The 2016 Annual Report of Changchai Company, Limited CHANGCHAI COMPANY, LIMITED
ANNUAL REPORT 2016
April 2017
The 2016 Annual Report of Changchai Company, Limited Table of Contents
Section I Important Statements, Contents and Definitions............................................................3 Section II Corporate Profile and Financial Results........................................................................5 Section III Business Profile...............................................................................................................8 Section IV Performance Discussion and Analysis.........................................................................10 Section V Significant Events...........................................................................................................21 Section VI Share Changes andShareholders’ Profile...................................................................33 Section VII Preference Shares........................................................................................................37 Section VIII Directors, Supervisors, Executive Officers and Staff..............................................38 Section IX Corporate Governance.................................................................................................47 Section X Corporate Bonds.............................................................................................................53 Section XI Financial Report............................................................................................................54 Section XII Documents Available for Reference.........................................................................158
Changchai Company, Limited Annual Report 2016 Section I Important Statements, Contents and Definitions The board of directors (the “Board”), the supervisory board (the “Supervisory Board”), as well as the directors, supervisors and executive officers of Changchai Company, Limited (the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report, and shall be jointly and severally liable for any false representation, misleading statements or material omissions in this Report.
Shi Xinkun, head of the Company, Zhang Xin, accounting head for this Report, and Jiang He, head of the accounting department (head of accounting), hereby guarantee that the Financial Report carried in this Report is factual, accurate and complete.
All directors attended the board meeting for the review of this Report.
Any plans for the future and other forward-looking statements mentioned in this Report shall NOT be considered as virtual promises of the Company to investors. Therefore, investors are kindly reminded to pay attention to possible investment risks.
The Company has described in detail the risks it might face in “IX 4. Possible risks in the future” under “Section IV Performance Discussion and Analysis” in this Report.
The Board has considered and approved the following proposal for profit distribution: Based on the total shares of 561,374,326, a cash dividend of RMB0.3 (tax inclusive) per 10 shares will be distributed to all shareholders of the Company. No bonus shares will be granted, nor will any capital reserve be converted into share capital.
This Annual Report and its abstract have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.
Changchai Company, Limited Annual Report 2016 Definitions
||||
|-|-|-|
|Term|Refers to|Definition|
|Company, the Company, Changchai|Refers to|Changchai Company, Limited|
|Changchai Benniu|Refers to|Chuangzhou Changchai Benniu Diesel Engine Fittings Co.,Ltd.|
|Changchai Wanzhou|Refers to|Changchai Wanzhou Diesel Engine Co., Ltd.|
|Housheng Investment|Refers to|Changzhou Housheng Investment Co., Ltd.|
|Housheng Agricultural Equipment|Refers to|Changzhou Changchai Housheng Agricultural EquipmentCo., Ltd.|
|Changchai Robin|Refers to|Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd.|
|RMB, RMB’0,000|Refers to|RMB, RMB Ten thousand|
|Reporting Period|Refers to|January 1, 2016-December 31, 2016|

Changchai Company, Limited Annual Report 2016 Section II Corporate Profile and Financial Results
I Corporate information
|||||
|-|-|-|-|
|Stock name|Changchai A, Changchai B|Stock code|000570, 200570|
|Stock exchange|Shenzhen Stock Exchange|||
|Company name in Chinese|常柴股份有限公司|||
|Abbr.|苏常柴|||
|Company name in English|CHANGCHAI COMPANY, LIMITED|||
|Abbr.|CHANGCHAI CO., LTD.|||
|Legal representative|Shi Xinkun|||
|Registered address|123 Huaide Middle Road, Changzhou, Jiangsu, China|||
|Zip code|213002|||
|Office address|123 Huaide Middle Road, Changzhou, Jiangsu, China|||
|Zip code|213002|||
|Company website|http://www.changchai.com.cn|||
|Email|cctqm@public.cz.js.cn|||

II Contact information
||||
|-|-|-|
||Board Secretary|Securities Representative|
|Name|He Jianjiang||
|Address|123 Huaide Middle Road, Changzhou, Jiangsu, China||
|Tel.|(86)519-68683155||
|Fax|(86)519-86630954||
|E-mail|cchjj@changchai.com||

III Information disclosure and place where this Report is kept
|||
|-|-|
|Newspapers designated by the Company for information disclosure|Securities Times, Ta Kung Pao (HK)|
|Website designated by the China Securities Regulatory Commission(CSRC) for the publication of this Report|http://www.cninfo.com.cn|
|Place where this Report is kept|Board Secretariat of the Company andthe Shenzhen Stock Exchange|

Changchai Company, Limited Annual Report 2016 IV Company registration and alteration
|||
|-|-|
|Credibility code|91320400134792410W|
|Changes in main business activities of the Company after going public|No changes|
|Changes of controlling shareholder|No changes|

V Other information
The CPAs firm hired by the Company
|||
|-|-|
|Name|Jiangsu Gongzheng Tianye Certified Public Accountants LLP|
|Office address|10/F, Yingtong Commerce Building, Changzhou, Jiangsu, China|
|Accountants writing signatures|Dai Weizhong, He Taifeng|

VI Accounting and financial results
||||||
|-|-|-|-|-|
||2016|2015|+/-%|2014|
|Operating revenues (RMB)|2,283,028,855.52|2,519,799,547.29|-9.40%|2,489,792,063.33|
|Net profit attributable toshareholders of the Company(RMB)|62,539,896.17|71,102,792.49|-12.04%|64,202,144.29|
|Net profit attributable toshareholders of the Companybefore exceptional profit andloss (RMB)|56,835,566.28|61,588,462.29|-7.72%|58,685,034.57|
|Net cash flows from operatingactivities (RMB)|99,473,944.04|127,926,882.95|-22.24%|-51,507,355.52|
|Basic earnings per share(RMB/share)|0.11|0.13|-15.38%|0.11|
|Diluted earnings per share(RMB/share)|0.11|0.13|-15.38%|0.11|
|Weighted average return onequity (%)|3.00%|3.53%|-0.53%|3.28%|
||December 31, 2016|December 31, 2015|+/-%|December 31, 2014|
|Total assets (RMB)|3,724,857,266.71|3,232,406,102.20|15.23%|3,166,783,758.18|
|Net assets attributable toshareholders of the Company(RMB)|2,323,712,892.92|2,002,910,311.01|16.02%|1,936,936,835.27|

Changchai Company, Limited Annual Report 2016 VII Differences in accounting data under domestic and foreign accounting standards
The net profit and net assets of this Reporting Period underChina’s accounting standards are the same with those under the international or any applicable foreign accounting standards.
VIII Financial results by quarter
Unit: RMB
||||||
|-|-|-|-|-|
||1Q|2Q|3Q|4Q|
|Operating revenues|654,517,225.08|509,143,496.61|605,182,860.65|514,185,273.18|
|Net profit attributable to shareholders of the Company|24,282,056.99|10,736,085.37|20,090,608.28|7,431,145.53|
|Net profit attributable to shareholders of the Companybefore exceptional profit and loss|24,946,954.15|3,563,547.46|19,718,706.88|8,606,357.79|
|Net cash flows from operating activities|-5,947,696.22|123,983,609.51|-46,874,591.45|28,312,622.20|

 IX Exceptional profit/loss
Unit: RMB
|||||
|-|-|-|-|
|Item|2016|2015|2014|
|Profit/loss on disposal of non-current assets (including offsetasset impairment provisions)|6,254,028.26|211,929.61|118,901.99|
|Government subsidies charged to the profit/loss for thisReporting Period (except for the government grants closelyrelated to the business of the Company and given at a fixedquota or amount in accordance with the State’s uniformstandards)|7,948,135.65|11,903,636.62|10,344,073.62|
|Capital occupation charges on non-financial enterprises that arecharged to the profit/loss for this Reporting Period|1,340,364.82|1,523,155.52|1,505,666.68|
|Profit/loss on fair value changes of transactional financialassets and liabilities & investment income from disposal oftransactional financial assets and liabilities as well as financialassets available for sale, except for effective hedges related toroutine operations of the Company|1,058,569.81|1,793,021.58|572,812.70|
|Impairment provision reversal for accounts receivable onwhich the impairment test is carried out separately||||
|Non-operating income and expense other than the above|-9,328,953.27|-4,109,778.32|-6,029,012.72|
|Less: Corporate income tax|1,294,119.50|1,747,894.80|995,341.14|
|Minority interests (after tax)|273,695.88|59,740.01|-8.59|
|Total|5,704,329.89|9,514,330.20|5,517,109.72|

Changchai Company, Limited Annual Report 2016 Section III Business Profile
I Main business scope for this Reporting Period
As a manufacturer, we specialize in the manufacture and sale of diesel engines, diesel engine fittings and castings, gasoline engines, gasoline engine fittings, cereal harvesting machinery, rotovators, walking tractors, molds and jigs as well as the assembly and sale of diesel engine and gasoline engine supporting sets.
We mainly manufacture and sell small and medium-sized single-cylinder and multi-cylinder diesel engines under the brand of “Changchai”, which are often used in tractors, combine-harvesters, light commercial vehicles, agriculture equipment, small-sized engineering machinery, generator sets, ship machines, etc.
II Significant changes in main assets
|||
|-|-|
|Main assets|Reason for any significant change|
|Available-for-sale financial assets|The closing amount stood at RMB820,072,500.00, up 63.04% from theopening amount, mainly because the Bank of Jiangsu, where theCompany holds shares, went public during this Reporting Period, andthe cost method which had been adopted in the measurement of theseshares changed to the fair value method.|
|Other current assets|The closing amount stood at RMB39,669,983.12, down 34.22% fromthe opening amount, mainly because some wealth management productsbecame due in this Reporting Period.|

III. Core competitiveness analysis
1. Brand advantage
Changchai is a national industrial enterprise with a history of over one hundred years. It is one of the earliest professional manufacturers of internal combustion engines in China. The brand "Changchai" is the earliest domestic trademark of production goods known as China's well-known trademarks. The diesel engine of "Changchai" brand is China's brand-name product. The enterprise has been certified by ISO9000 quality system, ISO14001 environmental management system, ISO/TS16949 automotive product quality management system, and accessed to the national export-free enterprise qualification. Changchai was honorably ranked among “the Top One Hundred Chinese Enterprises in Engineering Industry” and “China Pacesetter Enterprise of Industrial Industry” for several times, and was awarded the honorary title of “State-level Enterprise of Observing Contracts and Keeping Promise”, “China's Agricultural Machinery Parts and Components Leading Enterprises”, “China's Agricultural Machinery AAA Credit Enterprise”, “Jiangsu Independent Industries Brand Top 50”, “Quality Management Excellence Award of Jiangsu Province”, “Mayor Quality Award of Changzhou City”, also our company won as the 10 users most satisfied leading brands in “Jing Geng” competition in the last five years. In 2016, Changchai was entitled honors of "My Favorite Jiangsu Trademark in 2016" awarded the Administration for Industry and Commerce of Jiangsu Provincial, "China Agricultural Machinery Parts and Components Leading Enterprises" awarded by China Agricultural Machinery
Industry Association, and “Most Influential Brand of China Agricultural Machinery Industry in 2016" awarded
jointly by China Agricultural Machinery Industry Association, China Agricultural Mechanization Association, and
China Agricultural Machinery Circulation Association. For the past many years, in the process of achieving steady
Changchai Company, Limited Annual Report 2016 economic development of the enterprise, we developed in a sound manner and cultivated the “Changchai” brand, a famous small diesel engine brand of China with independent intellectual property rights
2. Technology advantage
Changchai has a state-level technology center and post-doctoral research station, and a research center of small and medium-power internal combustion engine engineering and technology in Jiangsu Province. Currently, Changchai is mainly engaged in production of small and medium-power single-cylinder and multi-cylinder diesel engine. It has a complete product range, a wide power level coverage, a high reputation and intellectual property rights for its main products.Changchai’s product research and development and scientific research projects have won the second prize of National Machinery Industry Science and Technology Progress Award, the second prize of Science and Technology Award of Jiangsu Province, and the first prize of Science and Technology Progress Award of Changzhou City etc. So far, we have obtained 130 patents granted home and abroad in total, including 6 invention patents.
3. Sales advantage
Changchai has built up a sales service network covering the whole country, with 11 sales business units, 31 sales service centers, over 400 service stations and 600 designated maintenance stations. With a perfect diesel sales service network system, our company is able to provide high quality, efficient and timely services for our customers.
Changchai Company, Limited Annual Report 2016 Section IV Performance Discussion and Analysis
I. Summary
In the year 2016, facing difficulties such as the continuous downward trend of the macro-economy, stricter emission laws and regulations, and the enormous pressure from safety and environmental protection requirements, we took core competitiveness improvement as the most important measure, by speeding product upgrades, optimizing the product structure, improving product quality, continuously promoting important technological transformation projects, making full use of the resource advantage, seizing opportunities in domestic and overseas markets, and expanding the advantages of superior products and business segments. As a result, we managed to maintain a stable and orderly development.
In 2016, we sold about 724,400 engines and engine units, of which about 116,600 were multi-cylinder engines, and about 607,800 are single-cylinder engines. We exported about 124,600 engines and engine units; and we achieved sales revenue of RMB2.283 billion, a yearly decline of9.4%. The net profit attributable to shareholders of the Company was RMB62.5714 million, a yearly decline of12.00%. Under the grim overall situation of the national small diesel engine industry, although our company's total sales of products went down from last year, our overall market share was stable, maintaining a leading position in the industry.
In terms of single-cylinder engines, our company adapted to new changes in the market, stabilize the main supporting enterprise market share, integrate A dealer team and continuously promote the secondary network construction. At the same time, we also accelerated the pace of product and market structure optimization, increased the proportion of superior products, and fully involved in bidding projects and the development of key customers. Concerning multi-cylinder engines, on the one hand, our company stabilized the existing supporting system to enhance the supporting market share, speed up the agricultural market support of 4G33 and 4L88 series of middle and high ranking new products, as well as the promotion of resources of national standard III. Our company also accelerated the support of end products such as light engines and rice transplanters, but the supporting sales of commercial vehicles decreased significantly.
Facing a more severe situation of foreign trade market in the past two years, our company's export business maintained stable and rapid development. Both export volume and export income of our company increased. As for market service, we focused on national standard III training for product upgrades and service station optimization, and continuously improved the service capacity of national standard III products. We made full use of the Internet, visualization and other means to improve the terminal market service capabilities by following-up and teamwork.
To sum up, in 2016, our company correctly grasped the industry trends, implemented targeted product structure adjustment, and did a lot to positively and effectively promote product upgrades. On the one hand, the upgrade of single multi-cylinder products to national standard III was basically completed. The technical route was recognized by the market and got an advantage in the development of the industry. On the other hand, the product structure adjustment achieved initial success. New key profitable products increased significantly, making good preparation for the new development of the company.
II. Main business analysis
1. Summary
See “I. Summary” in “Discussion& Analysis by the Management”.
Changchai Company, Limited Annual Report 2016 2. Revenues and costs
(1) Breakdown of operating revenues
Unit: RMB
|||||||
|-|-|-|-|-|-|
||2016||2015||+/-%|
||Amount|In total operatingrevenues|Amount|In total operatingrevenues||
|Total of theoperating income|2,283,028,855.52|100%|2,519,799,547.29|100%|-9.40%|
|Classified by industries||||||
|Internalcombustionengine industry|2,258,400,410.51|98.92%|2,495,248,411.83|99.03%|-9.49%|
|Other|24,628,445.01|1.08%|24,551,135.46|0.97%|0.31%|
|Classified by products||||||
|Diesel engines|2,258,400,410.51|98.92%|2,495,248,411.83|99.03%|-9.49%|
|Other|24,628,445.01|1.08%|24,551,135.46|0.97%|0.31%|
|Classified by regions||||||
|Domestic|1,974,994,464.83|86.51%|2,288,815,564.77|90.83%|-13.71%|
|Overseas|308,034,390.69|13.49%|230,983,982.52|9.17%|33.36%|

 (2) Industries, products or areas contributing over10% of operating revenues or profit
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Operating revenue|Operating cost|Gross profitmargin|Operatingrevenue:+/-% fromlast year|Operatingcost: +/-%from last year|Gross profitmargin: +/-%from last year|
|Classified by industries|||||||
|Internalcombustionengineindustry|2,258,400,410.51|1,849,826,031.76|18.09%|-9.49%|-11.68%|2.03%|
|Classified by products|||||||
|Dieselengines|2,258,400,410.51|1,849,826,031.76|18.09%|-9.49%|-11.68%|2.03%|
|Classified by regions|||||||
|Domestic|1,950,366,019.82|1,551,802,758.77|20.44%|-13.86%|-17.02%|3.03%|
|Overseas|308,034,390.69|298,023,272.99|3.25%|33.36%|32.86%|0.36%|

Changchai Company, Limited Annual Report 2016 (3) Are theCompany’s goods selling revenue higher than the service revenue?
|||||||
|-|-|-|-|-|-|
|Classified byindustries|Item|Unit|2016|2015|YoY +/-|
|Diesel engines|Sales volume|Piece|724,452|907,715|-20.19%|
||Output|Piece|745,941|870,754|-14.33%|
||Stock|Piece|85,003|63,514|33.83%|

 Reasons of yearly change up to30% of relevant data
√ Applicable□Not applicable
At the end of the Reporting Period, product inventories increased by33.83% over the same period last year, mainly because the company increased the product inventory in order to cope with the peak season in early 2017 at the end of the Reporting Period.
(4) Breakdown of operating costs
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Classified byproducts|Item|2016||2015||YoY +/-|
|||Amount|Ratio totheoperatingcost|Amount|Ratio to theoperatingcost||
|Diesel engines|Raw materials|1,504,920,345.33|80.62%|1,771,572,695.44|83.95%|-15.05%|
|Diesel engines|Wages|227,952,039.91|12.21%|200,838,801.68|9.52%|13.50%|
|Diesel engines|Depreciation|81,531,657.35|4.37%|77,956,874.68|3.69%|4.59%|
|Diesel engines|Energy|28,880,577.08|1.55%|30,561,457.15|1.45%|-5.50%|

 (5) List of the major trade debtors and major supplier
List of the major trade debtors of the Company
|||
|-|-|
|Total sales to the top 5 customers (RMB)|1,186,220,609.01|
|Ratio of the total sales to the top 5 customers to the annual total sales|51.96%|
|Ratio of the related party sales to the top 5 customers to the annual total sales|0.00%|

 Information of the top 5 customers of the Company
|||||
|-|-|-|-|
|SN|Name of customer|Sales amount (RMB)|Proportion in annual total sales|
|1|Customer 1|497,881,915.34|21.81%|
|2|Customer 2|260,523,748.85|11.41%|
|3|Customer 3|213,112,753.56|9.33%|
|4|Customer 4|107,843,322.26|4.72%|
|5|Customer 5|106,858,869.00|4.68%|
|Total|--|1,186,220,609.01|51.96%|

Changchai Company, Limited Annual Report 2016 List of the major suppliers of the Company
|||
|-|-|
|Total purchase to the top 5 suppliers (RMB)|215,630,764.22|
|Ratio of the total purchase to the top 5 suppliers to the annual total purchase|13.15%|
|Ratio of the related party purchase to the top 5 suppliers to the annual total purchase|0.00%|

 Information of the top 5 suppliers of the Company
|||||
|-|-|-|-|
|SN.|Name of supplier|Purchase amount (RMB)|Ratio to the annual purchase amount|
|1|Customer 1|60,796,149.82|3.71%|
|2|Customer 2|43,635,538.44|2.66%|
|3|Customer 3|41,255,451.77|2.52%|
|4|Customer 4|36,363,571.19|2.22%|
|5|Customer 5|33,580,053.00|2.05%|
|Total|--|215,630,764.22|13.15%|

3. Expenses
Unit: RMB
||||||
|-|-|-|-|-|
||2016|2015|YoY +/-|Notes of the significant changes|
|Sales expenses|103,969,577.79|98,122,345.71|5.96%||
|Management expenses|207,582,213.98|197,678,915.43|5.01%||
|Financial expenses|-11,542,165.08|-15,723,785.00||Mainly due to the decrease ofinterest income of the companyduring the Reporting Period andsupplier's discounted bills.|

 4.R&D investment
The Company has been paying attention on theR&D of the new products and new technology and regards the market as the orientation to constantly promote the technology upgrade, to make great efforts to enhance theR&D ability of theCompany’s technology and the self-innovation ability as well as to improve the added value of the products for constantly strengthening the market competitiveness of the Company.
List of theR&D investment of the Company
|||||
|-|-|-|-|
||2016|2015|Varied ratio|
|Number of the R&D personnel (person)|365|363|0.55%|
|Ratio to the R&D personnel|10.55%|10.12%|0.43%|
|Investment amount of the R&D (RMB10,000’)|78,811,840.43|77,961,271.34|1.09%|
|Ratio of the R&D investment to the operating income|3.45%|3.09%|0.36%|
|Amount of the capitalized R&D investment (RMB)|0.00|0.00|0.00%|
|Ratio of the capitalized R&D investment to the R&D investment|0.00%|0.00%|0.00%|

Changchai Company, Limited Annual Report 2016 5. Cash flow
Unit: RMB
|||||
|-|-|-|-|
|Item|2016|2015|YoY +/-|
|Subtotal of cash inflows from operating activities|2,505,758,062.18|2,686,973,788.27|-6.74%|
|Subtotal of cash outflows from operating activities|2,406,284,118.14|2,559,046,905.32|-5.97%|
|Net cash flows from operating activities|99,473,944.04|127,926,882.95|-22.24%|
|Subtotal of cash inflows from investing activities|45,132,445.41|17,469,925.84|158.34%|
|Subtotal of cash outflows from investing activities|67,310,667.45|68,003,567.09|-1.02%|
|Net cash flows from investing activities|-22,178,222.04|-50,533,641.25||
|Subtotal of cash inflows from financing activities|15,000,000.00|17,000,000.00|-11.76%|
|Subtotal of cash outflows from financing activities|35,733,831.12|32,438,823.99|10.16%|
|Net cash flows from financing activities|-20,733,831.12|-15,438,823.99||
|Net increase in cash and cash equivalents|56,561,890.88|61,954,417.71|-8.70%|

 Notes of the major effects on the YoY significant changes occurred of the data above
√ Applicable□ Not applicable
The increase in cash inflow from investing activities was mainly due to the withdrawal of funds from bank financial products during the Reporting Period.
III. Analysis of the non-core business
□Applicable√ Not applicable
IV. List of the assets and liabilities
1. List of the significant changes of the assets form
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||As at 31 Dec. 2016||As at 31 Dec. 2015||||
||||||Proportion|Explain any major|
|||Proportion in||Proportion in|||
||Amount||Amount||change|change|
|||total assets||total assets|||
|Monetary funds|670,703,802.02|18.01%|601,312,715.62|18.60%|-0.59%||
|Accounts receivable|359,279,821.69|9.65%|308,596,920.50|9.55%|0.10%||
|Inventories|494,046,458.44|13.26%|397,290,012.36|12.29%|0.97%||
|Investing real estate|55,072,689.23|1.48%|57,281,030.03|1.77%|-0.29%||
|Long-term equity investment|21,006,230.03|0.56%|20,769,304.76|0.64%|-0.08%||
|Fixed assets|553,678,938.87|14.86%|554,601,893.23|17.16%|-2.30%||
|Construction in progress|89,781,047.21|2.41%|108,198,455.01|3.35%|-0.94%||
|Short-term loans|10,000,000.00|0.27%|17,000,000.00|0.53%|-0.26%||
|Long-term loans|670,703,802.02|18.01%|601,312,715.62|18.60%|-0.59%||

Changchai Company, Limited Annual Report 2016 2. Assets and liabilities measured at fair value
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|||Gain/loss on|Cumulative|Impairment|Purchased|Sold||
|||fair value|fair value|provisions|amount in|amount||
||Opening||||||Closing|
|Item||change in the|change|in the|the|in the||
||amount||||||amount|
|||Reporting|recorded into|Reporting|Reporting|Reporting||
|||Period|equity|Period|Period|Period||
|Financial assets||||||||
|Financial assets||||||||
|measured at fair||||||||
|value and whose||||||||
|changes are||||||||
|recorded into|0.00||||||0.00|
|current gains and||||||||
|losses (excluding||||||||
|derivative||||||||
|financial assets)||||||||
|Available-for-sale||||||||
||495,780,000.00|317,092,500.00|623,048,300.00||||812,872,500.00|
|financial assets||||||||
|Subtotal of||||||||
||495,780,000.00|317,092,500.00|623,048,300.00||||812,872,500.00|
|financial assets||||||||
|Total of the||||||||
||495,780,000.00|317,092,500.00|623,048,300.00||||812,872,500.00|
|above||||||||
|Financial||||||||
||0.00||||||0.00|
|liabilities||||||||

3. Restricted asset rights at the end of the Reporting Period
||||
|-|-|-|
|Item|Book Value at the Ending Period|Reasons|
|Monetary funds|87,425,672.93|Security deposits for bank acceptance bills|
|Buildings|6,973,427.38|Collaterals for loan|
|Land use right|19,469,465.00|Collaterals for loan|
|Total|113,868,565.31||

V. List of the investment
1. Overall condition
□ Applicable√ Not applicable
2. List of the significant equity investment acquired from the Reporting Period
□ Applicable√ Not applicable
3. List of the significant non-equity investment has been executing during the Reporting Period
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2016 4. Investment on the financial assets
(1) List of the securities investment
No such situation of the Company during the Reporting Period.
(2) List of the derivative investment
No such situation of the Company during the Reporting Period.
5. Use of raised funds
No such situation of the Company during the Reporting Period.
VI. Selling of the significant assets and the equities
No such cases in this Reporting Period.
VII. Analysis of the major controlling and stock-participating companies
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|||Main|Registered|||Operating|||
|Name|Type|||Total assets|Net assets||Operating profit|Net profit|
|||services|capital|||revenues|||
|||Production|||||||
|Changchai||of diesel|||||||
||Subsidiary||55,063,000.00|176,044,790.50|100,757,978.77|150,718,980.23|-1,993,860.72|-5,610,886.94|
|Benniu||engine|||||||
|||fittings|||||||
|||Assembling|||||||
|Changchai||of diesel|||||||
||Subsidiary||85,000,000.00|132,841,434.23|113,595,088.53|66,035,872.53|2,426,480.84|2,686,324.49|
|Wanzhou||engine|||||||
|||fittings|||||||
|||External|||||||
|||investment|||||||
|Housheng|||||||||
||Subsidiary|and|30,000,000.00|35,536,468.30|34,875,699.59|1,340,364.82|1,195,513.64|916,890.70|
|Investment|||||||||
|||consulting|||||||
|||service|||||||
|||Agricultural|||||||
|||machinery|||||||
|Housheng|||||||||
|||product of|||||||
|Agricultural|Subsidiary||10,000,000.00|30,116,033.68|7,365,580.04|20,425,666.48|2,025,915.66|2,059,175.66|
|||rice|||||||
|Equipment|||||||||
|||transplanter|||||||
|||etc.|||||||
||Joint|Assembling|||||||
|Changchai|||||||||
||stock|of gasoline|37,250,000.00|80,218,115.74|63,655,243.17|154,944,857.08|3,183,020.39|1,315,524.51|
|Robin|||||||||
||company|engines|||||||

VIII. List of the structured main bodies controlled by the Company
Changchai Company, Limited Annual Report 2016□ Applicable√ Not applicable
IX. Outlook of theCompany’s future development
1. Industry competition structure and development tendency
At present, the development trend and market situation of the industry are mainly as follows: firstly, the demand for agricultural machinery and commercial vehicles slows down, bringing further competition of the industry; secondly, the rising cost of product emission upgrade is difficult for the market to accept; thirdly, users are very concerned about reliability, vibration, noise and appearance quality of diesel engines, and expectation of "Three Guarantees" extension increased significantly in the market. Overall, the diesel market competition is fierce. The industry will further reshuffle, and there will be better market prospects for diesel engines with high-performance in energy saving and environmental protection.
2. Company development strategies:
To base on the farm machinery, do stronger in the power, develop the fields and develop scientifically. The current products market structure of the Company mainly distributed in fields and export market such as the farm equipment such as the walking, small four-wheeler, big small and medium-sized wheeled tractors, gardening tractors and combine harvesters; agricultural small construction machinery, three rounds and low-speed vehicles; light trucks, pickups automobile industry; generator and water pump, small ship auxiliary machinery. The Company would take the market andusers’ demands as the orientation to seize the main line of the products and to improve the quality and increase the efficiency as well as to do better in the power and to constantly enhance the market competitiveness.
As for the matched power of the wheeled tractors, the Company maintains the advantages of the power section about 50 horsepower. As for the mating field of the combine-harvester, the Company will form a stable brand. As for the terminal end, the Company realizes the production cut-over of the rice transplanters and will soon step into the mass production. And the phenomenon “lack of heavy-duty and light-duty trucks” had been improved. The multi-cylinder machine products series under 30 horsepower needs to be improved in the future and to develop the over-80-horsepower roller tractors and diesel engines for engineering and non-road vehicles with small-lot production into the market. The Company will further innovate the new management mechanism and to create marketing mode as well as to reduce the cost expenses that to promote the sustainable and stable and healthy development of the Company.
3. Operation Plan for the Year 2017:
We will perfect single-cylinder engines and strengthen multi-cylinder engines; further quality standard, and develop both home and abroad markets. The sales income achieves RMB 2.3 billion and sales of new products exceed 80,000 sets are expected in 2017. The above operation plan does not represent the profit forecast of Y2017 by the listed company, and whether can be realized depends on various factors on the changes of market conditions and the effort level of the management team. There is a lot of uncertainty, and investors should pay special attention on it.
4. Possible risks and countermeasures:
(1) Market risk:
With fierce competition, over-capacity of some products and the total available market of the single cylinder engine were in a decline tendency as well as the demand from the industry was insufficient. And the profitability of the enterprises faced with rather great pressure.
Countermeasures:
Changchai Company, Limited Annual Report 2016 Firstly is to strengthen the production and sales management, to determine the production by the sales and to reasonably control the inventories.
Secondly is to make use of the leading position and brand advantages of the Company in the single-cylinder diesel engine market and expand the sales of air-cooled single-cylinder diesel engines and the high-power diesel engines.
Thirdly is to improve theR&D level of the Company, lean to medium-and high-class multi-cylinder diesel engines in product development and vigorously develop high-power diesel engines with high added value for non-road vehicles.
Fourthly is to strengthen the quality management, constantly enhance thecustomers’ satisfaction and the brand value as well as to enhance the products quality.
Fifthly is to update the service and management ideas, optimize the resources and to further enhance the after-sales service ability.
(2) Policy risk:
The macro-economic environment is complex and changeable, economic growth is slowing down and the policy on the diesel engine emissions is becoming stricter and stricter, which increased the operating difficulties and the pressure. As such, the market demands for some products of the Company will be affected to some extent. Countermeasures: The Company will pay close attention to thegovernment’s economic macro-control policies and market developments. To promote the work such as “promote the products upgrade and quality enhancing”, to embrace the upgrading of the engine emission standards, to accelerate the forging of the new “Standard V” platform, and to execute the necessary products resources reserves in advance.
(3) Talent risk:
With escalation of national environmental policy and fierce competition in the market, the social and customer requirements of product quality, performance and other aspects are getting higher and higher, meanwhile ourcompany’s needs of high-ranking talents are also growing as our resources in research and development increased. Solutions: introduce all kinds of high-ranking talents through varieties of channels and strengthen personnel training.
X. List of the received researches, visits and interviews
|||||
|-|-|-|-|
||Way of|||
|Time of reception||Visitor type|Index of the researches basic information|
||reception|||
|26 Dec. 2016|Other|Individual|List of the 8th new directors|
|23 Dec. 2016|Other|Individual|List of the shareholders’ number|
|16 Dec. 2016|Other|Individual|List of the controlling shareholders of the Company|
|8 Dec. 2016|Other|Individual|List of the state-owned enterprise reform|
|8 Dec. 2016|Other|Individual|Production and operation of the Company|
|1 Dec. 2016|Other|Individual|Suggestion of the future development of the Company|
|30 Nov. 2016|Other|Individual|Share price of secondary market of the Company|
|29 Nov. 2016|Other|Individual|List of the state-owned enterprise reform|
|18 Nov. 2016|Other|Individual|List of the state-owned enterprise reform|
|17 Nov. 2016|Other|Individual|List of the state-owned enterprise reform|

