Core Viewpoint - The People's Bank of China and the State Administration of Foreign Exchange have released a draft regulation to enhance the management and oversight of the interbank foreign exchange market, marking the first revision in 29 years, aimed at better serving the real economy and adapting to market demands [1][2]. Summary by Sections Regulatory Framework - The draft regulation aims to strengthen the regulatory framework of the interbank foreign exchange market, which has evolved significantly since the implementation of the interim regulations in 1996 [1][2]. Key Content of the Draft Regulation - The draft regulation includes five main aspects: 1. Strengthening oversight of the interbank foreign exchange market by the People's Bank of China and the State Administration of Foreign Exchange, with clear management requirements and penalties for various market participants [3]. 2. Establishing a comprehensive market supervision system that outlines requirements for institutional management, trader management, legal agreements, market maker management, information exchange, disclosure, data services, and self-regulation [3]. 3. Enhancing the management and service capabilities of foreign exchange market infrastructure, specifying responsibilities for transaction and clearing qualifications, and supervisory duties [3]. 4. Clarifying the business boundaries for participating institutions, including entry conditions and principles, and emphasizing risk mitigation services [3]. 5. Improving the forward-looking nature of foreign exchange market management by diversifying trading varieties and currencies based on market demand [3]. Specific Requirements - The draft regulation specifies that the foreign exchange trading center should expand the variety of RMB and foreign currency trading products and methods to meet the needs of the real economy, including spot, forward, swaps, and options [4].

Group 1 - The company aims to conduct derivative hedging business to lock in costs, reduce or avoid exchange rate risks, and enhance financial stability [1][2] - The board of directors approved the hedging proposal on July 17, 2025, allowing the company and its subsidiaries to engage in this business for a period of 12 months [1][3] - The hedging strategy will utilize forward foreign exchange contracts, foreign exchange swaps, foreign exchange options, and interest rate swaps to mitigate risks associated with foreign currency transactions [2][3] Group 2 - The maximum limit for the hedging transactions is set at RMB 5 million, with a maximum contract value of RMB 200 million on any trading day [2][3] - The company will engage with reputable financial institutions approved by the State Administration of Foreign Exchange and the People's Bank of China for these transactions [2][3] - The necessity of this hedging business is underscored by the company's significant import and export activities, which are closely tied to foreign exchange fluctuations [3][4] Group 3 - The company has established risk control measures, including careful selection of trading partners and strict management of transaction scales [4] - The company will adhere to relevant accounting standards for financial instruments and hedge accounting to ensure proper financial reporting [4][5] - The overall conclusion is that the derivative hedging business is both necessary and feasible for the company to mitigate foreign exchange risks and enhance operational efficiency [5]

Core Viewpoint - The document outlines the financial derivatives trading management system of Shenzhen Zhihua Precision Technology Co., Ltd., emphasizing risk prevention and internal management in derivatives trading activities [1][2]. Group 1: General Principles - The system aims to regulate the financial derivatives trading behavior of the company and its subsidiaries, focusing on preventing foreign exchange and interest rate risks [1][2]. - Financial derivatives include but are not limited to forward foreign exchange contracts, foreign exchange swaps, foreign exchange options, and interest rate swaps [1][2]. Group 2: Trading Operations - The company and its subsidiaries are prohibited from engaging in speculative trading; all derivatives transactions must be based on actual business operations to mitigate risks [2][3]. - Derivatives trading must only be conducted with qualified financial institutions approved by regulatory bodies [3][4]. Group 3: Approval Authority - The company's board of directors and shareholders' meeting serve as the decision-making bodies for derivatives trading, with specific approval processes outlined for different transaction scenarios [4][5]. - Transactions that exceed certain thresholds must be submitted for additional approval from the shareholders' meeting [4][5]. Group 4: Management and Internal Processes - The finance center is responsible for managing derivatives trading, including planning, operations, and financial accounting [5][6]. - A strict separation of duties and responsibilities is required to ensure independent operations within the derivatives trading process [5][6]. Group 5: Risk Management - The company must implement proactive risk control measures to identify and mitigate credit, market, operational, and legal risks associated with derivatives trading [7][8]. - In case of significant anomalies in trading activities, the finance department must report and propose solutions to the management [8][9]. Group 6: Information Disclosure - The company is required to disclose information regarding its derivatives trading activities in accordance with regulations from the China Securities Regulatory Commission and the Shenzhen Stock Exchange [9][10]. - Any significant losses or risks must be reported promptly through temporary announcements [9][10].