JC Master Legal News Issue 883

Key Takeaways for This Issue

The China Securities Regulatory Commission is soliciting public comments on the revision of the “Standards for Calculating Risk Control Indicators of Securities Companies.”

To support the sustained, stable, and sound development of securities companies, fully reflect and effectively mitigate their risks, and enhance the effectiveness and adaptability of their risk‑control indicator system, the China Securities Regulatory Commission has revised the “Standards for Calculating Risk‑Control Indicators of Securities Companies” (hereinafter referred to as the “Calculation Standards”) and is now soliciting public comments.

The integration of the North and South shipbuilding entities is entering its final countdown, as the listed platform under China Shipbuilding Group accelerates its restructuring.

On the evening of August 14, after two years of deliberation, the restructuring plan for China Shipbuilding and CSSC Defense was once again revised in light of the strategic merger between the northern and southern shipbuilding groups.

The Ministry of Finance has stated that it will accelerate the legislative process for multiple tax types.

Recently, Finance Minister Liu Kun wrote that it is necessary to closely coordinate with the relevant departments of the National People’s Congress to accelerate legislative work on taxes including the resource tax, deed tax, urban maintenance and construction tax, stamp tax, value-added tax, land appreciation tax, customs duties, and consumption tax.

University Student Sues Shanghai Disneyland, Seeking a Declaration That the Standard Clause Prohibiting Visitors from Bringing Food into the Park Is Invalid

Recently, Xiao Wang, a third-year student at East China University of Political Science and Law in Shanghai, was “searched through his bag and barred from entering Shanghai Disneyland with snacks” by park staff in early 2019. Xiao Wang has since taken Shanghai Disneyland to court.

Resolutely counteract and see it through to the end.

On August 15, in response to the Office of the United States Trade Representative’s announcement that it would impose an additional 10% tariff on approximately $300 billion worth of Chinese imports, the Customs Tariff Commission of the State Council of China issued a statement that clearly conveyed Beijing’s position: “This move by the U.S. side gravely violates the consensus reached at the Argentina and Osaka meetings between the leaders of China and the United States, and departs from the proper path of resolving differences through consultation. China will have no choice but to take necessary countermeasures.”

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission is soliciting public comments on the revision of the “Standards for Calculating Risk Control Indicators of Securities Companies.”

The China Banking and Insurance Regulatory Commission has issued the Provisional Measures for the Supervision of Insurance Asset–Liability Management.

Listings of STAR Market companies have already generated hundreds of millions in revenue for law offices.

Does an early screening of a listed company’s film or television production constitute inside information?

The first semi-annual report from the STAR Market has been released, with Rongbai Technology reporting revenue growth of over 40%.

Corporate & Commercial

Tsinghua Holdings has terminated the equity transfer; Tsinghua Unigroup will remain under Tsinghua’s umbrella.

The integration of the North and South shipbuilding entities is entering its final countdown, as the listed platform under China Shipbuilding Group accelerates its restructuring.

Steelmakers in many regions are curtailing production to support prices, leading to a slowdown in the pace of steel output growth.

Ping An Insurance Group’s net profit for the first half of the year rose 63.3% year on year; whether it will continue share buybacks depends on market conditions.

Kangmei Pharmaceutical engaged in long-term financial fraud; the China Securities Regulatory Commission plans to impose market bans on six individuals.

Taxation

The public consultation on the Land Value-Added Tax Law has concluded, but certain details still require clarification and refinement.

The Ministry of Finance has stated that it will accelerate the legislative process for multiple tax types.

Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on the Pilot Program to Extend the Qualification of General VAT Taxpayers to Comprehensive Bonded Zones

Interpretation of the “Announcement by the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Piloting the Granting of General VAT Taxpayer Status in Comprehensive Bonded Zones”

Interpretation of the “Decision of the State Taxation Administration on Abolishing the Measures for the Administration of Vehicle Acquisition Tax Collection”

Litigation & Arbitration

Wielding the “sharp sword” of supervision, a powerful offensive is once again launched—An overview of the second and third rounds of central supervision on eradicating organized crime and evil forces.

Xiamen’s Siming District has concluded a series of student‑registration cases involving “gaokao migrants.”

University Student Sues Shanghai Disneyland, Seeking a Declaration That the Standard Clause Prohibiting Visitors from Bringing Food into the Park Is Invalid

In a traffic accident resulting in death, the defendant is required to compensate for funeral expenses and corpse restoration costs.

The first-instance trial has commenced in the bribery case involving Xing Yun, former vice chairman of the Standing Committee of the People’s Congress of the Inner Mongolia Autonomous Region.

Other

Resolutely counteract and see it through to the end.

Finance & Capital Markets

The China Securities Regulatory Commission is soliciting public comments on the revision of the “Standards for Calculating Risk Control Indicators of Securities Companies.”

