to the technology-based enterprise in advanced material field, with chlor-alkali products as the base, with new materials and high value-added chemicals as the main body and with strong profitability. strengthen the opportunity research on field segments of special PVC resin and related downstream products of MDI/TDI.
(III) Operating plan
√Applicable□Not applicable
Faced with the situation of coexistence between chances and challenges and between pressure and power, the Company will take advantage of the situation to adapt to the new status of the economic development, promote the optimization of economic structure, promote the steady growth of business performance, boost the reform into depth, make steady progress, accelerate the transformation of development, and strive to achieve more efficient and more sustainable development of higher quality.
2016 Annual Report
1. Adhere to the green development as the premise to ensure safety and environmental protection controlled in all aspects. The Company will reshape the HSE management system to ensure system running effectively, strengthen the safety management measures and safety to enhance the intrinsic safety with great efforts, implement the responsibility, strengthen the examination with strict reward and penalty to enhance the HSE execution force, and improve the environmental management system to achieve green chemical industry and social caring with responsibility of caring.
2. Strive to remove the loss and get profit and ensure all the measures for reducing cost and enhancing efficiency implemented. The Company will stabilize the daily production and operation to ensure the high load operation of the profitable devices, optimize the sales structure to reduce procurement cost and seek to maximize the benefits, reduce the cost of public utilities costs to strengthen the efforts for implementing energy-saving and emission reducing projects and control strictly the three expenses and manufacturing cost to reduce the cost and improve the efficiency.
3. Speed up the industrialization of the key projects to lay a solid foundation for follow-up development. On the basis of completion of feasibility study report, the environmental impact assessment of 100,000t hydrogen chloride oxidation to chlorine project has been started; strengthen the technical upgrading of existing resin products, collect various PVC resins for analysis and evaluation, select 2 to 3 varieties according to different production characteristics and process for future development, furthermore, make improvement for the production process, line and technology for existing PVC products to improve the stability of PVC resin products.
4. Deepen the management to improve operation efficiency. Due to the sharp decrease in the staff of the Company, the organizational structure, business process, internal control system should be further organized and improved. The Company will optimize the organizational structure and personnel structure, establish reasonable incentive mechanism, to deepen the management and improve the efficiency.
5. Continue to explore the research on go out strategy to ensure the sustainable development. From the aspects of perfecting the existing industrial chain in Shanghai chemical industrial area, extending the existing product chain and looking for chemical new material product with high added value and technical content, in combination with the actual situation of the Company,
strengthen the opportunity research on field segments of special PVC resin and related downstream products of MDI/TDI.
(IV) Possible risks
√Applicable□Not applicable
1) Risk of microeconomic fluctuation. The downward economic pressure will not decrease in 2017 and the economic situation is still grim.
2) Policy risk and industrial risk. Under the background of deepening the structural reform of supply side and cutting excessive industrial capacity of the state, there will be greater uncertainty on chlor-alkali products and its downstream products market in 2017.
3) Raw material risk. Impacted by cold chain transportation, theCompany’s main raw material ethylene is of the unique commercial attributes, high fluctuations in price, and being easy to rise and difficult to fall. This will deviate from the production cost and bring risk to the control of the production cost of theCompany’s product ethylene dichloride. The electricity needed for sodium hydroxide is made as part of the raw material, but it is difficult to get policy favor for the price of the electricity for electrolysis under the guidance of existing location economy.
2. Countermeasures
1) Except for the five points in business plan, the Company shall strengthen the pace of transformation of scientific research innovation into productivity, and accelerate the process of industrialization of new technology chlorine hydride catalytic oxidation to chlorine and the amplification technology research on dichloroethane oxychlorination to perchlorethylene.
2) Continue to explore the research on go-global strategy to look for resource and location advantages. Aim at the regions with cost advantages to create new production base, and extend the production chain of the company, so as to realize the transformation and upgrading.
2016 Annual Report
3)
take
advantage of supply-marketing integrated platform of trade company to realize the “supply and marketing linkage, products linkage and main trade linkage” for comprehensive improvement of the marketing level.
(V) Other
□Applicable√Not applicable
IV. Note on the status and causes not disclosed as per criteria due to not being applicable to the provisions of the criteria or special causes
□Applicable√Not applicable
Section V Major Events
I. Proposal on profit distribution of ordinary shares or transfer of capital reserves
(I) The formulation, implementation or adjustment of the cash dividend policy
√Applicable□Not applicable
1. In 2012, the Company, according to relevant regulations of China Securities Regulatory Commission, Shanghai Securities Regulatory Bureau and Shanghai Stock Exchange, made amendment on relevant provisions related to profit distribution in the Articles of Association, further improved relevant decision-making process and mechanism, clarified the profit distribution form, the actual conditions and proportion of the cash dividend, the use principle of undistributed profit and other specific policies.
2. The cash dividend policy has not been adjusted in reporting period.
(II) TheCompany’s profit distribution plan for ordinary shares or proposal and the plan for capital reserves transferred to share capital or proposal in recent 3 years (including the reporting period)
Unit: Yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|The yearfordividenddistribution|Bonusshare forevery 10shares held|Issueddividendfor every10 sharesheld(RMB) (taxincluded)|Sharesincreasedfor every10 sharesheld|Totalamount ofcashdividendissued (taxincluded)|Net profitattributable toshareholders of thelisted Company inthe consolidatedstatements in theyear for dividenddistribution|Ratio in the netprofitattributable toshareholders ofthe listedCompany intheconsolidatedstatements (%)|
|2016|0|0|0|0|-328,091,761.80|0|
|2015|0|0||0|95,615,030.34|0|

 2014 0 0 0 0 -592,502,499.95 0 (III) Repurchase offer of shares in cash and included in cash dividends
□Applicable√Not applicable
(IV) If the profit is positive in the reporting period and the profit distributable to common shareholders by the parent company is positive but the Company does not lodge the proposal for profit distribution in cash for ordinary shares, the Company shall disclose in detail the reasons and the purpose and use plan of the undistributed profit
□Applicable√Not applicable
2016 Annual Report
II. Fulfillment of commitments
(I) Commitments of the actual controller, shareholders, related parties, purchaser and the Company made to other related parties in the reporting period or left to the reporting period
Applicable√Not applicable
(II) If there is earnings forecast for assets or project of the Company and the assets and project are still in forecasted earnings period during the reporting period, the Company shall explain whether the assets or project have reached the original earnings forecast and give the reasons
□Reached□Failing to reach√Not applicable
III. Fund occupation and the liquidation in the reporting period
□Applicable√Not applicable
IV. Note of the Company on the “non-standardauditor’s report” of the public accounting firm□Applicable√Not applicable
V. The analysis and explanation of the Company on the cause and influence of the changes in the accounting policy and accounting estimate or correction of significant accounting errors (I) Analysis and explanation of the Company on the cause and influence of the changes in the accounting policy and accounting estimate
√Applicable□Not applicable
Follow the Provisions on Accounting Treatment Value-added Tax
The Ministry of Finance published the Provisions on Accounting Treatment Value-added Tax (CK[2016] No. 22) Dec. 3, 2016 and the Provisions are applicable to the related transaction after May 1, 2016. The influences of the implementation of the provisions are as follows:
Contents and Reasons for the Changes of Approval Name and Amount of the Accounting Policies Procedures Affected Items
(1) Adjust the item “business tax and surcharges” Approved by the
in income statement to item “taxes and decision of the Taxes and surcharges
surcharges”. Board of Directors
The amount of taxes and surcharges of this year is (2) Reclassify the housing property tax, land use
increased by RMB tax, vehicle and vessel usage tax and stamp duty
6,835,416.74Yuan after arising from the business activities of the
Approved by the adjustment, and the amount enterprise since May 1, 2016 in the item
decision of the of administrative expenses of “administrative expenses” to the item “taxes and
Board of Directors this year is decreased by surcharges”, and the taxes incurred before May
RMB 6,663,499.58 Yuan 5, 2016 shall not be adjusted. The comparative
after adjustment. The amount data shall not be adjusted.
of sales expenses of this year is decreased by RMB
2016 Annual Report
Contents and Reasons for the Changes of Approval Name and Amount of the Accounting Policies Procedures Affected Items
171,917.16 Yuan after adjustment.
The adjusted increment in ending balance of other (3) Reclassify the value-added tax of income (or
current liabilities is RMB 0 gains) which has been recognized without
Approved by the Yuan, the adjusted increment fulfillment of VAT obligations and should be
decision of the in other non-current recognized as output VAT from the item “tax
Board of Directors liabilities is RMB 0 Yuan, payable” to the item “other current liabilities”.
and the adjusted decrement The comparative data shall not be adjusted.
in ending balance of tax payable is RMB 0Yuan. The adjusted increment in (4) Reclassify the credit balance of the
ending balance of other classification items of “VAT payable”, “unpaid
current assets is RMB 0 VAT”, “pending deduct VAT on purchase”,
Approved by the Yuan, the adjusted increment “input VAT to be recognized” and “VAT
decision of the in other non-current assets is retained” under the item “taxes payable” to the
Board of Directors RMB 0 Yuan, and the item “other current assets” (or “other non-current
adjusted increment in ending assets”). The comparative data shall not be
balance of tax payable is adjusted.
RMB 0Yuan.
(II) Analysis and explanation of the Company on the cause and influence of the correction of significant accounting errors
□Applicable√Not applicable
(III) Communication with former CPA firm
□Applicable√Not applicable
(IV) Other information
□Applicable√Not applicable
VI. Engagement and dismissal of the public accounting firm
Unit:104
Yuan Currency: RMB
|||
|-|-|
||Now engage|
|Name of the domestic public accounting firm|BDO China Shu Lun Pan Certified PublicAccountants LLP|
|Reward of the domestic public accounting firm|88|
|Audit term of years of the domestic public|6|

2016 Annual Report
||
|-|
|accounting firm|

||||
|-|-|-|
||Name|Reward|
|Public accounting firm for audit ofinternal control|BDO China Shu Lun Pan CertifiedPublic Accountants LLP|35.2|

Note on the engagement and dismissal of the public accounting firm
□Applicable√Not applicable
Note on reengagement of public accounting firm in audit period
□Applicable√Not applicable
VII. Risk of suspension of listing
(I) Cause for suspension of listing
□Applicable√Not applicable
(II) Countermeasures to be taken by the Company
□Applicable√Not applicable
VIII. Faced with the termination of listing and causes
□Applicable√Not applicable
IX. Events related to bankruptcy and reorganization
□Applicable√Not applicable
X. Significant lawsuits and arbitrations
□Existence of significant lawsuits and arbitrations in the year
√No significant lawsuits and arbitrations in this year
XI. Penalties to the listed Company, Directors, Supervisors, senior executives, controlling shareholder, actual controller and purchaser and the corrections
□Applicable√Not applicable
XII. Credit conditions of the Company and its controlling shareholder and actual controller in reporting period
□Applicable√Not applicable
XIII. The Company's equity incentive plan, employee stock ownership plan and other incentives to the employees and the influences
(I) Disclosure of related incentive matter in provisional announcement without subsequent progress or change
□Applicable√Not applicable
(II) Incentive matters not disclosed in provisional announcement or with subsequent progress Equity incentive
□Applicable√Not applicable
Other information
□Applicable√Not applicable
Information about employee stock ownership plan
□Applicable√Not applicable
2016 Annual Report
Other incentive measures
□Applicable√Not applicable
XIV. Significant related transactions
(I) Related transactions associated with routine operations
1. Events already disclosed in the provisional announcement and having no subsequent progress or change
√Applicable□Not applicable
|||
|-|-|
|Summary of events|Query Index|
|The 28th meeting of the 8th Board of Directors on Mar. 25,2016 and 2015 Annual Shareholders’ Meeting of Apr. 25,2016 reviewed and passed the Proposal on Daily RelatedTransactions of the Company. The related transaction ofthe Company and related parties are normal businessactivities and largely support the day-to-day operationsand development, conforming to the principle public,justice and fairness.|Reviewed and passed on the 28th meeting of the8th Board of Directors and 2015 AnnualShareholders’ Meetingwww.sse.com.cn|

2. Events already disclosed in the provisional announcement and having subsequent progress or change
□Applicable√Not applicable
3. Events not disclosed by provisional announcements
√Applicable□Not applicable
Unit:
104
Yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|Related transactionparty|Relationship|Type ofrelatedtransaction|Content ofrelatedtransaction|Pricingprinciplefor relatedtransaction|Amount ofrelatedtransaction|Ratio intotal amountoftransactionof the samekind(%)|
|Shanghai HuayiEnergy ChemicalCo., Ltd.|Controlledsubsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|92.13|0.02|
|Shanghai HuayiTianyuan ChemicalLogistics Co., Ltd.|Controlledsubsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|84.24|0.02|
|ShanghaiChlor-Alkali CreationCo., Ltd.|Wholly-owned subsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|140.30|0.03|
|Shanghai HuayiGroup EquipmentEngineering Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|44.17|0.01|
|Shanghai ChemicalSupply andMarketing Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|10.21|0.00|
|Shanghai ChemicalSupply andMarketing Co., Ltd.|Wholly-owned subsidiary ofparent|Purchasegoods|Materialpurchase|Settledthroughnegotiated|86.25|0.02|