Changchai Company, Limited Annual Report 2016
|||||
|-|-|-|-|
|12 Oct. 2016|Other|Individual|Impact of Jiangsu Bank listing on the Company|
|29 Sep. 2016|Other|Individual|List of the shareholders’ number|
|28 Sep. 2016|Other|Individual|List of the shareholders’ number|
|28 Sep. 2016|Other|Individual|Whether the Company has the organization intention|
|27 Sep. 2016|Other|Individual|List of the shareholders’ number|
|22 Sep. 2016|Other|Individual|List of the shareholders’ number|
|16 Sep. 2016|Other|Individual|List of the shareholders’ number|
|3 Sep. 2016|Other|Individual|List of the shareholders’ number|
|26 Aug. 2016|Other|Individual|Operation of the Company|
|13 Jul. 2016|Other|Individual|List of the shareholders’ number|
|18 Jun. 2016|Other|Individual|List of the shares of Jiangsu Bank held by the Company|
||||Shareholding increase or decrease plan of the major|
|13 Jun. 2016|Other|Individual||
||||shareholders|
|6 Jun. 2016|Other|Individual|List of the shareholders’ number|
||||List of the planning of the power industrial park of the|
|25 May 2016|Other|Individual||
||||Company|
|25 May 2016|Other|Individual|Whether the Company has the organization intention|
|19 May 2016|Other|Individual|List of the shareholders’ number|
|19 May 2016|Other|Individual|List of the Company’s stock|
|13 May 2016|Other|Individual|Operation of the Company|
|28 Apr. 2016|Other|Individual|Products of the Company|
|27 Apr. 2016|Other|Individual|List of the agricultural informatization|
|26 Apr. 2016|Other|Individual|List of the shareholders’ number|
|22 Apr. 2016|Other|Individual|List of the operation of the Changchai Benniu|
|22 Apr. 2016|Other|Individual|Operation of the Company|
|22 Apr. 2016|||List of the construction of technological transformation|
||Other|Individual||
||||project|
|22 Apr. 2016|Other|Individual|List of the external cooperation of the Company|
|22 Apr. 2016|Other|Individual|List of the operation of the Housheng Investment|
|22 Apr. 2016|Other|Individual|List of the future development of the Company|
||||Development orientation of the future technology products|
|21 Apr. 2016|Other|Individual||
||||of the Company|
|5 Apr. 2016|Other|Individual|List of the products development|
|31 Mar. 2016|Other|Individual|List of the future development of the Company|
|28 Mar. 2016|Other|Individual|List of the refinancing business participated by the|

Changchai Company, Limited Annual Report 2016
||||||
|-|-|-|-|-|
|||||Company|
|||||List of the refinancing business participated by the|
|28 Mar. 2016|Other|Individual|||
|||||Company|
|15 Mar. 2016|Other|Individual||List of the Company’s stock|
|10 Mar. 2016|Other|Individual||List of the shareholders’ number|
|1 Mar. 2016|Other|Individual||Operation of the Company|
|||||List of the Tsinghua Industrial Company participated by|
|23 Feb. 2016|Other|Individual|||
|||||the Company|
|23 Feb. 2016|Other|Individual||List of the shareholders’ number|
|||||List of the operation of the Housheng Agricultural|
|22 Feb. 2016|Other|Individual|||
|||||Equipment|
|10 Mar. 2016|Other|Individual||List of the shareholders’ number|
|1 Mar. 2016|Other|Individual||Operation of the Company|
|23 Feb. 2016||||List of the Tsinghua Industrial Company participated by|
||Other|Individual|||
|||||the Company|
|23 Feb. 2016|Other|Individual||List of the shareholders’ number|
|22 Feb. 2016||||List of the operation of the Housheng Agricultural|
||Other|Individual|||
|||||Equipment|
|6 Jan. 2016|Other|Individual||List of the Company’s stock|
|6 Jan. 2016|Other|Individual||Suggestion of the future development of the Company|
|6 Jan. 2016|Other|Individual||Operation of the Company|
|6 Jan. 2016|Other|Individual||List of the Company’s stock|
|5 Jan. 2016|Other|Individual||List of the Company’s stock|
|Reception times|||57||
|Number of reception institutions|||0||
|Number of reception person|||57||
|Number of receipting other targets|||0||
|Whether disclose, reveal or let out|||||
||||No||
|unpublished significant information|||||

Changchai Company, Limited Annual Report 2016 Section V Significant Events
I. List of the profits distribution of the common shares and turning capital reserve into share capital of the Company
In Articles of Association, which had confirmed the specific profits distribution and cleared out the conditions, standards and proportion of the cash bonus, stipulated the decision-making progress of the formulation and alternation of the profits distribution policies and the chapters as well as the regulations fully ensure the opportunities for the medium and small shareholders to exert the functions and to provide advices as well as appeals. The cash bonus of recent 3 years of the Company met with the regulations of the Articles of Association and during the decision-making process of the profits distribution proposal, the Independent Directors stated the independent advices and fully respected the advices from the medium and small shareholders. The profits distribution preplan and the turning capital reserve into share capital preplan of the Company were both met with the relevant regulations of the Articles of Association and so no.
|||
|-|-|
|Special explanation of cash dividend policy||
|Whether conformed with the regulations of the Articles of association or the requirements||
||Yes|
|of the resolutions of the shareholders’ meeting:||
|Whether the dividend standard and the proportion were definite and clear:|Yes|
|Whether the relevant decision-making process and the system were complete:|Yes|
|Whether the independent director acted dutifully and exerted the proper function:|Yes|
|Whether the medium and small shareholders had the chances to fully express their||
||Yes|
|suggestions and appeals, of which their legal interest had gained fully protection:||
|Whether the conditions and the process met the regulations and was transparent of the||
||Yes|
|adjustment or altered of the cash dividend policy:||

List of the dividend distribution proposal (preplan) of the common shares and the proposal (preplan) of turning capital reserve into share capital of the Company of the recent 3 years
|||||
|-|-|-|-|
|Dividendyear|Profits distribution proposal|Turning capital reserve intoshare capital proposal|Execution|
|2016|Distributed RMB0.30 of every 10shares (taxes including)|No|Still needed to submit to theAnnual General Meeting|
|2015|Distributed RMB0.23 of every 10shares (taxes including)|No|Finished the execution|
|2014|Distributed RMB0.20 of every 10shares (taxes including)|No|Finished the execution|

Cash dividend distribution of the common shares of the Company of the recent 3 years (including the Reporting Period)
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Amount of cash|Net profit|The ratio|Amount of the|Ratio of the cash|
|Dividend year|dividend|belonging to|accounting in net|cash dividend by|dividend by other|
||(including tax)|shareholders of|profit which|other methods|methods|

Changchai Company, Limited Annual Report 2016
|||||||
|-|-|-|-|-|-|
|||the listed company|belongs to|||
|||in consolidated|shareholders of|||
|||statement of|the listed company|||
|||dividend year|in consolidated|||
||||statement|||
|2016|16,841,229.78|62,539,896.17|26.93%|0.00|0.00%|
|2015|12,911,609.50|71,102,792.49|18.16%|0.00|0.00%|
|2014|11,227,486.52|64,202,144.29|17.49%|0.00|0.00%|

 II. Pre-plan for profit allocation and turning capital reserve into share capital for the Reporting Period
|||
|-|-|
|Bonus shares for every 10 shares (share)|0|
|Dividend for every 10 shares (RMB) (tax included)|0.30|
|Turning capital reserve into share capital for every 10 shares (share)|0|
|Total shares as the basis for the allocation preplan (share)|561,374,326|
|Total cash dividends (RMB) (tax included)|16,841,229.78|
|Distributable profit (RMB)|603,375,714.13|
|Percentage of the cash bonus of the total profits dividends|100%|
|Cash dividend situation||
|Other||
|Details about the profit allocation or turning capital reserve into share capital||
|The preplan of the profits distribution reviewed and approved by the Board of Directors of the Company was: based||
|on the total share capital of the Company on 31 Dec. 2016, the Company distributed the cash bonus of RMB0.30||
|(tax included) of every 10 shares for the whole shareholders. There was no bonus share and no turn from capital||
|reserve to share capital of 2016.||

III. Performance of commitments
||||||||
|-|-|-|-|-|-|-|
|Reason forcommitments|Commitment maker|Commitmentstype|Commitmentscomments|Commitmentsdate|Commitmentsperiod oftime|Performance|
|Othercommitments forminorityshareholders ofcompany|State-ownedAssetsSupervision|Increasingshares|1. Changzhou People’sGovernment State-ownedAsset Supervision and|July 10,2015|In thenext sixmonths|Changzhou People’sGovernment State-ownedAsset Supervision and|

Administrati would not unload the July 10, Commission
22
on holding-share “Su Changchai 2015. accumulatively increased
Commission A” in the next six months 2347500 shares of
Changchai Company, Limited Annual Report 2016
||||||||
|-|-|-|-|-|-|-|
||ofChangzhouMunicipalPeople’sGovernmentssion||from July 10, 2015.2. Changzhou People’sGovernment State-ownedAsset Supervision andAdministration Commissionwould increase the share “SuChangchai A” by 20 million.|||company by the bidtrading system ofShenzhen StockExchange, accounting for0.42% of the companytotal shares, and theinvestment amount was20 million. Thecommitment ofincreasing shares hasbeed fulfilled.|
||ChangchaiCompany,Limited|bonus|Rewards Plan forShareholders in Next ThreeYears(2014-2016)Under the premise of positivedistributive profit(remainingafter-tax profits after makingup for the loss and extractingfor the common reserves) inthis year or half year andabundant money flow and noinfluence on thefollowing-up going concernafter cash bonus, the profitsallocated by cash every yearshouldn’tbe lower than 10%of the allocable profits fromparent compan. Meanwhile,the accumulated allocableprofits by cash in thearbitrary continuous threeaccounting years should notbe lower than 30% of theannual average allocableprofits in those three years.|May 14,2015|In theyear of2014-2016|Under implement in anormal way|
|Whetherdelivercommitments on time|Yes||||||

IV. Occupation of theCompany’s capital by the controlling shareholder or its related parties for non-operating purposes
No such situation of the Company during the Reporting Period.
V. Explanation by the Board of Directors and the Supervisory Committee about the “non-standard audit report” issued by the CPAs firm for the Reporting Period
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2016 VI. Explanation of the changes of the accounting policy, the accounting estimates and the accounting methods compared to the last financial report
No such cases in the Reporting Period.
VII. Explain retrospective restatement due to correction of significant accounting errors in the Reporting Period
No such cases in the Reporting Period.
VIII. Explain change of the consolidation scope as compared with the financial reporting of last year
No such cases in the Reporting Period.
IX. Particulars about engagement and disengagement of CPAs firm
CPAs firm engaged at present
|||
|-|-|
|Name of domestic CPAs firm|Jiangsu Gongzheng Tianye Certified Public Accountants LLP|
|Remuneration for domestic CPAs firm forthe Reporting Period (RMB’0,000)|70|
|Consecutive years of the audit servicesprovided by domestic CPAs firm|15|
|Name of domestic CPAs firm|Dai Weizhong, He Taifeng|

Particulars on engaging the audit firm for the internal control, financial adviser or sponsor
During Reporting Period, the Company hired Jiangsu Gongzheng Tianye Certified Public Accountants LLP as the internal control auditor at the cost of RMB150,000.
X. Particulars about trading suspension and termination faced after the disclosure of annual report
□ Applicable√ Not applicable
XI. Bankruptcy and reorganization
No such cases in the Reporting Period.
XII. Significant lawsuit or arbitrations
|||||||
|-|-|-|-|-|-|
|Basic situation of the litigation(arbitration)|Amountinvolved inthe|Progress of thelitigation(arbitration)|Executionsituation onthe judgment|Disclosuredate|Index tothedisclosed|

Changchai Company, Limited Annual Report 2016
|||||||
|-|-|-|-|-|-|
||litigation(arbitration)(RMB’0,000)||of thelitigation(arbitration)|||
|About the lawsuit case of ShandongHongli Group Co., Ltd., the accusedcompany owed accumulatively RMB14.36 million to the Company. TheCompany sued to ChangzhouIntermediate People’s Court in 2001 andsued for compulsory execution in April,2002. Currently, the defendant has startedthe bankruptcy procedure.|1,436|Judged for thesecond trial|Under thecompulsoryexecution bythe court andin the processof liquidationandbankruptcy|||
|About the lawsuit case of Beijing BaicChangsheng Automobile Co., Ltd., theaccused company owed accumulativelyRMB 8.0636 million to the Company.According to the paper of civil mediationissued by the people's court of BeijingShunyi on 31 Oct. 2013, the Companywill amortize the arrears of RMB8.0636million. If Baic Changsheng failed toexecute the reconciliation agreement ontime, the Company should applied for thecompulsory execution of the wholeunpaid accounts at one time and the BaicChangsheng should pay for the otherwiseliquidated damages of RMB40,000 andthe interests of the overdue payment.|806.36|Up the end ofthe ReportingPeriod, BaicChangshenghad fully paidthe debt to thecompany.|Finished|August 30,2013November6, 2013|http//www.cninfo.com.cn.Announcement No.:2013-015,019|

XIII. Punishment and rectification
No such cases in the Reporting Period.
XIV. The honesty situations of the Company and its controlling shareholders and actual controller
□ Applicable√ Not applicable
XV. The actual implementation of the stock incentive plan, ESOP, or other Staff incentives
No such cases in the Reporting Period.
Changchai Company, Limited Annual Report 2016 XVI. Significant related-party transactions
XVI. Significant related-party transactions
1. Related-party transactions relevant to routine operation
No such cases in Reporting Period.
2. Related-party transactions incurred by assets or equity purchase
No such cases in the Reporting Period.
3. Related-party transactions common external investment
No such cases in the Reporting Period.
4. Credits and liabilities with related parties
No such cases in the Reporting Period.
(5) Other significant related-party transactions
No such cases in the Reporting Period.
XVII. Significant contracts and their execution
1. Trusteeship, contracting and leasing
(1) Trusteeship
No such cases in the Reporting Period.
(2) Contract
No such cases in the Reporting Period.
(3) Lease
No such cases in the Reporting Period.
2. Significant guarantees
(1) Guarantees provided by the Company
Unit:RMB’0,000
Changchai Company, Limited Annual Report 2016
||||||||||
|-|-|-|-|-|-|-|-|-|
|Guarantees provided by the Company for external parties (excluding those for subsidiaries)|||||||||
|Guaranteed party|Disclosure date oftheguaranteelineannouncement|Line ofguarantee|Actualoccurrencedate (date ofagreementsigning)|Actualguaranteeamount|Type ofguarantee|Term ofguarantee|Due ornot|Guarantee for arelatedparty ornot|
|Guarantees provided by the Company for its subsidiaries|||||||||
|Guaranteed party|Disclosure date oftheguaranteelineannouncement|Line ofguarantee|Actualoccurrencedate (date ofagreementsigning)|Actualguaranteeamount|Type ofguarantee|Term ofguarantee|Due ornot|Guarantee for arelatedparty ornot|
|ChangzhouChangchaiHoushengAgriculturalEquipment Co.,Ltd.|December 2, 2016|2,000|December 2,2016|2,000|Jointliability|1 year|No|No|
|Total guarantee line approvedfor the subsidiaries during theReporting Period (B1)||2,000||Total actual occurredamount of guarantee forthe subsidiaries duringthe Reporting Period(B2)||2,000|||
|Total guarantee line that hasbeen approved for thesubsidiaries at the end of theReporting Period (B3)||2,000||Total actual guaranteebalance for thesubsidiaries at the endof the Reporting Period(B4)||2,000|||
|Guarantees provided by the subsidiaries of the Company for subsidiaries|||||||||
|Guaranteed party|Disclosure date oftheguaranteelineannouncement|Line ofguarantee|Actualoccurrencedate (date ofagreementsigning)|Actualguaranteeamount|Type ofguarantee|Term ofguarantee|Due ornot|Guarantee for arelatedparty ornot|

Changchai Company, Limited Annual Report 2016
||||||
|-|-|-|-|-|
|Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees)|||||
|Total guarantee line approvedduring the Reporting Period(A1+B1+C1)|2,000|Total actual occurredamount of guaranteeduring the ReportingPeriod (A2+B2+C2)|2,000||
|Total guarantee line that hasbeen approved at the end ofthe Reporting Period(A3+B3+C3)|2,000|Total actual guaranteebalance at the end ofthe Reporting Period(A4+B4+C4)|2,000||
|Proportion of total actual guarantee amount（A4+B4+C4）in the net assets of the Company||0.86%|||
|Of which:|||||
|Guarantee amount provided for shareholders, actual controllers and its relatedparties(D)||||0|
|Amount of debt guarantee provided for the guaranteed party whose asset-liabilityratio is not less than 70% directly or indirectly（E）||||0|
|Part of the amount of the total guarantee over 50% of net assets （F）||||0|
|Total amount of the above three guarantees （D+E+F）||||0|
|Explanation on possibility to bear joint liability due to undue guarantees (if any)||||Not applicable|
|Explanation on the external guarantees in violation of stipulated procedures (ifany)||||Not applicable|

(2) Illegal external guarantee
No such case during Reporting Period
3. Cash assets management entrustment
(1) Wealth management entrustment
Unit:RMB’0,000
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Name ofthe trustee|Relatedtransactionornot|Type|Amount|Initialdate|EndedDate|Remunerationdeterminationmethod|PrincipalamountactuallyreceivedinReporting Period|Withdrawnimpairmentprovision( if any)|Estimateprofit|Amount ofactualprofitsorlossesinReporti|Actualwithdraw ofprofitsorlossesin|

Changchai Company, Limited Annual Report 2016
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||||||||ngPeriod|ReportingPeriod|
|Bank ofJiangshu|No|Break-evenfloatingproceedsfinancialproducts|1,000|August26, 2015|February24, 2016|One-timeconfirmation whenexpired|1000|17.95|17.95|17.95|
|Bank ofJiangshu|No|Break-evenfloatingproceedsfinancialproducts|1,000|November 3, 2015|May 4,2016|One-timeconfirmation whenexpired|1000|18.45|18.45|18.45|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|October20, 2015|January1, 2016|One-timeconfirmation whenexpired|300|4.19|4.19|4.19|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|500|December 20,2015|February29, 2016|One-timeconfirmation whenexpired|500|7.84|7.84|7.84|
|ZhongxinSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|September 21,2015|March16, 2016|One-timeconfirmation whenexpired|300|9.27|9.27|9.27|
|ZhongxinSecurities|No|Not break-evenfloatingproceedsfinancialproducts|100|September 30,2015|March30, 2016|One-timeconfirmation whenexpired|100|2.58|2.58|2.58|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|February23, 2016|May 24,2016|One-timeconfirmation whenexpired|300|4.19|4.19|4.19|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|March23, 2016|September19, 2016|One-timeconfirmation whenexpired|300|8.58|8.58|8.58|

Changchai Company, Limited Annual Report 2016
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|June 1,2016|November29, 2016|One-timeconfirmation whenexpired|300|8.14|8.14|8.14|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|August 9,2016|November9, 2016|One-timeconfirmation whenexpired|300|3.81|3.81|3.81|
|ZhongxinSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|March18, 2016|July 6,2016|One-timeconfirmation whenexpired|300|4.62|4.62|4.62|
|ShanghaiYi DezhenEquityInvestmentManagementCenter(LimitedPartnership)|No|Not break-evenfloatingproceedsfinancialproducts|200|March24, 2016|September28, 2016|Quarterlyconfirmation|200|7.80|7.80|7.80|
|ShanghaiYi DezhenEquityInvestmentManagementCenter(LimitedPartnership)|No|Not break-evenfloatingproceedsfinancialproducts|100|May 13,2016|November23, 2016|Quarterlyconfirmation|100|3.68|3.68|3.68|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|November1, 2016|February8, 2017|One-timeconfirmation whenexpired|0|3.90|||

Changchai Company, Limited Annual Report 2016
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|DonghaiSecurities|No|Not break-evenfloatingproceedsfinancialproducts|300|November16, 2016|May 20,2017|One-timeconfirmation whenexpired|0|7.80|||
|ShanghaiYi DezhenEquityInvestmentManagementCenter(LimitedPartnership)|No|Not break-evenfloatingproceedsfinancialproducts|200|November 1,2016|May 5,2017|Quarterlyconfirmation|0|7.30|||
|Total|||5,800|--|--|--|5,000|120.10|101.10|--|
|Capital resources|||||||Self-own idle fund||||
|Cumulative amount of principal and earnings maturity that fail to recover|||||||0||||
|Involved in lawsuit|||||||Not applicable||||
|Disclosure date of announcement on wealth management entrustmentreviewed and approved by the Board of Directors|||||||January 13, 2015||||
|Disclosure date of announcement on wealth management entrustmentreviewed and approved by the Board of Shareholders|||||||Not applicable||||
|Whether there is wealth management entrustment plan in future or not?|||||||Yes||||

（2）Entrustment loans
No such case during Reporting Period
(4) Other significant contracts
No such case during Reporting Period
XVIII. Other significant events
No such case during Reporting Period
Changchai Company, Limited Annual Report 2016 XIX. Significant events of subsidiaries
□ Applicable√ Not applicable
XX. Social responsibilities
□ Applicable√ Not applicable
XXI. Corporation bonds
The Company has no corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this Report or were due but could not be redeemed in full.
Changchai Company, Limited Annual Report 2016 Section VI. Change in Shares& Shareholders
I. Changes in shares
Unit: share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before the change||Increase/decrease (+/-)|||||After the change||
||Amount|Proportion|Newlyissueshare|Bonusshares|Capitalization ofpublicreserves|Other|Subtotal|Amount|Proportion|
|I. Restricted shares|0|0.00%||||||0|0.00%|
|1.Shares held by the state|0|0.00%||||||0|0.00%|
|2. Shares held bystate-own Legal-person|0|0.00%||||||0|0.00%|
|3. Shares held by otherdomestic investors|0|0.00%||||||0|0.00%|
|Among which: sharesheld by domestic legalperson|0|0.00%||||||0|0.00%|
|Shares held bydomestic natural person|0|0.00%||||||0|0.00%|
|4.Oversea shareholdings|0|0.00%||||||0|0.00%|
|Among which: sharesheld by oversea legalperson|0|0.00%||||||0|0.00%|
|Shares held byoversea natural person|0|0.00%||||||0|0.00%|
|II. Shares not subject totrading moratorium|561,374,326|100.00%||||||561,374,326|100.00%|
|1. RMB ordinary shares|411,374,326|73.28%||||||411,374,326|73.28%|
|2. Domestically listedforeign shares|150,000,000|26.72%||||||150,000,000|26.72%|
|3. Oversea listed foreignshares|0|0.00%||||||0|0.00%|
|4. Other|0|0.00%||||||0|0.00%|
|III. Total shares|561,374,326|100.00%||||||561,374,326|100.00%|

Changchai Company, Limited Annual Report 2016 II. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholding
Unit: share
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Total numberof commonshareholders atthe period-end|49,929|Total number ofcommonshareholders at theprior month-endbefore the disclosureof this Report||50,464||Total number ofpreferenceshareholders withresumed voting rightsat the period-end (ifany)||0|Total number ofpreferenceshareholders withresumed voting rightsat the prior month-endbefore the disclosureof this Report (if any)|||0||
|5% or greater shareholders or the top 10 shareholders||||||||||||||
|Name of shareholder|||Nature ofshareholder|Shareholdingpercentage(%)|Total sharesheld at theperiod-end||Increase/decreaseduring thisReportingPeriod|Number ofrestrictedsharesheld||Number ofnon-restricted shares held|Pledged orfrozen shares|||
||||||||||||Status||Number|
|State-owned Assets Supervision andAdministration Commission ofChangzhou Municipal People’sGovernment|||On behalf ofthegovernment|30.43%|170,845,236|||||170,845,236||||
|Bosera Value Growth Fund|||Other|2.49%|14,000,000|||||14,000,000||||
|Galaxy Futures Co., Ltd.-GalaxyFutures Shengshi No. 2 AssetManagement Plan|||Other|1.05%|5,915,274|||||5,915,274||||
|China Construction Bank-BoseraValue Growth No. 1 Fund|||Other|0.96%|5,400,000|||||5,400,000||||
|KGI Asia Limited|||Foreigncorporation|0.59%|3,324,845|||||3,324,845||||
|Rongtong Capital-IndustrialBank-Rongtong Capital Rongteng No.11 Asset Management Plan|||Other|0.56%|3,121,200|||||3,121,200||||
|Bank of Communications-EverbrightPramerica State-owned EnterpriseReform Theme Stock Fund|||Other|0.53%|2,950,000|||||2,950,000||||
|Zhong Ou Asset Management-Bankof China-Ping An Life Insurance-Zhong Ou Asset Management - PingAn Life Insurance EntrustedInvestment No. 1 Asset ManagementPlan|||Other|0.34%|1,899,930|||||1,899,930||||
|Li Liang|||Domesticindividual|0.33%|1,827,445|||||1,827,445||||

Changchai Company, Limited Annual Report 2016
|||||||||
|-|-|-|-|-|-|-|-|
|Vanguard Total International StockIndex Fund|Foreigncorporation|0.29%|1,626,592|||1,626,592||
|Strategic investors or general corporations becomingtop-ten shareholders due to placing of new shares||N/A||||||
|Related or acting-in-concert parties among theshareholders above||It is unknown whether there is among the top 10 tradable shareholders and the top10 non-restrictedly tradable shareholders any related parties or acting-in-concertparties as defined in the Administrative Measures for Information RegardingShareholding Alteration.||||||
|Shareholdings of the top ten non-restricted shareholders||||||||
|Name of shareholder||||Number of non-restrictedshares held at theperiod-end|Type of shares|||
||||||Type||Number|
|State-owned Assets Supervision and Administration Commission ofChangzhou Municipal People’s Government||||170,845,236|RMB ordinary shares||170,845,236|
|Bosera Value Growth Fund||||14,000,000|RMB ordinary shares||14,000,000|
|Galaxy Futures Co., Ltd.-Galaxy Futures Shengshi No. 2 AssetManagement Plan||||5,915,274|RMB ordinary shares||5,915,274|
|China Construction Bank-Bosera Value Growth No. 1 Fund||||5,400,000|RMB ordinary shares||5,400,000|
|KGI Asia Limited||||3,324,845|Domestically listedforeign shares||3,324,845|
|Rongtong Capital-Industrial Bank-Rongtong Capital Rongteng No. 11Asset Management Plan||||3,121,200|RMB ordinary shares||3,121,200|
|Bank of Communications-Everbright Pramerica State-ownedEnterprise Reform Theme Stock Fund||||2,950,000|RMB ordinary shares||2,950,000|
|Zhong Ou Asset Management-Bank of China-Ping An Life Insurance-Zhong Ou Asset Management - Ping An Life Insurance EntrustedInvestment No. 1 Asset Management Plan||||1,899,930|RMB ordinary shares||1,899,930|
|Li Liang||||1,827,445|RMB ordinary shares||1,827,445|
|Vanguard Total International Stock Index Fund||||1,626,592|Domestically listedforeign shares||1,626,592|
|Related or acting-in-concert parties among the top ten non-restrictedlytradable share holders and between the top ten non-restrictedlytradable share holders and the top ten shareholders||||It is unknown whether there is among the top 10 tradableshareholders and the top 10 non-restrictedly tradable shareholdersany related parties or acting-in-concert parties as defined in theAdministrative Measures for Information Regarding ShareholdingAlteration.||||
|Top ten common shareholders conducting securities margin trading||||Shareholder Li Liang held a total of 1,827,445 shares in theCompany, representing a stake of 0.33%, through the clientaccount of collateral securities for margin trading of Ping AnSecurities Co., Limited.||||

There was no shareholder of a company conduct the transaction of repurchase under the agreement during the
Reporting Period.
Changchai Company, Limited Annual Report 2016 2. Particulars about the controlling shareholder
Nature of controlling shareholder: Local state-controlled
Type of controlling shareholder: legal person
||||||
|-|-|-|-|-|
|Name of controllingshareholder|Legalrepresentative /companyprincipal|Date ofestablishment|Organization code|Business scope|
|State-owned AssetsSupervision andAdministrationCommission ofChangzhou MunicipalPeople’s Government|Lu Qiang||01411025-1|Not applicable|
|Shares held by thecontrolling shareholder inother listed companies byholding or shareholdingduring the ReportingPeriod|Not applicable||||