To support the sustained, stable, and sound development of securities companies, fully reflect and effectively mitigate their risks, and enhance the effectiveness and adaptability of the risk‑control indicator system, the China Securities Regulatory Commission (CSRC), on the basis of a thorough review of practical experience and in light of industry developments, has revised the “Standards for Calculating Risk‑Control Indicators of Securities Companies” (hereinafter referred to as the “Calculation Standards”) in accordance with the relevant provisions of the Measures for the Administration of Risk‑Control Indicators of Securities Companies (Order No. 125 of the CSRC). The revised standards are now being made public for public comment.

On June 16, 2016, the China Securities Regulatory Commission revised and issued the Measures for the Administration of Risk Control Indicators for Securities Companies and the Calculation Standards, further establishing and refining a risk‑control indicator system centered on net capital and liquidity. Three years of practical experience have demonstrated that the current risk‑control indicator framework, by strengthening capital constraints and raising the requirements for monitoring and managing liquidity risks, has effectively enhanced securities offices’ risk‑management capabilities and substantially bolstered the industry’s resilience to systemic risks.

As the market environment evolves and the industry continues to develop, risk measurement for certain business lines requires further refinement and clarification to meet the demands of risk management and industry progress under the new circumstances. Accordingly, while maintaining the overall framework unchanged, the China Securities Regulatory Commission has revised selected indicators in the “Calculation Standards” in light of market conditions and industry development needs. The key revisions include: First, to support securities offices in adhering to the principles of value investing and actively participating in market trading, the calculation standards for risk‑control metrics have been appropriately relaxed for investments in constituent stocks, equity‑index funds, policy‑oriented financial bonds, and similar products. Second, guided by the principle of balancing prudence with flexibility and prioritizing risk prevention, the calculation standards for relevant indicators have been refined to better reflect the characteristics of businesses such as stock pledge financing and private asset management, as well as the risk profiles of various financial products. Third, drawing on practical experience in market development, clear calculation standards for risk‑control metrics have been established for new businesses and products, ensuring comprehensive coverage of risks across all business lines. Fourth, to help securities offices enhance their overall risk‑management capabilities, a risk‑capital‑requirement adjustment factor of 0.5 has been set for those offices that have received an A‑class rating of AA or above in three consecutive years; additionally, it has been clarified that for securities offices subject to consolidated supervision, the calculation standards for relevant risk‑control indicators may be separately prescribed by the CSRC.

The China Securities Regulatory Commission stated that it will carefully review the valuable comments submitted by all sectors of society on the “Calculation Standards,” and will further refine the standards before issuing and implementing them.

The China Banking and Insurance Regulatory Commission has issued the Provisional Measures for the Supervision of Insurance Asset–Liability Management.

To further refine the regulatory framework for insurance asset–liability management, strengthen tiered supervision, and reinforce the binding nature of asset–liability management oversight, the China Banking and Insurance Regulatory Commission recently issued the Interim Measures for the Supervision of Insurance Asset–Liability Management (hereinafter referred to as the “Interim Measures”).

The Provisional Measures consist of 5 chapters and 37 articles. The main contents are as follows:

Chapter 1: General Provisions, which primarily sets forth the objectives of these regulations, their scope of application, and the definition of asset–liability management; clarifies relevant responsibilities; and establishes a regulatory framework that integrates asset–liability coordination with top-down and bottom-up linkages. Chapter 2: Asset–Liability Management for Insurance Companies, which, drawing on organizational structure, control processes, modeling tools, performance evaluation, management reporting, and such aspects as maturity‑structure matching, cost‑benefit alignment, and cash‑flow matching, lays out specific requirements for insurance companies to establish and refine robust asset–liability management systems, aligning these with the detailed provisions of the capability assessment rules and the quantitative assessment rules. Chapter 3: Regulatory Assessment, which mainly governs the methods for conducting regulatory assessments of asset–liability management. Chapter 4: Regulatory Measures, which specifies differentiated regulatory approaches based on insurers’ asset–liability management capabilities and compliance status, thereby strengthening the binding nature of asset–liability management oversight. Chapter 5: Supplementary Provisions, which primarily addresses the regulatory policies governing asset–liability management for insurance groups, reinsurance companies, and pension insurance companies that do not engage in insurance business, as well as matters such as the effective date.

The promulgation and implementation of the Provisional Measures will help insurers enhance their asset–liability management capabilities, mitigate the risks associated with asset–liability mismatches, guide the insurance industry’s transformation and promote prudent, balanced asset allocation, and foster high-quality industry development.

Listings of STAR Market companies have already generated hundreds of millions in revenue for law offices.