2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
||company|||price|||
|Shanghai HuayiInformationTechnology Co., Ltd.|Controlledsubsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|147.01|0.04|
|Shanghai WhiteElephant & SwanBattery Co., Ltd.|Controlledsubsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|0.49|0.00|
|Huayi Group (HongKong) Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|12,285.10|3.06|
|Shanghai TiantanAuxiliaries Co., Ltd|Controlledsubsidiary ofparentcompany|Purchasegoods|Materialpurchase|Settledthroughnegotiatedprice|608.89|0.15|
|Shanghai ChemicalIndustry Inspection &Detection Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|288.42|0.07|
|Shanghai HuayiTianyuan ChemicalLogistics Co., Ltd.|Controlledsubsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|2,474.87|0.62|
|Shanghai NewTianyuan ChemicalTransport Co., Ltd.|Controlledsubsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|524.80|0.13|
|ShanghaiChlor-Alkali CreationCo., Ltd.|Wholly-owned subsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|341.32|0.08|
|Shanghai HuayiEngineering Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|846.86|0.21|
|Shanghai HuayiInformationTechnology Co., Ltd.|Controlledsubsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|302.17|0.08|
|Shanghai PacificChemica EquipmentEngineering Co., Ltd.|Controlledsubsidiary ofparentcompany|Receiveservice|Receiveservice|Settledthroughnegotiatedprice|11.11|0.00|
|Shanghai HuayiEnergy ChemicalCo., Ltd.|Controlledsubsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|475.70|0.11|
|Shanghai 3F NewMaterials Co., Ltd.|Controlledsubsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|39.09|0.00|
|Shanghai HuayiTianyuan ChemicalLogistics Co., Ltd.|Controlledsubsidiary ofparent|Sell goods|Productsale|Settledthroughnegotiated|293.68|0.07|

2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
||company|||price|||
|ShanghaiChlor-Alkali CreationCo., Ltd.|Wholly-owned subsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|119.84|0.03|
|Shanghai TianyuanGroup ShengdePlastics Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|880.50|0.21|
|Shanghai Resin PlantCo., Ltd.|Wholly-owned subsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|37.76|0.01|
|Shanghai HuayiAcrylic Acid Co.,Ltd.|Controlledsubsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|225.66|0.05|
|Shanghai ChemicalSupply andMarketing Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|124.29|0.03|
|Shanghai SanaisiReagent Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|0.55|0.00|
|Shanghai YipingPigment Co., Ltd.|Controlledsubsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|191.59|0.05|
|Yixing HuayiColourating Scienceand Technology Co.,Ltd.|Controlledsubsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|644.31|0.15|
|Shanghai TiantanAuxiliaries Co., Ltd|Controlledsubsidiary ofparentcompany|Sell goods|Productsale|Settledthroughnegotiatedprice|71.44|0.02|
|Shanghai HuayiTianyuan ChemicalLogistics Co., Ltd.|Controlledsubsidiary ofparentcompany|Provideservice|Provideservice|Settledthroughnegotiatedprice|0.87|0.00|
|Shanghai HuayiEngineering Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Provideservice|Provideservice|Settledthroughnegotiatedprice|583.75|0.14|
|Shanghai HuayiPolymer Co., Ltd.|Wholly-owned subsidiary ofparentcompany|Provideservice|Provideservice|Settledthroughnegotiatedprice|46.20|0.01|
|Shanghai PacificChemica EquipmentEngineering Co., Ltd.|Controlledsubsidiary ofparentcompany|Provideservice|Provideservice|Settledthroughnegotiatedprice|5.19|0.00|
|Shanghai CokingStorage andTransportation Port|Controlledsubsidiary ofparent|Provideservice|Provideservice|Settledthroughnegotiated|13.16|0.00|

2016 Annual Report
||||||
|-|-|-|-|-|
|Co., Ltd|company|price|||
|Total||/|22,041.92|5.42|
|Particulars of big sale return|||||
|Notes on related transactions|||The transactions betweenthe Company and therelated parties is needed bythe Company's routineoperating activities forpurchase of raw materialand sale of products of theregular business activities,as well as the expendituresfor payment of service andcustody business producedfrom stripping the nonrecurring assets and noncore business. These arenecessary supplements forprofessional cooperationsand mutual exchange ofmerits between theCompany and thecontrolled shareholder andbetween partial subordinateenterprises, and suchrelated transactions shall becontinued in future.||

(II) Related transactions from acquisition and sale of assets or equity
1. Events already disclosed in the provisional announcement and having no subsequent progress or change
□Applicable√Not applicable
2. Events already disclosed in the provisional announcement and having subsequent progress or change
□Applicable√Not applicable
3. Events not disclosed by provisional announcements
□Applicable√Not applicable
4. If performance agreement involved, the performance implementation situation in reporting period should be disclosed
□Applicable√Not applicable
(III) Significant related transactions of common investment
1. Events already disclosed in the provisional announcement and having no subsequent progress or change
□Applicable√Not applicable
2. Events already disclosed in the provisional announcement and having subsequent progress or change
□Applicable√Not applicable
3. Events not disclosed by provisional announcements
□Applicable√Not applicable
2016 Annual Report
(IV) Relatedcreditor’s rights and debts
1. Events already disclosed in the provisional announcement and having no subsequent progress or change
□Applicable√Not applicable
2. Events already disclosed in the provisional announcement and having subsequent progress or change
□Applicable√Not applicable
3. Events not disclosed by provisional announcements
√Applicable□Not applicable
Unit:
104Yuan
Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Related party|Relationship|Provide fund to the relatedparty|||The related party providedfund to the listed Company|||
|||Beginningbalance|Amount|Closingbalance|Beginningbalance|Amount|Closingbalance|
|Shanghai Huayi TianyuanChemical Logistics Co., Ltd.|Controlledsubsidiary ofparent company|33.57|-0.09|33.48|6.35|7.75|14.10|
|Shanghai Chlor-AlkaliCreation Co., Ltd.|Wholly-ownedsubsidiary ofparent company|6.03|12.81|18.84|51.65|-39.40|12.25|
|Shanghai Resin Plant Co., Ltd.|Wholly-ownedsubsidiary ofparent company|4.00|1.74|5.74||||
|Shanghai Tianyuan GroupShengde Plastics Co., Ltd.|Wholly-ownedsubsidiary ofparent company|2,099.51|-1,174.00|925.51||||
|Shanghai Huayi EngineeringCo., Ltd.|Wholly-ownedsubsidiary ofparent company|28.51|271.04|299.55|11.42|187.21|198.63|
|Shanghai Huayi Acrylic AcidCo., Ltd.|Controlledsubsidiary ofparent company|88.84|-81.25|7.59||||
|Shanghai Huayi Fine ChemicalCo. Ltd.|Wholly-ownedsubsidiary ofparent company|0.47|72.65|73.12||||
|Shanghai Soap Making Co.,Ltd.|Controlledsubsidiary ofparent company||0 .00||0 .54|0.00|0.54|
|Shanghai Huayi EnergyChemical Co., Ltd.|Controlledsubsidiary ofparent company|144.18|-4.96|139.22||||
|Shanghai 3F New MaterialsCo., Ltd.|Controlledsubsidiary ofparent company|21.88|-10.18|11.70||||
|Shanghai Huayi Polymer Co.,Ltd.|Wholly-ownedsubsidiary ofparent company|107.52|-107.52|0.00||||
|Shanghai Tiantan AuxiliariesCo., Ltd|Controlledsubsidiary ofparent company|0.81|-0.81|0.00|0.00|53.47|53.47|
|Shanghai Yiping Pigment Co.,Ltd.|Controlledsubsidiary of|6.75|8.82|15.57||||

2016 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
||parent company|||||||
|Yixing Huayi ColouratingScience and Technology Co.,Ltd.|Controlledsubsidiary ofparent company|303.40|-29.29|274.11||||
|Shanghai Huayi InformationTechnology Co., Ltd.|Controlledsubsidiary ofparent company|65.93|-65.93|0.00|8.71|3.98|12.69|
|Shanghai Pacific ChemicaEquipment Engineering Co.,Ltd.|Controlledsubsidiary ofparent company|0.00|6.07|6.07||||
|Shanghai Huayi NewMaterials Co., Ltd|Controlledsubsidiary ofparent company|0.00|6.37|6.37||||
|Shanghai New TianyuanChemical Transport Co., Ltd.|Controlledsubsidiary ofparent company||||11.08|49.45|60.53|
|Shanghai Chemical IndustryInspection & Detection Co.,Ltd.|Wholly-ownedsubsidiary ofparent company||||1.41|46.80|48.21|
|Shanghai Chemical Supplyand Marketing Co., Ltd.|Wholly-ownedsubsidiary ofparent company||||10.36|-1.72|8.64|
|Shanghai Huayi EquipmentEngineering Co., Ltd|Wholly-ownedsubsidiary ofparent company||||12.20|14.89|27.09|
|Huayi Group (Hong Kong)Co., Ltd.|Wholly-ownedsubsidiary ofparent company||||3,730.85|-2,145.85|1,585.00|
|Shanghai Huayi Fine ChemicalCo. Ltd.|Wholly-ownedsubsidiary ofparent company||||0.00|27.77|27.77|
|Shanghai Huayi (Group)Company|Controllingshareholder|0.00|12.55|12.55|99,685.74|-82,683.89|17,001.85|
|Shanghai Shenyu MedicineChemical Co., Ltd.|Controlledsubsidiary ofparent company||||0.02|-0.02|0.00|
|Shanghai Huifeng Resin Plant|Wholly-ownedsubsidiary ofparent company||||5.14|0.00|5.14|
|Shanghai Huayi GroupHuayuan Chemical Co., Ltd.|Controlledsubsidiary ofparent company||||0.17|0.00|0.17|
|Shanghai Sanaisi Reagent Co.,Ltd.|Controlledsubsidiary ofparent company||||0.08|-0.01|0.07|
|Shanghai Peony Painting InkCo., Ltd|Controlledsubsidiary ofparent company||||0.14|0.00|0.14|
|Shanghai Huayi GroupFinance Co., Ltd.|Affiliatedcompany||||7.04|1.99|9.03|
|Total||2,911.40|-1,081.98|1,829.42|103,542.90|-84,477.58|19,065.32|
|Cause for the related creditor’s rights and debts||Caused by purchase and sale in regular production andoperation||||||
|Influence of the related creditor’s rights and debtson the Company||No influence on the Company’s operating results andfinancial status||||||

2016 Annual Report
(V) Other
□Applicable√Not applicable
XV. Important contracts and the implementation
(I) Custody, contracting and leasing
1. Custody
□Applicable√Not applicable
2. Contracting
□Applicable√Not applicable
3. Leasing
√Applicable□Not applicable
Unit:
104Yuan
Currency: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Name oflessor|Name oflessee|Leasedassets|Amountofleasedassets|Startingdate ofleasing|End dateof leasing|Incomefromleasing|Basisforsettingleasingincome|Relatedtransaction ornot|Relatedrelation|
|ShanghaiChlor-AlkaliChemicalCo., Ltd.|ShanghaiHuayiTianyuanChemicalLogisticsCo., Ltd.|Fixedasset|3,466.16|01-01-2016|12-31-2016|1,384.68|Settledthroughnegotiatedprice|Yes|Controlledsubsidiaryof parentcompany|
|ShanghaiChlor-AlkaliChemicalCo., Ltd.|ShanghaiTianyuanGroupShengdePlasticsCo., Ltd.|Fixedasset|633.35|01-01-2016|12-31-2016|365.08|Settledthroughnegotiatedprice|Yes|Wholly-ownedsubsidiaryof parentcompany|

