The sources of funds for equity incentive are: employees' cash contribution, the public welfare fund accumulated by the company over the years, welfare funds, financing provided by the company or major shareholders, and employees' mortgage loans to banks with equity. Companies can buy their own shares for employee stock ownership plans or equity incentives.

legal ground

Article 142nd of the Company Law of People's Republic of China (PRC)

A company may not purchase its own shares. However, except for one of the following circumstances:

(1) Reduce the registered capital of the company.

(2) Merging with other companies holding shares of the Company;

(3) Using shares for employee stock ownership plan or equity incentive;

(4) Shareholders request the company to purchase their shares because they disagree with the resolution of merger or division made by the shareholders' meeting;

(5) Using shares for the conversion of corporate bonds convertible into shares by listed companies.

(6) The need for listed companies to safeguard their own values and shareholders' rights and interests.