In the capital markets, law offices, as intermediary institutions, work alongside sponsoring securities offices and accounting offices to ensure the smooth execution of initial public offering (IPO) projects. Following the launch of the STAR Market, law offices and legal teams that previously held a competitive edge in IPO practice have reaped substantial benefits.

Among the 28 STAR Market companies that have already gone public, their total legal expenses amounted to RMB 107 million, or an average of RMB 3.84 million per company—slightly higher than the recent average for main‑board IPOs.

In terms of specific business practices, a legal team that has successfully advised a service‑sector company through its IPO notes that, based on regulatory inquiries directed at STAR Market‑listed offices, greater emphasis is being placed on the depth of due diligence conducted by law offices.

15 law offices reported revenues of 107 million.

In the process of corporate IPOs, law offices, as indispensable professional legal service providers, have made significant contributions to advancing the filing procedures of STAR Market‑listed companies.

In terms of brokerage participation, resources for STAR Market projects are concentrated among the industry’s top-tier, large law offices, particularly those with a distinct edge in non-litigation practice. Among the 151 STAR Market companies that have so far had their applications accepted—including the 28 already listed—35 law offices have provided legal services. Notably, the ranking of offices by the number of engagements closely mirrors the list of offices that led A-share IPOs in 2018.

Specifically, among the 35 law offices, Grandall Law Office stands out with a clear advantage, having provided services to 20 companies that have had their applications accepted on the STAR Market. Zhonglun Law Office follows closely behind, serving 15 companies. In addition, well-known major offices such as Junhe, Deheng, King & Wood Mallesons, and Guofeng each serve more than 10 companies. Together, the top 10 law offices account for 109 client engagements, representing over 70% of the total.

According to data disclosed by the 28 STAR Market‑listed companies to date, 15 law offices provided legal services, with total legal fees amounting to RMB 107 million—averaging RMB 3.84 million per company, slightly higher than the recent average for main‑board listings. Among them, Junhe, which advised Guangfeng Technology, billed RMB 8.2 million in a single engagement, the highest among the 28 STAR Market issuers. In terms of aggregate fees, Grandall handled matters for four companies—Lanqi Technology, Rongbai Technology, Hanchuan Intelligent, and Western Superconducting—earning a combined RMB 13.36 million in legal fees.

In this regard, legal experts have noted that the STAR Market has ushered in a new wave of growth for the securities law market. Attorney fees are determined by a range of factors, including the complexity of an IPO, the size and scale of the company, and its nature, making cross‑industry comparisons difficult. Based on current workload, fee levels remain broadly aligned with industry standards.

The review places high demands on the law office’s professionalism.

With the new STAR Market regime now fully in place, legal and policy factors have proven far more volatile than financial expertise. Judging from the STAR Market’s various regulations and the questions raised in response to feedback inquiries, the review process places greater emphasis on core business‑related content, thereby imposing higher professional standards on lawyers and law offices providing services for STAR Market listings.

In this regard, the lawyers handling the STAR Market project at Zhongyin Law Office explained that, as professional intermediaries, they are primarily responsible for providing legal services to enterprises throughout the application, inquiry, and issuance processes, with a particular focus on ensuring compliance in corporate operations and the listing process. Under the current regulatory framework governing the STAR Market, the most critical aspect of the lawyers’ due diligence is assessing compliance with the listing requirements, especially substantiating the five financial indicators stipulated in the listing rules.

In fact, given that the STAR Market has established a “5+2+2” listing framework, companies that do not fall under the commonly used “Standard One” or “Standard Four” must exercise particularly careful due diligence. During the multiple rounds of inquiries by the regulatory authorities, law offices are typically required to issue supplementary legal opinions, clarifying and substantiating the issues necessitating further verification, as well as detailing the verification methods employed.

The counsel handling the matter explained that the due diligence process generally comprises two approaches: documentary review and on-site verification. Documentary review primarily focuses on aspects such as the company’s historical development and business qualifications, while on-site verification entails examining the company’s operations, conducting interviews with shareholders, and other related activities. Compared with IPOs in other sectors, the methods employed in due diligence are broadly similar; however, based on the exchange’s inquiries, it appears that the regulator expects legal counsel to deepen their investigation into industry‑specific and technical expertise.

Regarding staffing, the lawyer further explained that, due to the specialized nature of securities‑related legal work, the team prioritizes quality over quantity. At present, each project registered with Zhongyin Law Office typically involves a core team of six to eight members, not including certain non‑core support personnel. Collaboration is primarily organized around the division of responsibilities across the various stages of the due diligence process. It should be noted that IPOs are a field that relies heavily on professional teamwork; effective coordination with sponsoring institutions and auditing offices is a critical component in ensuring a company’s successful listing.

Does an early screening of a listed company’s film or television production constitute inside information?