(II) Guarantee
□Applicable√Not applicable
(III) Management on cash assets made through committing others
1. Financing through commitment
□Applicable√Not applicable
2. Loan through commitment
□Applicable√Not applicable
3. Other financing investment and derivative investment
□Applicable√Not applicable
(IV) Other important contracts
□Applicable√Not applicable
2016 Annual Report
XVI. Notes to other major events
□Applicable√Not applicable
XVII. Fulfillment of social responsibility
(I) Poverty alleviation of listed company
□Applicable√Not applicable
(II) Work on social responsibility
√Applicable□Not applicable
For details, see 2016 Social Responsibility Report of Shanghai Chlor-Alkali Chemical Co., Ltd. (Summary) announced in the website of Shanghai Stock Exchange: www.sse.com.cn on March 30, 2017. (III) Information about environmental protection of the company and its subsidiaries belonging to key pollutant discharging unit published by environmental protection department
√Applicable□Not applicable
1. As for the environmental protection work in 2016, the Company has always adhered to the sustainable development path, strengthened the awareness of social responsibility, promoted the management and governance simultaneously based on the concept of green chemical industry, and the technical and economical indicators of environmental protection have been well fulfilled. The indicators of “three rates” for environmental protection have been completed, the running rate of environmental protection treatment facilities was100%, the industrial wastewater treatment rate was 100%, and the external monitoring qualification rate of the “three wastes” discharge was100%. The environmental protection expenditures of the Company in 2016 was RMB 38,922,800 Yuan, including RMB 16,720,000Yuan operating expenses, RMB 7,412,300Yuan of environmental protection maintenance fee and RMB 14,790,500Yuan of effluent charge. The environmental protection completion acceptance of by-product hydrogen energy project, integrated wastewater operation project in industrial area and
500m3
finished-product sodium hypochlorite storage tank construction project have been completed. Through setting goals and targets, operation control and emergency plan, the environmental management system of the company ensured the control of key environmental factors throughout the year. After the adjustment of the organizational structure of the company in July, the environmental management system shall follow the newly adjusted organizational structure to modify relevant procedure documents and supporting documents, update and identify the environmental factors of the Company and key environmental factors and implemented the control means of key environmental factors, and passed the third-party supervision and examination organized by Shanghai Audit Center of Quality System on November 30 and December; the environmental management system of the company was in continuous and effective operation. After optimized operation of wastewater integrated project of the two plants in chemical area in 2016 and incorporating the organic wastewater of Tianyuan into the organic wastewater treatment system of Huasheng, the problem that the organic wastewater of Tianyuan exceeded the takeover standard had been solved in 2016 and the organic wastewater of Huasheng was basically stable and operated up to standard after operation optimization. 244.22 tons of hazardous wastes from the two plants in chemical area were treated according to relevant regulations; more than 200 tons of hazardous wastes generated from the removal of production unit have been packed and stored in accordance with regulations for incineration treatment.
||
|-|
|Take the monitoring of environmental protection data of state-controlled enterprise as the basis to|
|ensure the stability and reliability of the daily operation of environmental protection devices. The|
|operating ratio and load rate of environmental protection device has reached the discharge standard|
|specified by laws and regulations; the unplanned shutdown of environmental protection shall be|
|managed as that of production unit, in case of shutdown for more than four hours, report to the quality,|
|environmental protection and security department of the company to be put on records and implement|
|the emergency plan of production unit at the same time to ensure the up-to-standard discharge of|
|wastewater and waste gas. Organize technical force to strive to make technological breakthrough for|
|environmental protection unit to ensure the effective operation of environmental protection device.|
|Since 2016, the comprehensive qualified rate of internal wastewater monitoring of the company|
|has always been 100%; except for the VCM recovery flue of Tianyuan Chemical Plant, the flue|

2016 Annual Report
||
|-|
|monitoring comprehensive qualified rate of others is 100%. The comprehensive qualified rate of|
|rainwater discharge monitoring is 100%. The environmental protective on-line monitoring instrument|
|for inorganic wastewater runs well, the qualification rate of on-line data transmission is 100% and the|
|transmission rate is 98% (indicator > 80%).|

Promoted the discharge reduction of VOCs, strengthened the management and control of startup and shutdown of production and the production site and reduced fugitive emission to further cut down the pollutant discharge from the source. As for VOCs discharge reduction, the Company has conducted leakage detection and repair (LDAR), quarterly detection and repair and EDC loading exhaust gas collection facility reconstruction, and the wastewater silo tail gas recovery project has been carried out as planned. On Dec. 14, 2016, Shanghai Academy of Environmental Sciences organized relevant technical experts to hold the technical verification and investigation meeting for special support funds of Shanghai Industrial VOCs emission reduction and enterprise pollution control project in Huasheng Chemical Plant and Tianyuan Chemical Plant of the Company. After onedays’ material examination and on-site inspection, the assessment of the Company for applying for special support fund for Shanghai industrial VOCs emission enterprises pollution control project passed.
(IV) Other information
□Applicable√Not applicable
XVIII. Convertible bond of the Company
(I) Convertible bond issuing
□Applicable√Not applicable
(II) Information about the convertible bond holder and guarantor in reporting period
□Applicable√Not applicable
(III) Changes of convertible bond in reporting period
□Applicable√Not applicable
Information about cumulative shares transfer of convertible bond in reporting period
□Applicable√Not applicable
(IV) Previous adjustments of conversion price
□Applicable√Not applicable
(V) Liabilities, credit change and cash arrangement for debt repayment in future years
□Applicable√Not applicable
(VI) Other information about convertible bond
□Applicable√Not applicable
Section VI Changes of Ordinary Shares and Particulars of Shareholders I. Changes of ordinary shares
(I) Changes of ordinary shares
1. Changes of ordinary shares
In the reporting period, the total number and share structure of the ordinary share were not changed. 2. Description of the changes in ordinary shares
√Applicable□Not applicable
On July 28, 2016, to support and participate in the establishment of Shanghai state-owned assets flow platform, Shanghai Huayi (Group) Company purchased Shanghai state-owned enterprises ETF shares with 34,692,000 Chlor-Alkali shares (accounting for5.16% of total equity of Huayi Group). After such exchange and purchase, the direct shareholding ratio of Shanghai Huayi (Group) Company reduced
from50.29% to47.29%.
2016 Annual Report
3. Impact of changes of ordinary shares on the earnings per share and net asset value per share in last year and the latest period (if any)
□Applicable√Not applicable
4. Other content deemed necessary by the Company to be disclosed or required by the securities regulatory institution to be disclosed
□Applicable√Not applicable
(II) Changes of the shares limited to be sold
□Applicable√Not applicable
II. Issuing and listing of securities
(I) Securities issuing in the reporting period
□Applicable√Not applicable
Note on the securities issuing in the reporting period (for bonds with different interest rates, state
respectively)
□Applicable√Not applicable
(II) Changes of the total number of the ordinary shares and structure of the shareholders and changes of the structure of theCompany’s assets and liabilities
□Applicable√Not applicable
(III) Existing internal staff shares
□Applicable√Not applicable
III. Particulars of the shareholders and the actual controller
(I) Total number of shareholders
|||
|-|-|
|Total number of ordinary shareholders as of end of the reportingperiod|85,244|
|Total number of ordinary shareholders at end of the previous monthbefore the disclosing date of the annual report|85,677|

(II) Top 10 shareholders, top 10 holders of tradable shares (or shareholders not under restricted sales condition)
Unit: share
|||||||||
|-|-|-|-|-|-|-|-|
|Top 10 shareholders||||||||
|Name of shareholder (in full)|Increase ordecrease inthe reportingperiod|Shares heldat end of thereportingperiod|Proportion (%)|Shareswithrestricted salescondition|Pledged orfrozen status||Natureofshareholder|
||||||Sharestatus|Number||
|Shanghai Huayi (Group)Company|-34,691,900|546,900,447|47.29|0|None|0|Stateownedlegalperson|
|SCBHK A/C BBH S/AVANGUARD EMERGINGMARKETS STOCK INDEXFUND|0|7,859,532|0.68|0|None|0|Overseaslegalperson|
|Central Huijin AssetManagement Limited LiabilityCompany|0|7,438,100|0.64|0|None|0|Stateownedlegalperson|

2016 Annual Report
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Industrial and CommercialBank of China Co., Ltd.－China Securities ShanghaiState-owned Enterprises ETF|6,526,623|6,526,623||0.56||0|None||0|Unknown|
|VANGUARD TOTALINTERNATIONAL STOCKINDEX FUND|668,901|4,921,701||0.43||0|None||0|Overseaslegalperson|
|Miao Guoqing|-730,000|3,000,000||0.26||0|None||0|Domestic naturalperson|
|TICO Trust CorporationLimited － Qingshan No. 1structured securities investmentassembled funds trust plan|2,956,790|2,956,790||0.26||0|None||0|Unknown|
|Fang Jianwei|-651,781|2,751,206||0.24||0|None||0|Domestic naturalperson|
|Bank of China Wuxi Branch|0|2,605,981||0.23||0|None||0|Stateownedlegalperson|
|ISHARES CORE MSCIEMERGING MARKETS ETF|1,157,500|2,441,900||0.21||0|None||0|Overseaslegalperson|
|Holdings of top 10 shareholders without restricted sales condition|||||||||||
|Name of shareholder|||Number ofshares withoutrestricted salescondition||Type and number of shares||||||
||||||Type|||Number|||
|Shanghai Huayi (Group) Company|||546,900,447||A share|||546,900,447|||
|SCBHK A/C BBH S/A VANGUARDEMERGING MARKETS STOCK INDEXFUND|||7,859,532||B share|||7,859,532|||
|Central Huijin Asset Management LimitedLiability Company|||7,438,100||A share|||7,438,100|||
|Industrial and Commercial Bank of China Co.,Ltd.－China Securities Shanghai State-ownedEnterprises ETF|||6,526,623||A share|||6,526,623|||
|VANGUARD TOTAL INTERNATIONALSTOCK INDEX FUND|||4,921,701||B share|||4,921,701|||
|Miao Guoqing|||3,000,000||B share|||3,000,000|||
|TICO Trust Corporation Limited － QingshanNo. 1 structured securities investment assembledfunds trust plan|||2,956,790||A share|||2,956,790|||
|Fang Jianwei|||2,751,206||B share|||2,751,206|||
|Bank of China Wuxi Branch|||2,605,981||A share|||2,605,981|||
|ISHARES CORE MSCI EMERGINGMARKETS ETF|||2,441,900||B share|||2,441,900|||
|Note on the related relation or concerted actionsfor above shareholders|||The Company’s shares have all been tradable since November12, 2009, and none of the shareholder is under restricted salescondition. It is unknown to the Company whether there isrelated relation or the concerted actor specified in theManagement Method on Information Disclosure forShareholding Change of the Shareholders of Listed Companies.||||||||

Holdings of top 10 shareholders with restricted conditions and the restricted conditions
□Applicable√Not applicable
2016 Annual Report
(III) Strategic investors or general legal person become top 10 shareholders due to rights issue□Applicable√Not applicable
IV. Particulars of the controlling shareholder and the actual controller
(I) Particulars of the controlling shareholder
1 Legal person
√Applicable□Not applicable
|||
|-|-|
|Name|Shanghai Huayi (Group) Company|
|Unit principal or legal representative|Liu Xunfeng|
|Date of establishment|Jan. 23, 1997|
|Main business|Operation and management of state-owned assets within authorizedrange, investment on industry, manufacture and sale for chemicaland medical products and equipment, installation, maintenance andcontracted service for projects of chemical and medical equipment.|
|Shares held in other domestic oroverseas listed companies during thereporting period|During the reporting period, Shanghai Huayi (Group) Companyheld 69.79% equity interest of Shanghai Huayi Group Co., Ltd and31.53% equity interest of Shanghai 3F New Material Co., Ltd.|

 2 Natural person
□Applicable√Not applicable
3 Special description of nonexistence of controlling shareholder in the Company
□Applicable√Not applicable
4 Index and dates of the changes of controlling shareholders in reporting period
□Applicable√Not applicable
5 Block diagram of property and control relations between the Company and controlling shareholder
√Applicable□Not applicable
(II) Particulars of the actual controller
1 Legal person
√Applicable□Not applicable
|||
|-|-|
|Name|State-owned Assets Supervision and Administration Commissionof Shanghai Municipal Government|

2016 Annual Report
2 Natural person
□Applicable√Not applicable
3 Special description of nonexistence of actual controller in the Company
□Applicable√Not applicable
4 Index and dates of the changes of actual controller in reporting period
□Applicable√Not applicable
5 Block diagram of property and control relations between the Company and actual controller√Applicable□Not applicable
6 Actual controller controls the Company through trust or other assets management modes□Applicable√Not applicable
(III) Other information about the controlling shareholder and actual controller
□Applicable√Not applicable
V. Legal person shareholders with the holdings more than10%
□Applicable√Not applicable
VI. Note on the limitation of shares for reduction
□Applicable√Not applicable
Section VII Particulars of Preferred Shares
□Applicable√Not applicable
2016 Annual Report
Section VIII Particulars of the Directors, Supervisors, Senior Executives and Staff Members
I. Changes in shareholding and particulars of rewards
(I) Particulars of Directors, Supervisors and senior executives (including the ones leaving post during the reporting period)
√Applicable□Not applicable
Unit: share
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Name|Position(note)|Gender|Age|Start date ofoffice term|End date ofoffice term|Sharesheld at thebeginningof year|Sharesheld atthe endof year|Increase ordecrease|Reason ofchange|Reward gotfrom theCompanyduring thereportingperiod(RMB'0000)(before tax)|Get rewardfrom theCompany'srelated partyor not|
|HuangDailie|Chairman ofthe board|Male|58|04-25-2016|04-25-2019|1,000|1,000|0||0|Yes|
|ZhangWeimin|Director,generalmanager|Male|49|04-25-2016|04-25-2019|10,000|10,000|0||72.40|No|
|Wang Wei|Director,deputy partysecretary|Male|48|04-25-2016|04-25-2019|0|0|0||61.50|No|
|Li Ning|Director|Female|49|04-25-2016|04-25-2019|0|0|0||0|Yes|
|Yu Zhaojun|Employeerepresentativedirector|Male|58|04-25-2016|04-25-2019|2,000|2,000|0||53.90|No|
|ZhangWenlei|Outsidedirector|Male|46|04-25-2016|04-25-2019|1,000|0|-1,000|Sold 1000shares onsecondarymarket at RMB15.72Yuan/share|10|No|
|ShaoZhengzhong|Independentdirector|Male|52|04-25-2016|04-25-2019|0|0|0||10|No|
|WangJinshan|Independentdirector|Male|55|04-25-2016|04-25-2019|0|0|0||5|No|
|Zhao Ziye|Independent|Male|37|04-25-2016|04-25-2019|0|0|0||5|No|