The controlling shareholder did not change during the Reporting Period
3. Particulars about actual controller
Nature of actual controllers: Local state-owned assets management institutions
Type of actual controller: legal person
||||||
|-|-|-|-|-|
|Name of the actualcontroller|Legalrepresentative /companyprincipal|Date ofestablishment|Organization code|Business scope|
|State-owned AssetsSupervision andAdministrationCommission ofChangzhou MunicipalPeople’s Government|Lu Qiang||01411025-1|Not applicable|
|Equity of shareholding andparticipating shares ofactual controllers in otherdomestic and foreign listedcompany during theReporting Period|Not applicable||||

Changchai Company, Limited Annual Report 2016 The actual controller did not change during the Reporting Period
The ownership and controlling relationship between the actual controller of the Company and the Company is detailed as follows:
STATE-OWNED ASSETS SUPERVISION AND ADMINISTRATION
COMMISSION OF CHANGZHOU MUNICIPALPEOPLE’S GOVERNMENT
30.43%
CHANGCHAI COMPANY, LIMITED
The actual controller controls the Company via trust or other ways of asset management
□ Applicable√ Not applicable
4. Particulars about other corporate shareholders with shareholding proportion over10%
□ Applicable√ Not applicable
5. Particulars about restriction of reducing holding-shares of controlling shareholders, actual controller, restructuring parties and other commitment entities
□ Applicable√ Not applicable
Section VII. Preference Shares
□ Applicable√ Not applicable
There was no preferred stock during Reporting Period.
Changchai Company, Limited Annual Report 2016 Section VIII. Directors, Supervisors, Senior Management Staff& Employees
I. Changes in shareholding of directors, supervisors and senior management staff
|||||||||
|-|-|-|-|-|-|-|-|
|Name|Position|Current/former|Gender|Age|Beginning date ofoffice term|Ending date ofoffice term|Number of sharesheld atperiod-end(share)|
|ShiXinkun|Chairman of theBoard|Current|Male|53|October 18, 2016|October 17, 2019|0|
|HeJianguang|Vice Chairman ofthe Board|Current|Male|53|October 18, 2016|October 17, 2019|0|
|ZhangXin|Director,General Manager|Current|Male|51|October 18, 2016|October 17, 2019|0|
|ShiJianchun|Director,Vice-generalManager|Current|Male|55|October 18, 2016|October 17, 2019|0|
|Xu Qian|Director|Current|Female|54|October 18, 2016|October 17, 2019|0|
|ZhangQiong|Director|Current|Female|59|October 18, 2016|October 17, 2019|0|
|LiMinghui|Independentdirector|Current|Male|43|October 18, 2016|October 17, 2019|0|
|Jia Bin|Independentdirector|Current|Male|39|October 18, 2016|October 17, 2019|0|
|FengGenfu|Independentdirector|Current|Male|60|October 18, 2016|October 17, 2019|0|
|YinLihou|Vice-generalManager|Current|Male|53|October 18, 2016|October 17, 2019|0|

Changchai Company, Limited Annual Report 2016
|||||||||
|-|-|-|-|-|-|-|-|
|Xu Yi|Vice-generalManager|Current|Male|53|October 18, 2016|October 17, 2019|0|
|LiuXiaoyun|Vice-generalManager|Current|Male|55|October 18, 2016|October 17, 2019|0|
|WeiJinxiang|Vice-generalManager|Current|Male|54|October 18, 2016|October 17, 2019|0|
|NiMingliang|Chairman of theSupervisor|Current|Male|50|October 18, 2016|October 17, 2019|0|
|Zhu Min|Supervisor|Current|Male|53|October 18, 2016|October 17, 2019|0|
|XieGuozhong|Supervisor|Current|Male|48|October 18, 2016|October 17, 2019|0|
|LuZhonggui|Supervisor|Current|Male|50|October 18, 2016|October 17, 2019|0|
|Liu Yi|Supervisor|Current|Male|48|October 18, 2016|October 17, 2019|0|
|HeJianjiang|Secretary of theBoard|Current|Male|38|October 18, 2016|October 17, 2019|0|
|XueGuojun|Chairman of theBoard|Former|Male|54|June 26, 2013|October 18, 2016|0|
|XuZhenping|Director|Former|Male|60|June 26, 2013|October 18, 2016|0|
|ZhuangRongfa|Director|Former|Male|73|June 26, 2013|October 18, 2016|0|
|ShenNingwu|Independentdirector|Former|Male|75|June 26, 2013|October 18, 2016|0|
|ZhongLei|Supervisor|Former|Male|48|June 26, 2013|October 18, 2016|0|
|Total|--|--|--|--|--|--|0|

Changchai Company, Limited Annual Report 2016 II. Particulars about changes of Directors, Supervisors and Senior Executives
||||||
|-|-|-|-|-|
|Name|Position|Type|Date|Reason|
|He Jianguang|GeneralManager|Current|October 18, 2016|Change of the term|
|Zhang Xin|Vice-generalManager|Current|October 18, 2016|Change of the term|
|Xue Guojun|Chairman of theBoard|Former|October 18, 2016|Expiration of the term|
|Xu Zhenping|Director|Former|October 18, 2016|Expiration of the term|
|Zhuang Rongfa|Director|Former|October 18, 2016|Expiration of the term|
|Shen Ningwu|Independentdirector|Former|October 18, 2016|Expiration of the term|
|Zhong lei|Supervisor|Former|October 18, 2016|Expiration of the term|

 III. Resumes of important personnel
Major background, main working experiences and responsibilities of current directors, supervisors and senior management staff
Shi Xinkun: He acted as vice-president of Changzhou Investment Group Co., Ltd. Now, he is the Chairman of the Board in our company.
He Jianguang: He successively acted as General Manager, Director, and Chief Engineer in our company. Now, he is the vice Chairman of the Board of our company.
Zhang Xin: He successively took the posts of Sales Manager, General Manager Assistant, and vice-general manager in our company. Now, he acts as Director and General Manager of our company.
Shi Jianchun: He successively acted as Party Secretary, Director, Vice-general Manager and Secretary of the Board of the Company. Now he is the Party Secretary, Director, Vice-general Manager and Chairman of the Board of Housheng Investment Co., Ltd.
Xu Qian: She successively worked as Clerk of Commerce of Changzhou Bureau of Finance, section member of Commercial Office, Deputy Principal Staff Member, Deputy Principal Staff Member, Deputy Section Chief of State-owned office of Changzhou Bureau of Finance and Section Chief of Changzhou SASAC Property Rights and Profits Management. Now, she is Deputy Researcher of Changzhou SASAC.
Zhang Qiong: She successively acted as Lecturer and Associate Professor in Department of Law of Anhui University, Deputy Director of Intellectual Property Office and Director of Legal Affairs Office in Shenzhen Huawei
Technologies Co., Ltd, Senior Manager, Assistant Secretary General of Shenzhen Innovation Investment Group Ltd,
Director, General Manager, and consultant of Anhui Hongtu Venture Capital Co., Ltd. Now, she works as Partner,
Changchai Company, Limited Annual Report 2016 General Manager of Board, and Secretary General of Xie Tong Funds Management Limited.
Feng Genfu: he held the post of Dean of Institute of Economics and Finance inXi’an Jiaotong University. Now, he is Professor and Doctoral Advisor of Institute of Economics and Finance inXi’an Jiaotong University, Independent Director of Tianmao Industry Group Co., Ltd,Xi’an Baode Automation Co., Ltd, and DatangInternational Power Generation Co., Ltd.
Li Minghui: He acted as Lecturer and Associate Professor of School of Accounting in Xiamen University, Associate Professor and Professor of School of Accounting in Nanjing University Business School. Now he is the Doctoral Supervisor of School of Accounting in Nanjing University Business School, independent director of Jiangsu DayBright Intelligent Electric Co., Ltd, Baosheng Science& Technology Innovation Co., Ltd, Nanjing Securities Co., Ltd, and Jiangsu Fasten Co., Ltd.
Jia Bin: He successively acted as the Deputy Director of No.1 Research office in Tianjin Research Institute of Internal Combustion Engine, now he acts as the Director of No.1 Research office in Tianjin Research Institute of Internal Combustion Engine and Secretary-general of CICEIA Small Gasoline Engine Branch.
Yin Lihou: He worked as Minister of Human Resources Department and General Manager Assitant. Now he acts as Deputy General Manager of the Company, and the Chairman of the Board of Changwan Co., Ltd.
Xu Yi: He successively took the posts of Director of Technical Center and General Manager Assitant. Now he is Vice-general Manager of the Company.
Liu Xiaoyun: He successively acted as Multi-cylinder Engine Factory Director, Minister of Purchase Department, and General Manager Assitant in the Company. Now he acts as Deputy General Manager of the Company. Wei Jinxiang: He successively held the posts of Department Director of Quality Assurance Department, General Manager Assistant of the Company. Now he acts as Deputy General Manager of the Company.
Ni Mingliang: Now he acts as Deputy Party Secretary, Secretary of Comission, Chairman of Labor Union and Chairman of the Supervisory.
Zhu Min: Now he acts as Deputy Section Chief and Principal Staff Member of Changzhou SASAC Property Rights, and Section Supervisor of Supervisory.
Xie Guozhong: Now he acts as General Manager Assitant, Secretary of Party General Branch of the Sales Company, General Manager and Supervisor of the Company and Director of Housheng Agriculture Equipment.
Lu Zhonggui: Now he acts as Minister of political Department, Office Director, Secretary of Organ Party General Branch as well as supervisor of the Company.
Liu Yi: He successively took the posts of Assistant Minister of Enterprise Management Department. Now he acts as Deputy Director of Finance Department and Supervisor of the Company and Supervisor of Changwan Company. He Jianjiang: He successively acted as Assistant Minister, Vice Minister of Investment and Development Department in our Company. Now he is secretary of the board and Minister of Investment and Development Department in our Company.
Changchai Company, Limited Annual Report 2016 Post-holding in shareholder units
|||||||
|-|-|-|-|-|-|
|Name ofthe personholdingany post inanyshareholder unit|Name of the shareholderunit|Position in theshareholder unit|Beginning date ofoffice term|Ending date ofoffice term|Receivespayment from theshareholder unit?|
|Xu Qian|State-owned AssetsSupervision andAdministrationCommission ofChangzhou MunicipalPeople’s Government|Deputy Researcher|July 1, 2014||Yes|
|Zhu Min|State-owned AssetsSupervision andAdministrationCommission ofChangzhou MunicipalPeople’s Government|Section Supervisor ofSupervisory|June 1, 2016||Yes|

Post-holding in other units
|||||||
|-|-|-|-|-|-|
|Name of the||||||
|person||||||
||||||Receives|
|holding any||Position in the other|Beginning date of|Ending date||
||Name of the other unit||||payment from|
|post in any||unit|office term|of office term||
||||||other units?|
|shareholder||||||
|unit||||||
|||Partner, General||||
|Zhang|Xie Tong Funds|||||
|||Manager of Board,|||Yes|
|Qiong|Management Limited|||||
|||and Secretary General||||
||Nanjing University|||||
|Li Minghui||Doctoral Supervisor|April 1, 2012||Yes|
||Jiangsu DayBright|||||
||Intelligent Electric Co.,|Independent Director|November 25, 2014|||
||Ltd|||||
||Baosheng Science &|Independent Director|December 3, 2014|||
||Technology Innovation|||||

Changchai Company, Limited Annual Report 2016
||||||
|-|-|-|-|-|
||Co., Ltd||||
||Nanjing Securities Co.,|Independent Director|||
||||May 12, 2016||
||Ltd||||
||Jiangsu Fasten Co., Ltd|Independent Director|April 20, 2015||
||Tianjin Research||||
|||the Director of No.1|||
||Institute of Internal||March 1, 2009||
|||Research office|||
||Combustion Engine||||
|Jia Bin||Secretary-general of||Yes|
||China Internal||||
|||CICEIA Small|||
||Combustion Engine||November 1, 2011||
|||Gasoline Engine|||
||Industry Association||||
|||Branch.|||
||Institute of Economics||||
|||Professor and|||
||and Finance in Xi’an||March 1, 2016||
|||Doctoral Advisor|||
||Jiaotong University||||
||Tianmao Industry||||
|||Independent Director|May 4, 2016||
|Feng Genfu|Group Co., Ltd||||
|||||Yes|
||Xi’an Baode||||
|||Independent Director|August 3, 2015||
||Automation Co., Ltd||||
||DatangInternational||||
||Power Generation Co.,|Independent Director|June 30, 2016||
||Ltd.||||

IV. Remuneration for directors, supervisors and senior management
Decision-making procedure, determining basis and actual payment for the remuneration of directors, supervisors and senior management
In 2016, the monthly salaries of directors, supervisors and senior executives in the Company were in line with the stipulations of relevant salary management and grade standards, and the benefits of the Company and assessment results. The Director Xu Qian, Supervisor Zhu Min obtained salaries in shareholders' entities.
Remuneration of the directors, supervisors and senior management of the Company during the Reporting Period is as follows:
Unit:RMB’0,000
||||||||
|-|-|-|-|-|-|-|
|Name|Position|Gender|Age|Current/former|Totalbefore-taxremunerationgained fromthe Company|Whether gainedremunerationfrom the relatedparties of theCompany|

Changchai Company, Limited Annual Report 2016
||||||||
|-|-|-|-|-|-|-|
|Shi Xinkun|Chairman of the Board|Male|53|Current|11.82|No|
|He Jianguang|Vice Chairman of the Board|Male|53|Current|47.3|No|
|Zhang Xin|Director,General Manager|Male|51|Current|43.75|No|
|Shi Jianchun|Director,Vice-general Manager|Male|55|Current|47.3|No|
|Xu Qian|Director|Female|54|Current|0|Yes|
|Zhang Qiong|Director|Female|59|Current|0|No|
|Li Minghui|Independent director|Male|43|Current|5|No|
|Jia Bin|Independent director|Male|39|Current|5|No|
|Feng Genfu|Independent director|Male|60|Current|1.25|No|
|Yin Lihou|Vice-general Manager|Male|53|Current|41.15|No|
|Xu Yi|Vice-general Manager|Male|53|Current|42.57|No|
|Liu Xiaoyun|Vice-general Manager|Male|55|Current|41.15|No|
|Wei Jinxiang|Vice-general Manager|Male|54|Current|39.26|No|
|Ni Mingliang|Chairman of the Supervisor|Male|50|Current|37.84|No|
|Zhu Min|Supervisor|Male|53|Current|0|Yes|
|Xie Guozhong|Supervisor|Male|48|Current|30.95|No|
|Lu Zhonggui|Supervisor|Male|50|Current|16.75|No|
|Liu Yi|Supervisor|Male|48|Current|16.36|No|
|He Jianjiang|Secretary of the Board|Male|38|Current|22.33|No|
|Xue Guojun|Chairman of the Board|Male|54|Former|39.41|No|
|Xu Zhenping|Director|Male|60|Former|42|No|
|Zhuang Rongfa|Director|Male|73|Former|0|No|
|Shen Ningwu|Independent director|Male|75|Former|2|No|
|Zhong lei|Supervisor|Male|48|Former|0|Yes|
|Total|--|--|--|--|533.19|--|

 Situations of equity incentives awarded to the directors, supervisors and senior management of the Company during the Reporting Period
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2016 V Employees
1. Number, functions and educational backgrounds of employees
|||
|-|-|
|Number of in-service employees of the Company|2,884|
|Number of in-service employees of main subsidiaries|576|
|Total number of in-service employees|3,460|
|Total number of employees with remuneration in this ReportingPeriod|3,460|
|Number of retirees to whom the Company or its main subsidiariesneed to pay retirement pension|0|
|Functions||
|Function|Number of employees|
|Production|2404|
|Sales|219|
|Technical|365|
|Financial|39|
|Administrative|324|
|Other|109|
|Total|3460|
|Educational backgrounds||
|Educational background|Number of employees|
|Junior high school graduates and below|1,549|
|High school graduates|1,062|
|College graduates and technical secondary school graduates|540|
|Bachelors|287|
|Masters above|22|
|Total|3,460|

 2. Employee remuneration policy
The Company always adhered to the principle of tilting the remuneration incentive mechanism towards excellent talents, so as to display the roles of various professional technicians, management staffs and skilled
backbones. Besides, it adhered to the principle of increasing theemployee’s income integrated with increasing
labor production efficiency and production& operation efficiency, so as to perfect the salary structure and further
increaseemployees’ income steadily.
Changchai Company, Limited Annual Report 2016 3. Employee training plans
The Company established the Management Rules on the Education& Training for Employees, aiming to enhanceemployees’ quality and try its best to cultivate a team of faithful and highly professional talents. Besides, it innovated the training mechanism, optimized the training environment, and reinforced to encourage employees to attend various training, so as to inspire theemployees’ potential to the maximum extent and further promote the sustainable development of the Company.
4. Labor outsourcing
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2016 Section IX Corporate Governance
I Basic situation of corporate governance
In the Reporting Period, the Company was strictly in line with laws, statutes such as Company Law, Securities Laws, Code of Corporate Governance of Listed Companies, Guide Opinion on Establishment of Independent Director System by Listed Companies and Guidelines on Internal Controls of Listed Companies and so on, continuously perfected corporate governance, established and accomplished internal management and control system, consistently and deeply put forward corporate governance activities, so as to further normalized operation of the Company, raising corporate governance level, laying a guard for steady and healthy development of the Company, protect legal rights and interests of the Company and all shareholders.
The Company promulgated or revised a series of internal control system through all aspects of normal operation and management activities in accordance with each national laws and regulations, characteristics of the industry, operation and self-managing business, and improved it continuously, and finally formed a normative management system. And formulated a series of management system, process and standard covered each operation link and level of the financial assets control, human resources management, quality environment management and internal audit supervisor etc., which ensured all the work had rules to follow.
Was there any material incompliance with the regulatory documents issued by the CSRC governing the governance of listed companies?
No.
II Independence of businesses, personnel, asset, organizations and finance which are separate from the controlling shareholder
The Company was totally independent from the controlling shareholder State-owned Assets Supervision and Administration Commission of Changzhou MunicipalPeople’s Government in terms of assets, business, personnel, organization and financing, with independent& complete business and capability to operate independently. III Horizontal competition
□ Applicable√ Not applicable
IV Annual and special meetings of shareholders convened during this Reporting Period 1. Meetings of shareholders convened during this Reporting Period
|||||||
|-|-|-|-|-|-|
|Meeting|Type|Investorparticipationratio|Convened date|Disclosure date|Index todisclosedinformation|
|2015 Annual Meeting ofShareholders|Annual|0.05%|05/26/2016|05/27/2016|2016-011|
|The 1st Special Meeting ofShareholders in 2016|Special|0.04%|10/18/2016|10/19/2016|2016-021|

Changchai Company, Limited Annual Report 2016 2. Special meetings of shareholders convened at the request of preference shareholders with resumed voting rights
□ Applicable√ Not applicable
V Performance of independent directors in this Reporting Period
1. Attendance of independent directors in board meetings and meetings of shareholders
||||||||
|-|-|-|-|-|-|-|
|Attendance of independent directors in board meetings|||||||
|Independentdirector|Due presencein thisReportingPeriod (times)|Presence onsite (times)|Presence bytelecommunication (times)|Presencethrough aproxy (times)|Absence(times)|Absent for twoconsecutive times|
|Shen Ningwu|10|2|8|0|0|No|
|Feng Genfu|2|1|1|0|0|No|
|Li Minghui|12|2|9|1|0|No|
|Jia Bin|12|3|9|0|0|No|
|Attendance of independentdirectors in meetings ofshareholders as non-votingdelegates (times)||2|||||

2. Objections raised by independent directors on issues of the Company
Did any independent directors raised any objections on issues of the Company?
No such cases in this Reporting Period.
3. Other details about the performance of duties by independent directors
The independent directors of the Company in line with the law, rules, normative documents and obligations given by the Company of the Company law, Article of Associations and Independent Directors Work Rules, comprehensively focused on the development and operation of the Company, actively attended the general meeting of shareholder and meeting of board of directors, and given independent opinions for the significant events of the Company, and effectively maintained the profits of the Company and all the shareholders. The Company actively listened to the suggestions from the independent directors upon the significant events and adopted them.
Changchai Company, Limited Annual Report 2016 VI Performance of duties by specialized committees under the Board during this Reporting Period
1. Summary Report on Responsibility Performance of the Audit Committee under the Board of Directors: During the Reporting Period, the Audit Committee under the Board of Directors performed its duty according to the diligent and responsible principle, based on relevant regulations such as the Company Law, the Guidelines for Corporate Governance of Listed Companies, the Articles of Association as well as provisions in the Enforcement Regulation of the Audit Committee under the Board of Director of the Company.
(1) Major work of Audit Committee in Reporting Period:
1) Periodically examined the working plan and execution of inner control of the Company;
2) Communicated fully with the CPAs firm on plan and content of audit;
3) Urged the CPAs firm to summit report as scheduled;
4) The Audit Committee reviewed the financial statements of the Company before the audit and after the issuance of preliminary opinion by the CPAs firm. After it communicated with the CPAs firm on some important items as well as major accounting estimation items, audit adjustment items and important accounting policies which were likely to have potential influence on the financial statements, it considered that the financial statements reflected the overall situation of the Company authentically, accurately and completely.
5) Submitted the summary report on annual audit of the Company conducted by the CPAs firm to the Board of Directors;
6) Advised to continue the appointment of Jiangsu Gongzheng Certified Public Accountants Co., Ltd as the audit institution of the Company in 2016.
(2) Written opinions on financial statements of the Company issued by the Audit Committee
1) On March 21, 2017, the Audit Committee the Audit Committee examined the financial statements of the Company after the certified public accountants had issued the preliminary opinion on the statements, and issued a written opinion as follows: The financial statements of the Company were prepared in accordance with the New Accounting Standards for Enterprises and relevant financial rules of the Company, and faithfully reflected the financial position of the Company as at December 31, 2016, as well as the business results and cash flows in 2016 in all material aspects.
2) With regard to the audited financial statements 2016, on April 11, 2017, the Audit Committee made the following resolution: the Audit Committee reviewed the financial statements 2016 audited by auditors, and believed that the said financial statements faithfully reflected the financial position of the Company as at December 31, 2016, as well as the business results and cash flows in 2016 in all material aspects. It agreed to submit the statements to the Board of Directors for examination and approval.
(3) Summary report on the audit work conducted by the CPAs firm in 2016:
Changchai Company, Limited Annual Report 2016 According to the annual audit plan jointly formulated by the Audit Committee and Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd, auditors communicated fully with the management personnel of the Company and members of the Audit Committee on the consolidation of financial statements, accounting adjustment, accounting policy and other accounting work needed to be improved, which helped both parties acquire a deeper understanding about the operation, financial process and implementation of the New Accounting Standards for Business Enterprises in the Company. With such understanding, the annual audit accountants would make more mature judgment to issue a fair audit conclusion.
The Audit Committee held that the CPAs firm conducted the audit strictly in accordance with provisions stipulated in the Independent Auditing Standards for CPAs of the PRC. The time of audit was sufficient, and the auditors with excellent ability to practice were deployed reasonably. The issuedauditor’s report fully reflected the financial position of the Company as at December 31, 2016, as well as the business results and cash flows in 2016, and the audit conclusion was in line with the actual situation of the Company.
(4) Resolution letter on renewing the employment of the CPAs firm:
The Audit Committee convened a meeting on April 11, 2017 to review the matter concerning the employment of a CPAs firm for the audit in 2017, and the review opinion was as follows:
Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd had accomplished the audit of the Company 2016, and theauditor’s report reflected the actual financial status of the Company in 2016 objectively and fairly. The Audit Committee was satisfied with the audit conducted by Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd and decided to continue to engage it as the audit institution of the Company in 2017. The said proposal was agreed to be submitted to the
4th
Session of the
8th
Board of Directors for review. 2. Summary Report on Responsibility Performance of Remuneration& Appraisal Committee under the Board of Directors:
The Remuneration& Appraisal Committee under the Board of Directors was composed of three Directors, including 2 Independent Directors and 1 Inner Director. And one of the Independent Directors assumed the position of Chairman of the Committee.
In the Reporting Period, the Remuneration& Appraisal Committee raised the proposal on implementing the appraisal of senior executives in 2016, based on the fulfillment of the main financial indicators and operation targets in 2016, which were determined in the Contract for Appraisal of Senior Executives in 2016.
In the Reporting Period, based on relevant regulations and rules, the Remuneration& Appraisal Committee examined the remuneration of theCompany’s senior executives in 2016 and issued opinions as follows:
The Remuneration& Appraisal Committee held that, the remuneration of theCompany’s senior executives in 2016 was in accordance with provisions in the Contract for Appraisal of Senior Executives in 2016, as well as the laws, regulations and rules of the Company.
Changchai Company, Limited Annual Report 2016 VII Performance of duties by the Supervisory Board
The Supervisory Board raised no objections in this Reporting Period.
VIII Appraisal and incentive for executive officers
The Company has established a fair and objective performance appraisal and incentive restraint mechanism for senior management staffs. The annual remuneration of senior management staffs consisted of the basic annual salary and performance appraisal bonus, and the basic annual salary was distributed monthly with a certain proportion, while the performance appraisal bonus was distributed after being appraised according to the appraisal scheme for senior management staffs signed between the Board of Directors and the managers for each year.
IX Internal control
1. Serious internal control defects found in this Reporting Period
□ Yes√ No
2. Internal control self-evaluation report
||||
|-|-|-|
|Disclosure date of the internalcontrol self-evaluation report|04/13/2017||
|Index to the disclosed internalcontrol self-evaluation report|2017-005||
|Total assets of the evaluated entitiesas a percentage in the consolidatedtotal assets|100.00%||
|Operating revenues of the evaluatedentities as a percentage in theconsolidated operating revenues|100.00%||
|Defect identification standards|||
|Type|Financial-report related|Non-financial-report related|
|Nature standard|The Company classified the defects as|Defects with the following random|
||serious defect, important defect and|characteristics should be|
||general defect according to the|recognized as serious defect:|
||influence degree from the internal|1) Seriously violated the national|
||control:|laws and administrative regulations|
||(1) Serious defect: refers to one or|and the normative documents;|
||multiple groups with control defect|2) “three significant one great”|
||which may lead the enterprise|event had not been through the|
||seriously deviates the control target;|collective decision-making|
||(2) Important defect: refers to one or|process;|
||multiple groups with control defect|3) the significant events involved|
||with the severity and the economic|with the production and operation|

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
||results lower than the great defect but|of the Company lacked of|
||may still lead the enterprise seriously|systematic control or the|
||deviates the control target;|institutional system was invalid;|
||(3) General defect: refers to other|4) the internal control of the|
||defect except for the great defect and|information disclosure was invalid,|
||significant defect.|which led the Company be open|
||Nature standards:|condemned by the supervision|
||defects with the following random|department;|
||characteristics should be recognized|5) the serious defect from the|
||as serious defect:|assessment results of the internal|
||1) the defect involves with the|control had not been revised.|
||malpractice of the Directors,||
||Supervisors and Senior Executives;||
||2) revised the disclosed financial||
||report;||
||3) CPAs discovered the great||
||misstatement among the current||
||financial statement while which could||
||not be found during the operating||
||process of the internal control;||
||4) the supervision from the Audit||
||Committee and the internal audit||
||institution of the enterprise was||
||invalid.||
|Quantitative standard||Refer to the quantitative criteria of|
||Quantitative standards:||
|||the internal control defect of the|
||The quantitative standards of||
|||financial report, to recognize the|
||recognizing the significant degree of||
|||quantitative criteria of the|
||the misstatement (including the false||
|||significant degree of the internal|
||negatives) of the consolidated||
|||control defect of the non-financial|
||financial report of the Company based||
|||report of the Company as:|
||on the data from the 2016||
|||Serious defect: possibly caused|
||consolidated statements was as:||
|||directly losses≥0.1% of the net|
||Serious defect: misstatement≥5% of||
|||assets|
||the annual profits||
|||Important defect: 0.05% of the net|
||Important defect: 2.5% of the annual||
|||assets≤possibly caused directly|
||profits≤misstatement ＜ 5% of the||
|||losses＜0.1% of the net assets|
||annual profits||
|||General defect: possibly caused|
||General defect＜2.5% of the annual||
|||directly losses＜0.05% of the net|
||profits||
|||assets|
|Number of seriousfinancial-report-related defects|0||
|Number of seriousnon-financial-report-related defects|0||
|Number of importantfinancial-report-related defects|0||
|Number of importantnon-financial-report-related defects|0||

Changchai Company, Limited Annual Report 2016 XAuditor’s report on internal control
|||
|-|-|
|Opinion paragraph in the auditor’s report on internal control||
|We believed that Changchai Company, Limited maintained effective internal control of the financial report insignificant aspects according to the Basic Norms of Internal Control and relevant regulations on December 31,2016.||
|Auditor’s report on internal controldisclosed or not|Disclosed|
|Disclosure date|04/13/2017|
|Index to the disclosed auditor’sreport on internal control|2017-005|
|Type of the auditor’s opinion|Standard unqualified opinion|
|Seriousnon-financial-report-related defects|None|

Indicate by tick mark whether any modified opinions are expressed by the CPAs firm in itsauditor’s report on theCompany’s internal control.
□ Yes√ No
Indicate by tick mark whether theauditor’s report on theCompany’s internal control issued by the CPAs firm is consistent with the self-evaluation report of the Board.
√ Yes□ No
Section X Corporate Bonds
The Company has no corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this Report or were due but could not be redeemed in full.
Changchai Company, Limited Annual Report 2016 Section XI Financial Report
IAuditor’s report
|||
|-|-|
|Type of auditor’s opinion|Standard unqualified opinion|
|Date of signing the auditor’s report|04/11/2017|
||Jiangsu Gongzheng Tianye Certified Public|
|Name of the auditor||
||Accountants LLP|
|No. of the auditor’s report|SGW [2017] No. A467|
|Name of CPA|Dai weizhong, He Taifeng|