Recently, “Nezha: Birth of the Demon Child” broke box-office records for Chinese animation, sending Enlight Media’s stock soaring once again on the back of an unexpectedly blockbuster hit.

The earliest preview screening date for “Nezha” was July 13, with the official release set for July 26. However, the most recent rally in Enlight Media’s stock price began on July 15—the very first trading day after the film’s early preview. As a result, even before the movie’s official release, some brokerage offices issued research reports explicitly advising investors to seize the trading opportunities presented by the blockbuster “Nezha.”

Early screenings are a common marketing strategy in the film industry, designed to build buzz and positive word-of-mouth ahead of a wide release, thereby boosting overall box-office revenue—nothing inherently wrong with that. However, given that films are the primary products of publicly listed entertainment companies and a key driver of their financial performance, does early access for certain groups constitute insider information?

A previous advance screening event had sparked considerable controversy. Before its official release, Huayi Brothers’ film “Private Custom” organized an “early screening” session inviting fund managers and other institutional investors. According to reports, because the film’s quality fell far short of expectations, Huayi Brothers subsequently faced heavy selling by institutions, leading to a sharp drop in its stock price.

This move has drawn skepticism from investors, the media, and experts, who contend that “early screenings” constitute insider information and allege that Huayi Brothers may have violated securities‑disclosure regulations. In a subsequent response to this issue, the China Securities Regulatory Commission stated that this represents a new development and emerging challenge in the securities market and that it will conduct further investigations and studies.

Since then, Huayi Brothers has not been held accountable for this, and advance screenings have not been classified as “violation of information disclosure” or “insider trading.” Meanwhile, with the explosive growth of China’s film market, advance screenings have remained a standard practice in the industry to this day.

Does an advance screening of a film constitute inside information? According to the Securities Law, “inside information” refers to undisclosed information relating to a company’s operations, finances, or factors that have a significant impact on the market supply and demand for the company’s securities. The reason why advance screenings cannot be classified as “inside information” is twofold: first, such screenings are a “semi‑public” activity rather than truly “undisclosed”; second, they do not decisively determine a film’s final box office performance and therefore cannot be deemed to have a “significant impact.”

However, advance screenings remain a thorny issue that appears inequitable and can easily give rise to market speculation. A question worth debating is whether listed film and television companies will, in the future, proactively and promptly disclose box-office figures for advance screenings. The market will have to wait and see.

The first semi-annual report from the STAR Market has been released, with Rongbai Technology reporting revenue growth of over 40%.

It has been nearly a month since the STAR Market was launched, and on the evening of August 15, the first semi-annual reports from STAR Market‑listed companies were released. According to an announcement by Rongbai Technology (688005), in the first half of this year, the company’s operating revenue and net profit stood at RMB 1.95 billion and RMB 115 million, respectively, up 45.12% and 2.92% year over year.

Notably, Rongbai Technology repeatedly highlighted the status of NCM811 power batteries in its semi-annual report and projected that the share of NCM811 cathode materials and related battery products would increase substantially in 2019. In response, institutions have also expressed optimism; Guangzheng Hengsheng stated that, following the mass production of Rongbai’s NCM811, sales of high-nickel cathode materials are expected to grow year over year, potentially boosting the company’s profit margins significantly.

R&D expenses increased by 40%.

The substantial year-on-year increase in Rongbai Technology’s first-half revenue is closely tied to higher product sales. During the period, the company shipped 11,200 tonnes of cathode materials, up 87% year over year—of which high-nickel accounted for 9,790 tonnes, a 201% year-over-year surge, while the conventional series totaled 1,374 tonnes, down 48% from the prior year. Meanwhile, precursor sales reached 1,417 tonnes, a 44% year-over-year rise.

However, driven by factors such as declining raw-material prices and an increase in externally sourced precursors, Rongbai Technology’s gross margin declined year over year in the first half of the year. Data show that the company’s cost of sales rose 53.85% in the first half, outpacing the growth rate of its revenue for the same period.

In response, Rongbai Technology stated that the company strengthened supply-chain management in the second quarter, leading to an improvement in the situation. As reflected in the financial data, its non‑GAAP net profit for the second quarter increased by 8.03% compared with the same period in 2018. Rongbai Technology expects that, in the second half of the year, the pace of decline in key raw-material prices will moderate, and the company will further expand the use of self‑produced precursors, resulting in a continued quarter‑over‑quarter improvement in gross margin.

The STAR Market places great emphasis on the level of R&D investment by listed companies. According to its interim report, Rongbai Technology continued to ramp up its R&D spending, with R&D expenses reaching RMB 78.418 million in the first half of the year, a year-on-year increase of 43.4%. Specifically, the rise in R&D costs was driven primarily by expenditures in materials, salaries and wages, as well as depreciation and amortization.