2016 Annual Report
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||director||||||||||
|Gu Lili|Chairman ofsupervisorycommittee|Male|45|04-25-2016|04-25-2019|0|0|0|0|Yes|
|Zhang Hu|Supervisor|Male|47|04-25-2016|04-25-2019|0|0|0|0|Yes|
|Tang Liang|Supervisor|Male|46|04-25-2016|04-25-2019|0|0|0|40.21|No|
|Zhou Mei|Employeerepresentativesupervisor|Female|48|04-25-2016|04-25-2019|0|0|0|34.92|No|
|ZhangGuohua|Employeerepresentativesupervisor|Male|48|04-25-2016|04-25-2019|0|0|0|37.21|No|
|Cao Jinrong|CFO|Male|41|04-25-2016|04-25-2019|1,000|1,000|0|48.32|No|
|YuanMaoquan|Deputygeneralmanager|Male|48|04-25-2016|04-25-2019|1,000|1,000|0|56.31|No|
|Dong Yan|Secretary ofthe board ofdirectors|Female|44|04-25-2016|04-25-2019|1,000|1,000|0|47.03|No|
|WangLinzao|Generalmanagerassistant|Male|54|04-25-2016|04-25-2019|1,000|1,000|0|64.43|No|
|HuYongkang|Formerdirector,deputy Partysecretary|Male|61|12-20-2012|04-25-2016|3,000|3,000||41.15|No|
|WangZengjin|Formerdirector|Male|50|12-20-2012|04-25-2016|1,000|1,000||0|Yes|
|LiZengquan|Formerindependentdirector|Male|42|12-20-2012|04-25-2016|0|0||5|No|
|ZhangGuoming|Formerindependentdirector|Male|54|12-30-2014|04-25-2016|0|0||5|No|
|Chen Yao|Formerchairman ofsupervisory|Male|53|09-17-2013|04-25-2016|0|0||0|Yes|

2016 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||committee|||||||||||
|Yu Bin|Formersupervisor|Male|42|12-20-2012|04-25-2016|1,000|1,000|||0|Yes|
|WangMingchun|Formersupervisor|Female|55|12-20-2012|04-25-2016|10,000|2,000|-8,000|Sold 8000shares onsecondarymarket at RMB13.56Yuan/share|21.94|No|
|Xu Peiwen|Formersecretary ofthe board ofdirectors|Male|60|12-20-2012|04-25-2016|7,000|7,000|0||44.58|No|
|Total|/|/|/|/|/||||/|663.90|/|

|||
|-|-|
|Name|Main work experience|
|Huang Dailie|He used to be the Deputy Party secretary, executive Director and general manager of Shanghai Huayi Group Enterprise Development Co., Ltd. andmanager of Enterprise Adjustment Department of Huayi Group. Now he is the director and general manager of Shanghai Huayi (Group) Company;director, deputy secretary of CPC Committee and chairman of trade union of Shanghai Huayi Co., Ltd.; Chairman of the Board of Shanghai Chlor-AlkaliChemical Co., Ltd.|
|ZhangWeimin|He used to be the assistant of general manager and deputy general manager of Shanghai Huayi Acrylic Acid Co., Ltd., deputy general manager of economicoperating department of Shanghai Huayi (Group) Company and general manager of safety & environmental protection department and chief of armedsecurity department of Shanghai Huayi (Group) Company. Now he is the Director, general manager and deputy secretary of Party Committee of ShanghaiChlor-Alkali Chemical Co., Ltd.|
|Wang Wei|He used to be the deputy general manager of human resources department of Shanghai Huayi (Group) Company and the deputy general manager ofShanghai Huayi Investmetn Co., Ltd. Now he is the director and deputy secretary (executive) of Party Committee of Shanghai Chlor-Alkali Chemical Co.,Ltd.|
|Li Ning|She used to be the general manager of financial department of Shanghai Huayi (Group) Company. Now she is the general manager of capital operationdepartment of Shanghai Huayi Group Co., Ltd., the director of Shanghai 3F New Materials Co., Ltd and the director of Shanghai Chlor-Alkali ChemicalCo., Ltd.|
|Yu Zhaojun|He used to be the Party secretary of PVC factory of Shanghai Chlor-Alkali Chemical Co., Ltd. Now he is the employee representative director, DeputyParty secretary, secretary of Party discipline committee, chairman of trade union and party secretary of department office of Shanghai Chlor-AlkaliChemical Co., Ltd.|

2016 Annual Report
|||
|-|-|
|Zhang Wenlei|He used to be deputy chief of technical operation department, chief of general department and deputy secretary general of China Chlor-Alkali IndustryAssociation. Now he is vice chairman and secretary general of China Chlor-Alkali Industry Association, routine councilor of China Petrochemical IndustryAssociation, vice chairman of China Chemical Environment Protection Association, Independent Director of Tangshan Sanyou Chemical Group Co., Ltd.and outside Director of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|ShaoZhengzhong|He used to be the lecturer of material science department of Fudan University, the lecturer, associate professor, subdean and professor of polymer sciencedepartment of Fudan University and associate professor of biology research institute of Aarhus University in Denmark. Now he is the doctoral tutor inpolymer science department of Fudan University. He is also the councilor of Shanghai Municipal Chemistry & Chemical Engineering Association,subeditor of Journal of Materials Chemistry-B of Britain Royal Society of Chemistry (RSC) and member of multiple academic committees and theIndependent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Wang Jinshan|He used to be the Vice Chairman of the Board of Directors and President of Nanjing First-O-Lite Co., Ltd.; Chairman of the Board of Directors andPresident of Nanjing First New Materials Co., Ltd. Now he is the director and general manager of Nanjing First-O-Lite Co., Ltd. He is the IndependentDirector of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Zhao Ziye|He used to be the associate professor of Shanghai University of Finance and Economics, the Independent Director of Anshan No. 1 Engineering Co., Ltdand the Independent Director of Shanghai Jinshan Development Co., Ltd. as well as the Independent Director of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Gu Lili|He used to be the vice secretary of discipline inspection commission and general manager of supervision and examination department of Shanghai Huayi(Group) Company. Now he is the vice president of Shanghai Huayi Group Co., Ltd. and the Chairman of Supervisory Committee of Shanghai Chlor-AlkaliChemical Co., Ltd.|
|Zhang Hu|He used to be the CFO of Shanghai Huayi Acrylic Acid Co., Ltd. Now he is the deputy general manager of finance department of Shanghai Huayi GroupCo., Ltd. and the supervisor of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Tang Liang|He used to be the manager of technical development department of Shanghai Chlor-Alkali Chemical Co., Ltd. Now he is the manager of investmentplanning department of Shanghai Chlor-Alkali Chemical Co., Ltd. and the supervisor of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Zhou Mei|She used to be the assistant manager of the supervision, examination and security department of Shanghai Chlor-Alkali Chemical Co., Ltd. Now she is themanager of armed security department and vice-chairman of trade union of Shanghai Chlor-Alkali Chemical Co., Ltd. as well as the supervisor of ShanghaiChlor-Alkali Chemical Co., Ltd.|
|ZhangGuohua|He used to be the director of party office and the deputy party secretary of department office of Shanghai Chlor-Alkali Chemical Co., Ltd. Now he is theregional secretary of party committee of Shanghai Chlor-Alkali Chemical Co., Ltd. in Caojing, and the supervisor of Shanghai Chlor-Alkali Chemical Co.,Ltd.|
|Cao Jinrong|He used to be the deputy manager of assets department of Shanghai Huayi (Group) Company and deputy general manager of Shanghai Huayi Group|

2016 Annual Report
|||
|-|-|
||Investment Co., Ltd. Now he is CFO of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|YuanMaoquan|He used to be the assistant chief and routine deputy chief of technical center of Shanghai Chlor-Alkali Chemical Company and deputy chief engineer ofShanghai Chlor-Alkali Chemical Co., Ltd. Now he is the deputy general manager of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Dong Yan|She used to be assistant manager, manager, deputy chief economist of the human resource department of Shanghai Chlor-Alkali Chemical Co., Ltd. Nowshe is the Secretary of the Board of Directors and deputy chief economic engineer of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Wang Linzao|He used to be the manager of production director department of Shanghai Chlor-Alkali Chemical Co., Ltd., deputy general manager of Shanghai TianyuanHuasheng Chemical Co., Ltd., secretary of CPC general branch and factory director of Huasheng Chemical Plant, and production controller of ShanghaiChlor-Alkali Chemical Co., Ltd. Now he is the employee representative Supervisor and assistant of general manager of Shanghai Chlor-Alkali ChemicalCo., Ltd.|
|Hu Yongkang|He used to be general manager, Party secretary and Chairman of the Board of Shanghai Wujin Chemical Co., Ltd. and director, Party secretary and deputygeneral manager of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Wang Zengjin|He used to be the director of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Li Zengquan|He used to be the independent director of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|ZhangGuoming|He used to be the independent director of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Chen Yao|He used to be the Chairman of Supervisory Committee of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Yu Bin|He used to be the supervisor of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|WangMingchun|He used to be deputy Party secretary, secretary of Party disciplinary committee and chairman of trade union of PVC factory of Shanghai Chlor-AlkaliChemical Co., Ltd., vice chairman of trade union of Shanghai Chlor-Alkali Chemical Co., Ltd. and secretary of CPC committee of PVC factory. Now he isthe employee representative Supervisor of Shanghai Chlor-Alkali Chemical Co., Ltd.|
|Xu Peiwen|He used to be the Board Secretary of Shanghai Tianyuan (Group) Co., Ltd., and the Board Secretary and chief of the Board Secretary's office of ShanghaiChlor-Alkali Chemical Co., Ltd.|

Presentation of other events
√Applicable□Not applicable
2016 Annual Report
On March 25, 2016, the
28th
Conference of the Eighth Board of Directors and the
19th
Conference of the Eighth Board of Supervisors reviewed and passed the proposal for general selection of directors and supervisors, the selections had been conducted on 2015 AnnualShareholders’ Meeting held on Apr. 25, 2016, and the employee directors, employee supervisor were selected on the joint conference of the congress of workers and staff of the Company. On Apr. 25, 2016, the Chairman of Board of Directors and Chairman of Supervisory Committee were elected on the first conference of the Ninth Board of Director and Board of Supervisors of the Company, the new session of senior executives were engaged; relevant announcements had been disclosed on the website (www.sse.com.cn) of Shanghai Stock Exchange on Apr. 26, 2016.
(II) Equity incentive awarded to the Director and senior executives during the reporting period
□Applicable√Not applicable
II. Particulars of Directors, Supervisors and senior executives (including the ones leaving post during the reporting period)
(I) Position inshareholder’s unit
√Applicable□Not applicable
|||||
|-|-|-|-|
|Name|Name of shareholder’s unit|Position in shareholder's unit|Start date of office term|
|Huang Dailie|Shanghai Huayi (Group) Company|Director, general manager|12-02-2015|

(II) Position in other unit
√Applicable□Not applicable
|||||
|-|-|-|-|
|Name|Name of other unit|Position in other unit|Start date of office term|
|Zhang Weimin|Shanghai Huntsman Polyurethane Co., Ltd.|Director, Vice chairman of the board ofdirectors|08-20-2015|
|Zhang Weimin|Shanghai Huayi Group Finance Co., Ltd.|Director|08-20-2015|
|Zhang Weimin|Shanghai Chlor-Alkali New Materials TradingCo., Ltd.|Executive director|02-18-2016|
|Wang Wei|Shanghai Chlor-Alkali Machinery Co., Ltd.|Inner Mongolia Junzheng Tianyuanchemical Co., Ltd.|12-18-2015|
|Wang Wei|Shanghai Tianyuan (Group) Co., Ltd.|Director|12-18-2015|
|Zhang Wenlei|Tangshan Sanyou Chemical Group Co., Ltd.|Independent director|09-15-2014|
|Wang Linzao|Shanghai Jinyuan Tap Water Co., Ltd.|Director|07-01-2011|
|Wang Linzao|Shanghai Lianheng Isocyanic Acid Grease Co.,Ltd.|Director|01-10-2016|
|Cao Jinrong|Shanghai Ruisheng Enterprise Co. Ltd.|Executive director|03-01-2012|
|Cao Jinrong|Inner Mongolia Junzheng Tianyuan Chemical|Chief supervisor|12-14-2016|