Text of theAuditor’s Report
All shareholders of Changchai Company, Limited,
We have audited the accompanying financial statements of Changchai Company, Limited (the “Company”), which comprise theCompany’s and consolidated balance sheets as at December 31, 2016, theCompany’s and consolidated income statements, theCompany’s and consolidated cash flow statements, theCompany’s and consolidated statements of changes inshareholders’ equity for the year then ended, as well as the notes to the financial statements.
1. Themanagement’s responsibility for the financial statements
The management of the Company is responsible for the preparation of these financial statements as per the Accounting Standards for Business Enterprises. Such a responsibility includes: (1) designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; (2) selecting and adopting appropriate accounting policies; and (3) making rational accounting estimations.
2.Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with the Audit Standards for Chinese Registered Accountants, which require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risks assessments, the auditor considers the internal control related to the preparation of the financial statements so as to design proper audit procedures. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate, which provides a basis for us to express auditing opinion.
3.Auditor’s opinion
In our opinion, the financial statements of the Company have been prepared according to the Accounting Standards for Business Enterprises in all material aspects, which give a fair view of theCompany’s and consolidated financial positions as at December 31, 2016 and theCompany’s and consolidated operating results and cash flows for the year then ended.
Jiangsu Gongzheng Tianye Certified Public Accountants LLP Chinese CPA: Dai Weizhong
·
Wuxi China Chinese CPA: He Taifeng
April 11, 2017
Changchai Company, Limited Annual Report 2016 II Financial statements
Currency unit for the financial statements: RMB
1. Consolidated balance sheet
Prepared by Changchai Company, Limited
Unit: RMB
||||
|-|-|-|
|Item|December 31, 2016|December 31, 2015|
|Current assets:|||
|Monetary funds|670,703,802.02|601,312,715.62|
|Settlement reserve|||
|Interbank lendings|||
|Financial assets at fair value through profit/loss|||
|Derivative financial assets|||
|Notes receivable|501,070,279.01|498,502,274.42|
|Accounts receivable|359,279,821.69|308,596,920.50|
|Accounts paid in advance|15,483,475.43|12,882,271.70|
|Premiums receivable|||
|Reinsurance premiums receivable|||
|Receivable reinsurance contract reserve|||
|Interest receivable|||
|Dividends receivable|||
|Other accounts receivable|4,165,674.62|5,622,539.81|
|Financial assets purchased under agreements to resell|||
|Inventories|494,046,458.44|397,290,012.36|
|Assets held for sale|||
|Non-current assets due within one year|||
|Other current assets|39,669,983.12|60,304,691.41|
|Total current assets|2,084,419,494.33|1,884,511,425.82|
|Non-current assets:|||
|Loans and advances to customers|||
|Available-for-sale financial assets|820,072,500.00|502,980,000.00|
|Held-to-maturity investments|||
|Long-term accounts receivable|||
|Long-term equity investments|21,006,230.03|20,769,304.76|
|Investment property|55,072,689.23|57,281,030.03|
|Fixed assets|553,678,938.87|554,601,893.23|

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Construction in progress|89,781,047.21|108,198,455.01|
|Engineering materials|||
|Disposal of fixed assets|||
|Productive living assets|||
|Oil-gas assets|||
|Intangible assets|99,915,137.62|103,101,462.47|
|R&D expenses|||
|Goodwill|||
|Long-term deferred expenses|||
|Deferred tax assets|911,229.42|962,530.88|
|Other non-current assets|||
|Total non-current assets|1,640,437,772.38|1,347,894,676.38|
|Total assets|3,724,857,266.71|3,232,406,102.20|
|Current liabilities:|||
|Short-term borrowings|10,000,000.00|17,000,000.00|
|Borrowings from the Central Bank|||
|Money deposits accepted and inter-bank deposits|||
|Interbank borrowings|||
|Financial liabilities at fair value through profit/loss|||
|Derivative financial liabilities|||
|Notes payable|276,090,000.00|238,200,000.00|
|Accounts payable|605,424,726.65|535,978,470.07|
|Accounts received in advance|40,890,620.69|26,665,671.38|
|Financial assets sold for repurchase|||
|Fees and commissions payable|||
|Payroll payable|58,549,908.90|60,309,349.29|
|Taxes payable|9,622,332.76|10,798,062.93|
|Interest payable|||
|Dividends payable|3,891,433.83|3,891,433.83|
|Other accounts payable|204,446,810.56|201,151,632.46|
|Reinsurance premiums payable|||
|Insurance contract reserve|||
|Payables for acting trading of securities|||
|Payables for acting underwriting of securities|||
|Liabilities held for sale|||

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Non-current liabilities due within one year|||
|Other current liabilities|2,454,381.75|2,403,287.06|
|Total current liabilities|1,211,370,215.14|1,096,397,907.02|
|Non-current liabilities:|||
|Long-term borrowings|||
|Bonds payable|||
|Of which: Preference shares|||
|Perpetual bonds|||
|Long-term accounts payable|||
|Long-term payroll payable|||
|Special payables|||
|Provisions|||
|Deferred income|61,057,232.08|53,121,605.70|
|Deferred tax liabilities|109,949,700.00|62,385,825.00|
|Other non-current liabilities|||
|Total non-current liabilities|171,006,932.08|115,507,430.70|
|Total liabilities|1,382,377,147.22|1,211,905,337.72|
|Owners’ equity:|||
|Share capital|561,374,326.00|561,374,326.00|
|Other equity instruments|||
|Of which: Preference shares|||
|Perpetual bonds|||
|Capital reserve|164,328,665.43|164,328,665.43|
|Less: Treasury shares|||
|Other comprehensive income|623,048,300.00|353,519,675.00|
|Special reserve|11,715,417.22|10,069,746.98|
|Surplus reserve|311,880,248.88|305,758,285.91|
|Provisions for general risks|||
|Retained earnings|651,365,935.39|607,859,611.69|
|Equity attributable to owners of the Company|2,323,712,892.92|2,002,910,311.01|
|Minority interests|18,767,226.57|17,590,453.47|
|Total owners’ equity|2,342,480,119.49|2,020,500,764.48|
|Total liabilities and owners’ equity|3,724,857,266.71|3,232,406,102.20|

Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin
Head of the accounting department: Jiang He
Changchai Company, Limited Annual Report 2016 2. Balance sheet of the Company
Unit: RMB
||||
|-|-|-|
|Item|December 31, 2016|December 31, 2015|
|Current assets:|||
|Monetary funds|637,109,762.94|572,530,396.20|
|Financial assets at fair value through profit/loss|||
|Derivative financial assets|||
|Notes receivable|500,870,279.01|490,777,874.42|
|Accounts receivable|308,800,670.90|263,878,166.23|
|Accounts paid in advance|9,845,904.32|6,512,574.55|
|Interest receivable|||
|Dividends receivable|||
|Other accounts receivable|3,694,673.93|4,885,363.01|
|Inventories|430,345,089.36|348,179,430.41|
|Assets held for sale|||
|Non-current assets due within one year|||
|Other current assets|24,225,031.87|41,403,182.61|
|Total current assets|1,914,891,412.33|1,728,166,987.43|
|Non-current assets:|||
|Available-for-sale financial assets|812,872,500.00|495,780,000.00|
|Held-to-maturity investments|||
|Long-term accounts receivable|||
|Long-term equity investments|205,472,730.03|205,235,804.76|
|Investment property|55,072,689.23|57,281,030.03|
|Fixed assets|450,042,747.40|445,343,167.61|
|Construction in progress|89,781,047.21|108,198,455.01|
|Engineering materials|||
|Disposal of fixed assets|||
|Productive living assets|||
|Oil-gas assets|||
|Intangible assets|78,558,644.37|81,159,855.82|
|R&D expenses|||
|Goodwill|||
|Long-term deferred expenses|||
|Deferred tax assets|911,229.42|962,530.88|

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Other non-current assets|||
|Total non-current assets|1,692,711,587.66|1,393,960,844.11|
|Total assets|3,607,602,999.99|3,122,127,831.54|
|Current liabilities:|||
|Short-term borrowings|||
|Financial liabilities at fair value through profit/loss|||
|Derivative financial liabilities|||
|Notes payable|251,220,000.00|218,200,000.00|
|Accounts payable|596,734,009.07|527,416,373.82|
|Accounts received in advance|37,250,941.51|24,537,940.90|
|Payroll payable|52,498,428.10|55,068,743.12|
|Taxes payable|6,587,374.37|8,521,233.87|
|Interest payable|||
|Dividends payable|3,243,179.97|3,243,179.97|
|Other accounts payable|194,596,980.96|194,650,090.70|
|Liabilities held for sale|||
|Non-current liabilities due within one year|||
|Other current liabilities|||
|Total current liabilities|1,142,130,913.98|1,031,637,562.38|
|Non-current liabilities:|||
|Long-term borrowings|||
|Bonds payable|||
|Of which: Preference shares|||
|Perpetual bonds|||
|Long-term payables|||
|Long-term payroll payable|||
|Special payables|||
|Provisions|||
|Deferred income|61,057,232.08|53,121,605.70|
|Deferred tax liabilities|109,949,700.00|62,385,825.00|
|Other non-current liabilities|||
|Total non-current liabilities|171,006,932.08|115,507,430.70|
|Total liabilities|1,313,137,846.06|1,147,144,993.08|
|Owners’ equity:|||
|Share capital|561,374,326.00|561,374,326.00|

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Other equity instruments|||
|Of which: Preference shares|||
|Perpetual bonds|||
|Capital reserve|183,071,147.70|183,071,147.70|
|Less: Treasury shares|||
|Other comprehensive income|623,048,300.00|353,519,675.00|
|Special reserve|11,715,417.22|10,069,746.98|
|Surplus reserve|311,880,248.88|305,758,285.91|
|Retained earnings|603,375,714.13|561,189,656.87|
|Total owners’ equity|2,294,465,153.93|1,974,982,838.46|
|Total liabilities and owners’ equity|3,607,602,999.99|3,122,127,831.54|

 Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin Head of the accounting department: Jiang He
Changchai Company, Limited Annual Report 2016 3. Consolidated income statement
Unit: RMB
||||
|-|-|-|
|Item|2016|2015|
|1. Operating revenues|2,283,028,855.52|2,519,799,547.29|
|Including: Sales income|2,283,028,855.52|2,519,799,547.29|
|Interest income|||
|Premium income|||
|Fee and commission income|||
|2. Operating costs|2,217,112,902.09|2,445,178,600.59|
|Including: Cost of sales|1,866,617,336.37|2,110,216,135.62|
|Interest expenses|||
|Fee and commission expenses|||
|Surrenders|||
|Net claims paid|||
|Net amount provided as insurance contract reserve|||
|Expenditure on policy dividends|||
|Reinsurance premium|||
|Taxes and surtaxes|13,005,243.59|7,632,813.49|
|Selling expenses|103,969,577.79|98,122,345.71|
|Administrative expenses|207,582,213.98|197,678,915.43|
|Finance costs|-11,542,165.08|-15,723,785.00|
|Asset impairment loss|37,480,695.44|47,252,175.34|
|Add: Profit on fair value changes (“-” means loss)||-109,642.19|
|Investment income (“-” means loss)|4,128,745.08|9,120,105.94|
|Including: Share of profit/loss of associates and joint ventures|236,925.27|670,328.77|
|Exchange gains (“-” means loss)|||
|3. Operating profit (“-” means loss)|70,044,698.51|83,631,410.45|
|Add: Non-operating income|15,602,392.47|14,048,268.56|
|Including: Profit on disposal of non-current assets|6,445,469.06|298,236.45|
|Less: Non-operating expense|10,729,181.83|8,510,877.99|
|Including: Loss on disposal of non-current assets|191,440.80|86,306.84|
|4. Total profit (“-” means loss)|74,917,909.15|89,168,801.02|
|Less: Corporate income tax|11,201,239.88|16,684,465.13|
|5. Net profit (“-” means loss)|63,716,669.27|72,484,335.89|

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Net profit attributable to owners of the Company|62,539,896.17|71,102,792.49|
|Minority interests’ income|1,176,773.10|1,381,543.40|
|6. Other comprehensive income net of tax|269,528,625.00|4,360,500.00|
|Other comprehensive income net of tax attributable to owners ofthe Company|269,528,625.00|4,360,500.00|
|6.1 Other comprehensive income that will not be reclassifiedinto profit/loss|||
|6.1.1 Changes in net liabilities or assets with a definedbenefit plan upon re-measurement|||
|6.1.2 Share of other comprehensive income of investeesthat cannot be reclassified into profit/loss under the equity method|||
|6.2 Other comprehensive income to be subsequentlyreclassified into profit/loss|269,528,625.00|4,360,500.00|
|6.2.1 Share of other comprehensive income of investeesthat will be reclassified into profit/loss under the equity method|||
|6.2.2 Profit/loss on fair value changes of available-for-salefinancial assets|269,528,625.00|4,360,500.00|
|6.2.3 Profit/loss on reclassifying held-to-maturityinvestments into available-for-sale financial assets|||
|6.2.4 Effective profit/loss on cash flow hedges|||
|6.2.5 Currency translation differences|||
|6.2.6 Other|||
|Other comprehensive income net of tax attributable to minorityinterests|||
|7. Total comprehensive income|333,245,294.27|76,844,835.89|
|Attributable to owners of the Company|332,068,521.17|75,463,292.49|
|Attributable to minority interests|1,176,773.10|1,381,543.40|
|8. Earnings per share|||
|8.1 Basic earnings per share|0.11|0.13|
|8.2 Diluted earnings per share|0.11|0.13|

 Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin Head of the accounting department: Jiang He
Changchai Company, Limited Annual Report 2016 4. Income statement of the Company
Unit: RMB
||||
|-|-|-|
|Item|2016|2015|
|1. Operating revenues|2,261,424,064.06|2,516,865,611.28|
|Less: Operating costs|1,872,397,292.00|2,129,587,480.88|
|Taxes and surtaxes|11,368,257.55|7,167,609.31|
|Selling expenses|97,391,154.08|92,215,078.66|
|Administrative expenses|192,068,868.64|182,609,958.75|
|Finance costs|-12,744,187.93|-17,089,993.07|
|Asset impairment loss|36,296,470.30|42,554,499.55|
|Add: profit on fair value changes (“-” means loss)|||
|Investment income (“-” means loss)|3,274,175.27|7,808,397.71|
|Including: Share of profit/loss of associates and joint ventures|236,925.27|670,328.77|
|2. Operating profit (“-” means loss)|67,920,384.69|87,629,374.91|
|Add: Non-operating income|14,298,854.08|12,294,626.92|
|Including: Profit on disposal of non-current assets|6,445,439.34|82,621.37|
|Less: Non-operating expense|10,617,280.45|8,218,111.06|
|Including: Loss on disposal of non-current assets|179,739.42|53,999.76|
|3. Total profit (“-” means loss)|71,601,958.32|91,705,890.77|
|Less: Corporate income tax|10,382,328.59|15,640,001.29|
|4. Net profit (“-” means loss)|61,219,629.73|76,065,889.48|
|5. Other comprehensive income net of tax|269,528,625.00|4,360,500.00|
|5.1 Other comprehensive income that will not be reclassified intoprofit and loss|||
|5.1.1 Changes in net liabilities or assets with a defined benefitplan upon re-measurement|||
|5.1.2 Share of other comprehensive income of investees thatcannot be reclassified into profit/loss under the equity method|||
|5.2 Other comprehensive income to be subsequently reclassifiedinto profit/loss|269,528,625.00|4,360,500.00|
|5.2.1 Share of other comprehensive income of investees that willbe reclassified into profit/loss under the equity method|||
|5.2.2 Profit/loss on fair value changes of available-for-salefinancial assets|269,528,625.00|4,360,500.00|
|5.2.3 Profit/loss on reclassifying held-to-maturity investmentsinto available-for-sale financial assets|||
|5.2.4 Effective profit/loss on cash flow hedges|||

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|5.2.5 Currency translation differences|||
|5.2.6 Other|||
|6. Total comprehensive income|330,748,254.73|80,426,389.48|
|7. Earnings per share|||
|7.1 Basic earnings per share|||
|7.2 Diluted earnings per share|||

Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin Head of the accounting department: Jiang He
Changchai Company, Limited Annual Report 2016 5. Consolidated cash flow statement
Unit: RMB
||||
|-|-|-|
|Item|2016|2015|
|1. Cash flows from operating activities:|||
|Cash received from sale of commodities and rendering of service|2,449,124,878.50|2,636,363,557.61|
|Net increase in money deposits from customers and interbankplacements|||
|Net increase in loans from the Central Bank|||
|Net increase in funds borrowed from other financial institutions|||
|Cash received from premium of original insurance contracts|||
|Net cash received from reinsurance business|||
|Net increase in deposits of policy holders and investment fund|||
|Net increase in disposal of financial assets at fair value throughprofit/loss|||
|Interest, fees and commissions received|||
|Net increase in interbank borrowings|||
|Net increase in funds in repurchase business|||
|Tax refunds received|41,561,022.48|28,895,174.42|
|Cash received from other operating activities|15,072,161.20|21,715,056.24|
|Subtotal of cash inflows from operating activities|2,505,758,062.18|2,686,973,788.27|
|Cash paid for goods and services|1,900,783,453.31|2,072,255,235.99|
|Net increase in loans and advances to customers|||
|Net increase in funds deposited in the Central Bank and interbankplacements|||
|Cash paid for claims of original insurance contracts|||
|Interest, fees and commissions paid|||
|Cash paid as policy dividends|||
|Cash paid to and for employees|340,494,353.98|311,707,299.43|
|Taxes paid|64,165,805.35|86,777,245.36|
|Cash paid for other operating activities|100,840,505.50|88,307,124.54|
|Subtotal of cash outflows due to operating activities|2,406,284,118.14|2,559,046,905.32|
|Net cash flows from operating activities|99,473,944.04|127,926,882.95|
|2. Cash flows from investing activities:|||
|Cash received from retraction of investments|32,000,000.00|2,000,000.00|
|Cash received as investment income|3,891,819.81|8,810,777.17|

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Net cash received from disposal of fixed assets, intangible assetsand other long-term assets|240,625.60|6,659,148.67|
|Net cash received from disposal of subsidiaries or other businessunits|||
|Cash received from other investing activities|9,000,000.00||
|Subtotal of cash inflows from investing activities|45,132,445.41|17,469,925.84|
|Cash paid to acquire fixed assets, intangible assets and otherlong-term assets|59,310,667.45|36,003,567.09|
|Cash paid for investment|8,000,000.00|32,000,000.00|
|Net increase in pledged loans|||
|Net cash paid to acquire subsidiaries and other business units|||
|Cash paid for other investing activities|||
|Subtotal of cash outflows due to investing activities|67,310,667.45|68,003,567.09|
|Net cash flows from investing activities|-22,178,222.04|-50,533,641.25|
|3. Cash flows from financing activities:|||
|Cash received from capital contributions|||
|Including: Cash received from minority shareholder investmentsby subsidiaries|||
|Cash received as borrowings|15,000,000.00|17,000,000.00|
|Cash received from issuance of bonds|||
|Cash received from other financing activities|||
|Subtotal of cash inflows from financing activities|15,000,000.00|17,000,000.00|
|Repayment of borrowings|22,000,000.00|20,000,000.00|
|Cash paid for interest expenses and distribution of dividends orprofit|13,715,123.57|12,410,748.99|
|Including: dividends or profit paid by subsidiaries to minorityinterests|||
|Cash paid for other financing activities|18,707.55|28,075.00|
|Sub-total of cash outflows due to financing activities|35,733,831.12|32,438,823.99|
|Net cash flows from financing activities|-20,733,831.12|-15,438,823.99|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|||
|5. Net increase in cash and cash equivalents|56,561,890.88|61,954,417.71|
|Add: Opening balance of cash and cash equivalents|526,716,238.21|464,761,820.50|
|6. Closing balance of cash and cash equivalents|583,278,129.09|526,716,238.21|

Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin
Head of the accounting department: Jiang He
Changchai Company, Limited Annual Report 2016 6. Cash flow statement of the Company
Unit: RMB
||||
|-|-|-|
|Item|2016|2015|
|1. Cash flows from operating activities:|||
|Cash received from sale of commodities and rendering of service|2,508,387,008.21|2,709,527,428.26|
|Tax refunds received|41,561,022.48|28,895,174.42|
|Cash received from other operating activities|11,890,841.69|18,196,561.87|
|Subtotal of cash inflows from operating activities|2,561,838,872.38|2,756,619,164.55|
|Cash paid for goods and services|2,020,333,070.85|2,197,759,847.18|
|Cash paid to and for employees|301,052,336.85|276,172,157.36|
|Taxes paid|56,155,882.63|79,691,910.58|
|Cash paid for other operating activities|93,256,112.12|80,587,740.62|
|Subtotal of cash outflows due to operating activities|2,470,797,402.45|2,634,211,655.74|
|Net cash flows from operating activities|91,041,469.93|122,407,508.81|
|2. Cash flows from investing activities:|||
|Cash received from retraction of investments|20,000,000.00||
|Cash received as investment income|3,037,250.00|7,499,068.94|
|Net cash received from disposal of fixed assets, intangible assetsand other long-term assets|240,625.60|6,440,518.67|
|Net cash received from disposal of subsidiaries or other businessunits|||
|Cash received from other investing activities|9,000,000.00|4,000,000.00|
|Subtotal of cash inflows from investing activities|32,277,875.60|17,939,587.61|
|Cash paid to acquire fixed assets, intangible assets and otherlong-term assets|56,182,564.81|31,944,367.09|
|Cash paid for investment||20,000,000.00|
|Net cash paid to acquire subsidiaries and other business units|||
|Cash paid for other investing activities||4,000,000.00|
|Subtotal of cash outflows due to investing activities|56,182,564.81|55,944,367.09|
|Net cash flows from investing activities|-23,904,689.21|-38,004,779.48|
|3. Cash flows from financing activities:|||
|Cash received from capital contributions|||
|Cash received as borrowings|||
|Cash received from issuance of bonds|||
|Cash received from other financing activities|||

Changchai Company, Limited Annual Report 2016
||||
|-|-|-|
|Subtotal of cash inflows from financing activities|||
|Repayment of borrowings|||
|Cash paid for interest expenses and distribution of dividends orprofit|12,911,609.50|11,227,486.52|
|Cash paid for other financing activities|||
|Sub-total of cash outflows due to financing activities|12,911,609.50|11,227,486.52|
|Net cash flows from financing activities|-12,911,609.50|-11,227,486.52|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|||
|5. Net increase in cash and cash equivalents|54,225,171.22|73,175,242.81|
|Add: Opening balance of cash and cash equivalents|503,933,918.79|430,758,675.98|
|6. Closing balance of cash and cash equivalents|558,159,090.01|503,933,918.79|

 Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin Head of the accounting department: Jiang He
7. Consolidated statement of changes inowners’ equity
2016
Unit: RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2016|||||||||||||
||Equity attributable to owners of the Company|||||||||||Minorityinterests|Total owners’equity|
||Share capital|Other equity instruments|||Capital reserve|Less:Treasury shares|Othercomprehensiveincome|Specialreserve|Surplus reserve|Generalriskreserve|Retainedearnings|||
|||Preferenceshares|Perpetualbonds|Other||||||||||
|1. Balance at the end ofthe prior year|561,374,326.00||||164,328,665.43||353,519,675.00|10,069,746.98|305,758,285.91||607,859,611.69|17,590,453.47|2,020,500,764.48|
|Add: Changes inaccounting policies||||||||||||||
|Correction oferrors in prior periods||||||||||||||
|Business mergersunder the same control||||||||||||||
|Other||||||||||||||
|2. Balance at thebeginning of the year|561,374,326.00||||164,328,665.43||353,519,675.00|10,069,746.98|305,758,285.91||607,859,611.69|17,590,453.47|2,020,500,764.48|
|3. Increase/ decrease inthe period (“-” meansdecrease)|||||||269,528,625.00|1,645,670.24|6,121,962.97||43,506,323.70|1,176,773.10|321,979,355.01|
|3.1 Totalcomprehensive income|||||||269,528,625.00||||62,539,896.17|1,176,773.10|333,245,294.27|
|3.2 Capital increasedand reduced by owners||||||||||||||

|||||
|-|-|-|-|
|3.2.1 Ordinaryshares increased byshareholders||||
|3.2.2 Capitalincreased by holders ofother equityinstruments||||
|3.2.3 Amounts ofshare-based paymentscharged to owners’equity||||
|3.2.4 Other||||
|3.3 Profit distribution|6,121,962.97|-19,033,572.47|-12,911,609.50|
|3.3.1Appropriation tosurplus reserve|6,121,962.97|-6,121,962.97||
|3.3.2Appropriation togeneral risk provisions||||
|3.3.3Appropriation toowners (orshareholders)||-12,911,609.50|-12,911,609.50|
|3.3.4 Other||||
|3.4 Internalcarry-forward ofowners’ equity||||
|3.4.1 New increaseof capital (or share||||

||||||||||
|-|-|-|-|-|-|-|-|-|
|capital) from capitalreserve|||||||||
|3.4.2 New increaseof capital (or sharecapital) from surplusreserve|||||||||
|3.4.3 Surplusreserve for making uploss|||||||||
|3.4.4 Other|||||||||
|3.5 Special reserve||||1,645,670.24||||1,645,670.24|
|3.5.1 Withdrawnfor the period||||4,416,865.61||||4,416,865.61|
|3.5.2 Used in theperiod||||2,771,195.37||||2,771,195.37|
|3.6 Other|||||||||
|4. Closing balance|561,374,326.00|164,328,665.43|623,048,300.00|11,715,417.22|311,880,248.88|651,365,935.39|18,767,226.57|2,342,480,119.49|

2015
Unit: RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2015|||||||||||||
||Equity attributable to owners of the Company|||||||||||Minorityinterests|Total owners’equity|
||Share capital|Other equity instruments|||Capital reserve|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplus reserve|Generalriskreserve|Retainedearnings|||
|||Preferenceshares|Perpetualbonds|Other||||||||||
|1. Balance at the end ofthe prior year|561,374,326.00||||164,328,665.43||349,159,175.00|8,332,077.21|298,151,696.96||555,590,894.67|16,208,910.07|1,953,145,745.34|
|Add: Changes inaccounting policies||||||||||||||
|Correction oferrors in prior periods||||||||||||||
|Business mergersunder the same control||||||||||||||
|Other||||||||||||||
|2. Balance at thebeginning of the year|561,374,326.00||||164,328,665.43||349,159,175.00|8,332,077.21|298,151,696.96||555,590,894.67|16,208,910.07|1,953,145,745.34|
|3. Increase/ decrease inthe period (“-” meansdecrease)|||||||4,360,500.00|1,737,669.77|7,606,588.95||52,268,717.02|1,381,543.40|67,355,019.14|
|3.1 Totalcomprehensive income|||||||4,360,500.00||||71,102,792.49|1,381,543.40|76,844,835.89|
|3.2 Capital increasedand reduced by owners||||||||||||||
|3.2.1 Ordinaryshares increased byshareholders||||||||||||||

|||||
|-|-|-|-|
|3.2.2 Capitalincreased by holders ofother equityinstruments||||
|3.2.3 Amounts ofshare-based paymentscharged to owners’equity||||
|3.2.4 Other||||
|3.3 Profit distribution|7,606,588.95|-18,834,075.47|-11,227,486.52|
|3.3.1Appropriation tosurplus reserve|7,606,588.95|-7,606,588.95||
|3.3.2Appropriation togeneral risk provisions||||
|3.3.3Appropriation toowners (orshareholders)||||
|3.3.4 Other||-11,227,486.52|-11,227,486.52|
|3.4 Internalcarry-forward ofowners’ equity||||
|3.4.1 New increaseof capital (or sharecapital) from capitalreserve||||
|3.4.2 New increase||||

||||||||||
|-|-|-|-|-|-|-|-|-|
|of capital (or sharecapital) from surplusreserve|||||||||
|3.4.3 Surplusreserve for making uploss|||||||||
|3.4.4 Other|||||||||
|3.5 Special reserve||||1,737,669.77||||1,737,669.77|
|3.5.1 Withdrawnfor the period||||4,394,339.56||||4,394,339.56|
|3.5.2 Used in theperiod||||2,656,669.79||||2,656,669.79|
|3.6 Other|||||||||
|4. Closing balance|561,374,326.00|164,328,665.43|353,519,675.00|10,069,746.98|305,758,285.91|607,859,611.69|17,590,453.47|2,020,500,764.48|

Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin Head of the accounting department: Jiang He
8. Statement of changes inowners’ equity of the Company
2016
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2016|||||||||||
||Share capital|Other equity instruments|||Capital reserve|Less:Treasuryshares|Othercomprehensiveincome|Special reserve|Surplus reserve|Retained earnings|Total owners’equity|
|||Preferenceshares|Perpetualbonds|Other||||||||
|1. Balance at the end ofthe prior year|561,374,326.00||||183,071,147.70||353,519,675.00|10,069,746.98|305,758,285.91|561,189,656.87|1,974,982,838.46|
|Add: Changes inaccounting policies||||||||||||
|Correction oferrors in prior periods||||||||||||
|Other||||||||||||
|2. Balance at thebeginning of the year|561,374,326.00||||183,071,147.70||353,519,675.00|10,069,746.98|305,758,285.91|561,189,656.87|1,974,982,838.46|
|3. Increase/ decrease inthe period (“-” meansdecrease)|||||||269,528,625.00|1,645,670.24|6,121,962.97|42,186,057.26|319,482,315.47|
|3.1 Totalcomprehensive income|||||||269,528,625.00|||61,219,629.73|330,748,254.73|
|3.2 Capital increasedand reduced by owners||||||||||||
|3.2.1 Ordinaryshares increased byshareholders||||||||||||
|3.2.2 Capitalincreased by holders of||||||||||||

|||||
|-|-|-|-|
|other equityinstruments||||
|3.2.3 Amounts ofshare-based paymentscharged to owners’equity||||
|3.2.4 Other||||
|3.3 Profit distribution|6,121,962.97|-19,033,572.47|-12,911,609.50|
|3.3.1Appropriation tosurplus reserve|6,121,962.97|-6,121,962.97||
|3.3.2Appropriation toowners (orshareholders)||-12,911,609.50|-12,911,609.50|
|3.3.3 Other||||
|3.4 Internalcarry-forward ofowners’ equity||||
|3.4.1 New increaseof capital (or sharecapital) from capitalreserve||||
|3.4.2 New increaseof capital (or sharecapital) from surplusreserve||||
|3.4.3 Surplusreserve for making up||||

|||||||||
|-|-|-|-|-|-|-|-|
|loss||||||||
|3.4.4 Other||||||||
|3.5 Special reserve||||1,645,670.24|||1,645,670.24|
|3.5.1 Withdrawnfor the period||||4,416,865.61|||4,416,865.61|
|3.5.2 Used in theperiod||||2,771,195.37|||2,771,195.37|
|3.6 Other||||||||
|4. Closing balance|561,374,326.00|183,071,147.70|623,048,300.00|11,715,417.22|311,880,248.88|603,375,714.13|2,294,465,153.93|