Rongbai Technology stated that, in the first half of the year, the company vigorously advanced R&D on high-nickel products, which boast high energy density, large discharge capacity, excellent cycle performance, and a relatively stable structure. Among these, several products—including high‑nickel NCM811 and single‑crystal NCM622—have been recognized by premium customers such as CATL, Lishen, and BYD.

Since May 2019, Rongbai Technology’s NCA power‑battery products have achieved monthly shipments in the hundred‑ton range. These NCA products offer distinct advantages in energy density, cycle life, and safety performance, and the company stated that it will further intensify its efforts to expand market penetration going forward.

The share of NCM811 batteries will increase.

In a recent research report, Guangzheng Hengsheng noted that, going forward, as ternary cathode material technology advances rapidly and battery costs decline, the penetration of ternary lithium batteries in the energy storage market and emerging application areas will steadily increase—factors that are expected to drive substantial growth in the cathode materials market.

Specifically regarding Rongbai Technology, Guangzheng Hengsheng believes that the company is benefiting from the rapid growth of the new‑energy vehicle power‑battery sector, which has generated robust demand for ternary cathode materials. Following the mass production of NCM811, sales of high‑nickel cathode materials have risen year after year. As the proportion of high‑nickel content in cathode materials continues to increase in the future, the company’s profit margins are expected to improve significantly.

Domestic manufacturers are rapidly adopting NCM811 batteries. According to available data, NCM811 boasts a specific capacity of up to 200 mAh/g and a discharge plateau of approximately 3.8 V, enabling the development of high‑energy‑density batteries. However, NCM811 cells also suffer from poor safety and relatively rapid capacity fade over cycling.

When discussing industry trends, Rongbai Technology stated that, within the current technological framework, high-nickel ternary materials represent the most viable commercial solution, and the trend toward higher nickel content in ternary cathode materials is clearly evident. At present, NCM811‑based power battery products offer a 25% increase in energy density compared to NCM523 counterparts; further optimization of high‑nickel cathode performance could boost this energy‑density advantage by more than 30%.

Rongbai Technology believes that NCM811 and NCA are typical representatives of high-nickel ternary cathode materials and have both been deployed on a large scale. Each material has its own strengths and weaknesses: NCM811 offers superior cycle life and reduced gas generation at elevated temperatures, while NCA exhibits better rate capability. Looking ahead, these two chemistries may eventually converge, giving rise to NCMA‑based products.

Regarding the company’s flagship NCM811 product, Rongbai Technology remains highly confident. According to the company’s assessment, from a market‑application perspective, both prismatic and pouch batteries are showing clear growth trends, and it is expected that NCM811 will eventually surpass NCA in terms of market share. The company also anticipates that, in 2019, the proportion of NCM811 cathode materials and related battery products will increase significantly.

Commercial & Corporate

Tsinghua Holdings has terminated the equity transfer; Tsinghua Unigroup will remain under Tsinghua’s umbrella.

The shareholding reform of Tsinghua Unigroup, which has been underway for nearly a year, has been officially concluded.

On August 9, three listed companies under Tsinghua Unigroup—Unisplendour Corporation, UNISOC, and Unisplendour Optoelectronics—issued announcements stating that Tsinghua Holdings Co., Ltd. (hereinafter referred to as “Tsinghua Holdings” or “Qingkong”) has decided to terminate the transfer of certain equity interests in Tsinghua Unigroup to Shenzhen Investment Holdings Co., Ltd. According to the announcement, Tsinghua Unigroup’s shareholding structure remains unchanged: Tsinghua Holdings continues to hold a 51% stake, retaining its status as the controlling shareholder; moreover, Tsinghua Holdings remains the company’s actual controller and will continue to support Tsinghua Unigroup’s development.

The shareholding reform of Tsinghua Unigroup once attracted widespread attention.

On September 4, 2018, Tsinghua Holdings entered into separate agreements with Suzhou High-Speed Rail New City State-owned Assets Operation and Management Co., Ltd. (hereinafter referred to as “Suzhou High-Tech”) and Hainan United Asset Management Co., Ltd. (hereinafter referred to as “Hainan United”). Under these agreements, Tsinghua Holdings intends to transfer its 30% and 6% equity interests in Tsinghua Unigroup to Suzhou High-Tech and Hainan United, respectively.

This agreement was terminated on October 25, 2018. On the same day, Tsinghua Holdings, Unigroup, and Shenzhen Investment Control jointly signed a Framework Cooperation Agreement, under which Tsinghua Holdings intended to transfer its 36% equity stake in Unigroup to Shenzhen Investment Control.

On August 9, 2019, according to an announcement issued by a listed company under Tsinghua Unigroup, the reason for terminating the transfer of the 36% equity stake was changes in the internal and external market environment that had occurred recently.