2016 Annual Report
|||||
|-|-|-|-|
||Co., Ltd.|||
|Dong Yan|Inner Mongolia Junzheng Tianyuan ChemicalCo., Ltd.|Director|12-14-2016|
|Dong Yan|Shanghai Huntsman Polyurethane Co., Ltd.|Director|01-11-2016|
|Dong Yan|Shanghai LvWei Plasitics Co., Ltd.|Director|01-11-2016|
|Tang Liang|Inner Mongolia Junzheng Tianyuan ChemicalCo., Ltd.|Director|12-14-2016|

III. Rewards of the Directors, Supervisors and senior executives
√Applicable□Not applicable
|||
|-|-|
|Decision-making process for the rewards of theDirectors, Supervisors and senior executives|The rewards of the Directors, Supervisors and senior executives shall be decided by the Company's salary &examination committee.|
|Basis for deciding the rewards of the Directors,Supervisors and senior executives|Issued according to the Examination Measures for the Reward of the Directors, Supervisors and senior executives.|
|Actual issuing of the rewards of the Directors,Supervisors and senior executives|The Board of Directors decided the reward standard for the Directors, Supervisors and Senior Executives gettingsalary from the Company this year and paid the rewards monthly in accordance with the Company's unified salarymanagement system and the annual performance review by the salary & checking committee of the Board ofDirectors. The standard for allowance to Independent Directors was examined and passed by the shareholders'meeting.|
|Total reward got actually by all the Directors,Supervisors and Senior Executives at end of thereporting period|RMB 6,639,000Yuan|

IV. Changes of the Directors, Supervisors and senior executives
√Applicable□Not applicable
|||||
|-|-|-|-|
|Name|Position|Change|Reason of change|
|Li Ning|Director|Elected|Mrs. Li Ning was elected as the director of the Company by voting on 2015 Annual Shareholders’Meeting On Apr. 25, 2016 and related announcement was disclosed on the website of Shanghai StockExchange on Apr. 26, 2016.|
|Wang Wei|Director|Elected|Mr. Wang Wei was elected as the director of the Company by voting on 2015 Annual Shareholders’Meeting On Apr. 25, 2016 and related announcement was disclosed on the website of Shanghai StockExchange on Apr. 26, 2016.|
|Wang Jinshan|Independent director|Elected|Mr. Wang Jinshan was elected as the independent director of the Company by voting on 2015 AnnualShareholders’ Meeting On Apr. 25, 2016 and related announcement was disclosed on the website of|

2016 Annual Report
|||||
|-|-|-|-|
||||Shanghai Stock Exchange on Apr. 26, 2016.|
|Zhao Ziye|Independent director|Elected|Mr. Zhao Ziye was elected as the independent director of the Company by voting on 2015 AnnualShareholders’ Meeting On Apr. 25, 2016 and related announcement was disclosed on the website ofShanghai Stock Exchange on Apr. 26, 2016.|
|Gu Lili|Chairman ofsupervisory committee|Elected|Mr. Gu Lili was elected as the shareholder representative supervisor by voting on 2015 AnnualShareholders’ Meeting On Apr. 25, 2016 and was elected as the Chairman of Supervisory Committee afterexamination and pass on the first meeting of the 9th Board of Supervisors on Apr. 25, 2016. Relatedannouncements was disclosed on the website of Shanghai Stock Exchange on Apr. 26, 2016.|
|Zhang Hu|Supervisor|Elected|Mr. Zhang Hu was elected as the supervisor of the Company by voting on 2015 Annual Shareholders’Meeting On Apr. 25, 2016, and related announcement was disclosed on the website of Shanghai StockExchange on Apr. 26, 2016.|
|Tang Liang|Supervisor|Elected|Mr. Tang Liang was elected as the supervisor of the Company by voting on 2015 Annual Shareholders’Meeting On Apr. 25, 2016, and related announcement was disclosed on the website of Shanghai StockExchange on Apr. 26, 2016.|
|Zhou Mei|Employee supervisor|Elected|Elected democratically by staff representatives on the 9th meeting of the 3rd Congress of Workers andStaff. Related announcement had bee disclosed on the website of Shanghai Stock Exchange on Mar. 9,2016.|
|Zhang Guohua|Employee supervisor|Elected|Elected democratically by staff representatives on the 9th meeting of the 3rd Congress of Workers andStaff. Related announcement had bee disclosed on the website of Shanghai Stock Exchange on Mar. 9,2016.|
|Dong Yan|Secretary of the boardof directors|Engaged|Engaged by the first meeting of the 9th Board of Directors of the Company on Apr. 25, 2016.|
|Wang Linzao|General managerassistant|Engaged|Engaged by the first meeting of the 9th Board of Directors of the Company on Apr. 25, 2016.|
|Hu Yongkang|Director, deputy partysecretary|Left the post|Expiration of the term of office.|
|Wang Zengjin|Director|Left the post|Expiration of the term of office.|
|Li Zengquan|Independent director|Left the post|Expiration of the term of office.|
|Zhang Guoming|Independent director|Left the post|Expiration of the term of office.|
|Chen Yao|Chairman ofsupervisory committee|Left the post|Expiration of the term of office.|
|Yu Bin|Supervisor|Left the post|Expiration of the term of office.|
|Wang Mingchun|Supervisor|Left the post|Expiration of the term of office.|
|Xu Peiwen|Secretary of the boardof directors|Left the post|Expiration of the term of office.|

2016 Annual Report
V. Punishment by the securities regulatory authorities in recent 3 years
□Applicable√Not applicable
VI. Employees of the parent company and main subsidiaries
(I) Particulars of employees
|||
|-|-|
|Number of in-service employees of the parent company|692|
|Number of in-service employees of the main subsidiaries|223|
|Total number of in-service employees|915|
|Number of retired employees borne by the parent company and main subsidiaries|4,255|
|Profession structure||
|Type of profession|Number of people|
|Production personnel|569|
|Sales people|50|
|Technical personnel|72|
|Finance personnel|20|
|Administrative personnel|204|
|Total|915|
|Educational status||
|Type of educational status|Number of people|
|Bachelor or higher|257|
|Junior college|345|
|Senior high school (technical secondary school)|260|
|Lower than senior high school|53|
|Total|915|

 (II) Salary policy
√Applicable□Not applicable
The Company implements the Position Level Salary Measures of Shanghai Chlor-Alkali Chemical Co., Ltd.
(III) Training plan
√Applicable□Not applicable
In 2016, the Company made employee training for 4797 men-times. The training includes 3987 men-times for front-line employees, accounting for83.11% in total training. The main training content: post operation training (on-the-job training and job-transfer training), special work training (including the training for obtaining
certificate of post), QHSE training, staff skill and skill level training (including skill level and training for employment with certificate), HSE entire staff training,
2016 Annual Report
team leader training, series training of labor union, degree program training, professional qualification improvement training and young employee cultivation. The training includes 810 men-times for non front-line employees, accounting for16.89% in total training. Main training content: professional technical training at the engineers advanced study and training base in party school, engineering training for professional technical personnel, special topic lecture, management and strategy course training, title and further education training, QHS training and HSE entire staff training.
(IV) Labor outsourcing
□Applicable√Not applicable
VII. Other
□Applicable√Not applicable
Section IX Company Governance
I. Introduction to Company governance
√Applicable□Not applicable
The Company kept on improving the Company's corporate governance structure, regulating its operation and strengthening its internal management strictly in accordance with the provisions and requirements of the Company Law, Securities Law and the Management Principle of the Listed Companies and the files for company's governance issued by China Securities Regulatory Committee and Shanghai Stock Exchange.
1. About the shareholders and the shareholders' meeting
The Company convened the shareholders' meeting strictly according to relevant provisions and procedures in the Articles of Association and the Rules of Procedure of the Shareholders' Meeting. It can ensure the equal position and lawful rights and interests of all the shareholders, especially the middle and small shareholders, let them enjoy and exercise fully their rights. All of the Company's related transactions have been made strictly according to the principle of fair and equitable, the pricing principle are disclosed to the public, and the related Director and related shareholders avoided the voting.
2. Controlling shareholder and the listed Company
The controlling shareholder exercises its right and bears the obligation according to law, not intervening directly or indirectly the Company's decision-making and operating activities without the authority of the shareholders' meeting. The Company and the controlling shareholder make Five Independence, i.e. assets, business, organization, finance and personnel. The Company's Board of Directors, Supervisory Committee and the internal institutions can all make operation independently to ensure the Company making and implementing the significant decisions independently.
3. Directors and the Board of Directors
The Company elects the Directors strictly in accordance with the procedure specified in the Company Law and Articles of Association, the Board of Directors is of scientific composition, clear responsibilities and perfect systems. The Company establishes four special committees, i.e. strategy, audit, nomination and salary& checking, under the Board of Directors, and all these committees can work earnestly and diligently strictly in accordance with the Articles of Association and the Work Enforcement Regulations of the Special Committees under the Board of Directors. For the Company's significant decisions and investments all the Directors can well play their professional role, raise their professional opinions and proposals, provide great support to the Company's scientific policy-making, and perform their duties loyally, cautiously, earnestly and diligently.
2016 Annual Report
4. Supervisors and the Supervisory Committee
The Company's Supervisory Committee elects the Supervisors strictly in accordance with the procedure specified in the Company Law and the Articles of Association, and the convening procedure conforms to the Rules of Procedure of the Supervisory Committee and has intact and true meeting record. The Company's Supervisors can perform earnestly their duties, make supervision independently on the Company's finance and operation status and the legitimacy and compliance of the Company's Directors, managers and other senior executives based on the manner of being responsible to all the shareholders, and safeguard the lawful rights and interests of the Company and the shareholders.
5. Performance appraisal and incentive and constraint mechanism
The Company has established and gradually improved the performance appraisal standard and incentive and constraint mechanism for the Directors, Supervisors and senior executives, and the engagement of the senior executives is open and transparent and meets the requirements of relevant laws and statutes. 6. Information disclosure and transparence
The Company has truly, accurately, completely and timely discloses relevant information strictly in accordance with the requirements of relevant laws and codes and its own Management System on the Information Disclosure Affairs and the internal report system on Significant Information, and ensure all the investors can obtain effective information equally. In the reporting period, the Company totally completed 4 periodic reports and 22 provisional announcements, making the investors can learn the status of the Company timely, fairly, accurately and completely.
7. Management on insider information
During the reporting period, the Company executed strictly the Management on Registration of the Persons in the Know of Insider Information, got down with the work on keeping secret of the insider information and required to fill in the record file of the person in the know of the insider information to safeguard the interest of the shareholders.
If there is significant difference between company governance and the requirements of relevant regulations of China Securities Regulatory Commission; if yes, give the reason
□Applicable√Not applicable
II. Briefing on the shareholders' meeting
|||||
|-|-|-|-|
|The meeting|Convening date|Index on the website specified for carryingthe resolutions|Date for disclosing the resolutions|
|2015 annual shareholders’ meeting|04-25-2016|www.sse.com.cn|04-26-2016|

Information aboutshareholders’ meeting
□Applicable√Not applicable
2016 Annual Report
III. Duty performance of the Directors
(I) Particulars of the Directors for attending the Board meetings and shareholders meeting
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name ofdirector|IndependentDirector ornot|Particulars of attending the Board Meetings||||||Particulars ofattending theshareholders’meeting|
|||Number of Boardmeetings incurrent year|Number ofattendancesin person|Number ofattendancesthroughcommunication|Number ofattendancesthroughcommitment|Numberofabsence|Whether not attendingin person the meetingconsecutively for 2times or not|Number ofattendances in theshareholders' meeting|
|Huang Dailie|No|8|8|0|0|0|No|1|
|Li Ning|No|6|5|0|1|0|No|1|
|Zhang Weimin|No|8|8|0|0|0|No|1|
|Wang Wei|No|6|6|0|0|0|No|1|
|Yu Zhaojun|No|8|8|0|0|0|No|1|
|Zhang Wenlei|No|8|8|0|0|0|No|1|
|ShaoZhengzhong|Yes|8|8|0|0|0|No|1|
|Wang Jinshan|Yes|6|6|0|0|0|No|1|
|Zhao Ziye|Yes|6|6|0|0|0|No|1|