2015
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2015|||||||||||
||Share capital|Other equity instruments|||Capital reserve|Less:Treasuryshares|Othercomprehensiveincome|Special reserve|Surplus reserve|Retained earnings|Total owners’equity|
|||Preference shares|Perpetual bonds|Other||||||||
|1. Balance at the end of theprior year|561,374,326.00||||183,071,147.70||349,159,175.00|8,332,077.21|298,151,696.96|503,957,842.86|1,904,046,265.73|
|Add: Changes in accountingpolicies||||||||||||
|Correction of errors inprior periods||||||||||||
|Other||||||||||||
|2. Balance at the beginning ofthe year|561,374,326.00||||183,071,147.70||349,159,175.00|8,332,077.21|298,151,696.96|503,957,842.86|1,904,046,265.73|
|3. Increase/ decrease in theperiod (“-” means decrease)|||||||4,360,500.00|1,737,669.77|7,606,588.95|57,231,814.01|70,936,572.73|
|3.1 Total comprehensiveincome|||||||4,360,500.00|||76,065,889.48|80,426,389.48|
|3.2 Capital increased andreduced by owners||||||||||||
|3.2.1 Ordinary sharesincreased by shareholders||||||||||||
|3.2.2 Capital increased byholders of other equityinstruments||||||||||||
|3.2.3 Amounts ofshare-based payments chargedto owners’ equity||||||||||||

|||||||||
|-|-|-|-|-|-|-|-|
|3.2.4 Other||||||||
|3.3 Profit distribution|||||7,606,588.95|-18,834,075.47|-11,227,486.52|
|3.3.1 Appropriation tosurplus reserve|||||7,606,588.95|-7,606,588.95||
|3.3.2 Appropriation toowners (or shareholders)||||||-11,227,486.52|-11,227,486.52|
|3.3.3 Other||||||||
|3.4 Internal carry-forward ofowners’ equity||||||||
|3.4.1 New increase ofcapital (or share capital) fromcapital reserve||||||||
|3.4.2 New increase ofcapital (or share capital) fromsurplus reserve||||||||
|3.4.3 Surplus reserve formaking up loss||||||||
|3.4.4 Other||||||||
|3.5 Special reserve||||1,737,669.77|||1,737,669.77|
|3.5.1 Withdrawn for theperiod||||4,394,339.56|||4,394,339.56|
|3.5.2 Used in the period||||2,656,669.79|||2,656,669.79|
|3.6 Other||||||||
|4. Closing balance|561,374,326.00|183,071,147.70|353,519,675.00|10,069,746.98|305,758,285.91|561,189,656.87|1,974,982,838.46|

 Legal representative: Shi Xinkun Accounting head for this Report: Zhang Xin Head of the accounting department: Jiang He
III. Company Profile
Changchai Company, Limited (hereinafter referred to as “the Company”) was founded on 5 May 1994, which is a company limited by shares promoted solely by Changzhou Diesel Engine Plant through the approval by the State Commission for Restructuring the Economic Systems with document TGS[1993] No. 9 on 15 Jan. 1993 by way of public offering of shares. With the approved of thePeople’s Government of Jiangsu Province SZF[1993] No. 67, as well as reexamined and approved by China Securities Regulatory Commission (“CSRC”) through document ZJFSZ (1994) No. 9, the Company initially issued A shares to the public from 15 Mar. 1994 to 30 Mar. 1994. As approved by the Shenzhen Stock Exchange through document SZSFZ (1994) No. 15, such tradable shares of the public got listing on 1 Jul. 1994 at Shenzhen Stock Exchange with “Su Changchai A” for short of stock, as well as “0570” as stock code (present stock code is “000570”).
In 1996, with the recommendation of the Office of thePeople’s Government of Jiangsu Province SZBH[1996] No. 13, as well as first review by Shenzhen Municipal Securities Administration Office through SZBZ[1996] No. 24, and approval of the State Council Securities Commission ZWF[1996] No. 27, the Company issued 100 million B shares to qualified investors on 27 Aug. 1996 to 30 Aug. 1996, getting listed on 13 Sep. 1996.
On 9 Jun. 2006, the Company held ashareholders’ general meeting related to A shares market to examine and approve share merger reform plan, and performed the share merger reform on 19 Jun. 2006.
As examined and approved at the 2009 2nd ExtraordinaryShareholders’ General Meeting in Sep. 2009, based on the total share capital of 374,249,551 shares as at 30 Jun. 2009, the Company implemented the profit distribution plan, i.e. to distribute 5 bonus shares and cash of RMB0.8 for every 10 shares, with registered capital increased by RMB187,124,775.00, as well as registered capital of RMB561,374,326.00 after change. As at 31 Dec. 2015, the total share capital of the Company is 561,374,326.00 shares, as well as registered capital of RMB561,374,326.00, which verified by Jiangsu Gongzheng Tianye Certified Public Accountants Company Limited with issuing Capital Verification Report SGC[2010] No. B002. And the unified social credit code of the enterprise business license of the Company is 91320400134792410W.
TheCompany’s registered address is situated at No. 123 Huaide Middle Road, Changzhou, Jiangsu, as well as its head office located at No. 123 Huaide Middle Road, Changzhou, Jiangsu.
The Company belongs to manufacturing with business scope including manufacturing and sale of diesel engine, diesel engines part and casting, grain harvesting machine, rotary cultivators, walking tractor, mould and fixtures, assembling and sale of diesel generating set and pumping unit. The Company mainly engaged in the production and sales of small and medium-sized single cylinders and multi-cylinder diesel engine with the label of Changchai Brand. The diesel engine produced and sold by the Company were mainly used in tractors, combine harvest models, light commercial vehicle, farm equipment, small-sized construction machinery, generating sets and shipborne machinery and equipment, etc. TheCompany’s main business remained unchanged in the Reporting Period.
The Company established theShareholders’ General Meeting, the Board of Directors and the Board ofSupervisors，Corporate office, Financial Department, Political Department, Investment and Development Department, Enterprise Management Department, Human Recourses Department, Production Department, Procurement Department, Sales Company, Market Department, Chief Engineer Office, Technology Center, QA Department, Foundry Branch, Machine Processing Branch, Single-cylinder Engine branch, Multi-cylinder Engine Branch and Overseas Business Department in the Company.
The financial report has been approved to be issued by the Board of Directors on 11 Apr. 2017.
The consolidated scope of the Company of the Reporting Period including the parent company and 4 subsidiaries, which of no change when compared with the last period. For the details of the consolidated scope of the Reporting Period and the changes situation, please refer to the changes of the consolidated scope of the notes to the financial report and the notes to the equities among other entities.
IV. Basis for preparation of the financial report
1. Basis for preparation
With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with<The Accounting Standards for BusinessEnterprises—BasicStandard> issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 41 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 Feb. 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission.
In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, where impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements.
2. Continuation
The Company comprehensively evaluated the information acquired recently that there would be no such factors in the 12 months from the end of the Reporting Period that would obviously influence the continuation capability of the Company and predicted that the operating activities would continue in the future 12 months of the Company. The financial statement compiled base on the continuous operation.
V. Important accounting policies and estimations
Notification of specific accounting polices and accounting estimations:
The Company and each subsidiary according to the actual production and operation characteristics and in accord with the regulations of the relevant ASBE, formulated certain specific accounting polices and accounting estimations, which mainly reflected in the withdrawal method of the bad debt provision of the accounts receivable (Notes III, 11), the measurement of the inventory (Notes III, 12) and the depreciation of the fixed assets (Notes III, 16) etc. As for the details of the significant accounting judgment and the estimations made by the management layer, please refer to Notes III, 30 “Important accounting judgment and estimations”.
1. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements prepared by the Group are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present theCompany’s and theGroup’s financial positions, business results and cash flows and other relevant information.
2. Fiscal period
The fiscal periods are divided into fiscal year and metaphase, the fiscal year is from Jan. 1 to Dec. 31 and as the metaphase included monthly, quarterly and semi-yearly periods.
3. Operating cycle
A normal operating cycle refers to a period from the Group purchasing assets for processing to realizing cash or cash equivalents. An operating cycle for the Group is 12 months, which is also the classification criterion for the liquidity of its assets and liabilities.
4. Currency used in bookkeeping
Renminbi is functional currency of the Company.
5. Accounting methods for business combinations under the same control and business combinations not under the same control
(1) Business combinations under the same control:
A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary.
For the merger of enterprises under the same control, if the consideration of the merging enterprise is that it makes payment in cash, transfers non-cash assets or bear its debts, it shall, on the date of merger, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted.
If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. All direct costs for the business combination, including expenses for audit, evaluating and legal services shall be
recorded into the profits and losses at the current period. The expenses such as the handling charges and commission etc, premium income of deducting the equity securities, and as for the premium income was insufficient to dilute, the retained earnings shall be written down.
Owning to the reasons such as the additional investment, for the equity investment held before acquiring the control right of the combined parties, the confirmed relevant gains and losses, other comprehensive income and the changes of other net assets since the date of the earlier one between the date when acquiring the original equity right and the date when the combine parties and combined ones were under the same control to the combination date, should be respectively written down and compared with the beginning balance of retained earnings or the current gains and losses during the statement period.
(2) Business combinations not under the same control
A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination.
The combination costs of the acquirer and the identifiable net assets obtained by the acquirer in a business combination shall be measured at the fair values. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains forms the acquiree as business reputation. The direct relevant expenses occurred from the enterprise combination should be included in the current gains and losses when occurred. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The difference between the fair value of the assets paid out by the Company and its book value should be included in the current gains and losses. The purchase date refers to the date that the purchaser acquires the control right of the acquiree.
For the business combinations not under the same control realized through step by step multiple transaction, as for the equity interests that the Group holds in the acquiree before the acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. The equity holed by the acquiree which involved with the other comprehensive income and the otherowners’ equities changes except for the net gains and losses, other comprehensive income and the profits distribution and other related comprehensive gains and otherowners’ equities which in relation to the equity interests that the Group holds in the acquiree before the acquiring date should be transferred into the current investment income on the acquiring date, except for the other comprehensive income occurred from the re-measurement of the net profits of the defined benefit plans or the changes of the net assets of the investees.
6. Methods for preparing consolidated financial statements
The Company confirms the consolidated scope based on the control and includes the subsidiaries with actual control right into the consolidated financial statement.
The consolidated financial statement of the Company is compiled according to the regulations of No. 33 of ASBE-Consolidated Financial Statement and the relevant regulations and as for the whole significant come-and-go balance, investment, transaction and the unrealized profits should be written off when compiling the consolidated financial statement. The portion of asubsidiary’sshareholders’ equity and the portion of asubsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and minority shareholder profits and losses respectively and presented separately undershareholders’ equity and net profits in the consolidation financial statements. The portion of asubsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in thesubsidiary’s openingowners’ equity, minority interests are offset. The accounting policy or accounting period of each subsidiary is different from which of the Company, which shall be adjusted as the Company; or subsidiaries shall prepare financial statement again required by the Company when preparing the consolidated financial statements.
As for the added subsidiary company not controlled by the same enterprise preparing the consolidated financial statement, shall adjust individual financial statement based on the fair value of the identifiable net assets on the acquisition date; as for the added subsidiary companies controlled by the same enterprise preparing the financial statement, shall not adjust the financial statement of the subsidiaries, namely survived by integration as participating in the consolidation when the final control party starts implementing control and should adjust the period-begin amount of the consolidated balance sheet and at the same time adjust the relevant items of the compared statement. As for the disposed subsidiaries, the operation result and the cash flow should be included in the consolidated income statement and the consolidated cash flow before the disposing date; the disposed subsidiaries of the current period, should not be adjusted the period-begin amount of the consolidated balance sheet.
Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the originalsubsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Group according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when theGroup’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment and the otherowners’ equities changes except for the net gains and losses, other comprehensive income and profits distribution in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferred into current investment gains) when such control ceases. And subsequent
measurement is conducted on the residual equity interests according to the No.2 Accounting Standard for Business Enterprises-Long-term Equity Investments or the No.22 Accounting Standard for Business Enterprises-Recognition and Measurement of Financial Instruments.
For the disposal of equity investment belongs to a package deal, should be considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the lose of control, when the Group losing control on its subsidiary.
For the disposal of the equity investment not belongs to a package deal, should be executed accounting treatment according to the relevant policies of partly disposing the equity investment of the subsidiaries under the situation not lose the control right before losing the control right; when losing the control right, the former should be executed accounting treatment according to the general disposing method of the disposal of the subsidiaries. 7. Classification of joint arrangements and accounting treatment of joint operations
The Group classifies joint arrangements into joint operations and jointventures。
A joint operation refers to a joint arrangement where the Group is the joint operations party of the joint arrangement and enjoys assets and has to bear liabilities related to the arrangement. The Company confirms the following items related to the interests share among the joint operations and executes accounting treatment according to the regulations of the relevant ASBE:
(1) Recognizes the assets that it holds and bears in the joint operation and recognizes the jointly-held assets according to theGroup’s stake in the joint operation;
(2) Recognizes the liabilities that it holds and bears in the joint operation and recognizes the jointly-held liabilities according to theGroup’s stake in the joint operation;
(3) Recognizes the income from sale of theGroup’s share in the output of the joint operation
(4) Recognizes the income from sale of the jointoperation’s outputs according to theGroup’s stake in it
(5) Recognizes the expense solely incurred to the Group and the expense incurred to the joint operation according to theGroup’s stake in it.
8. Recognition standard for cash and cash equivalents
In theGroup’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount of cash and whose risks in change of value are minimal.
9. Foreign currency businesses and translation of foreign currency financial statements
(1) Foreign currency business
Concerning the foreign-currency transactions that occurred, the foreign currency shall be converted into the recording currency according to the middle price of the market exchange rate disclosed by thePeople’s Bank of China on the date of the transaction. Among the said transactions that occurred, those involving foreign exchanges shall be converted according to the exchange rates adopted in the actual transactions.
On the balance sheet date, the foreign-currency monetary assets and the balance of the liability account shall be converted into the recoding currency according to the middle price of the market exchange rates disclosed by thePeople’s Bank of China on the Balance Sheet Date. The difference between the recording-currency amount converted according to the exchange rate on the Balance Sheet Date and the original book recording-currency amount shall be recognized as gains/losses from foreign exchange. And the exchange gain/loss caused by the foreign-currency borrowings related to purchasing fixed assets shall be handled according to the principle of capitalizing borrowing expenses; the exchange gain/loss incurred in the establishment period shall be recorded into the establishment expense; others shall be recorded into the financial expenses for the current period.
On the balance sheet date, the foreign-currency non-monetary items measured by historical cost shall be converted according to the middle price of the market exchange disclosed by thePeople’s Bank of China on the date of the transaction, with no changes in the original recording-currency amount; while the foreign-currency non-monetary items measured by fair value shall be converted according to the middle price of the market exchange disclosed by thePeople’s Bank of China on the date when the fair value is recognized, and the exchange gain/loss caused thereof shall be recognized as the gain/loss from fair value changes and recorded into the gain/loss of the current period.
(2) Translation of foreign currency
The assets and liabilities items among the balance sheet of the foreign operation shall be translated at a spot exchange rate on the balance sheet date. Among theowner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. And the revenues and expenses items among the balance sheet of the foreign operation shall be translated at the approximate exchange rate of the transaction date. The difference caused from the above transaction of the foreign currency statement should be listed in the other comprehensive income among theowners’ equities.
10. Financial instruments
(1) Category of financial instruments
The Company classifies the financial assets into four kinds such as trading financial assets, available-for-sale financial assets, accounts receivable and held-to-maturity investment according to the investment purpose and the economy nature.
The Company classifies the financial liabilities into two kinds such as the financial liabilities measured by fair value with the changes included in the current gains and losses and the other financial liabilities measured by amortized cost according to the economy nature.
(2) Recognition basis and measurement methods of financial instruments
The trading financial assets should be measured by fair value with the changes of fair value included in the current gains and losses; the available-for-sale financial assets should be measured by fair value with the changes of fair value included in theowners’ equities; and the accounts receivable and the held-to-maturity investment should be measured by amortized cost.
(3) Recognition basis and measurement methods of financial instruments transformation
The Company transfers or delivers a financial asset to a party other than the issuer of the financial asset and the transformation of the financial assets could be whole of the financial assets or a part of it, which including two methods:
The enterprise transfers the right to another party for receiving the cash flow of the financial asset;
The enterprise transfers the financial asset to another party, but maintains the right to receive the cash flow of the financial asset and undertakes the obligation to pay the cash flow it receives to the final recipient.
Where the Company has transferred a part or nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset and the difference between the consideration received and the book value of the transferred financial assets should be recognized as gains and losses and at the same time transfers the accumulative gains or losses from the recognized financial assets among the originalowners’ equities in the gains and losses; if it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall continue to recognize the whole or part of the financial assets and the consideration received be recognized as financial liabilities.
Where the Company neither transfers nor retains nearly all of the risks and rewards related to the ownership of a financial asset, and it does not cease its control on the said financial asset, it recognizes the relevant financial asset and liability accordingly according to the extent of its continuous involvement in the transferred financial asset. (4) De-recognition conditions of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly.
(5) Recognition methods of the fair value of main financial assets and financial liabilities
As for the financial assets held by the Company or the financial liabilities plans to undertake, if there exists active market, should adopt the current offering price in the active market, and as for the financial assets plans to be purchased by the Company or the financial liabilities undertook, should adopt the current offering in the active market, and if there is no current offering price or asking price, should adopt the market quotation of the recent transactions or the adjusted market quotation of the recent transactions, except for there is definite evidence indicate the market quotation is not the fair value.
Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques, including the prices adopted by the parties, who are familiar with the condition, in the latest market transaction upon their own free will, the current fair value obtained by referring to other financial instruments of the same essential nature etc.
(6) Impairment test method and withdrawal methods of impairment provision of financial assets (excluding accounts receivable)
The Company shall carry out an inspection, on the balance sheet day, on the carrying amount of the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision shall be made. For the financial assets with significant single amount, if there is objective evidence indicates the occurred impairment, should recognize the impairment losses and should include which in the current gains and losses. As for the financial assets with insignificant single amount but not occur impairment, the Company should execute the impairment test by credit groups according to the credit degree of the customers and the actual situation of the happen of the bad debts over the years for recognizing the impairment losses.
The expression “objective evidence proving that the financial asset has been impaired” refers to the actually incurred events which, after the financial asset is initially recognized, have an impact on the predicted future cash flow of the said financial asset that can be reliably measured by the enterprise.
The objective evidences that can prove the impairment of a financial asset shall include:
A serious financial difficulty occurs to the issuer or debtor;
The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.;
The creditor makes any concession to the debtor who is in financial difficulties due to economic or legal factors, etc.;
The debtor will probably become bankrupt or carry out other financial reorganizations;
The financial asset can no longer continue to be traded in the active market due to serious financial difficulties of the issuer;
It is impossible to identify whether the cash flow of a certain asset within a certain combination of financial assets has decreased or not. But after making an overall appraisal according to the public data available, it is found that the predicted future cash flow of the said combination of financial assets has indeed decreased since it was initially recognized and such decrease can be measured, for example, the ability of the debtor of the said combination of financial assets worsens gradually, the unemployment rate of the country or region where the debtor is situated increases, the prices of the region where the guaranty is situated are obviously dropping, or the industrial sector concerned is in slump, etc.;
Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. wherein the debtor operates its business, which makes the investor of an equity instrument unable to take back its investment;
Where the fair value of the equity instrument investment drops significantly or not contemporarily;
Other objective evidences showing the impairment of the financial asset.
Where a financial asset measured on the basis of post-amortization costs is impaired, the carrying amount of the said financial asset shall be calculated by the difference between the book value and the current value of the predicted future cash flow of the impairment losses.
Where any financial asset measured on the basis of post-amortization costs is recognized as having suffered from any impairment loss, if there is any objective evidence proving that the value of the said financial asset has been restored, and it is objectively related to the events that occur after such loss is recognized, the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period.
Where a sellable financial asset is impaired, even if the recognition of the financial asset has not been terminated, the accumulative losses arising from the decrease of the fair value of theowner’s equity which is directly included shall be transferred out and recorded into the profits and losses of the current period.. The accumulative losses are the initial cost after deducting the principal, the amortization amount, fair value of current period and balance after originally recorded into impairment loss of profits or losses. After the recognition of impairment losses, if there is any objective evidence indicated that the value of financial assets is resumed and objectively related to the events after the recognition of impairment losses, transfer the impairment losses originally recognized, transfer the impairment losses of available for sale equity instrument investment and recognized as other comprehensive income, and transfer the impairment losses of available for sale liability instruments and record into current profits or losses.
11. Receivables
(1) Accounts receivable with significant single amount for which the bad debt provision is made individually
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|Recognition criteria of accounts receivable withindividual and significant amount|significant single amounts refers to the accountsreceivable of the single amount more than RMB 1million (RMB 1 million include) (including accountsreceivable and other accounts receivable)|
|Withdrawal method of the bad debt provision of theaccounts receivable with significant single amounts|The Company makes an independent impairmenttest on the accounts receivable with significant singleamount, and provision for bad debts shall withdrawn onthe basis of the balance between the current values of thepredicted future cash flow lower than book value. Uponindependent impairment test, the accounts receivablewith significant single amounts has not been impaired, itshall be withdrawn bad debt provision based on endingbalance by adopting aging analysis method.|

（2）Withdrawing the bad debt provision of the accounts receivable according to groups of credit ris
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|Name of Groups|Withdrawal method of the bad debt provision|
|the age of the accounts receivable is divided by thegroups of credit risk|aging analysis method|

Withdrawing the bad debt provision by adopting aging analysis method among those groups:
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|Aging|Withdrawal proportion of accountsreceivable|Withdrawal proportion of otheraccounts receivable|
|Within 1 year(1 year included)|2%|2%|
|1 to 2 years|5%|5%|
|2 to 3 years|15%|15%|
|3 to 4 years|30%|30%|
|4 to 5 years|60%|60%|
|Over 5 years|100%|100%|

（3）Receivables with insignificant amount but being individually withdrawn the provision for bad debts
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|The reason for the bad debt provision ofthe accounts receivable|insignificant single amounts refers to the accounts receivable ofthe single amount lower than RMB 1 million (RMB 1 million notinclude) (including accounts receivable and other accountsreceivable).|
|The withdrawal method of the bad debtprovision of the accounts receivable|As for an account receivable with an insignificant single amountand which can not show its risk feature when withdrawing a bad-betprovision for it on the group basis, the bad-debt provision for theaccount receivable shall be withdrawn based on the difference of theexpected present value of the future cash flows of the accountreceivable that less than its carrying amount. The Company shallwithdraw the bad-debt provision for such an account receivable bycombining the aging method and individual judgment based on thedebtor entity’s actual financial position, cash flows and other relevantinformation.|

12. Inventory
(1) Category of Inventory
Inventory refers to the held-for-sale finished products or commodities, goods in process, materials consumed in the production process or the process providing the labor service etc. Inventory is mainly including the raw materials, low priced and easily worn articles, unfinished products, inventories and work inprocess–outsourced etc.
(2) Pricing method
Purchasing and storage of the various inventories should be valued according to the planed cost and the dispatch be calculated according to the weighted average method; carried forward the cost of the finished products according to the actual cost of the current period and the sales cost according to the weighted average method. (3) Determination basis of the net realizable value of inventory and withdrawal method of the provision for falling price of inventory
At the balance sheet date, inventories are measured at the lower of the cchengpinost and net realizable value.
When all the inventories are checked roundly, for those which were destroyed, outdated in all or in part, sold at a
loss, etc, the Company shall estimate the irrecoverable part of its cost and withdrawal the inventory falling price reserve at the year-end. Where the cost of the single inventory item is higher than the net realizable value, the inventory falling price reserve shall be withdrawn and recorded into profits and losses of the current period. Of which: in the normal production and operating process, as for the commodities inventory directly for sales such as the finished products, commodities and the materials for sales, should recognize the net realizable value according to the amount of the estimated selling price of the inventory minuses the estimated selling expenses and the relevant taxes; as for the materials inventory needs to be processed in the normal production and operating process, should recognize its net realizable value according to the amount of the estimated selling price of the finished products minuses the cost predicts to be occur when the production completes and the estimated selling expenses as well as the relevant taxes; on the balance sheet date, for the same inventory with one part agreed by the contract price and other parts not by the contract price, should be respectively recognized the net realizable value. For items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same or similar end users or purposes, and cannot be practicably evaluated separately from other items in that product line provision for decline in value is determined on an aggregate basis; for large quantity and low value items of inventories, provision for decline in value is made based on categories of inventories.
(4) The perpetual inventory system is maintained for stock system.
(5) Amortization method of low-value consumables and packages
One time amortization method is adopted for low-value consumables and packages.
13. Divided as assets held for sale
The Company recognizes the components (or the non-current assets) which meet with the following conditions as assets held for sale:
(1) The components must be immediately sold only according to the usual terms of selling this kind of components under the current conditions;
(2) The Company had made solutions on disposing the components (or the non-current assets), for example, the Company should gain the approval from the shareholders according to the regulations and had acquired the approved from the Annual General Meeting or the relevant authority institutions;
(3) The Company had signed the irrevocable transformation agreement with the transferee;
(4) The transformation should be completed within 1 year.
14. Long-term equity investments
(1) Judgment standard of joint control and significant influences
Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Company and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Group which could anticipate in the finance and the operation polices of the investees, but could not control or jointly control the formulation of the policies with the other parties.
(2) Recognition for initial investment cost
The initial investment cost of the long-term equity investment shall be recognized by adopting the following ways in accordance with different methods of acquisition:
① As for those forms under the same control of the enterprise combine, if the combine party takes the cash payment, non-cash assets transformation, liabilities assumption or equity securities issuance as the combination consideration, should take the shares of the book value by the ultimate control party in the consolidate financial statement of theowners’ equities of the combiners acquired on the merger date as the initial investment cost. The difference between the initial investment cost and the book value of the paid combination consideration or the total amount of the issued shares of the long-term equity investment should be adjusted the capital reserve; If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. To include each direct relevant expense occurred when executing the enterprise merger into the current gains and losses; while the handling charges and commission occurs from the issuing the equity securities or the bonds for the enterprise merger should be included in the initial measurement amount of theshareholders’ equities or the liabilities.
② As for long-term equity investment acquired through the merger of enterprises not under the same control, its initial investment cost shall regard as the combination cost calculated by the fair value of the assets, equity instrument issued and liabilities incurred or undertaken on the purchase date adding the direct cost related with the acquisition. The identifiable assets of the combined party and the liabilities (including contingent liability) undertaken on the combining date shall be measured at the fair value without considering the amount of minority interest. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. The acquirer shall record the negative balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree into the consolidated income statement directly. The agent expense and other relevant management expenses such as the audit, legal service and evaluation consultation occurs from the enterprise merger, should be included in the current gains and losses when occur; while the handling charges and commission occurs from the issuing the equity securities or the bonds for the enterprise merger should be included in the initial measurement amount of theshareholders’ equities or the liabilities.
③ Long-term equity investment obtained by other means
The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost
which is actually paid.
The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued.
The initial cost of a long-term equity investment of an investor shall be the value stipulated in the investment contract or agreement, the unfair value stipulated in the contract or agreement shall be measured at fair value. As for long-term investment obtained by the exchange of non-monetary assets, where it is commercial in nature, the fair value of the assets surrendered shall be recognized as the initial cost of the long-term equity investment received; where it is not commercial in nature, the book value of the assets surrendered shall be recognized as the initial cost of the long-term equity investment received.
The initial cost of a long-term equity investment obtained by recombination of liabilities shall be recognized at fair value of long-term equity investment.
(3) Subsequent measurement and recognition of profits and losses
① An investment in the subsidiary company shall be measured by employing the cost method
Where the Company hold, and is able to do equity investment with control over an invested entity, the invested entity shall be its subsidiary company. Where the Company holds the shares of an entity over50%, or, while the Company holds the shares of an entity below50%, but has a real control to the said entity, then the said entity shall be its subsidiary company.
② An investment in the joint enterprise or associated enterprise shall be measured by employing the equity method Where the Company hold, and is able to do equity investment with joint control with other parties over an invested entity, the invested entity shall be its joint enterprise. Where the Company hold, and is able to have equity investment with significant influences on an invested entity, the invested entity shall be its associated entity. After the Company acquired the long-term equity investment, should respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and theowners’ equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in theowners’ equity .
The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity.
If the accounting polices adopted by the investees is not accord with that of the Group, should be adjusted according to the accounting policies of the Group and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income.
For the transaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Group according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized.
The Company shall recognize the net losses of the invested enterprise according to the following sequence: first of all, to write down the book value of the long-term equity investment. Secondly, if the book value of the long-term equity investment is insufficient for written down, should be continued to recognized the investment losses limited to the book value of other long-term equity which forms of the net investment of the investees and to written down the book value of the long-term accounts receivable etc. Lastly, through the above handling, for those should still undertake the additional obligations according to the investment contracts or the agreements, it shall be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Group shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits.
In the preparation for the financial statements, the balance existed between the long-term equity investment increased by acquiring shares of minority interest and the attributable net assets on the subsidiary calculated by the increased shares held since the purchase date (or combination date), the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained profits shall be adjusted; the Company disposed part of the long-term equity investment on subsidiaries without losing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing the long-term equity investment shall be recorded intoowners’ equity.
For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual payment gained shall be recorded into current profits and losses.
For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded intoowners’ equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees according to the corresponding proportion. Theowners’ equity recognized owning to the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current gains and losses according to the proportion.
For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the current gains and losses according to the proportion;
the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion.
For those the Company lost the control of the investees by disposing part of the equity investment as well as the remained equity after disposal could execute joint control or significant influences on the investees, should change to measure by equity method when compiling the individual financial statement and should adjust the measurement of the remained equity to equity method as adopted since the time acquired; if the remained equity after disposal could not execute joint control or significant influences on the investees, should change the accounting disposal according to the relevant regulations of the recognition and measurement standards of financial instrument, and its difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized by adopting equity method for measurement or the recognition and measurement standards of financial instrument before the Group acquired the control of the investees, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the control of them, while the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. Of which, for the disposed remained equity which adopted the equity method for measurement, the other comprehensive income and the otherowners’ equity should be carried forward according to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to the recognition and measurement standards of financial instrument, the other comprehensive income and the otherowners’ equity should be carried forward in full amount.
For those the Company lost the control of the investees by disposing part of the equity investment, the disposed remained equity should change to calculate according to the recognition and measurement standards of financial instrument, and difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized from the original equity investment by adopting the equity method, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the equity method for measurement, while for theowners’ equity recognized owning to the changes of the otherowner’s equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current investment income with full amount when terminate adopting the equity method.
15. Investment real estates
Measurement mode of investment real estates:
Measurement of cost method
Depreciation or amortization method:
The investment real estate shall be measured at its cost. Of which, the cost of an investment real estate by acquisition consists of the acquisition price, relevant taxes, and other expense directly relegated to the asset; the cost of a self-built investment real estate composes of the necessary expenses for building the asset to the hoped condition for use. The investment real estates invested by investors shall be recorded at the value stipulated in the investment contracts or agreements, but the unfair value appointed in the contract or agreement shall be entered into the account book at the fair value.
As for withdrawal basis of provision for impairment of investment real estates, please refer to withdrawal method for provision for impairment of fixed assets.
16. Fixed assets
(1) Conditions for recognition
Fixed assets refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake of producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Company and its cost could be reliable measured.
(2) Depreciation method
||||||
|-|-|-|-|-|
|Category of fixedassets|Depreciation method|Useful life|Residual value(%)|Annual deprecation(%)|
|Houses and buildings|Average method ofuseful life|20-40||2.50-5|
|Machine equipment|Average method ofuseful life|6-15||6.67-16.67|
|Transportationequipment|Average method ofuseful life|5-10||10-20|
|Electronic equipment|Average method ofuseful life||||
|Other equipment|Average method ofuseful life|5-10||10-20|