First, the international market situation is becoming increasingly severe and complex. Integrated circuits and core technologies have emerged as focal points in the strategic competition among major powers. Second, Tsinghua Unigroup, a leading large-scale, diversified integrated‑circuit enterprise in China, has achieved numerous breakthroughs over the past year.

For example, in February 2019, Unisoc unveiled its 5G communications technology platform, Makalu, along with its first 5G baseband chip, Ivy 510, at the 2019 Mobile World Congress (MWC), marking Unisoc’s entry into the global forefront of 5G. In 2018, Tsinghua Unigroup’s chip shipments reached 4 billion units. By the end of this year, Yangtze Memory Technologies, a subsidiary of Tsinghua Unigroup, is set to begin mass production of its 64-layer 3D NAND flash memory, which leverages its independently developed Xtacking technology, signaling that a major breakthrough in high-end chip manufacturing is just around the corner.

For this very reason, industry insiders have pointed out that, as the sector’s leading player, Tsinghua Unigroup’s future development will exert a significant impact on the entire integrated circuit industry. To ensure its continued success, it is imperative to adapt to the times and reassess its strategic direction. The return of Tsinghua Unigroup to Tsinghua University can be regarded as the most prudent option at present.

In addition, on May 20, 2019, Unisoc issued an announcement stating that it was planning to acquire 100% of the equity in Beijing Unisplendour Liansheng Technology Co., Ltd. (hereinafter referred to as “Unisplendour Liansheng”), a holding company under its indirect controlling shareholder, Tsinghua Unigroup Co., Ltd., through a share‑issuance‑based asset acquisition. This move would enable the integration of Linxens, the French chip‑carrier giant controlled by Unisplendour Liansheng, into Unisoc. Under applicable laws and regulations, for the transaction to succeed, the actual controller of Unisoc must remain unchanged during the three years preceding the deal.

Meanwhile, another subsidiary of Tsinghua Unigroup that is preparing for an IPO—Unisoc, the world’s third-largest mobile‑chip design company listed on the public market—will also benefit from Qingkong’s continued status as the de facto controller of Tsinghua Unigroup.

On May 24, 2019, Unisoc, a subsidiary of Tsinghua Unigroup, announced that it had begun preparations for an IPO on the STAR Market, with plans to complete a pre-IPO financing round and a full corporate restructuring within the year, and to file for listing in 2020.

In accordance with the relevant laws and regulations governing the listing process, a company’s controlling shareholder must remain unchanged for at least three years prior to its public offering. As a stable controlling shareholder, Qingkong’s importance to Unigroup’s listed subsidiaries and its upcoming IPO‑eligible entities is self‑evident. In the foreseeable future, Unigroup will continue to be anchored at Tsinghua University, leveraging the institution’s robust support to achieve steady and sustainable growth.

The integration of the North and South shipbuilding entities is entering its final countdown, as the listed platform under China Shipbuilding Group accelerates its restructuring.

On the evening of August 14, after two years of deliberation, the restructuring plan for China Shipbuilding and CSSC Defense was once again revised in light of the strategic merger between the northern and southern shipbuilding groups.

In response to this news, on August 15, stocks linked to the merger of China Shipbuilding and CSSC saw broad-based gains. Meanwhile, China Shipbuilding and CSSC Defense both hit their daily upper limits, closing at RMB 23.95 per share and RMB 16.98 per share, respectively.

According to sources familiar with the two shipbuilding groups, “As stated in the announcement, this revision of the restructuring plan is intended to facilitate the accelerated implementation of market‑based debt‑to‑equity swaps and the strategic restructuring of the shipbuilding industry, and accordingly, adjustments are being proposed to the restructuring schemes for China Shipbuilding and CSSC Defense.”

Reorganization and Restructuring Plan

According to the revised restructuring plan, China Shipbuilding’s role as the platform for integrating CSSC Group’s shipbuilding and marine‑related businesses remains unchanged, with the company proposing to acquire CSSC Group’s core military and civilian shipbuilding assets at a valuation of RMB 36.6 billion.

According to current estimates, upon completion of the restructuring plan, China Shipbuilding will hold 100% equity in Jiangnan Shipyard, Waigaoqiao Shipbuilding, CSSC Chengxi, Huangpu Wenchong, and 67.64% equity in Guangzhou Shipyard International—representing a reduction of only 32.54 percentage points in its stake in Guangzhou Shipyard International compared with the original plan.

According to an insider at the company, “The key objective of our restructuring plan is to accelerate the implementation of the company’s previously announced reorganization proposal.”