 Explanations for not attending the meeting in person consecutively for 2 times:
□Applicable√Not applicable
|||
|-|-|
|Number of Board meetings convened in current year|8|
|Incl.: Number of on-site meetings|2|
|Number of meetings convened through communication|6|
|Number of meetings convened on-site and through communication|0|

(II) Objection of the Independent Directors on relevant events of the Company
□Applicable√Not applicable
(III) Other
□Applicable√Not applicable
2016 Annual Report
IV. Important opinions and proposals raised by the special committees under the Board of Directors while performing their duties in the reporting period, and if any objection exists, the details shall be disclosed
√Applicable□Not applicable
In 2016, the special committee of the Company's Board of Directors, based on the provisions of the Enforcement Regulations of Special Committees under the Board of Directors, performed their duties earnestly, conducted work actively, gave full play to their own special skills and played active role on the decision-making of the Board of Directors for significant events. The audit committee could perform its duty earnestly in the work for annual report and relevant work, raised construction suggestions on the Company's periodic report, internal control systems, asset disposal and related transactions, and supervised the Company to make healthful, stable and rapid development furthermore. The salary& checking committee convened meeting to check the salary of the senior executives in 2015, and raised the checking plan on the salary of the senior executives in 2016. The nomination committee convened the meeting to discuss and make proposal for change of the Company's Directors. The Company lay stress on exerting the knowledge of the special committees under the Board of Directors in specialty and information to promote the decision-making of the Board of Directors more scientific and more effective.
V. Note of the Supervisory Committee on discovering theCompany’s risk
√Applicable□Not applicable
VI. Note of the Company on being unable to ensure independence and self operation capability in business, assets, organization and finance with the controlling shareholder
□Applicable√Not applicable
In case of the existence of horizontal competition, the corresponding solutions, job schedule and subsequent wok plan of the Company
□Applicable√Not applicable
VII. Establishing and implementing the check mechanism and incentive mechanism for the senior executives in the reporting period
√Applicable□Not applicable
The Company implements the Checking Method on the Salary of Senior Executives of the Company, and the salary& checking committee under the Board of Directors made the annual performance review, decided the reward standard for the Directors, Supervisors and Senior Executives getting salary from the Company and paid the rewards monthly.
VIII. Whether disclose the internal control self-assessment report or not
√Applicable□Not applicable
2016 Annual Report
For details of the 2016 Internal Control Self-assessment Report of Shanghai Chlor-Alkali Chemical Co., Ltd., see relevant announcement in the website of Shanghai Stock Exchange www.sse.com.cn on March 30, 2017.
Note on significant deficiencies in the internal control during the reporting period
□Applicable√Not applicable
IX. Note on relevant status of the auditor's report for internal control
√Applicable□Not applicable
For details of theAuditor’s Report for Internal Control of Shanghai Chlor-Alkali Chemical Co., Ltd. in 2016, see relevant announcement in the website of Shanghai Stock Exchange www.sse.com.cn on March 30, 2017.
Whether disclose theauditor’s report for internal control or not: yes
X. Other
□Applicable√Not applicable
Section X Particulars of theCompany’s Bonds
□Applicable√Not applicable
2016 Annual Report
Section XI Financial Report
I.Auditor’s report
√Applicable□Not applicable
XKSHBZ[2017] No. ZA11253 To all shareholders of Shanghai Chlor-Alkali Chemical Co., Ltd.,
We have audited the attached financial statements of Shanghai Chlor-Alkali Chemical Co., Ltd. (hereafter referred to as Chlor-Alkali Chemical), including the consolidated and theCompany’s balance sheets as of Dec. 31, 2016, the consolidated and theCompany’s income statements in 2016, the consolidated and theCompany’s cash flow statements, the consolidated and theCompany’s statements of changes inowner’s equity and the notes on the financial statements.
I. The responsibility of the management
To prepare the financial statements and make fair presentation in it is the responsibility of the management of the Company. Such responsibility shall include: (1) to prepare the financial statements and make fair presentation in them in accordance with the provisions of the enterprise accounting standard; (2) to design, execute and maintain necessary internal control to prevent the financial statements from making significant misreport caused by fraud or error.
II. Responsibility of the certified public accountants
Our responsibility is to express audit opinion to the financial statements based on the execution of the audit work. We have made the audit work in accordance with the provisions in the audit standard of China certified public accountant. The audit standard of China certified public accountant requires us to observe the code of professional ethics of China certified public accountants, plan and execute the audit work and obtain the reasonable assurance for not making significant misreport in the financial statements
The audit work involves the implementation of audit procedure to obtain the amount of financial statements and disclosed audit evidences. The selection of the audit procedure depends on the judgment of the certified public accountants, including the evaluation to the risk of significant misreport of the financial statements caused by the fraud or error. While making risk evaluation, the certified public accountant shall consider the internal control related to the preparing of the financial statements and the fair presentation to design proper audit procedure, but the purpose is not to express opinion for the effectiveness of the internal control. The audit work shall also include to evaluate the suitability of the accounting policy selected by the management and the reasonableness of the accounting estimate and to evaluate the general presentation of the financial statements.
We believe, the audit evidences we have obtained are adequate and proper and provide basis for expressing the audit opinion.
2016 Annual Report
III. Audit opinion
We deem that, the financial statements of the Company have been prepared in accordance with the provisions of the enterprise accounting standard in all significant aspects, and have reflected the consolidated and the Company's financial status on Dec. 31, 2016 and the consolidated and theCompany’s operating results and cash flow in 2016
BDO China Shu Lun Pan Certified China certified public accountant:
Public Accountants LLP Gu Xuefeng
China certified public accountant: Chen Luying
Shanghai· China March 28, 2017
2. Financial Statement
Consolidated Balance Sheet
December 31, 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Current assets||||
|Cash and cash balances||433,999,695.91|240,425,945.13|
|Settlement reserve||||
|Lent to banks and other financial institutions||||
|Financial assets at fair value through profit or loss||||

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Derivative financial asset||||
|Notes receivable||448,822,006.32|336,221,352.79|
|Accounts receivable||202,272,347.66|259,044,580.24|
|Prepayments||50,056,591.51|136,446,799.31|
|Insurance Premium receivable||||
|reinsurance account Receivable||||
|Reserves for reinsurance contract Receivable||||
|Interest receivable||||
|Dividends receivable||||
|Other receivables||762,159.00|3,561,716.78|
|Financial assets purchased under resale agreements||||
|Inventories||159,466,728.86|384,885,265.71|
|Assets classified as held for sale||||
|Non-current assets due within one year||||
|Other current assets||||
|Total current assets||1,295,379,529.26|1,360,585,659.96|
|Non-current assets:||||
|Loans and advances||||

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Available-for-sale financial assets||453,209,607.08|424,078,182.70|
|Investment held to maturity||||
|Long-term receivables||||
|Long-term equity investments||365,215,620.38|288,855,432.45|
|Investment properties||||
|Fixed assets||1,978,086,015.56|2,132,521,000.23|
|Construction in progress||97,570,414.69|305,408,986.91|
|Project materials||37,478.63|1,381,336.82|
|Disposal of fixed assets||||
|Productive biological assets||||
|Oil & gas assets||||
|Intangible assets||267,521,472.23|281,295,016.13|
|Development expenditure||17,364,046.98|30,247,277.15|
|Goodwill||||
|Long-term prepaid expenses||15,196,164.92|23,460,981.73|
|Deferred tax assets||35,696.33|20,529.71|
|Other non-current assets||||
|Total non-current assets:||3,194,236,516.80|3,487,268,743.83|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Total assets||4,489,616,046.06|4,847,854,403.79|
|Current liabilities:||||
|Short-term borrowing||1,256,000,000.00|620,000,000.00|
|Borrowing from the central bank||||
|Customer deposits and deposits from banks and other financialinstitutions||||
|Interbank borrowing||||
|Financial assets measured with fair value and having itschanges accounted in current income and loss||||
|Derivative financial assets||||
|Notes payable||||
|Accounts payable||358,647,789.59|376,955,805.82|
|Receipts in advance||243,595,103.99|253,175,587.07|
|Financial assets sold for repurchase||||
|Handling fees and commissions payable||||
|Employee benefits payable||131,471,648.00|780,802.00|
|Taxes payable||80,270,216.68|14,824,741.55|
|Interest payable||1,955,378.33|2,788,929.31|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Dividends payable||2,724,553.75|2,724,553.75|
|Other payables||88,814,552.29|441,394,365.43|
|Reinsurance accounts payable||||
|Reserve for insurance contract||||
|Acting trading securities||||
|Acting underwriting securities||||
|Assets classified as available-for-sale assets||||
|Non-current liabilities due within one year||||
|Other current liabilities||||
|Total current liabilities||2,163,479,242.63|1,712,644,784.93|
|Non-current liabilities||||
|Long-term borrowing||||
|Bonds payable||||
|Including: Preferred stock||||
|Debt sustainability||||
|Long-term payables||170,000,000.00|645,000,000.00|
|Long-term employee benefits payable||181,130,000.00|190,880,000.00|
|Special payables||11,050,000.00|11,050,000.00|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Provisions||1,238,255.07||
|Deferred income||6,873,750.00|6,650,100.00|
|Deferred tax liabilities||14,562,645.00|11,653,477.05|
|Other non-current liabilities||||
|Total non-current liabilities||384,854,650.07|865,233,577.05|
|Total liabilities||2,548,333,892.70|2,577,878,361.98|
|Shareholders' equity:||||
|Share capital||1,156,399,976.00|1,156,399,976.00|
|Other equity instruments||||
|Including: Preferred stock||||
|Debt sustainability||||
|Capital reserve||1,674,270,987.60|1,674,270,987.60|
|Less :Treasury stock||||
|Other Comprehensive Income||20,585,420.26|12,317,916.44|
|Special reserve||||
|Surplus reserves||11,329,760.39|11,329,760.39|
|General risk reserve||||
|Retained earnings||-920,865,356.69|-592,773,594.89|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Total shareholders’ equity attributable to shareholders of theCompany||1,941,720,787.56|2,261,545,045.54|
|Minority interests||-438,634.20|8,430,996.27|
|Total shareholders’ equity||1,941,282,153.36|2,269,976,041.81|
|Total liabilities and shareholders’ equities||4,489,616,046.06|4,847,854,403.79|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm: Balance Sheet of Parent Company
December 31, 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Current assets:||||
|Cash and cash balances||371,434,054.50|212,133,296.30|
|Financial assets at fair value through profit or loss||||
|Derivative financial assets||||
|Notes receivable||256,156,372.62|334,581,352.79|
|Accounts receivable||323,192,407.70|253,571,576.96|
|Prepayments||51,172,870.23|137,481,599.22|
|Interest receivable||||
|Dividend receivable||||
|Other receivables||4,509,657.46|10,766,735.59|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Inventories||155,028,612.34|371,277,788.79|
|Assets classified as held for sale||||
|Non-current assets due within one year||20,000,000.00||
|Other current assets||||
|Total current assets||1,181,493,974.85|1,319,812,349.65|
|Non-current assets:||||
|Available-for-sale financial assets||426,458,325.42|413,190,044.22|
|Held-to-maturity investments||||
|Long-term receivables||||
|Long-term equity investments||473,550,440.36|355,444,207.96|
|Investment properties||||
|Fixed assets||1,960,644,705.74|2,111,593,701.25|
|Construction in progress||91,697,502.44|302,075,871.66|
|Project materials||37,478.63|1,381,336.82|
|Disposal of fixed assets||||
|Productive biological assets||||
|Oil & gas assets||||
|Intangible assets||254,644,610.18|259,886,963.38|
|Development expenditure||17,364,046.98|30,247,277.15|
|Goodwill||||
|Long-term prepaid expenses||15,196,164.92|23,152,249.71|
|Deferred tax assets||||
|Other non-current assets|||20,000,000.00|
|Total non-current assets||3,239,593,274.67|3,516,971,652.15|
|Total assets||4,421,087,249.52|4,836,784,001.80|
|Current liabilities:||||
|Short-term borrowing||1,256,000,000.00|620,000,000.00|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Financial assets measured with fair value and having its changesaccounted in current income and loss||||
|Derivative financial assets||||
|Notes payable||||
|Accounts payable||341,939,490.32|370,153,498.98|
|Receipts in advance||232,409,605.46|253,775,506.41|
|Employee benefits payable||121,407,244.00|513,377.00|
|Tax payable||75,506,168.49|12,682,879.20|
|Interest payable||1,955,378.33|2,788,929.31|
|Dividend payable||1,189,676.90|1,189,676.90|
|Other payables||81,786,755.91|457,108,038.56|
|Assets classified as available-for-sale assets||||
|Non-current liabilities due within one year||||
|Other current liabilities||||
|Total current liabilities||2,112,194,319.41|1,718,211,906.36|
|Non-current liabilities||||
|Long-term borrowing||||
|Bonds payable||||
|Including: Preferred stock||||
|Debt sustainability||||
|Long-term payables||170,000,000.00|645,000,000.00|
|Long-term employee benefits||181,130,000.00|190,880,000.00|
|Special payables||11,050,000.00|11,050,000.00|
|Provisions||||
|Deferred income||6,873,750.00|6,650,100.00|
|Deferred tax liabilities||9,728,506.05|10,785,123.90|
|Other non-current liabilities||||