(3) Recognition basis, pricing and depreciation method of fixed assets by finance lease
The Company recognizes those meet with the following one or certain standards as the fixed assets by finance lease:① The leasing contract had agreed that (or made the reasonable judgment according to the relevant conditions on the lease starting date) when the lease term expires, the ownership of leasing the fixed assets could be transferred to the Company;② The Company owns the choosing right for purchasing and leasing the fixed assets, with the set purchase price which is estimated far lower than the fair value of the fixed assets by finance lease when executing the choosing right, so the Company could execute the choosing right reasonably on the lease starting date;③ Even if the ownership of the fixed assets not be transferred, the lease period is of75% or above of the useful life of the lease fixed assets;④ The current value of the minimum lease payment on the lease starting date of the Company is equal to90% or above of the fair value of the lease fixed assets on the lease starting date; the current value of the minimum lease receipts on the lease starting date of the leaser is equal to90% or above of the fair value of the lease fixed assets on the lease starting date;⑤ The nature of the lease assets is special that only the Company could use it if not execute large transformation.
The fixed assets by finance lease should take the lower one between the fair value of the leasing assets and the current value of the minimum lease payment on the lease starting date as the entry value. As for the minimum lease payment which be regarded as the entry value of the long-term accounts payable, its difference should be regarded as the unrecognized financing expense. For the initial direct expenses occur in the lease negotiations and the signing process of the lease contracts that attribute to the handling expenses, counsel fees, travel expenses and stamp taxes of the lease items, should be included in the charter-in assets value. The unrecognized financing expenses should be amortized by adopting the actual interest rate during the period of the lease term. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life
17. Construction in process
(1) Valuation of the progress in construction
Construction in progress shall be measured at actual cost. Self-operating projects shall be measured at direct materials, direct wages and direct construction fees; construction contract shall be measured at project price payable; project cost for plant engineering shall be recognized at value of equipments installed, cost of installation, trail run of projects. Costs of construction in process also include borrowing costs and exchange gains and losses, which should be capitalized.
(2) Standardization on construction in process transferred into fixed assets and time point
The construction in process, of which the fixed assets reach to the predicted condition for use, shall carry forward fixed assets on schedule. The one thathasn’t audit the final accounting shall recognize the cost and make depreciation in line with valuation value. The construction in process shall adjust the original valuation value at its historical cost but not adjust the depreciation that has been made after auditing the final accounting.
18. Borrowing costs
(1) Recognition principle of capitalization of borrowing costs
The borrowing costs shall include the interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. Where the borrowing costs occurred belong to specifically borrowed loan or general borrowing used for the acquisition and construction of investment real estates and inventories over one year (including one year) shall be capitalized, and record into relevant assets cost. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. The borrowing costs shall not be capitalized unless they simultaneously meet the following three requirements: (1) The asset disbursements have already incurred; (2) The borrowing costs have already incurred; and (3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started.
(2) The period of capitalization of borrowing costs
The borrowing costs arising from acquisition and construction of fixed assets, investment real estates and inventories, if they meet the above-mentioned capitalization conditions, the capitalization of the borrowing costs shall be measured into asset cost before such assets reach to the intended use or sale, Where acquisition and construction of fixed assets, investment real estates and inventories is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended, and recorded into the current expense, till the acquisition and construction of the assets restarts. When the qualified asset is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased, the borrowing costs occurred later shall be included into the financial expense directly at the current period.
(3) Measurement method of capitalization amount of borrowing costs
As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment.
Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing.
19. Intangible assets
(1) Pricing method, Service life, and Impairment test
(1) Pricing method of intangible assets
Intangible assets purchased should take the actual payment and the relevant other expenses as the actual cost. For the intangible assets invested by the investors should be recognized the actual cost according to the value of the investment contracts or agreements, however, for the value of the contracts or agreements is not fair, the actual cost should be recognized according to the fair value.
For the intangible assets acquires from the exchange of the non-currency assets, if own the commercial nature, should be recorded according to the fair value of the swap-out assets; for those not own the commercial nature, should be recorded according to the book value of the swap-out assets.
For the intangible assets acquires from the debts reorganization should be recognized by the fair value.
(2) Amortization method and term of intangible assets
As for the intangible assets with limited service life, which are amortized by straight-line method when it is available for use within the service period, shall be recorded into the current profits and losses. The Company shall, at least at the end of each year, check the service life and the amortization method of intangible assets with limited service life. When the service life and the amortization method of intangible assets are different from those before, the years and method of the amortization shall be changed.
Intangible assets with uncertain service life may not be amortized. However, the Company shall check the service life of intangible assets with uncertain service life during each accounting period. Where there are evidences to prove the intangible assets have limited service life, it shall be estimated of its service life, and be amortized according to the above method mentioned.
The rights to use land of the Company shall be amortized according to the rest service life.
(2) Accounting polices of internal R& D expenses
The internal research and development projects of an enterprise shall be classified into research phase and development phase: the term “research” refers to the creative and planned investigation to acquire and understand new scientific or technological knowledge; the term “development” refers to the application of research achievements and other knowledge to a certain plan or design, prior to the commercial production or use, so as to produce any new material, device or product, or substantially improved material, device and product.
The Company collects the expenses of the corresponding phases according to the above standard of classifying the research phase and the development phase. The research expenditures for its internal research and development projects of an enterprise shall be recorded into the profit or loss for the current period. The development expenditures for its internal research and development projects of an enterprise may be capitalized when they satisfy the following conditions simultaneously: it is feasible technically to finish intangible assets for use or sale; it is intended to finish and use or sell the intangible assets; the usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally; it is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; the development expenditures of the intangible assets can be reliably measured.
20. Impairment of long-term assets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Group should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease in value no matter whether it exists.
If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or present value of predicted cash flow. Asset fair value should be determined according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market, fair value should be determined according to theBuyer’s price of the asset. If no sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of predicted asset cash flow should be determined by the proper discount rate according to Assets in service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash flow independently. In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combination except business reputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in future. 21. Amortization method of long-term deferred expenses
Long-term deferred expanses of the Company shall be recorded in light of the actual expenditure, and amortized averagely within benefit period. In case of no benefit in the future accounting period, the amortized value of such project that fails to be amortized shall be transferred into the profits and losses of the current period.
22. Payroll
(1) Accounting treatment of short-term compensation
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Group should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value.
(2) Accounting treatment of the welfare after demission
The Company classifies the welfare plans after demission into defined contribution plans and defined benefit plans. Welfare plans after demission refers to the agreement on the welfare after demission reaches between the Company and the employees, or the regulations or methods formulated by the Company for providing the welfare after demission for the employees. Of which, defined contribution plans refers to the welfare plans after demission that the Company no more undertake the further payment obligations after the payment of the fixed expenses for the independent funds; defined benefit plans, refers to the welfare plans after demission except for the defined contribution plans.
Defined contribution plans
During the accounting period that the Company providing the service for the employees, the Company should recognize the liabilities according to the deposited amount calculated by defined contribution plans, and should be included in the current gains and losses or the relevant assets cost.
(3) Accounting treatment of the demission welfare
The Company should recognize the payroll payment liabilities occur from the demission welfare according to the earlier date between the following two conditions and include which in the current gains and losses when providing the demission welfare for the employees: the Company could not unilaterally withdraw the demission welfare owning to the relieve plans of the labor relationship or reduction; when the Company recognizing the costs or expenses related to the reorganization involves with the demission welfare payments.
23. Estimated liabilities
(1) Criteria of estimated liabilities
Only if the obligation pertinent to a contingencies shall be recognized as an estimated debts when the following conditions are satisfied simultaneously:
① That obligation is a current obligation of the Company;
② It is likely to cause any economic benefit to flow out of the Company as a result of performance of the obligation; and
③ The amount of the obligation can be measured in a reliable way.
(2) Measurement of estimated liabilities
The Company shall measure the estimated debts in accordance with the best estimate of the necessary expenses for the performance of the current obligation.
The Company shall check the book value of the estimated debts on the Balance Sheet Date. If there is any conclusive evidence proving that the said book valuecan’t truly reflect the current best estimate, the Company shall, subject to change, make adjustment to carrying value to reflect the current best estimate.
24. Revenue
(1) Recognition of revenue from sale of goods: the revenue from selling shall be recognized by the following conditions: The significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant revenue and costs of selling goods can be measured in a reliable way. The amount of the revenue from selling shall ascertain the revenue incurred by selling goods in accordance with the received or receivable price stipulated in the contract or agreement signed between the enterprise and the buyer, unless the received or receivable amount as stipulated in the contract or agreement is unfair.
(2) Recognition of revenue from providing labor services: When the total revenue and costs from providing labor can be measured in a reliable way; the relevant economic benefits are likely to flow into the enterprise; the schedule of completion under the transaction can be measured in a reliable way, the revenue from providing labor shall be recognized. If the Company can reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method on the date of the balance sheet, otherwise the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected to be compensated. The Company recognized the completion process of the transaction concerning the labor services according to the proportion of the occurred cost of the estimated total cost. The total amount of the revenue from providing services should be recognized according to the contract price received or receivable from the accepting of the labor services or the agreement price except for those unfair prices.
(3) Recognition of the revenue from transferring use rights of assets: When the relevant economic benefits are likely to flow into the enterprises and the amount of revenues can be measured in a reliable way, the revenue from abalienating the right to use assets shall be recognized. The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the enterprise's cash is used by others and the actual interestrate；the amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract oragreement；as for the rental revenue: the amount of the rental revenue from the operation lease should be recognized according to the straight-line method during each period of the lease term or accrued into the current gains and losses if rental actual occurred.
25. Government subsidies
(1) Category
A government subsidy means the monetary or non-monetary assets obtained free by an enterprise from the government. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income according to the relevant government documents.
For those the government documents not definite stipulate the assistance object, the judgment basis of the Company classifies the government subsidies pertinent to assets and government subsidies pertinent to income is: whether are used for purchasing or constructing or for forming the long-term assets by other methods.
(2) Recognition of the government subsidies
The government subsidies should be recognized only when meet with the attached conditions of the government subsidies as well as could be acquired.
If the government subsidies are the monetary assets, should be measured according to the received or receivable amount; and for the government subsidies are the non-monetary assets, should be measured by fair value.
(3) Accounting treatments
The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. The government subsidies pertinent to incomes shall be treated respectively in accordance with the circumstances as follows: those subsidies used for compensating the related future expenses or losses of the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized; or those subsidies used for compensating the related expenses or losses incurred to the enterprise shall be directly included in the current profits and losses.
26. Deferred income tax assets and liabilities
(1) Basis of recognizing the deferred income tax assets
According to the difference between the book value of the assets and liabilities and their tax basis, A deferred tax assets shall be measured in accord with the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
The recognition of the deferred income tax assets is limited by the income tax payable that the Company probably gains for deducting the deductible temporary differences. At the balance sheet date, where there is strong evidence showing that sufficient taxable profit will be available against which the deductible temporary difference can be utilized, the deferred tax asset unrecognized in prior period shall be recognized.
The Company assesses the carrying amount of deferred tax asset at the balance sheet date. Ifit’s probable that sufficient taxable profit will not be available against which the deductible temporary difference can be utilized, the Company shall write down the carrying amount of deferred tax asset, or reverse the amount written down later whenit’s probable that sufficient taxable profit will be available
(2) Basis of recognizing the deferred income tax liabilities
According to the difference between the book value of the assets and liabilities and their tax basis, A deferred tax liabilities shall be measured in accord with the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
27. Lease
(1) Accounting treatment of operating lease
Lessee in an operating lease shall treat the lease payment under an operating lease as a relevant asset cost or the current profit or loss on a straight-line basis over the lease term. The initial direct costs incurred shall be recognized as the current profit or loss; Contingent rents shall be charged as expenses in the periods in which they are incurred. Lessors in an operating lease shall be recognized as the current profit or loss on a straight-line basis over the lease term; Initial direct costs incurred by lessors shall be recognized as the current profit or loss; the initial direct expenses occur should be directly included in the current gains and losses except for those with larger amount and be capitalized as well as be included in the gains and losses by stages. Contingent rents shall be charged as expenses in the periods in which they are incurred.
(2) Accounting treatments of financial lease
When the Company as the lessee, On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges and the occurred initial direct expenses, should be recorded in the lease assets value. During each lease period, should recognize the current financing expenses by adopting the actual interest rate.
When the Company as the leasor and on the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. During each lease period, should recognize the current financing revenues adopting the actual interest rate.
28. Other significant accounting policies and estimates
(1) Operation termination
Operation termination refers to the compose part that meet with one of the following conditions which had been disposed by the Group or be classified to held-to-sold as well as could be individually distinguished in operating and compiling the financial statement:
① The compose part represents an individual main business or a main operation area;
② The compose part is a part intends to dispose and plan an individual main business or a main operation area;
③ The compose part is a subsidiary which be acquired only for resold.
(2) Hedging accounting
The term “hedging” refers to one or more hedging instruments which are designated by an enterprise for avoiding the risks of foreign exchange, interest rate, commodity price, stock price, credit and etc., and which is expected to make the changes in fair value or cash flow of hedging instrument(s) to offset all or part of the changes in the fair value or cash flow of the hedged item.
The term “hedging instrument” shall refer to a derivative instrument which is designated by an enterprise for hedging and by which it is expected that changes in its fair value or cash flow can offset the changes in fair value or cash flow of the hedged item. For a hedging of foreign exchange risk, a non-derivative financial asset or non-derivative financial liability may be used as a hedging instrument.
The “hedged item” shall refer to the following items which make an enterprise faced to changes in fair value or cash flow and are designated as the hedged objectives.
The hedging should be executed by the hedging accounting methods when satisfying the following conditions at the same time:
① At the commencement of the hedging, the enterprise shall specify the hedging relationship formally (namely the relationship between the hedging instrument and the hedged item) and prepare a formal written document on the hedging relationship, risk management objectives and the strategies of hedging.
② The hedging expectation is highly efficient and meets the risk management strategy, which is confirmed for the hedging relationship by enterprise at the very beginning.
③ For a cash flow hedging of forecast transaction, the forecast transaction shall be likely to occur and shall make the enterprise faced to the risk of changes in cash flow, which will ultimately affect the profits and losses.
④ The effectiveness of hedging can be reliably measured.
⑤ The hedging is highly effective in accounting period in which the hedging relationship is specified.
29. Changes in main accounting policies and estimates
(1) Change of main accounting policies
□ Applicable√ Inapplicable
(2) Change of main accounting estimates
□ Applicable√ Inapplicable
30. Critical accounting judgments and estimates
Due to the inside uncertainty of operating activity, the Group needed to make judgments, estimates and assumption on the book value of the accounts without accurate measurement during the employment of accounting policies. And these judgments, estimates and assumption were made basing on the prior experience of the senior executives of the Group, as well as in consideration of other factors. These judgments, estimates and assumption would also affect the report amount of income, costs, assets and liabilities, as well as the disclosure of contingent liabilities on balance sheet date. However, the uncertainty of these estimates was likely to cause significant adjustment on the book value of the affected assets and liabilities.
The Group would check periodically the above judgments, estimates and assumption on the basis of continuing operation. For the changes in accounting estimates only affected on the current period, the influence should be recognized at the period of change occurred; for the changes in accounting estimates affected the current period and also the future period, the influence should be recognized at the period of change occurred and future period. On the balance sheet date, the Group needed to make judgments, estimates and assumption on the accounts in the following important items:
(1) Provision for bad debts
In accordance with the accounting policies of accounts receivable, the Group measured the losses for bad debts by adopting allowance method. The impairment of accounts receivable was based on the appraisal of the recoverability of accounts receivable. The impairment of accounts receivable was dependent on the judgment and estimates. The actual amount and the difference of previous estimates would affect the book value of accounts receivable and the withdrawal and reversal on provision for bad debts of accounts receivable during the period of estimates being changed.
(2) Provision for falling price of inventories
In accordance with the accounting policies of inventories, for the inventories that the costs were more than the net realizable value as well as out-of-date and dull-sale inventories, the Group withdrawn the provision for falling price of inventories on the lower one between costs and net realizable value. Evaluating the falling price of inventories needed the management level gain the valid evidence and take full consideration of the purpose of inventories, influence of events after balance sheet date and other factors, and then made relevant judgments and estimates. The actual amount and the difference of previous estimates would affect the book value of inventories and the withdrawal and reversal on provision for bad debts of inventories during the period of estimates being changed. (3) Held-to-maturity investment
The Company classifies the non-derivative financial assets which meet with conditions with fixed or confirmable repayment amount and fixed maturity date as well as the Company owns definite intention and ability to hold until mature as the held-to-maturity investment. To execute the classification needs large judgment. In the
process of executing the judgment, the Company would assess the intention and ability of the investment which hold until the due date. Except for the particular situation (for example, selling the investment with insignificant amount when approaching the due date), if the Company fails to hold the investment until the due date, should re-classify the investment to the available-for-sale financial assets and would no more be classified as the held-to-maturity investment in the current fiscal year as well as the afterward two complete fiscal years. If there exits such situation, that would probably cause significant influences on the value of the relevant financial assets presented on the financial statement and may influence the risks management strategies of the financial instruments of the Company. (4) Held-to-maturity investment impairment
The Company confirms whether the held-to-maturity investment has impairment depends on the judgment from the management layer to a large extent. The objective evidences of the impairments including the issuers which occur serious financial difficulties that lead the financial assets could not continue to trade in the active market and to execute the contracts regulations (for example, to return the interests or the principal violates a treaty) etc. In the process of executing judgment, the Company needs to evaluate the influences of the objective evidences of the impairment on the estimated future cash flow.
(5) The impairment of financial assets available for sale
The Group judged whether the financial assets available for sale were impaired relying heavily on the judgment and assumption of the management team, so as to decide whether recognized the impairment losses in the income statement. During the process of making the judgment and assumption, the Group needed to appraise the balance of the cost of the investment exceeding its fair value and the continuous period, the financial status and business forecast in a short period, including the industrial situation, technical reform, credit level, default rate and risk of counterparty.
(6) Provision for impairment of non-financial non-current assets
The Group made a judgment on the non-current assets other than financial assets whether they had any indication of impairment on the balance sheet date. For the intangible assets without finite service life, other than the annual impairment test, they should be subject to the impairment test when there was any indication of impairment. For other non-current non-financial assets, which should be subjected to impairment test when there was indication of impairment indicated that the book valuecan’t be recoverable.
When the book value of the assets or assets portfolio was more than the recoverable amount, which was the higher one between the net amount of fair value after deducting the disposal expenses and the discounted amount of the estimated future cash flow, it means impairment incurred.
The net amount of fair value after deducting the disposal expenses should be fixed the price in the sale agreement for similar assets in the fair transaction minus the increased costs directly attributable to the assets disposal.
When estimated the discounted value of future cash flow, the Group needed to make important judgment on the output, selling price, relevant costs and the discount rate for calculating the discounted amount, etc. When estimated the recoverable amount, the Group would adopt all the available documents, including the prediction for relevant output, selling price and relevant operating costs arising from reasonable and supportive assumptions.
The Group made the impairment test on goodwill at least one time per year, which required to predict the discounted amount of the future cash flow of the assets or assets portfolio with the distributed good will, for which, the Group needed to predict the future cash flow of the assets or assets portfolio, and adopt the property discounted rate to decide the discounted amount of future cash flow.
(7) Depreciation and amortization
For the investment real estate, fixed assets and intangible assets, the Group withdrew the depreciation and amortization by adopting the straight-line method during the service life after full consideration of the salvage value. The Group checked the service life periodically so as to decide the amount of depreciation and amortization at each Reporting Period. The service life was fixed by the Group in accordance with the previous experience of the similar assets and the expected technical update. If there was any significant change on the previous estimates, the depreciation and amortization expenses should be adjusted.
(8) Income tax
During the routine operating activities, there were some uncertainty in the ultimate tax treatment and calculation for parts of transactions. Some accounts of such transaction could be listed as pre-tax expenditures only after the approval of taxation authorities. If there were any differences between the ultimate result of recognition for these taxation maters and their initial estimates, the differences would affect the current income tax and deferred income tax at the period of ultimate recognition.
VI. Taxation
1. Main taxes and tax rate
||||
|-|-|-|
|Type of tax|Taxation basis|Tax rates|
|VAT|Payable to sales revenue|13%, 17%|
|Business tax|Taxable operating revenue|5%|
|Urban maintenance andconstruction tax|Taxable turnover amount|Tax paid in accordance with the taxregulations of tax units location|
|Corporate income tax|Taxable income|25% or 15%|
|Education surcharge|Taxable turnover amount|5%|

2. Tax preference
In 2015, the Company has been identified as High-tech Enterprises, therefore, it enjoys 15-percent preferential rate for corporate income tax; theCompany’s controllingsubsidiary—Changchai Wanzhou Diesel Engine Co., Ltd., the controlling subsidiary company, shall pay the corporate income tax at tax rate15% from 1 Jan. 2011 to 31 Dec. 2020 in accordance with the Notice of the Ministry of Finance, the General Administration of Customs of PRC and the National Administration of Taxation about the Preferential Tax Policies for the Western Development. VII. Notes on major items in consolidated financial statements of the Company (The unit was RMB, if there was no special illustration)
1. Monetary funds
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Cash on hand|314,905.29|252,373.65|
|Bank deposits|582,963,123.80|526,463,864.56|
|Other monetary funds|87,425,772.93|74,596,477.41|
|Total|670,703,802.02|601,312,715.62|

 At the period-end, the restricted monetary fund was of RMB 87,425,672.93 in total, of which the bank acceptance deposit was of RMB 87,425,672.93.
3. Notes receivable
(1) Notes receivable listed by category
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Bank acceptance bill|501,070,279.01|498,502,274.42|
|Total|501,070,279.01|498,502,274.42|

 (2) Notes receivable pledged by the Company at the period-end
N/A
(3) Notes receivable which had endorsed by the Company or had discounted and had not due on the balance sheet date at the period-end
Unit: RMB
||||
|-|-|-|
|Item|Amount of recognition termination at theperiod-end|Amount of not terminated recognition at theperiod-end|
|Bank acceptance bill|376,560,093.54||
|Total|376,560,093.54||

(4) There was no notes transferred to accounts receivable because drawer of the notes fails to executed the
contract or agreement.
4. Accounts receivable
(1) Accounts receivable disclosed by category
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Category|Closing balance|||||Opening balance|||||
||Book balance||Bad debtprovision||Bookvalue|Book balance||Bad debtprovision||Bookvalue|
||Amount|Proportion (%)|Amount|Withdrawalproportion (%)||Amount|Proportion (%)|Amount|Withdrawalproportion (%)||
|Accountsreceivable withsignificant singleamount for whichbad debt provisionseparately accrued|27,508,638.82|4.62|25,391,099.21|92.30|2,117,539.61|32,966,572.81|6.03%|28,743,568.09|87.19%|4,223,004.72|
|Accountsreceivablewithdrawn baddebt provisionaccording to creditriskscharacteristics|567,673,711.72|95.33|210,511,429.64|37.08|357,162,282.08|511,838,003.05|93.66%|207,464,087.27|40.53%|304,373,915.78|
|Accountsreceivable withinsignificantsingle amount forwhich bad debtprovisionseparately accrued|276,298.29|0.05|276,298.29|100.00||1,686,716.39|0.31%|1,686,716.39|100.00%||
|Total|595,458,648.83|100.00|236,178,827.14|39.66|359,279,821.69|546,491,292.25|100.00%|237,894,371.75|43.53%|308,596,920.50|

Accounts receivable with significant single amount for which bad debt provision separately accrued at period end: Unit: RMB
||||||
|-|-|-|-|-|
|Accountreceivable(by unit)|Closing balance||||
||Account receivable|Bad debt provision|Withdrawalproportion (%)|Withdrawal reason|
|Customer 1|1,902,326.58|1,902,326.58|100.00|Difficult to recovered|
|Customer 2|6,215,662.64|6,202,854.45|99.79|Difficult to recovered|
|Customer 3|4,319,339.17|2,214,607.75|51.27|Estimated difficult to recover|
|Customer 4|3,279,100.00|3,279,100.00|100.00|Estimated difficult to recover|
|Customer 5|2,133,377.01|2,133,377.01|100.00|Estimated difficult to recover|
|Customer 6|5,359,381.00|5,359,381.00|100.00|Difficult to recovered|
|Customer 7|2,584,805.83|2,584,805.83|100.00|Difficult to recovered|
|Customer 8|1,714,646.59|1,714,646.59|100.00|Difficult to recovered|
|Total|27,508,638.82|25,391,099.21|||

In the groups, accounts receivable adopting aging analysis method to accrue bad debt provision:
Unit: RMB
|||||
|-|-|-|-|
|Aging|Closing balance|||
||Accounts receivable|Bad debt provision|Withdrawal proportion (%)|
|Within 1 year|357,020,701.75|7,140,414.51|2.00|
|1 to 2 years|3,080,848.05|154,042.40|5.00|
|2 to 3 years|1,820,092.27|273,013.85|15.00|
|3 to 4 years|527,790.44|158,337.13|30.00|
|4 to 5 years|6,096,643.65|3,657,986.19|60.00|
|Over 5 years|199,127,635.56|199,127,635.56|100.00|
|Total|567,673,711.72|210,511,429.64||

(2) Accounts receivable withdraw, reversed or collected during the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB5,408,351.39; the amount of the reversed or collected part during the Reporting Period was of RMB 6,666,742.43.
(3) The actual write-off accounts receivable
Unit: RMB
|||
|-|-|
|Item|Write-off account|
|Changge Shiying Machinery Co., Ltd|457,153.57|

 (4) Top 5 of the closing balance of the accounts receivable collected according to the arrears party
At the period-end, the total amount of top 5 of the closing balance of the accounts receivable collected according to the arrears party was RMB 192,749,341.51, which was32.37% of the closing balance of the accounts receivable and the relevant closing balance of bad debt provision was RMB 20,942,174.47.
5. Prepayment
(1) List by aging analysis:
Unit: RMB
||||||
|-|-|-|-|-|
|Aging|Closing balance||Opening balance||
||Amount|Proportion (%)|Amount|Proportion (%)|
|Within 1 year|13,981,887.79|90.30|11,891,116.78|92.30|
|1 to 2 years|515,122.72|3.33|7,418.00|0.06|
|2 to 3 years|7,418.00|0.05|114,790.79|0.89|
|3 to 4 years|110,100.79|0.71|||
|4 to 5 years|||||
|Over 5 years|868,946.13|5.61|868,946.13|6.75|
|Total|15,483,475.43|100.00|12,882,271.70|100.00|

(2) Top 5 of the closing balance of the prepayment collected according to the prepayment target
At the period-end, the total amount of top 5 of the closing balance of the prepayment collected according to the
prepayment target was RMB 13,130,359.44, which was84.80% of the closing balance of the accounts receivable.
6. Other accounts receivable
(1) Other accounts receivable disclosed by category
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Category|Closing balance|||||Opening balance|||||
||Book balance||Bad debtprovision||Bookvalue|Book balance||Bad debtprovision||Bookvalue|
||Amount|Proportion (%)|Amount|Withdrawalproportion (%)||Amount|Proportion (%)|Amount|Withdrawalproportion (%)||
|Other accountsreceivable withsignificant singleamount for whichbad debt provisionseparately accrued|2,853,188.02|7.82|2,853,188.02|100.00||2,853,188.02|7.66%|2,853,188.02|100.00%||
|Other accountsreceivablewithdrawn baddebt provisionaccording to creditriskscharacteristics|30,950,737.22|84.83|26,785,062.60|86.54|4,165,674.62|32,431,210.57|87.10%|26,808,670.76|82.66%|5,622,539.81|
|Other accountsreceivable withinsignificantsingle amount forwhich bad debtprovisionseparately accrued|2,679,801.13|7.35|2,679,801.13|100.00||1,952,628.15|5.24%|1,952,628.15|100.00%||
|Total|36,483,726.37|100.00|32,318,051.75|88.58|4,165,674.62|37,237,026.74|100.00%|31,614,486.93|84.90%|5,622,539.81|