According to reports, following the restructuring, the existing intra‑industry competition between China Shipbuilding and CSSC Defense in vessel types such as very large crude carriers (VLCCs) will be eliminated. As one of the aforementioned sources explained, “Through this restructuring, integrating the group’s core military and civilian shipbuilding businesses into the company will strengthen its position as a listed platform for the shipbuilding and marine industries, while unlocking synergies across these segments.”

Some analysts have stated that the adjustments to this restructuring plan could lay a promising foundation for post‑merger capital‑market activities.

The aforementioned source stated: “This restructuring is solely a merger between listed companies and will not affect the strategic restructuring of China Shipbuilding Industry Corporation and China State Shipbuilding Corporation.”

Countdown to the merger of the North and South shipyards

According to the restructuring draft disclosed by China Shipbuilding, China Shipbuilding is positioned as an integration platform for its shipbuilding and marine‑related businesses, while CSSC Defense will serve as the integration platform for the CSSC Group’s propulsion‑systems business.

According to industry insiders, the restructuring of the listed companies under China Shipbuilding Group appears more like a preparatory move ahead of the strategic merger of the North and South shipbuilding groups.

The draft indicates that China Shipbuilding will establish a power‑systems platform. China Shipbuilding Group will contribute its 100% stake in CSSC Power, its 51% stake in the CSSC Power Research Institute, and its 15% stake in CSSC‑Mitsui, while China Shipbuilding Co., Ltd. will contribute its 100% stake in Hudong Heavy Machinery, jointly forming a new CSSC Power Group.

CSSC Defense has conducted an asset swap, exchanging its 69.02% stake in Huangpu Wenchong and its 49% stake in Guangzhou Shipyard International for a 100% stake in CSSC Power Group. This means that CSSC Power Group will become a wholly owned subsidiary of CSSC Defense.

In addition, prior to the restructuring plan for China Shipbuilding, another listed company under the CSSC Group, CSSC Technology, also disclosed a draft restructuring proposal. The company intends to acquire 100% of Haiying Group’s equity for RMB 2.11 billion, thereby strengthening its position as a platform for high‑tech and emerging industries within the CSSC Group.

In fact, compared with CSSC Group’s platform consolidation, CSSC Heavy Industry had already consolidated its listed platforms some time ago—namely, China Shipbuilding Industry Corporation (CSIC), whose primary business is shipbuilding and marine engineering, and China Dynamics, which focuses on marine propulsion systems.

According to a relevant official from a listed subsidiary of China Shipbuilding Industry Corporation, “The company’s operations are currently proceeding as normal. As for the specific plans regarding the restructuring of the North and South shipbuilding groups, further notice is still pending.”

Although the merger of the two shipping companies has been conofficeed, the market is still closely watching the timetable for the deal. In response, officials from the listed subsidiaries of both companies stated: “We expect the merger to take place relatively soon.”

The merger of the North and South China shipbuilding groups will enhance international competitiveness.

In fact, the market had long anticipated the merger of China Shipbuilding Industry Corporation and China State Shipbuilding Corporation. Particularly as the shipbuilding industry remained in a prolonged slump and faced fierce competition in the international market, the merger has become inevitable.

Yang Delong, chief economist at Qianhai Open Source Fund, analyzed: “The merger of the two companies is positive news. Drawing on the significance of the CRRC merger, such a combination will help the offices grow stronger and larger. Once the two entities are consolidated into a single company, their competitiveness will be enhanced, bolstering their capabilities in areas such as project R&D and external business negotiations.”

According to data from VesselsValue, the merger of China Shipbuilding Industry Corporation (CSIC) and China State Shipbuilding Corporation (CSSC), along with the merger of South Korea’s Hyundai Heavy Industries Co., Ltd. and Daewoo Shipbuilding & Marine Engineering Co., Ltd., will give rise to two massive shipbuilding giants, collectively commanding approximately 46% of the global shipbuilding market, which is currently dominated by the world’s top ten shipbuilders.

Shen Meng, Executive Director at Champagne Capital, stated: “The merger of the two shipbuilding giants is a move to advance state‑owned enterprise reform, optimize the industrial structure, and enhance international competitiveness. As competition in the shipbuilding sector today is largely driven by inter‑national dynamics, the merger will further strengthen China’s overall competitive edge in the industry.”

Additionally, some market analysts note that following the merger of the two shipbuilding groups, there will be enhanced technological leadership and greater ability to command premium pricing in segments such as Very Large Ore Carriers (VLOCs), Capesize bulk carriers, Panamax bulk carriers, LR2 and LR1 tankers, MR tankers, and feeder‑class container vessels. At the same time, by redefining each shipyard’s strategic positioning and establishing its core vessel types, more resources can be concentrated on developing high‑end production capacity.