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Closing balance|Opening balance|
|Total non-current liabilities||378,782,256.05|864,365,223.90|
|Total liabilities||2,490,976,575.46|2,582,577,130.26|
|Shareholders’ equity:||||
|Share capital||1,156,399,976.00|1,156,399,976.00|
|Other equity instruments||||
|Including: Preferred stock||||
|Debt sustainability||||
|Capital reserve||1,690,068,638.82|1,690,068,638.82|
|Less: Treasury stock||||
|Other Comprehensive Income||7,715,149.28|11,345,002.84|
|Special reserve||||
|Surplus reserves||11,329,760.39|11,329,760.39|
|Retained earnings||-935,402,850.43|-614,936,506.51|
|Total shareholders’ equity||1,930,110,674.06|2,254,206,871.54|
|Total liabilities and shareholders’ equity||4,421,087,249.52|4,836,784,001.80|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
Consolidated Income Statement
January-December 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount ofprevious period|
|1. Total Operating income||6,754,397,061.69|6,170,874,223.67|
|Including: Operating income||6,754,397,061.69|6,170,874,223.67|
|Interest income||||
|Earned premium||||

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount ofprevious period|
|Fee and commission income||||
|2. Total Operating Cost||7,245,409,457.47|6,427,713,999.83|
|Including: Operating costs||6,128,517,218.57|5,559,439,778.97|
|Interest expenditure||||
|Fee and commission expense||||
|Returned premium||||
|Net compensation expenditure||||
|Withdrawn net insurance contract reserve||||
|Dividend expenditure on insurance policies||||
|Reinsurance expenses||||
|Business taxes and levies||28,916,705.72|19,193,727.90|
|Selling expenses||184,329,793.95|199,911,085.12|
|Administrative expenses||480,214,277.58|402,196,032.57|
|Financial expense||74,994,167.59|140,436,053.89|
|Asset impairment losses||348,437,294.06|106,537,321.38|
|Plus: Income from fair value changes (for loss, fill in "-")||||
|Investment profit (loss is expressed with "-")||131,189,596.30|147,125,155.93|
|Including: Income from investments in associates and JCEs||97,360,187.93|44,597,649.84|
|Exchange gain/loss (for loss, fill in "-")||||
|3. Operating Profit (Indicate Loss with "-")||-359,822,799.48|-109,714,620.23|
|Plus: Non-operating income||26,386,162.15|220,140,784.81|
|Including: Gains from disposal of non-current assets||823,415.34|175,597,261.11|
|Less: Non-operating expenses||1,377,001.45|864,280.61|
|Including: Losses from disposal of non-current assets||525,479.38|520,754.37|
|4. Total Profit (Indicate Total Loss with "-")||-334,813,638.78|109,561,883.97|
|Less: Income tax expenses||1,703,353.49|4,672,427.26|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount ofprevious period|
|5. Net Profit (Indicate Loss with "-")||-336,516,992.27|104,889,456.71|
|Net profit attributable to shareholders of the Company||-328,091,761.80|95,615,030.34|
|Profit or loss attributable to minority interests||-8,425,230.47|9,274,426.37|
|6. Net amount of other comprehensive revenues after tax||8,267,503.82|10,397,536.07|
|Net amount of other comprehensive revenues after tax attributable toshareholders of parent company||8,267,503.82|10,397,536.07|
|(1) Other comprehensive income that will not be reclassifiedsubsequently to profit or loss||-460,000.00|-13,980,000.00|
|1) Changes in net liabilities or net assets due to remeasurement ofdefined benefit plans||-460,000.00|-13,980,000.00|
|2) Other comprehensive income that will not be reclassified subsequentlyto profit or loss of invested entities under equity method||||
|(2) Other comprehensive income that may be reclassified subsequentlyto profit or loss||8,727,503.82|24,377,536.07|
|1) Other comprehensive income that may be reclassified subsequently toprofit or loss of invested entities under equity method in future||||
|2) Changes in fair value of available-for-sale financial assets||8,727,503.82|24,377,536.07|
|3) Profit or loss of held-to-maturity investments that are reclassified asavailable-for-sale financial assets||||
|4) Effective part of profit or loss of cash flow hedge||||
|5) Exchange differences on translating foreign operations||||
|6) Other||||
|Other comprehensive income (loss) attributable to minority interests||||
|7. Total Comprehensive Income||-328,249,488.45|115,286,992.78|
|Total comprehensive income attributable to shareholders of the Company||-319,824,257.98|106,012,566.41|
|Total comprehensive income attributable to minority interests||-8,425,230.47|9,274,426.37|
|8. Earnings per Share||||
|(1) Basic earnings per share||-0.2837|0.0827|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount ofprevious period|
|(2) Diluted earnings per share||-0.2837|0.0827|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
Income Statement of Parent Company
January-December 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|1. Operating income||4,221,442,504.36|5,306,202,144.25|
|Less: Operating cost||3,635,572,923.53|4,779,946,815.88|
|Business taxes and levies||25,583,943.98|16,200,534.43|
|Sales expenses||166,289,797.50|184,902,755.30|
|Administrative expenses||444,945,382.58|352,189,770.28|
|Financial expense||74,847,579.48|139,259,008.16|
|Asset impairment losses||350,543,850.73|104,311,645.14|
|Plus: Income from fair value changes (for loss, fill in "-")||||
|Investment profit (loss is expressed with "-")||132,724,899.42|196,816,182.18|
|Including: Income from investments in associates and JCEs||97,360,187.93|44,597,649.84|
|2. Operating Profit (Indicate Loss with "-")||-343,616,074.02|-73,792,202.76|
|Plus: Non-operating income||24,394,366.15|217,277,438.15|
|Including: Gains from disposal of non-current assets||541,341.67|175,459,449.37|
|Less: Non-operating expenses||1,244,636.05|460,655.84|
|Including: Losses from disposal of non-current assets||512,438.97|376,422.17|
|3. Total Profit (Indicate Total Loss with "-")||-320,466,343.92|143,024,579.55|
|Less: Income tax expense||||
|4. Net Profit (Indicate Loss with "-")||-320,466,343.92|143,024,579.55|

2016 Annual Report
||||
|-|-|-|
|5.Net amount of other comprehensive revenues after tax|-3,629,853.56|10,389,083.82|
|(1) Other comprehensive income that will not be reclassified subsequently to profitor loss|-460,000.00|-13,980,000.00|
|1) Changes in net liabilities or net assets due to remeasurement of defined benefitplans|-460,000.00|-13,980,000.00|
|2) Other comprehensive income that will not be reclassified subsequently to profit orloss of invested entities under equity method|||
|(2) Other comprehensive income that may be reclassified subsequently to profit orloss|-3,169,853.56|24,369,083.82|
|1) Other comprehensive income that may be reclassified subsequently to profit orloss of invested entities under equity method in future|||
|2) Changes in fair value of available-for-sale financial assets|-3,169,853.56|24,369,083.82|
|3) Profit or loss of held-to-maturity investments that are reclassified asavailable-for-sale financial assets|||
|4) Effective part of profit or loss of cash flow hedge|||
|5) Exchange differences on translating foreign operations|||
|6) Other|||
|6. Total Comprehensive Income|-324,096,197.48|153,413,663.37|
|7.Earnings per Share:|||
|(1) Basic earnings per share|||
|(2) Diluted earnings per share|||

Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
Consolidated Cash Flow Statement
January-December 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|1. Cash flow from operating activities:||||

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|Cash received from sale of goods and rendering of services||7,509,526,827.49|7,510,561,650.86|
|Net increases in customer deposits and peer deposits||||
|Net increases in borrowing from central bank||||
|Net increases in interbank borrowing from other financial institutions||||
|Cash received from premiums on primary insurance contracts||||
|Net cash amount received from reinsurance business||||
|Net increase in deposits from policyholder||||
|Net increase from disposal of financial assets measured in fair value and having itschanges accounted in current profit and loss||||
|Cash collected from interest, handling fees and commissions||||
|Net increases in interbank borrowing||||
|Net increase in repurchase business capital||||
|Receipts of tax refunds||807,011.37|1,550,381.55|
|Other cash received related to operating activities||101,174,531.77|176,962,786.84|
|Sub-total of cash inflow from operating activities||7,611,508,370.63|7,689,074,819.25|
|Cash payments for goods purchased and services received||6,460,589,082.43|6,546,749,918.62|
|Net increases in customer loans and advances||||
|Net increases in deposits with central bank and other financial institutions||||
|Original insurance contract claims paid||||
|Cash payments for interests, fees and commissions||||
|Policyholder dividend paid||||
|Cash payments to and on behalf of employees||372,744,973.77|392,633,278.07|
|Payments for various types of taxes||147,418,472.69|209,497,530.89|
|Other payments relating to operating activities||141,899,080.50|234,341,659.22|
|Sub-total of cash outflow relating to operating activities||7,122,651,609.39|7,383,222,386.80|
|Net cash flow from operating activities||488,856,761.24|305,852,432.45|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|2. Cash flow from investing activities||||
|Cash receipts from recovery of investments||14,750,893.88||
|Cash receipts from investment income||40,900,561.88|50,188,256.22|
|Net cash receipts from disposals of fixed assets, intangible assets and otherlong-term assets||1,895,801.68|366,988,374.84|
|Net cash paid for acquisition of subsidiaries and other business units|||201,393,475.46|
|Other cash received related to investing activities||340,000.00|568,000.00|
|Sub-total of cash inflow from investing activities||57,887,257.44|619,138,106.52|
|Cash payment to acquire or construct fixed assets, intangible assets and otherlong-term assets||71,811,205.80|116,302,260.65|
|Cash payments to acquire investments||18,316,800.00|40,466,400.00|
|Net increase in pledge loans||||
|Net cash paid for acquisition of subsidiaries and other business units||||
|Other cash paid related to investing activities||||
|Subtotal of cash outflow from investing activities||90,128,005.80|156,768,660.65|
|Net cash flow from investing activities||-32,240,748.36|462,369,445.87|
|3. Cash flow from financing activities||||
|Cash received from capital contributions||||
|Including: cash receipts from capital contributions from minority shareholders ofsubsidiaries||||
|Cash received from borrowings||1,718,900,000.00|2,487,739,713.32|
|Cash received from bond issue||||
|Other cash received related to financing activities||||
|Sub-total of cash inflow from financing activities||1,718,900,000.00|2,487,739,713.32|
|Cash repayments of borrowings||1,909,900,000.00|3,277,077,512.61|
|Cash payments for distribution of dividends or profits or settlement of interestexpenses||75,227,416.76|140,724,441.68|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|Including: payments for distribution of dividends or profit to minority shareholders ofsubsidiaries||||
|Other cash payments relating to financing activities||||
|Sub-total of cash outflow relating to financing activities||1,985,127,416.76|3,417,801,954.29|
|Net cash flow from financing activities||-266,227,416.76|-930,062,240.97|
|4. Effect of foreign exchange rate changes on cash and cash equivalents||3,241,849.50|-325,298.50|
|5. Net increase in cash and cash equivalents||193,630,445.62|-162,165,661.15|
|Add: Opening balance of cash and cash equivalents||240,369,250.29|402,534,911.44|
|6. Closing balance balance of cash and cash equivalents||433,999,695.91|240,369,250.29|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
Cash Flow Statement of Parent Company
January-December 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|1. Cash flow from operating activities:||||
|Cash receipts from the sale of goods and rendering of services||4,680,256,864.22|6,511,335,605.62|
|Tax rebate received||807,011.37|279,357.64|
|Other cash receipts relating to operating activities||83,844,488.95|156,904,899.36|
|Sub-total cash inflow from operating activities||4,764,908,364.54|6,668,519,862.62|
|Cash payments for goods purchased and services||3,674,822,963.70|5,714,454,512.78|
|Cash payments to and on behalf of employees||326,343,263.63|317,693,761.30|
|Payments for various types of taxes||135,326,338.40|182,897,891.76|
|Other payments relating to operating activities||129,019,340.43|198,804,795.65|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|Sub-total cash outflow relating to operating activities||4,265,511,906.16|6,413,850,961.49|
|Net cash flow from operating activities||499,396,458.38|254,668,901.13|
|2. Cash flow from investing activities||||
|Cash receipts from recovery of investments||14,750,893.88||
|Cash receipts from investment income||42,435,865.00|75,126,857.37|
|Net cash receipts from disposal of fixed assets, intangible assets and other long-termassets||1,520,827.72|366,829,419.15|
|Net cash paid for acquisition of subsidiaries and other business units|||224,174,251.71|
|Other cash received related to investing activities||340,000.00|568,000.00|
|Sub-total cash flow from investing activities||59,047,586.60|666,698,528.23|
|Cash payments to acquire or construct fixed assets, intangible assets and otherlong-term assets||68,748,453.09|75,105,899.49|
|Cash payments to acquire investments||68,316,800.00|40,466,400.00|
|Net cash paid for acquisition of subsidiaries and other business units||||
|Other cash paid related to investing activities||||
|Sub-total cash outflow relating to investing activities||137,065,253.09|115,572,299.49|
|Net cash flow from investing activities||-78,017,666.49|551,126,228.74|
|3. Cash flow from financing activities||||
|Cash received from capital contributions||||
|Cash received from borrowings||1,739,000,000.00|2,373,595,009.82|
|Cash received from bond issue||||
|Other cash receipts relating to financing activities||||
|Sub-total cash inflow from financing activities||1,739,000,000.00|2,373,595,009.82|
|Cash repayments of borrowings||1,930,000,000.00|3,189,876,409.11|
|Cash payments for distribution of dividends or profits or settlement of interest expenses||74,319,883.19|137,950,238.68|
|Other cash paid related to financing activities||||
|Sub-total cash outflow relating to financing activities||2,004,319,883.19|3,327,826,647.79|
|Net cash flow from financing activities||-265,319,883.19|-954,231,637.97|