Other accounts receivable with significant single amount for which bad debt provision separately accrued at period end:
Unit: RMB
||||||
|-|-|-|-|-|
|Other accountreceivable(by unit)|Closing balance||||
||Other accountreceivable|Bad debt provision|Withdrawalproportion (%)|Withdrawal reason|
|Changchai GroupImport & ExportCompany|2,853,188.02|2,853,188.02|100|Difficult to recover|
|Total|2,853,188.02|2,853,188.02|||

In the groups, other accounts receivable adopting aging analysis method to accrue bad debt provision:
Unit: RMB
|||||
|-|-|-|-|
|Aging|Closing balance|||
||Other accounts receivable|Bad debt provision|Withdrawal proportion (%)|
|Within 1 year|3,630,055.73|72,601.12|2.00|
|1 to 2 years|120,076.86|6,003.84|5.00|
|2 to 3 years|61,989.57|9,298.44|15.00|
|3 to 4 years|621,279.82|186,383.95|30.00|
|4 to 5 years|16,399.95|9,839.97|60.00|
|Over 5 years|26,500,935.29|26,500,935.29|100.00|
|Total|30,950,737.22|26,785,062.60||

(2) Accounts receivable withdraw, reversed or collected during the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 706,757.69; the amount of the reversed or collected part during the Reporting Period was of RMB 3,192.87.
(3) The actual write-off other accounts receivable
N/A
(4) Other accounts receivable classified by the nature of accounts
Unit: RMB
||||
|-|-|-|
|Nature|Closing book balance|Opening book balance|
|Margin and cash pledge|4,200.00|4,200.00|
|Unit current amount|19,305,341.92|20,433,624.06|
|Employee loan|1,819,817.62|2,011,484.92|
|Other|15,354,366.83|14,787,717.76|
|Total|36,483,726.37|37,237,026.74|

 (5) Top 5 of the closing balance of the other accounts receivable collected according to the arrears party Unit: RMB
|||||||
|-|-|-|-|-|-|
|Name of units|Nature|Closing balance|Aging|Proportion ofthe total yearend balance ofthe accountsreceivable (%)|Closingbalance of baddebt provision|
|Changzhou Compressor Co.,Ltd.|Current|2,940,000.00|Over 5 years|8.06|2,940,000.00|
|Import and Export Company ofChangchai Group|Current|2,853,188.02|Over 5 years|7.82|2,853,188.02|
|Changzhou New DistrictAccounting Center|Current|1,626,483.25|Over 5 years|4.46|1,626,483.25|
|OEM Group Settlement Center|Current|1,140,722.16|Over 5 years|3.13|1,140,722.16|
|Changzhou XingshengProperty Management Co., Ltd|Current|496,450.56|Within 1 year|1.35|9,929.01|
|Total||9,056,843.99||24.82|8,570,322.44|

7. Inventory
(1) Category of inventory
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|Closing balance|||Opening balance|||
||Book balance|Falling pricereserves|Book value|Book balance|Falling pricereserves|Book value|
|Raw material|105,129,601.58|4,315,935.29|100,813,666.29|111,288,103.55|2,587,305.60|108,700,797.95|
|Goods inprocess|127,378,644.50|21,803,781.18|105,574,863.32|110,165,018.34|23,144,279.29|87,020,739.05|
|Inventorygoods|280,847,238.35|20,174,913.34|260,672,325.01|208,519,567.29|20,277,368.92|188,242,198.37|
|Materialsprocessed oncommission|25,326,273.77|597,808.75|24,728,465.02|12,310,710.53||12,310,710.53|
|Low-valueconsumables|3,557,926.14|1,300,787.34|2,257,138.80|2,316,353.80|1,300,787.34|1,015,566.46|
|Total|542,239,684.34|48,193,225.90|494,046,458.44|444,599,753.51|47,309,741.15|397,290,012.36|

(2) Falling price reserves of inventory
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|Openingbalance|Increased amount||Decreased amount||Closing balance|
|||Withdrawal|Other|Reverse orwrite-off|Other||
|Raw material|2,587,305.60|1,774,322.02||45,692.33||4,315,935.29|
|Materialsprocessed oncommission||597,808.75||||597,808.75|
|Finishedproducts|20,277,368.92|14,296,707.22||14,399,162.80||20,174,913.34|
|Goods inprocess|23,144,279.29|21,366,683.67||22,707,181.78||21,803,781.18|
|Low-valueconsumables|1,300,787.34|||||1,300,787.34|
|Total|47,309,741.15|38,035,521.66||37,152,036.91||48,193,225.90|

8. Other Current Assets
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|The VAT tax credits|31,669,983.12|28,304,691.41|
|Bank financing product||20,000,000.00|
|Securities company financing product|6,000,000.00|12,000,000.00|
|Ju pai financing product|2,000,000.00||
|Total|39,669,983.12|60,304,691.41|

 9. Available-for-sale financial assets
(1) List of available-for-sale financial assets
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|Closing balance|||Opening balance|||
||Bookbalance|Depreciationreserves|Book value|Book balance|Depreciationreserves|Book value|
|Available-for-saleequity instruments:|821,282,500.00|1,210,000.00|820,072,500.00|504,190,000.00|1,210,000.00|502,980,000.00|
|Measured by fair value|812,872,500.00||812,872,500.00|457,780,000.00||457,780,000.00|
|Measured by costmethod|8,410,000.00|1,210,000.00|7,200,000.00|46,410,000.00|1,210,000.00|45,200,000.00|
|Total|821,282,500.00|1,210,000.00|820,072,500.00|504,190,000.00|1,210,000.00|502,980,000.00|

（2）Available-for-sale financial assets measured by fair value at the period-end
Unit: RMB
|||||
|-|-|-|-|
|Category|Available-for-saleequity instruments|Available-for-saledebt instruments|Total|
|Cost of equity instruments/ amortized cost of debtinstruments|79,874,500.00||79,874,500.00|
|Fair value|812,872,500.00||812,872,500.00|
|Changes of fair value accumulated recorded into othercomprehensive income|623,048,300.00||623,048,300.00|

(3) Available-for-sale financial assets measured by cost at the period-end
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Investees|Book balance||||Depreciation reserves||||Shareholdingproportion amongtheinvestees(%)|Cashbonus oftheReporting Period|
||Period-begin|Increase|Decrease|Period-end|Period-begin|Increase|Decrease|Period-end|||
|JiangsuBank|38,000,000.00||38,000,000.00||||||||
|QidongLiantongDynamometerCo., Ltd.|7,200,000.00|||7,200,000.00|||||3.2|160,000.00|
|Others|1,210,000.00|||1,210,000.00|1,210,000.00|||1,210,000.00|||
|Total|46,410,000.00||38,000,000.00|8,410,000.00|1,210,000.00|||1,210,000.00||160,000.00|

① Jiangsu Bank was listed in A share on August 2016, and the investment was measured by fair value after that period.
② Others: RMB510,000 in Chengdu Changwan Diesel Engine Marketing Corp., and RMB290,000 in Wanzhou Changwan Diesel Engine Fitting Corp. and RMB20,000 in Changzhou Economic and Technological Development Co., Ltd., RMB100,000 in Changzhou Tractors Co., Ltd., RMB200,000 in the Industrial Financing Mutual Benefit Association of Changzhou Economic and Information Technology Commission and RMB90,000 in Beijing Engineering and Agricultural Machinery Co., Ltd.. Due to difficulty in recovery, full-amount
impairment provisions were made for the aforesaid accounts.
(4) Changes of the impairment of the available-for-sale financial assets during the Reporting Period Unit: RMB
|||||
|-|-|-|-|
|Category|Available-for-sale equityinstruments|Available-for-sale debtinstruments|Total|
|Balance of the withdrawn impairmentat the period-begin|1,210,000.00||1,210,000.00|
|Balance of the withdrawn impairmentat the period-end|1,210,000.00||1,210,000.00|

（5）The reason for an increase of63.04% of closing balance than opening balance is that our company measured holding Jiangsu Bank by fair value in current period, so the closing market value increased dramatically.
10. Long-term equity investment
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Investees|Openingbalance|Increase/decrease||||||||Closingbalance|Closingbalance ofimpairmentprovision|
|||Additionalinvestment|Reducedinvestment|Gains andlossesrecognized underthe equitymethod|Adjustment ofothercomprehensiveincome|Changesof otherequity|Cash bonusor profitsannouncedto issue|Withdrawal ofimpairmentprovision|Other|||
|Joint Ventures||||||||||||
|Associated enterprises||||||||||||
|Changzhou FujiChangchai RobinGasolineEngineCo., Ltd.|20,769,304.76|||236,925.27||||||21,006,230.03||
|BeijingTsinghuaIndustrial|||||||||||44,182.50|

||||||
|-|-|-|-|-|
|InvestmentManagement Co.,Ltd.|||||
|Subtotal|20,769,304.76|236,925.27|21,006,230.03|44,182.50|
|Total|20,769,304.76|236,925.27|21,006,230.03|44,182.50|

11. Investment property
(1) Investment property adopted the cost measurement mode
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Houses and buildings|Land use right|construction inprogress|Total|
|I. Original book value|||||
|1. Openingbalance|87,632,571.14|||87,632,571.14|
|2. Increasedamount of the period|||||
|(1) Outsourcing|||||
|(2) Transfer ofinventory\fixedassets\project underconstruction|||||
|（3）Enterprisesmerger increase|||||
|3. Decreased amountof the period|||||
|(1) Disposal|||||
|(2) Other transfer|||||
|4.Closing balance|||||

||||
|-|-|-|
|II. The accumulativedepreciation andaccumulativeamortization|||
|1. Openingbalance|30,351,541.11|30,351,541.11|
|2. Increasedamount of the period|2,208,340.80|2,208,340.80|
|(1) Thedepreciation oramortization|2,208,340.80|2,208,340.80|
|3. Decreased amountof the period|||
|(1) Disposal|||
|(2) Other transfer|||
|4.Closing balance|32,559,881.91|32,559,881.91|
|III. Impairmentprovision|||
|1. Openingbalance|||
|2. Increasedamount of the period|||
|(1) Disposal|||
|3. Decreased amountof the period|||
|(1) Disposal|||
|(2) Other transfer|||
|4.Closing balance|||
|IV. Book value|||
|1.Closing book value|55,072,689.23|55,072,689.23|
|2.Opening bookvalue|57,281,030.03|57,281,030.03|

12. Fixed assets
(1) List of fixed assets
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Item|Houses andbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Other|
|I. Original bookvalue||||||
|1. Openingbalance|419,409,924.25|802,789,176.38|23,547,415.98|34,971,574.20|1,280,718,090.81|
|2. Increasedamount of theperiod|3,660,199.12|71,564,557.24|124,854.70|4,310,645.03|79,660,256.09|
|(1) Purchase|870,000.00|3,601,601.02||206,897.44|4,678,498.46|
|(2) Constructionproject transfer|2,790,199.12|67,962,956.22|124,854.70|4,103,747.59|74,981,757.63|
|（3）Enterprisesmerger increase||||||
|3. Decreasedamount of theperiod|4,061,877.00|20,694,427.98|665,092.08|3,702,963.39|29,124,360.45|
|(1) Disposal orScrap|4,061,877.00|20,694,427.98|665,092.08|3,702,963.39|29,124,360.45|
|4. Closingbalance|419,008,246.37|853,659,305.64|23,007,178.60|35,579,255.84|1,331,253,986.45|
|II. The accumulativedepreciation||||||
|1. Openingbalance|212,091,873.84|468,192,248.83|15,368,212.09|26,845,593.79|722,497,928.55|
|2. Increasedamount of theperiod|15,676,994.07|59,250,366.26|2,029,207.41|2,661,353.43|79,617,921.17|
|(1) Withdrawal|15,676,994.07|59,250,366.26|2,029,207.41|2,661,353.43|79,617,921.17|

|||||||
|-|-|-|-|-|-|
|(2) Enterprisecombination andincrease||||||
|3. Decreasedamount of theperiod|3,641,066.64|19,088,432.01|635,312.44|3,700,128.41|27,064,939.50|
|(1) Disposal orScrap|3,641,066.64|19,088,432.01|635,312.44|3,700,128.41|27,064,939.50|
|4. Closingbalance|224,127,801.27|508,354,183.08|16,762,107.06|25,806,818.81|775,050,910.22|
|III. Impairmentprovision||||||
|1. Openingbalance||3,618,269.03|||3,618,269.03|
|2. Increasedamount of theperiod||||||
|(1) Withdrawal||||||
|3. Decreasedamount of theperiod||1,094,131.67|||1,094,131.67|
|(1) Disposal orScrap||1,094,131.67|||1,094,131.67|
|4. Closing balance||2,524,137.36|||2,524,137.36|
|IV. Book value||||||
|1.Closing bookvalue|194,880,445.10|342,780,985.20|6,245,071.54|9,772,437.03|553,678,938.87|
|2.Opening bookvalue|207,318,050.41|330,978,658.52|8,179,203.89|8,125,980.41|554,601,893.23|

 The accumulative depreciation in Reporting Period was RMB79,617,921.17; the original value of construction
in progress transfer into fix assets was RMB74,981,757.63.
13. Construction in progress
(1) List of construction in progress
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|Closing amount|||Opening amount|||
||Book balance|Impairmentprovision|Book value|Book balance|Impairmentprovision|Book value|
|Trial productionworkshop projecttechnology center|4,233,919.80||4,233,919.80|22,960,533.29||22,960,533.29|
|Castingrenovation project|396,000.00||396,000.00|396,000.00||396,000.00|
|Expansioncapacity ofmulti-cylinder(The 2nd Period)|57,529,623.42||57,529,623.42|40,050,712.95||40,050,712.95|
|Base of land inHehai Road||||33,550.53||33,550.53|
|Diesel EngineCylinder BodyFlexibleManufacturingLine|15,110,073.95||15,110,073.95|1,851,752.13||1,851,752.13|
|Equipment to beinstalled andpayment forprojects|12,511,430.04||12,511,430.04|42,905,906.11||42,905,906.11|
|Total|89,781,047.21||89,781,047.21|108,198,455.01||108,198,455.01|

(2) Changes of significant construction in progress
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Name o f item|Openingbalance|Increasedamount of theperiod|Amount thattransferred tofixed assets ofthe period|Otherdecreasedamount ofthe period|Closing balance|Capitalresources|
|Trial productionworkshop projecttechnology center|22,960,533.29|1,993,135.80|20,719,749.29||4,233,919.80|Self-raised|
|Casting renovationproject|396,000.00||||396,000.00|Self-raised|
|Expansion capacityof multi-cylinder(The 2nd Period)|40,050,712.95|17,616,848.99|137,938.52||57,529,623.42|Self-raised|
|Base of land inHehai Road|33,550.53|388,800.00|422,350.53|||Self-raised|
|Diesel EngineCylinder BodyFlexibleManufacturing Line|1,851,752.13|13,258,321.82|||15,110,073.95|Self-raised|
|Total|65,292,548.90|33,257,106.61|21,280,038.34||77,269,617.17|--|

 14. Intangible assets
（1）Particulars about Intangible assets
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Land use right|Software|Other|Total|
|I. Original book value|||||
|1. Opening balance|137,782,945.30|7,039,691.42||144,822,636.72|
|2. Increased amount of theperiod||1,756,140.17||1,756,140.17|
|(1) Purchase||1,756,140.17||1,756,140.17|

|||||
|-|-|-|-|
|(2) Internal research anddevelopment||||
|(2) Enterprises merger increase||||
|3. Decreased amount of the period||||
|(1) Withdrawal||||
|4. Closing balance|137,782,945.30|8,795,831.59|146,578,776.89|
|II. Accumulated amortization||||
|1. Opening balance|38,511,304.87|3,209,869.38|41,721,174.25|
|2. Increased amount of theperiod|2,792,049.12|2,150,415.90|4,942,465.02|
|(1) Withdrawal|2,792,049.12|2,150,415.90|4,942,465.02|
|3. Decreased amount of the period||||
|(1) Disposal||||
|4. Closing balance|41,303,353.99|5,360,285.28|46,663,639.27|
|III. Impairment provision||||
|1. Opening balance||||
|2. Increased amount of theperiod||||
|(1) Withdrawal||||
|3. Decreased amount of the period||||
|(1) Disposal||||
|4. Closing balance||||
|IV. Book value||||
|1.Closing book value|96,479,591.31|3,435,546.31|99,915,137.62|
|2.Opening book value|99,271,640.43|3,829,822.04|103,101,462.47|

15. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets had not been off-set
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Closing balance||Opening balance||
||Deductibletemporarydifference|Deferred income taxassets|Deductible temporarydifference|Deferred income taxassets|
|Assets impairmentprovision|6,074,862.83|911,229.42|6,416,872.53|962,530.88|
|Total|6,074,862.83|911,229.42|6,416,872.53|962,530.88|

 (2) Deferred income tax liabilities had not been off-set
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Closing balance||Opening balance||
||Taxable temporarydifference|Deferred income taxassets|Taxable temporarydifference|Deferred income taxassets|
|Assets impairmentprovision|732,998,000.00|109,949,700.00|415,905,500.00|62,385,825.00|
|Total|732,998,000.00|109,949,700.00|415,905,500.00|62,385,825.00|

 (3) List of unrecognized deferred income tax assets
Unit: RMB
||||
|-|-|-|
|Item|Closing amount|Opening amount|
|Bad debt provision|262,422,016.06|263,091,986.15|
|Inventory falling price reserves|48,193,225.90|47,309,741.15|
|Total|310,615,241.96|310,401,727.30|

 16. Other non-current assets
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Closing balance|Closing impairmentprovision|Opening balance|Openingimpairmentprovision|
|Entrust loans|14,000,000.00|14,000,000.00|14,000,000.00|14,000,000.00|
|Total|14,000,000.00|14,000,000.00|14,000,000.00|14,000,000.00|

17. Short-term loans
(1) Category of short-term loans
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Mortgage loan|5,000,000.00|12,000,000.00|
|Guaranteed loan|5,000,000.00|5,000,000.00|
|Total|10,000,000.00|17,000,000.00|

 (2) List of the short-term loans overdue but not return
(3)The reason for a decrease of41.18% of closing balance than opening balance is that the loans of our subsidiary Changwan decreased in current period.
18. Notes payable
Unit: RMB
||||
|-|-|-|
|Category|Closing balance|Opening balance|
|Bank acceptance bill|276,090,000.00|238,200,000.00|
|Total|276,090,000.00|238,200,000.00|

 There was no due but not pay notes payable at the period-end.
19. Accounts payable
(1) List of accounts payable
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Payment for goods|605,424,726.65|535,978,470.07|
|Total|605,424,726.65|535,978,470.07|

 (2) There was no notes of the accounts payable aging over one year
20. Advance from customers
(1) List of advance from customers
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Payment for goods|40,890,620.69|26,665,671.38|
|Total|40,890,620.69|26,665,671.38|

(2) There was no significant advance from customers aging over one year
(3) The reason for a increase of53.35% of closing balance than opening balance is mainly that the stock in sales season added advance from some customers.
21. Payroll payable
(1) List of Payroll payable
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|
|I. Short-term salary|60,309,349.29|300,948,673.13|302,708,113.52|58,549,908.90|
|II. welfare after departure-defined contribution plan||37,719,070.46|37,719,070.46||
|III. Termination benefits||67,170.00|67,170.00||
|Total|60,309,349.29|338,734,913.59|340,494,353.98|58,549,908.90|

 (2) List of Short-term salary
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|
|1. Salary, bonus, allowance,subsidy|53,805,049.80|253,931,739.68|257,015,862.87|50,720,926.61|
|2. Employee welfare||6,539,596.50|6,539,596.50||
|3. Social insurance||18,329,613.92|18,329,613.92||
|Including: Medical insurancepremiums||14,830,115.83|14,830,115.83||
|Work-related injury insurance||2,577,353.37|2,577,353.37||
|Maternity insurance||922,144.72|922,144.72||
|4. Housing fund||17,230,006.28|17,230,006.28||
|5. Labor union budget andemployee education budget|6,504,299.49|4,917,716.75|3,593,033.95|7,828,982.29|
|6. Other short-termcompensation|60,309,349.29|300,948,673.13|302,708,113.52|58,549,908.90|

(3) List of drawing scheme
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|
|1. Basic endowmentinsurance||35,678,708.54|35,678,708.54||
|2. Unemploymentinsurance expense||2,040,361.92|2,040,361.92||
|Total||37,719,070.46|37,719,070.46||

22. Taxes payable
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|VAT|972,104.89|467,010.50|
|Business tax||2,900.00|
|Corporate income tax|5,537,211.23|5,923,463.67|
|Personal income tax|940,612.41|49,924.16|
|Urban maintenance and constructiontax|902,501.60|1,996,316.42|
|Property tax|143,204.51|143,204.50|
|Education Surcharge|51,563.36|840,517.28|
|The comprehensive fee|1,075,134.76|1,374,726.40|
|Total|9,622,332.76|10,798,062.93|

 23. Dividends payable
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Common stock dividends|3,243,179.97|3,243,179.97|
|Minority shareholder dividends|648,253.86|648,253.86|
|Total|3,891,433.83|3,891,433.83|

Reason for unpaid dividends payable over one year: the shareholder has not get.
24. Other accounts payable
(1) Other accounts payable listed by nature of the account
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Margin and deposit|2,700,853.59|3,149,353.59|
|Unit current amount|11,420,825.32|15,550,754.25|
|Personal amount payable|1,067,429.96|955,910.51|
|Sales discount and three guarantees|151,408,043.35|146,392,031.63|
|Other|37,849,658.34|35,103,582.48|
|Total|204,446,810.56|201,151,632.46|

 (2) Other significant accounts payable with aging over one year
Other significant accounts payable with aging over one year mainly was temporarily closed and owe payment unsettled.
25. Other current-liabilities
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Sewage charge|200,000.00|200,000.00|
|Electric charge|2,254,381.75|1,795,289.06|
|Other||407,998.00|
|Total|2,454,381.75|2,403,287.06|

 26. Deferred income
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|Formationreasons|
|Governmentsubsidies|53,121,605.70|9,000,000.00|1,064,373.62|61,057,232.08|Governmentallocations|
|Total|53,121,605.70|9,000,000.00|1,064,373.62|61,057,232.08|--|

Items involved in government subsidies:
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|Openingbalance|Amount ofnewly subsidy|Amountaccrued innon-businessincome|Other changes|Closingbalance|Related to theassets/ income|
|Electric controlof dieselengineresearch anddevelopmentandindustrialization allocations|1,842,000.00||398,400.00||1,443,600.00|Related to theassets|
|National majorproject specialallocations|28,770,000.00||||28,770,000.00|Related to theassets|
|Removecompensation|22,509,605.70||665,973.62||21,843,632.08|Related to theassets|
|Research and|||||||
|development|||||||
|and|||||||
|industrializatio|||||||
|n allocations of|||||||
|||||||Related to the|
|national III/IV||9,000,000.00|||9,000,000.00||
|||||||assets|
|standard|||||||
|high-powered|||||||
|efficient diesel|||||||
|engine for|||||||
|agricultural use|||||||
|Total|53,121,605.70|||||--|

27. Share capital
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||Openingbalance|Increase/decrease (+/-)|||||Closing balance|
|||Newly issueshare|Bonusshares|Capitalizationof publicreserves|Other|Subtotal||
|The sumof shares|561,374,326.00||||||561,374,326.00|

28. Capital reserves
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|
|Capital premium|143,990,690.24|||143,990,690.24|
|Other capital reserves|20,337,975.19|||20,337,975.19|
|Total|164,328,665.43|||164,328,665.43|

 29. Other comprehensive income
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|Openingbalance|Reporting Period|||||Closingbalance|
|||Amountincurredbeforeincome tax|Less:Amounttransferredinto profitand loss inthe currentperiod thatrecognizedinto othercomprehensive income inprior period|Less:incometaxexpense|After-taxattribute tothe parentcompany|After-taxattribute tominorityshareholder||
|Othercomprehensive|353,519,675.00|317,092,500.00||47,563,875.00|269,528,625.00||623,048,300.00|

|||||||
|-|-|-|-|-|-|
|reclassified intoprofits or losses||||||
|Profits or lossesof change in fairvalue ofavailable-for-salefinancial assets|353,519,675.00|317,092,500.00|47,563,875.00|269,528,625.00|623,048,300.00|
|Total|353,519,675.00|317,092,500.00|47,563,875.00|269,528,625.00|623,048,300.00|

 30. Special reserves
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|
|Safety productioncost|10,069,746.98|4,416,865.61|2,771,195.37|11,715,417.22|
|Total|10,069,746.98|4,416,865.61|2,771,195.37|11,715,417.22|

 31. Surplus reserves
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increase|Decrease|Closing balance|
|Statutory surplusreserves|292,601,428.01|6,121,962.97||298,723,390.98|
|Discretional surplusreserves|13,156,857.90|||13,156,857.90|
|Total|305,758,285.91|6,121,962.97||311,880,248.88|

 32. Retained profits
Unit: RMB
||||
|-|-|-|
|Item|2016|2015|
|Opening balance of retained profits beforeadjustments|607,859,611.69|555,590,894.67|
|Opening balance of retained profits afteradjustments|607,859,611.69|555,590,894.67|

||||
|-|-|-|
|Add: Net profit attributable to owners ofthe Company|62,539,896.17|71,102,792.49|
|Less: Withdrawal of statutory surplusreserves|6,121,962.97|7,606,588.95|
|Dividend of common stock payable|12,911,609.50|11,227,486.52|
|Closing retained profits|651,365,935.39|607,859,611.69|

 33. Revenues and operating costs
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Reporting Period||Same period of last year||
||Revenue|Operating costs|Revenue|Operating costs|
|Main operations|2,258,400,410.51|1,849,826,031.76|2,495,248,411.83|2,094,368,998.80|
|Other operations|24,628,445.01|16,791,304.61|24,551,135.46|15,847,136.82|
|Total|2,283,028,855.52|1,866,617,336.37|2,519,799,547.29|2,110,216,135.62|

 34. Business tax and surcharges
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Business tax|7,500.00|22,650.00|
|Urban maintenance and constructiontax|2,649,728.73|4,424,215.49|
|Education Surcharge|1,892,413.41|3,185,948.00|
|House property tax|4,169,245.49||
|Land use tax|2,976,381.90||
|Stamp tax|894,177.60||
|Vehicle and vessel tax|2,280.00||
|Other taxes|413,516.46||
|Total|13,005,243.59|7,632,813.49|

According to “Notice of‘VAT AccountingTreatment’ Issued by Ministry of Finance” (Finance and
Accounting[2016] No.22), after full trial for changing business tax to VAT, the name of “business tax and surcharges” was changed to “tax and surcharges”, which was for calculating consumption tax, urban maintenance and construction tax, and resources tax, education surcharge, house property tax, land use tax, vehicle and vessel tax and stamp tax, and other related taxes inenterprise’s business activities.
35. Sales expenses
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Office expenses|18,933,214.19|21,201,667.69|
|Employee’s remuneration|28,799,684.22|28,684,358.57|
|Sales promotional expense|9,370,719.41|9,218,580.00|
|Three guarantees|39,799,196.44|30,238,223.49|
|Transport fees|6,837,099.50|8,414,005.85|
|Other|229,664.03|365,510.11|
|Total|103,969,577.79|98,122,345.71|

 36. Administrative expenses
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Office expenses|17,890,984.51|19,693,941.37|
|Employee’s remuneration|97,316,215.78|89,702,808.14|
|Depreciation and amortization|15,942,006.73|20,448,433.20|
|Research and development expense|53,319,103.98|37,769,695.87|
|Transport fees|2,966,033.22|2,948,275.12|
|Repair charge|4,796,798.73|5,269,797.93|
|Taxes||8,605,279.72|
|Safety expenses|1,645,670.24|1,737,669.77|
|Other|13,705,400.79|11,503,014.31|
|Total|207,582,213.98|197,678,915.43|

 37. Financial expenses
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Interest expenses|1,220,678.60|1,183,262.47|
|Less: Interest income|5,446,142.49|7,372,960.51|

||||
|-|-|-|
|Exchange net profit or loss|-6,491,112.12|-6,135,135.67|
|Other|-825,589.07|-3,398,951.29|
|Total|-11,542,165.08|-15,723,785.00|

 38. Asset impairment loss
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|I. Bad debt loss|-554,826.22|6,001,727.18|
|II. Inventory falling price loss|38,035,521.66|41,250,448.16|
|Total|37,480,695.44|47,252,175.34|

 39. Gains on the changes in the fair value
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Financial assets measured by fair value and thechanges be included in the current profits andlosses|-109,642.19|-109,642.19|
|Total|-109,642.19|-109,642.19|

 40. Investment income
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Long-term equity investment income accountedby equity method|236,925.27|670,328.77|
|Investment income received from disposal offinancial assets measured by fair value and thechanges be included in the current profits andlosses during holding period|294,760.70|594,434.83|
|Investment income received from holding ofavailable-for-sale financial assets|2,833,250.00|6,547,113.40|
|Investment income from disposal of bankfinancial products|364,000.00|468,547.94|
|Investment income received from disposal ofsecurities financial products|399,809.11||
|Financing security gains||839,681.00|
|Total|4,128,745.08|9,120,105.94|

Current accruals reduce by54.73% compared with the previous period, mainly are dividends of Jiangsu Bank
of the previous period. Current accruals have not been allocated.
41. Non-operating gains
Unit: RMB
|||||
|-|-|-|-|
|Item|Reporting Period|Same period of lastyear|Recorded in theamount of thenon-recurring gainsand losses|
|Total gains from disposal of non-currentassets|6,445,469.06|298,236.45|6,445,469.06|
|Including: Gains from disposal of fixedassets|6,445,469.06|298,236.45|6,445,469.06|
|Insurance compensation|7,948,135.65|11,903,636.62|7,948,135.65|
|Penalty income|357,156.87|1,133,046.55|357,156.87|
|Government subsidies|157,649.63|163,851.65|157,649.63|
|Income from disposal of current assets|264,992.00|539,523.00|264,992.00|
|Other|428,989.26|9,974.29|428,989.26|
|Total|15,602,392.47|14,048,268.56|15,602,392.47|