2016 Annual Report
|||||
|-|-|-|-|
|Item|Note|Amount incurred incurrent period|Amount of previousperiod|
|4. Effect of foreign exchange rate on cash and cash equivalents||3,241,849.50|-1,271,463.09|
|5. Net Increase in cash and cash equivalents||159,300,758.20|-149,707,971.19|
|Add: Opening balance of cash and cash equivalents||212,133,296.30|361,841,267.49|
|6. Closing Balance of cash and cash equivalents||371,434,054.50|212,133,296.30|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
2016 Annual Report
Consolidated Statement on Changes in Shareholders' Equity
January-December 2016
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|Current period|||||||||||||
||shareholders’s equity Attributable to the Parent Company|||||||||||Minorshareholders’ equity|Totalshareholders' equity|
||Sharecapital|Other equityinstruments|||Capitalreserve|Less:Shares instock|OtherComprehensiveIncome|Specialreserve|Surplusreserves|Commonriskprovision|Attributable profit|||
|||Preferredstock|Sustainabledebt|Others||||||||||
|1.Balance at the end of last year|1,156,399,976.00||||1,674,270,987.60||12,317,916.44||11,329,760.39||-592,773,594.89|8,430,996.27|2,269,976,041.81|
|Add: Change of accountingpolicy||||||||||||||
|Correcting of previouserrors||||||||||||||
|Merger of entities undercommon control||||||||||||||
|Others||||||||||||||
|2.Balance at the beginning ofthis year|1,156,399,976.00||||1,674,270,987.60||12,317,916.44||11,329,760.39||-592,773,594.89|8,430,996.27|2,269,976,041.81|
|3. Increase/decrease at thisterm(for decrease, fill in "-")|||||||8,267,503.82||||-328,091,761.80|-8,869,630.47|-328,693,888.45|

2016 Annual Report
||||||
|-|-|-|-|-|
|(1) Total ComprehensiveIncome|8,267,503.82|-328,091,761.80|-8,425,230.47|-328,249,488.45|
|(2) Capital injection andreduction by shareholders|||||
|1) Total comprehensiveincome|||||
|2) Investment or decreasing ofcapital by shareholders|||||
|3) Amount of shares paid andaccounted as shareholders’equity|||||
|4) Others|||||
|(3) Profit allotment|||-444,400.00|-444,400.00|
|1) Providing of surplusreserves|||||
|2) Providing of common riskprovisions|||||
|3) Allotment to the owners (orshareholders)|||-444,400.00|-444,400.00|
|4) Others|||||
|(4) Internal transferring ofshareholders’ equity|||||

2016 Annual Report
|||||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|1) Capitalizing of capitalreserves (or to capital shares)||||||||||||||||||||
|2) Capitalizing of surplusreserves (or to capital shares)||||||||||||||||||||
|3) Making up losses bysurplus reserves.||||||||||||||||||||
|4) Others||||||||||||||||||||
|(5) Special reserve||||||||||||||||||||
|1) Provided this term|||||||||||13,368,608.56||||||||13,368,608.56|
|2) Used this term|||||||||||13,368,608.56||||||||13,368,608.56|
|(6) Other||||||||||||||||||||
|4. Balance at the end of thisterm|1,156,399,976.00||||||1,674,270,987.60||20,585,420.26||||11,329,760.39|||-920,865,356.69|-438,634.20||1,941,282,153.36|
|Item||Previous period||||||||||||||||||
|||Shareholders’s equity Attributable to the Parent Company|||||||||||||||Minorshareholders’ equity|Totalshareholders' equity||
|||Sharecapital|Other equityinstruments|||Capitalreserve||Less:Shares instock||OtherComprehensive Income||Specialreserve||Surplusreserves|Common riskprovision|Attributable profit||||
||||Preferredstock|Sustainabledebt|Others|||||||||||||||
|1.Balance at the end of last year||1,156,399,9||||1,683,394,0||||1,920,380.37||||11,329,76||-688,388,6|91,606,113.|2,256,261,620||

2016 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
||76.00|15.86||0.39|25.23|33|.72|
|Add: Change of accountingpolicy||||||||
|Correcting of previous errors||||||||
|Merger of entities undercommon control||||||||
|Others||||||||
|2.Balance at the beginning of thisyear|1,156,399,976.00|1,683,394,015.86|1,920,380.37|11,329,760.39|-688,388,625.23|91,606,113.33|2,256,261,620.72|
|3. Increase/decrease at this term(for decrease, fill in "-")||-9,123,028.26|10,397,536.07||95,615,030.34|-83,175,117.06|13,714,421.09|
|(1) Total ComprehensiveIncome|||10,397,536.07||95,615,030.34|9,274,426.37|115,286,992.78|
|(2) Capital injection andreduction by shareholders||-9,123,028.26||||-89,649,543.43|-98,772,571.69|
|1) Total comprehensive income||||||||
|2) Investment or decreasing ofcapital by shareholders||||||||
|3) Amount of shares paid andaccounted as shareholders’equity||||||||
|4) Others||-9,123,028.||||-89,649,543.|-98,772,571.6|

2016 Annual Report
||||||
|-|-|-|-|-|
||26||43|9|
|(3) Profit allotment|||-2,800,000.00|-2,800,000.00|
|1) Providing of surplus reserves|||||
|2) Providing of common riskprovisions|||||
|3) Allotment to the owners (orshareholders)|||-2,800,000.00|-2,800,000.00|
|4) Others|||||
|(4) Internal transferring ofshareholders’ equity|||||
|1) Capitalizing of capitalreserves (or to capital shares)|||||
|2) Capitalizing of surplusreserves (or to capital shares)|||||
|3) Making up losses by surplusreserves.|||||
|4) Others|||||
|(5) Special reserve|||||
|1) Provided this term||14,426,417.80||14,426,417.80|
|2) Used this term||14,426,41||14,426,417.80|

2016 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||7.80|||||
|(6) Other|||||||||
|4. Balance at the end of this term|1,156,399,976.00|1,674,270,987.60|12,317,916.44||11,329,760.39|-592,773,594.89|8,430,996.27|2,269,976,041.81|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
Statement on Changes in Shareholders' Equity of Parent Company
January-December 2016
Prepared by: SHANGHAI CHLOR-ALKAL CHEMICAL CO.,LTD
Unit: Yuan Currency: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|Current period|||||||||||
||Sharecapital|Other equity instruments|||Capitalreserve|Less: Shares instock|OtherComprehensive Income|Specialreserve|Surplusreserves|Attributable profit|Totalshareholders' equity|
|||Preferred stock|Sustainable debt|Others||||||||
|1.Balance at the end of last year|1,156,399,976.00||||1,690,068,638.82||11,345,002.84||11,329,760.39|-614,936,506.51|2,254,206,871.54|
|Add: Change of accountingpolicy||||||||||||
|Correcting of previous errors||||||||||||
|Others||||||||||||

2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
|2.Balance at the beginning of thisyear|1,156,399,976.00|1,690,068,638.82|11,345,002.84|11,329,760.39|-614,936,506.51|2,254,206,871.54|
|3. Increase/decrease at this term(for decrease, fill in "-")|||-3,629,853.56||-320,466,343.92|-324,096,197.48|
|(1) Total ComprehensiveIncome|||-3,629,853.56||-320,466,343.92|-324,096,197.48|
|(2) Capital injection andreduction by shareholders|||||||
|1) Total comprehensive income|||||||
|2) Investment or decreasing ofcapital by shareholders|||||||
|3) Amount of shares paid andaccounted as shareholders’equity|||||||
|4) Others|||||||
|(3) Profit allotment|||||||
|1) Providing of surplus reserves|||||||
|2) Allotment to the owners (orshareholders)|||||||
|3) Others|||||||
|(4) Internal transferring of|||||||

2016 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
|shareholders’ equity||||||||
|1) Capitalizing of capitalreserves (or to capital shares)||||||||
|2) Capitalizing of surplusreserves (or to capital shares)||||||||
|3) Making up losses by surplusreserves.||||||||
|4) Others||||||||
|(5) Special reserve||||||||
|1) Provided this term||||13,368,608.56|||13,368,608.56|
|2) Used this term||||13,368,608.56|||13,368,608.56|
|(6) Other||||||||
|4. Balance at the end of this term|1,156,399,976.00|1,690,068,638.82|7,715,149.28||11,329,760.39|-935,402,850.43|1,930,110,674.06|

|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|Previous period|||||||||||
||Sharecapital|Other equity instruments|||Capitalreserve|Less:Shares instock|OtherComprehensive Income|Specialreserve|Surplusreserves|Attributableprofit|Totalshareholders' equity|
|||Preferred stock|Sustainable debt|Others||||||||

2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
|1.Balance at the end of last year|1,156,399,976.00|1,690,068,638.82|955,919.02|11,329,760.39|-757,961,086.06|2,100,793,208.17|
|Add: Change of accounting policy|||||||
|Correcting of previous errors|||||||
|Others|||||||
|2.Balance at the beginning of this year|1,156,399,976.00|1,690,068,638.82|955,919.02|11,329,760.39|-757,961,086.06|2,100,793,208.17|
|3. Increase/decrease at this term (fordecrease, fill in "-")|||10,389,083.82||143,024,579.55|153,413,663.37|
|(1) Total Comprehensive Income|||10,389,083.82||143,024,579.55|153,413,663.37|
|(2) Capital injection and reduction byshareholders|||||||
|1) Total comprehensive income|||||||
|2) Investment or decreasing of capital byshareholders|||||||
|3) Amount of shares paid and accounted asshareholders’ equity|||||||
|4) Others|||||||
|(3) Profit allotment|||||||

2016 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
|1) Providing of surplus reserves||||||||
|2) Allotment to the owners (or shareholders)||||||||
|3) Others||||||||
|(4) Internal transferring of shareholders’equity||||||||
|1) Capitalizing of capital reserves (or tocapital shares)||||||||
|2) Capitalizing of surplus reserves (or tocapital shares)||||||||
|3) Making up losses by surplus reserves.||||||||
|4) Others||||||||
|(5) Special reserve||||||||
|1) Provided this term||||14,426,417.80|||14,426,417.80|
|2) Used this term||||14,426,417.80|||14,426,417.80|
|(6) Other||||||||
|4. Balance at the end of this term|1,156,399,976.00|1,690,068,638.82|11,345,002.84||11,329,760.39|-614,936,506.51|2,254,206,871.54|

 Legal representative: Superintendent responsible for accounting: Superintendent for accountancy firm:
2016 Annual Report
Section XII Documents For Reference
|||
|-|-|
|Documents for reference|1.Financial statements signed and stamped by legal representative,principal in charge of accounting,CFO and head of accountingdepartment;|
|Documents for reference|2.The original auditor's report stamped by the public accounting firm and signed and stamped by the certified public accountant;|
|Documents for reference|3.Articles of Association of Shanghai Chlor-Alkali Co.,Ltd. during the report period;|
|Documents for reference|4.The formal version of all files and originials of the announcements disclosed in the newspapers appointed by China SecuritiesRegulatory Commission during the report period;|
|Documents for reference|5.The company shall furnish the above documents for reference while China Securities Regulatory Commission and the stock exchangerequest to provide them and the shareholders request to consult them according to the requirements of the statute or the Articles ofAssociation.|

Chairman of the Board :
Presenting date approved by the Board of Directors
March 30,2017