 Lists of government subsidies
Unit: RMB
|||||
|-|-|-|-|
|Item|Reporting Period|Same period of lastyear|Related to theassets/ income|
|The central budget investment plans|2,000,000.00|3,000,000.00|Related to theincome|
|Special fund for industrial development|500,000.00||Related to theincome|
|Special fund for Promoting thetransformation of industrial economy steadygrowth|1,250,000.00|6,510,000.00|Related to theincome|
|The mayor quality award||500,000.00|Related to theincome|
|Stabilization subsidy|1,928,234.75||Related to theincome|
|Science and Technology Progress Award||30,000.00|Related to theincome|
|Talent development funds|80,000.00|184,000.00|Related to theincome|
|Other science and technology projectallocations||130,000.00|Related to theincome|

|||||
|-|-|-|-|
|Other incentives and subsidies|615,527.28|485,263.00|Related to theincome|
|Compensation for demolition|665,973.62|665,973.62|Related to the assets|
|Famous brand subsidy|300,000.00||Related to theincome|
|R & D and industrialization of electricnon-road diesel engine|398,400.00|398,400.00|Related to the assets|
|Industry-university-institute cooperationsubsidy|150,000.00||Related to theincome|
|Association subsidy|60,000.00||Related to theincome|
|Total|7,948,135.65|11,903,636.62||

42. Non-operating expenses
Unit: RMB
|||||
|-|-|-|-|
|Item|Reporting Period|Same period of lastyear|Recorded in theamount of thenon-recurring gainsand losses|
|Loss on disposal of non-current assets|191,440.80|86,306.84|191,440.80|
|Including: Loss on disposal of fixed assets|191,440.80|86,306.84|191,440.80|
|Donation|310,000.00|260,000.00|310,000.00|
|The flood control security fund||2,468,397.34||
|Loss on disposal of current assets|9,640,304.91|4,489,449.93|9,640,304.91|
|Other|587,436.12|1,206,723.88|587,436.12|
|Total|10,729,181.83|8,510,877.99|10,729,181.83|

 43. Income tax expense
(1) Lists of income tax expense
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Current income taxes|11,149,938.42|16,562,132.69|
|Deferred income taxes|51,301.46|122,332.44|
|Total|11,201,239.88|16,684,465.13|

(2) Adjustment process of accounting profit and income tax expense
Unit: RMB
|||
|-|-|
|Item|Reporting Period|
|Total profits|74,917,909.15|
|Current income tax expense accounted by tax andrelevant regulations|11,237,686.38|
|Influence of different tax rate suitable to subsidiary|-281,919.26|
|Influence of non-taxable income|-440,987.50|
|Influence of not deductable costs, expenses and losses|3,521,373.78|
|Influence of deductable losses of deferred income taxassets derecognized used in previous period|-514,793.92|
|Influence of deductible temporary difference ordeductible losses of deferred income tax assetsderecognized in Reporting Period.|494,592.90|
|Tax preference incurred from qualified expense|-2,814,712.50|
|Income tax expense|11,201,239.88|

 44. Supplementary information to cash flow statement
(1) Other cash received relevant to operating activities
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Subsidies and grants|6,883,762.03|10,839,263.00|
|Cash received from other current account|2,742,256.68|3,502,832.73|
|Interest income|5,446,142.49|7,372,960.51|
|Total|15,072,161.20|21,715,056.24|

 (2) Other cash paid relevant to operating activities
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of last year|
|Sale expense paid into cash|50,525,203.20|46,608,291.02|
|Management expense paid into cash|48,853,500.64|39,027,007.46|
|Commission Expenses|585,735.15|701,704.94|
|Other|876,066.51|1,970,121.12|
|Total|100,840,505.50|88,307,124.54|

45. Supplementary information to cash flow statement
(1) Information of net profit to net cash flows generated from operating activities
Unit: RMB
||||
|-|-|-|
|Supplementary materials|Reporting Period|Last period|
|1. Reconciliation of net profit to net cash flows generated fromoperating activities|--|--|
|Net profit|63,716,669.27|72,484,335.89|
|Add: Provision for impairment of assets|37,480,695.44|47,252,175.34|
|Depreciation of fixed assets, of oil-gas assets, of productive biologicalassets|81,826,261.97|85,201,281.00|
|Amortization of intangible assets|4,942,465.02|4,216,562.60|
|Losses on disposal of fixed assets, intangible assets and other long-termassets (gains by "-")|-6,254,028.26|-211,929.61|
|Losses from variation of fair value (gains by "-")||109,642.19|
|Financial expenses (gains by "-")|1,220,678.60|1,211,337.47|
|Investment losses (gains by "-")|-4,128,745.08|-9,120,105.94|
|Decrease in deferred income tax assets (increase by "-")|51,301.46|122,332.44|
|Decrease in inventory (increase by "-")|-134,791,967.74|59,048,257.34|
|Decrease in accounts receivable from operating activities (increase by"-")|-70,568,271.81|-142,246,349.15|
|Increase in payables from operating activities (decrease by "-")|138,226,784.07|16,574,597.23|
|Other|-12,247,898.90|-6,715,253.85|
|Net cash flows generated from operating activities|99,473,944.04|127,926,882.95|
|2. Investing and financing activities that do not involving cash receiptsand payment:|--|--|
|3. Net increase in cash and cash equivalents|--|--|
|Closing balance of cash|583,278,129.09|526,716,238.21|
|Less: Opening balance of cash|526,716,238.21|464,761,820.50|
|Net increase in cash and cash equivalents|56,561,890.88|61,954,417.71|

 (2) Cash and cash equivalents
Unit: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|I. Cash|583,278,129.09|526,716,238.21|
|Including: Cash on hand|314,905.29|252,373.65|
|Bank deposit on demand|582,963,123.80|526,463,864.56|
|Other monetary funds on demand|100.00||
|II. Closing balance of cash and cash equivalents|583,278,129.09|526,716,238.21|

46. The assets with the ownership or use right restricted
Unit: RMB
||||
|-|-|-|
|Item|Closing book value|Restricted reason|
|Monetary capital|87,425,672.93|Bank acceptance draft deposited in the margin|
|Houses and buildings|6,973,427.38|Pledge for bank loan|
|Land use right|19,469,465.00|Pledge for bank loan|
|Total|113,868,565.31||

47. Foreign currency monetary items
Unit: RMB
|||||
|-|-|-|-|
|Item|Closing foreign currency balance|Exchange rate|Closing convert to RMB balance|
|Monetary capital||||
|Including: USD|13,601,122.55|6.937|94,350,987.13|
|HKD|162,384.51|0.8945|145,252.94|
|SGD|54,427.95|4.7995|261,226.95|
|Account receivable||||
|Including: USD|5,052,495.61|6.937|35,049,162.08|

 VIII. Changes of merge scope
N/A
IX. Equity in other entities
1. Equity in subsidiary
(1) The structure of the enterprise group
||||||||
|-|-|-|-|-|-|-|
|Name of the subsidiary|Mainoperatingplace|Registrationplace|Nature ofbusiness|Holding percentage (%)||Way ofgaining|
|||||Directly|Indirectly||
|Changchai Wanzhou DieselEngine Co., Ltd.|Chongqing|Chongqing|Industry|60.00%||Set-up|
|Changzhou ChangchaiBenniu Diesel EngineFittings Co., Ltd.|ChangzhouCity|ChangzhouCity|Industry|99.00%|1.00%|Set-up|
|Changzhou HoushengInvestment Co., Ltd.|ChangzhouCity|ChangzhouCity|Service|100.00%||Set-up|
|Changzhou ChangchaiHousheng AgriculturalEquipment Co., Ltd.|ChangzhouCity|ChangzhouCity|Industry|70.00%|25.00%|Set-up|

(2) Significant not wholly owned subsidiary
Unit: RMB
||||||
|-|-|-|-|-|
|Name of the subsidiary|Shareholdingproportion ofminorityshareholder|The profits andlosses arbitrate tothe minorityshareholders|Declaringdividendsdistribute tominorityshareholder|Balance ofminorityshareholder atclosing period|
|Changchai Wanzhou Diesel EngineCo., Ltd.|40.00%|1,073,814.32||18,398,947.57|
|Changzhou Changchai HoushengAgricultural Equipment Co., Ltd.|5.00%|102,958.78||368,279.00|

(3) The main financial information of significant not wholly owned subsidiary
Unit: RMB Thousand Yuan
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Nameof thesubsidiary|Closing balance||||||Opening balance||||||
||currentassets|Non-current assets|Totalassets|Currentliabilities|Non-currentliability|Totalliabilities|currentassets|Non-current assets|Totalassets|Currentliabilities|Non-currentliability|Totalliabilities|
|ChangchaiWanzhou DieselEngineCo.,Ltd.|43,462,836.42|27,671,597.38|71,134,433.80|25,137,064.88||25,137,064.88|41,770,953.46|28,631,830.17|70,402,783.63|27,089,950.52||27,089,950.52|
|ChangzhouChangchaiHoushengAgriculturalEquipment Co.,Ltd.|29,743,164.98|372,868.70|30,116,033.68|22,750,453.64||22,750,453.64|16,619,127.25|440,565.96|17,059,693.21|11,753,288.83||11,753,288.83|

Unit: RMB Thousand Yuan
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name of thesubsidiary|Reporting Period||||Same period of last year||||
||Operationrevenue|Net profit|Totalcomprehensiveincome|Operatingcash flow|Operationrevenue|Net profit|Totalcomprehensiveincome|Operatingcash flow|
|ChangchaiWanzhouDieselEngine Co.,Ltd.|66,035,872.53|2,684,535.81|2,684,535.81|5,461,701.22|99,618,978.42|3,763,210.92|3,763,210.92|6,750,035.77|
|ChangzhouChangchaiHoushengAgriculturalEquipmentCo., Ltd.|20,425,666.48|2,059,175.66|2,059,175.66|1,114,872.81|5,594,781.07|-2,474,819.32|-2,474,819.32|-5,350,193.17|

2. Equity in joint venture or associated enterprise
(1) Significant joint venture arrangement or associated enterprise
||||||||
|-|-|-|-|-|-|-|
|Name|Mainoperatingplace|Registrationplace|Natureofbusiness|Proportion||Accountingtreatment oftheinvestmentof jointventure orassociatedenterprise|
|||||Directly|Indirectly||
|Changzhou Fuji ChangchaiRobin Gasoline Engine Co., Ltd.|ChangzhouCity|ChangzhouCity|Industry|33.00%||Equitymethod|

 (2) Main financial information of significant associated enterprise
Unit: RMB
||||
|-|-|-|
|Item|Changzhou Fuji Changchai Robin Gasoline Engine Co.,Ltd.||
||Closing balance/ ReportingPeriod|Opening balance /last period|
|Current assets|70,478,877.04|70,218,388.26|
|Non-current assets|9,739,238.70|11,465,367.78|
|Total assets|80,218,115.74|81,683,756.04|

||||
|-|-|-|
|Current liabilities|16,562,872.57|11,746,468.25|
|Non-current liability||7,000,000.00|
|Total liabilities|16,562,872.57|18,746,468.25|
|Equity attributable to owners of the Company|63,655,243.17|62,937,287.79|
|Portion of net assets calculated according toproportion of shareholdings|21,006,230.03|20,769,304.76|
|Book value of investment to associated enterprise|21,006,230.03|20,769,304.76|
|Operation revenue|154,944,857.08|139,148,868.35|
|Net profit|1,315,524.51|2,138,273.61|
|Total comprehensive income|1,315,524.51|2,138,273.61|
|Equity received from associated enterprises inReporting Period||361,000.00|

X. The risk related financial instruments
The goal of theCompany’s risk management was gaining the balance between the risk and income, and reduced the negative impact to the operation performance of the Company in the lowest level and maximized the interests of shareholders and other equity investors, base on the risk management goal, the basis strategy of theCompany’s risk management was to recognized and analyse all kinds of risk that the Company faced, set up suitable risk bottom line and conduct risk management, and supervised the risks timely and reliably and control the risk within the limited scope.
The main risks of the Company due to financial instruments were credit risk, liquidity risk and market risk. The management level had reviewed and approved the policies to manage the risks, which summarized as follows: (I) Credit risk
Credit risk was one party of the contract failed to fulfill the obligations and causes loss of financial assets of the other party.
The credit of risk of the Company mainly was related to account receivable, in order to control the risk, the Company conduct the following methods.
The Company only conducts related transaction with approved and reputable third party, in line with the policy of the Company, the Company need to conduct credit-check for the clients adopting way of credit to conduct transaction. In addition, the Company continuously monitors the balance of account receivable to ensure the Company would not face the significant bad debt risk.
(II) Liquidity Risk
Liquidity risk was referred to their risk of incurring capital shortage when performing settlement obligation in the way of cash payment or other financial assets. The policies of the Company were to ensure that there was sufficient cash to pay the due liabilities.
The liquidity risk was centralized controlled by the financial department of the Company. The financial department through supervising the balance of the cash and securities can be convert to cash at any time and the
rolling prediction of cash flow in future 12 months to ensure the Company have sufficient cash to pay the liabilities
under the case of all reasonable prediction,
(III) Market risk
Market risk is refer to risk of the fair value or future cash flow of financial instrument changed due to the change of market price, including: foreign exchange rate risk, interest rate risk.
1. Interest rate risk
Interest rate risk was referred to risk of the fair value or future cash flow of financial instrument changed due to the change of market interest risk.
2. Foreign exchange risk
Foreign exchange rate risk is referred to the risk incurred form the change of exchange rate. The export sales of the Company mainly was market of Southeast Asia region which settled by USD. Though theCompany’s export business receiving part of payment for goods in advance, but the balance had a certain credit term, if the RMB appreciates against the dollar, the company's accounts receivable will incur foreign currency exchange loss. XI. The disclosure of the fair value
1. Closing fair value of assets and liabilities calculated by fair value
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Closing fair value||||
||Fair valuemeasurementitems at level 1|Fair valuemeasurementitems at level 2|Fair valuemeasurementitems at level 3|Total|
|I. Consistent fair value measurement|--|--|--|--|
|(I) Financial assets calculated by fair valueand changes record into current profits orlosses|||||
|1. Trading financial assets|||||
|Transactional financial assets|||||
|Equity tool investment|812,872,500.00|||812,872,500.00|
|(II) Available-for-sale financial assets|812,872,500.00|||812,872,500.00|
|Equity tool investment|812,872,500.00|||812,872,500.00|
|Total assets of consistent fair valuemeasurement|--|--|--|--|

2. Market price recognition basis for consistent and inconsistent fair value measurement items at level 1 Tradable financial assets and available for sale financial assets of the Company were funds and shares with the closing price as the basis of fair value calculation at period-end.
XII. Related party and related Transaction
1. Information related to parent company of the Company
|||||||
|-|-|-|-|-|-|
|Name of parent company|Registrationplace|Nature ofbusiness|Registeredcapital|Parent company’sownership of theCompany|Parent company’svoting right of theCompany|
|Changzhou GovernmentState-owned AssetsSupervision andAdministration Commission|ChangzhouCity|||30.43%|30.43%|

The actual controller of the Company is Changzhou Government State-owned Assets Supervision and Administration Commission. At 31 Dec. 2016, it held30.43% shares of the Company (state owned shares). Final control of the Company is Changzhou Government State-owned Assets Supervision and Administration Commission.
2. Subsidiaries of the Company
The details of subsidiaries of the Company please refer to equity in other entities in note to financial statements. 3. Information on the joint ventures and associated enterprises of the Company
The details of the joint ventures and associated enterprises of the Company please refer to equity in other entities in note to financial statements.
4. The Company had no other related party.
N/A
5. The Company had no other related transaction need to be disclosed.
N/A
XIII. Commitments and contingency
1. Significant commitments
As of 31 Dec. 2016, there were no significant commitments to be disclosed.
2. Contingency
(1) Significant contingency at balance sheet date
Litigation and arbitration in the Reporting Period
||||||
|-|-|-|-|-|
|Name of the entity|Date of accepted|Name of the litigation or|Amount involved|Remark|

||||||
|-|-|-|-|-|
|||arbitration institutions|(RMB tenthousand)||
|Shandong Hongli Group Co., Ltd.|2001.6.27|Changzhou IntermediatePeople's Court|1,436.00|Under thebankruptcy andliquidation|
|Beijing Beiqi ChangshengAutomobile Co., Ltd.|2013.8.12|Beijing Shunyi DistrictPeople's Court|806.36|Finished|
|Total|2242.36||||

Notes to the case:
(1) About the lawsuit case of Shandong Hongli Group Co., Ltd., the accused company owed accumulatively RMB14.36 million to the Company. The Company sued to Changzhou IntermediatePeople’s Court in 2001 and sued for compulsory execution in April, 2002. Currently, the defendant has started the bankruptcy procedure. The aforesaid payment has arranged for the full provision for bad debts.
(2) As the litigation of Beijing Beiqi Changsheng Automobile Co., Ltd., the company owned our Company 8.0636 million; Beijing Shunyi District People's Court accepted the case on 12 Aug. 2013. Under the auspices, two sides concluded mediation agreement. Beiqi Changsheng pays RMB 8,063,600.00 to the Company by stage. Although the Company bombarded many times, Beijing Beiqi Changsheng Automobile Co., Ltd did not perform its obligation of payment in line with mediation agreement. As of the end of Reporting Period, the Company had paid the full payment.
(2) The Company does not have important contingency which is required to be disclosed, explanation shall also be given.
N/A
XIV. Events after balance sheet date
1. Profit distribution
Unit: RMB
|||
|-|-|
|Planning allocation of profits or dividends|16,841,229.78|

 2. Business merger
The Company held the interim meeting of board of directors on 26 Aug. 2016. The meeting reviewed and approved the Proposal about Receiving67% of Stock Rights of Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. Held by Fuji Heavy Industries Ltd.. After merger is completed, the Company will hold100% of stock rights of Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. and Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. will be transferred to domestic enterprise from Sino-Foreign joint venture. Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. completed the industrial and commercial registration of alteration related to stock rights transfer and got Business License changed by Market Supervision Commission of Changzhou National High-Tech Industrial Development Area (New North Area) on 20 Jan. 2017. The registered capital is RMB 37,250,000, scope of business comprises small general gasoline engine and concerned equipment (including agricultural machinery, engineering machinery, water pump unit and small generator unit); production, processing, research, development, sales, technical consultation of relevant components and spare parts. Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. will be added into the scope of consolidated statements of the Company since January 2017 and the stock rights transfer will have certain influence on the profit and loss of the Company in
2017.
XV. Other significant events
1. Segment information
Due to the operation scope of the Company and subsidiaries were similar, the Company conduct common management, did not divide business unit, so the Company only made single branch report.
2. Other important transactions and events have an impact oninvestor’s decision-making
As of the approval issue date of financial statements, the Company did not complete the liquidation procedures of 2016 annual enterprise income tax.
XVI. Notes of main items in the financial statements of the Company
1. Accounts receivable
(1) Accounts receivable classified by category
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Category|Closing balance|||||
||Book balance||Bad debt provision||Book value|
||Amount|Proportion(%)|Amount|Withdrawalproportion||
|Accounts receivablewith insignificantsingle amount forwhich bad debtprovision separatelyaccrued|37,894,677.78|7.17%|31,210,576.96|82.36%|6,684,100.82|
|Accounts receivablewithdrawal of baddebt provision of bycredit riskscharacteristics:|490,383,771.93|92.78%|188,267,201.85|38.39%|302,116,570.08|
|Accounts receivablewith insignificantsingle amount forwhich bad debtprovision separatelyaccrued|276,298.29|0.05%|276,298.29|100.00%||
|Total|528,554,748.00|100.00%|219,754,077.10|41.58%|308,800,670.90|

 Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end
Unit: RMB
||||||
|-|-|-|-|-|
|Account receivable|Book balance|Bad debt provision|Withdrawalproportion|Withdrawalreason|

||||||
|-|-|-|-|-|
|Customer 1|1,902,326.58|1,902,326.58|100.00%|Difficult torecover|
|Customer 2|6,215,662.64|6,202,854.45|99.79%|Difficult torecover|
|Customer 3|4,319,339.17|2,214,607.75|51.27%|Estimateddifficult to recover|
|Customer 4|3,279,100.00|3,279,100.00|100.00%|Estimateddifficult to recover|
|Customer 5|2,133,377.01|2,133,377.01|100.00%|Estimateddifficult to recover|
|Customer 6|5,359,381.00|5,359,381.00|100.00%|Difficult torecover|
|Customer 7|2,584,805.83|2,584,805.83|100.00%|Difficult torecover|
|Customer 8|1,714,646.59|1,714,646.59|100.00%|Difficult torecover|
|Customer 9|10,386,038.96|5,819,477.75|56.03%|Estimateddifficult to recover|
|Total|44,942,468.52|35,630,157.18|||

In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
Unit: RMB
|||||
|-|-|-|-|
|Aging|Closing balance|||
||Account receivable|Bad debt provision|Withdrawal proportion|
|Within 1 year|301,185,313.00|6,023,706.26|2.00%|
|1 to 2 years|2,835,235.05|141,761.75|5.00%|
|2 to 3 years|1,709,857.97|256,478.70|15.00%|
|3 to 4 years|527,790.44|158,337.13|30.00%|
|4 to 5 years|6,096,643.65|3,657,986.19|60.00%|
|Over 5 years|178,028,931.82|178,028,931.82|100.00%|
|Total|490,383,771.93|188,267,201.85||

(2) Bad debt provision withdrawal, reversed or recovered in the report period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 5,287,674.00; the amount of the reversed or collected part during the Reporting Period was of RMB 7,733,853.77.
(3) The actual write-off accounts receivable
|||
|-|-|
||Written-off amount|
|Item||
||457,153.57|
|Changge Shiying Machinery Co., Ltd.||

 (4) Top five of account receivable of closing balance collected by arrears party
The total amount of top five of account receivable of closing balance collected by arrears party was RMB 192,749,341.51,36.47% of total closing balance of account receivable, the relevant closing balance of bad debt provision withdrawn was RMB 20,942,174.47.
2. Other accounts receivable
(1) Other account receivable classified by category
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Category|Closing balance|||||
||Book balance||Bad debt provision||Book value|
||Amount|Proportion(%)|Amount|Withdrawalproportion||
|Other accountsreceivable withinsignificant singleamount for which baddebt provisionseparately accrued|2,853,188.02|8.56%|2,853,188.02|100.00%||
|Other accountsreceivable withdrawnbad debt provisionaccording to creditrisks characteristics|27,799,389.26|83.40%|24,104,715.33|86.71%|3,694,673.93|
|Other accountsreceivable withinsignificant singleamount for which baddebt provisionseparately accrued|2,679,801.13|8.04%|2,679,801.13|100.00%||
|Total|33,332,378.41|100.00%|29,637,704.48|88.92%|3,694,673.93|

 Other accounts receivable with significant single amount for which bad debt provision separately accrued at the
period-end
Unit: RMB
||||||
|-|-|-|-|-|
|Other accounts receivable|Book balance|Bad debtprovision|Withdrawalproportion (%)|Withdrawalreason|
|Changchai Group Import & ExportCo., Ltd.|2,853,188.02|2,853,188.02|100.00%|Difficult torecover|
|Total|2,853,188.02|2,853,188.02|--|--|

In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
Unit: RMB
|||||
|-|-|-|-|
|Aging|Closing balance|||
||Other accounts receivable|Bad debt provision|Withdrawal proportion(%)|
|Within 1 year|3,175,600.75|63,512.01|2.00%|
|1 to 2 years|109,930.77|5,496.54|5.00%|
|2 to 3 years|60,114.33|9,017.15|15.00%|
|3 to 4 years|600,705.43|180,211.63|30.00%|
|4 to 5 years|16,399.95|9,839.97|60.00%|
|Over 5 years|23,836,638.03|23,836,638.03|100.00%|
|Total|27,799,389.26|24,104,715.33||

(2) Bad debt provision withdrawal, reversed or recovered in the report period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 707,128.41; the amount of the reversed or collected part during the Reporting Period was of RMB 000.
(3) The actual write-off other accounts receivable
N/A
(4) Other account receivable classified by account nature
Unit: RMB
||||
|-|-|-|
|Nature|Closing balance|Opening balance|
|Guarantee and cash pledge|4,200.00|4,200.00|
|Unit current amount|16,917,626.21|17,463,134.91|
|Petty cash &employee borrowing|1,056,185.37|1,560,886.41|
|Other|15,354,366.83|14,787,717.76|
|Total|33,332,378.41|33,815,939.08|

(5) Top 5 of the closing balance of the other accounts receivable collected according to the arrears party
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Name of the entity|Nature|Closing balance|Aging|Proportion%|Bad debtprovision|
|Changzhou Compressor Co.,Ltd.|Intercoursefunds|2,940,000.00|Over 5 years|8.82%|2,940,000.00|
|Changchai Group Import &Export Co., Ltd.|Intercoursefunds|2,853,188.02|Over 5 years|8.56%|2,853,188.02|
|Changzhou New DistrictAccounting Center|Intercoursefunds|1,626,483.25|Over 5 years|4.88%|1,626,483.25|
|OEM Group Settlement Center|Intercoursefunds|1,140,722.16|Over 5 years|3.42%|1,140,722.16|
|Changzhou XingshengProperty Management Co., Ltd.|Intercoursefunds|496,450.56|Within 1year|1.49%|9,929.01|
|Total|--|9,056,843.99|--|27.17%|8,570,322.44|

 3. Long-term equity investment
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|Closing balance|||Opening balance|||
||Book balance|Depreciationreserves|Book value|Book balance|Depreciationreserves|Book value|
|Investment to thesubsidiary|184,466,500.00||184,466,500.00|184,466,500.00||184,466,500.00|
|Investment to jointventures andassociated enterprises|21,050,412.53|44,182.50|21,006,230.03|20,813,487.26|44,182.50|20,769,304.76|
|Total|205,516,912.53|44,182.50|205,472,730.03|205,279,987.26|44,182.50|205,235,804.76|

 (1) Investment to the subsidiary
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Investee|Openingbalance|Increase|Decrease|Closingbalance|Withdrawnimpairmentprovisionin theReportingPeriod|Closingbalance ofimpairmentprovision|
|Changchai WanzhouDiesel Engine Co.,Ltd.|51,000,000.00|||51,000,000.00|||
|Changzhou|96,466,500.00|||96,466,500.00|||

||||
|-|-|-|
|Changchai BenniuDiesel EngineFittings Co., Ltd.|||
|ChangzhouHousheng InvestmentCo., Ltd.|30,000,000.00|30,000,000.00|
|ChangzhouChangchai HoushengAgriculturalEquipment Co., Ltd.|7,000,000.00|7,000,000.00|
|Total|184,466,500.00|184,466,500.00|

(2) Investment to joint ventures and associated enterprises
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Investee|Openingbalance|Increase/decrease in Reporting Period||||||||Closingbalance|Closingbalance ofimpairmentprovision|
|||Additionalinvestment|Negativeinvestment|Investment profitand lossrecognized underthe equitymethod|Adjustmentof othercomprehensive income|Changes ofotherequity|Declaration of cashdividendsor profits|Withdrawnimpairmentprovision|Other|||
|I. Associated Enterprises||||||||||||
|II. Joint Ventures||||||||||||
|ChangzhouFujiChangchaiRobinGasolineEngine Co.,Ltd.|20,769,304.76|||236,925.27||||||21,006,230.03||
|BeijingTsinghuaXingyeIndustrialInvestmentManagement Co., Ltd.|44,182.50|||||||||44,182.50|44,182.50|
|Subtotal|20,813,487.26|||236,925.27||||||21,050,412.53|44,182.50|
|Total|20,813,487.26|||236,925.27||||||21,050,412.53|44,182.50|

4. Revenues and operating costs
Unit: RMB
||||||
|-|-|-|-|-|
|Item|Reporting Period||Same period of last year||
||Revenue|Operating costs|Revenue|Operating costs|
|Main operations|2,238,155,721.58|1,856,049,114.70|2,495,008,065.10|2,115,049,779.90|
|Other operations|23,268,342.48|16,348,177.30|21,857,546.18|14,537,700.98|
|Total|2,261,424,064.06|1,872,397,292.00|2,516,865,611.28|2,129,587,480.88|

 5. Investment income
Unit: RMB
||||
|-|-|-|
|Item|Reporting Period|Same period of lastyear|
|Long-term equity investment income accounted by equity method|236,925.27|670,328.77|
|Investment income received from holding of available-for-salefinancial assets|2,673,250.00|5,829,840.00|
|Investment income from disposal of bank financial products|364,000.00|468,547.94|
|Financing security gains||839,681.00|
|Total|3,274,175.27|7,808,397.71|

 XVII. Supplementary materials
1. Items and amounts of extraordinary gains and losses
Unit: RMB
||||
|-|-|-|
|Item|Amount|Explanation|
|Gains/losses on the disposal of non-current assets|6,254,028.26||
|Tax rebates, reductions or exemptions due to approvalbeyond authority or the lack of official approval documents|7,948,135.65||
|Included in current profit and loss against the non-financialenterprises occupation fee funds collected|1,340,364.82||
|Gain/loss from change of fair value of transactional assetsand liabilities, and investment gains from disposal oftransactional financial assets and liabilities andavailable-for-sale financial assets, other than valid hedgingrelated to the Company’s common businesses|1,058,569.81||
|Other non-operating income and expenses other than theabove|-9,328,953.27||
|Less: Income tax effects|1,294,119.50||
|Minority interests effects|273,695.88||
|Total|5,704,329.89|--|

2. Return on equity (ROE) and earnings per share (EPS)
|||||
|-|-|-|-|
|Profit as of Reporting Period|Weighted average ROE (%)|EPS (RMB/share)||
|||EPS-basic|EPS-diluted|
|Net profit attributable to commonshareholders of the Company|3.00%|0.11|0.11|
|Net profit attributable to commonshareholders of the Company afterdeduction of non-recurring profitand loss|2.73%|0.10|0.10|

Section XII Documents Available for Reference
Documents available for reference include the following:
1. This Annual Report carrying the signature of the Board Chairman;
2. The financial statements signed and sealed by the legal representative, the accounting head for this Report and the head of the accounting department;
3. The originalAuditor’s Report signed and sealed by the CPAs, as well as sealed by the CPAs firm;
4. The originals of all theCompany’s documents and announcements which were disclosed on Securities Time and Ta Kung Pao (HK) (newspapers designated by the CSRC for information disclosure) during this Reporting Period; and
5. The Articles of Association of the Company.
The above-mentioned documents available for reference are all kept in the Secretariat of the Board of Directors of the Company.
This Annual Report and its abstract have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.
The Board of Directors Changchai Company, Limited April 13, 2017