In response, a responsible official from both the Northern and Southern shipbuilding divisions stated: “At present, the company’s business is primarily focused on the international market. Consequently, our competitors include shipbuilders from multiple countries, such as those in South Korea and Japan. We believe that the restructuring will enhance our competitiveness on the global stage.”

Steelmakers in many regions are curtailing production to support prices, leading to a slowdown in the pace of steel output growth.

Iron ore costs have surged, and downstream demand has fallen short of expectations, yet crude steel output continues to grow robustly—this has been a striking feature of the steel market recently. Can steel consumption and steelmakers’ profits really be sustained?

As expected, the steel market is facing mounting inventory pressures. According to the latest data from Xiben Xin Ganxian, domestic rebar inventories currently stand at 6.4554 million tons, up by more than 2 million tons compared with the same period last year. Meanwhile, rebar prices have also fallen to a new year-to-date low.

To this end, steelmakers in Shandong, Sichuan, and other regions have recently decided to maintain prices and curb production, while the rate of plant maintenance is steadily rising.

On August 13, several steel companies in Shandong Province convened an information‑sharing meeting. Major construction‑materials producers reached a series of agreements, including a 400,000‑ton production cut across six steel mills to curb output and support prices. Given that Shandong’s construction‑materials prices had been relatively lower than those in other regions, the price gap is expected to gradually narrow. In addition, Shandong steelmakers plan to work with leading mills in neighboring provinces to strengthen information exchange and price coordination, jointly safeguarding stability in the steel industry.

Coincidentally, on August 12, Sichuan Provincial Local Metallurgical Holding Group Co., Ltd. convened a working-group meeting to advance the implementation of production‑restriction measures across its affiliated manufacturing enterprises. According to the schedule, its 11 steel subsidiaries will phase in production cuts between August 12 and 27, with mutual oversight of compliance.

In the view of industry insiders, the production cuts in the steel sector have come somewhat too late.

According to data from the National Bureau of Statistics, from January to July 2019, pig iron production totaled 473.44 million tons, up 6.7% year on year; crude steel production reached 577.06 million tons, an increase of 9.0% year on year; and steel product output stood at 697.76 million tons, up 11.2% year on year. Compared with downstream consumption trends, production growth has been excessively rapid.

According to monitoring data from Lange Steel Network, as of August 2, the blast furnace operating rate among 100 small and medium-sized steel enterprises nationwide stood at 81.3%, up 8.6 percentage points from the previous low reached on March 29 this year. Coupled with the expansion of advanced production capacity, China’s crude steel output growth in the first half of the year reached 9.9%.

“Following a sustained decline in prices since July, spot prices have reached their lowest level of the year. Not only have steel distributors been posting losses for some time, but most plate‑producing steelmakers are also now operating at a loss, leaving construction‑steel producers with little to no profit,” said Sun Hui, director of the Xiben New Rail Line Research Center.

Chen Kexin, chief analyst at the Lange Steel Research Center, stated bluntly that as long as per‑ton steel profits remain robust, no amount of repeated directives will deter steelmakers from increasing production. However, with recent widespread declines in steel prices, profit margins have plummeted, and some companies and product grades are even posting losses. If this trend persists, it will inevitably curb steel producers’ expansionary momentum, easing supply pressures and creating conditions for a price rebound.

Looking at monthly data, national crude steel production began to decline in June. Output fell by 1.75% month-on-month in June and by 2.64% in July.

In addition to explicit production cuts aimed at supporting prices, Mysteel data also shows a growing trend of proactive maintenance shutdowns at steel mills. As of August 13, more than 38 steel plants had announced planned maintenance, with the nine major regions reporting an average outage duration of 7.29 days. These shutdowns are expected to reduce daily output by a total of 84,150 tonnes, while conofficeed production‑cut impacts have already reached 1.4894 million tonnes. With steelmakers increasingly opting for voluntary production curtailments, market confidence has strengthened markedly, leading the national steel market to halt its decline, stabilize, and even begin to rebound.

Sun Hui stated that, following a sustained pullback in steel prices earlier, market panic has subsided. Given the anticipated seasonal improvement in demand and potential tightening of environmental regulations in northern China, steel prices could see a moderate rebound. However, with inventory levels remaining relatively high this year, a cautiously optimistic stance is warranted for the near term.

Ping An Insurance Group’s net profit for the first half of the year rose 63.3% year on year; whether it will continue share buybacks depends on market conditions.

“How is the share buyback program progressing? Does Ping An’s stock price at an all-time high reflect its intrinsic value?” On August 16, at China Ping An’s interim results press conference, the buyback plan and the stock’s performance were the central topics of discussion during the Q&A session.

In the first half of this year, Ping An Insurance Group injected a strong boost into its share price through substantial share buybacks. Since the company’s initial repurchase on June 18, its stock has risen 14.9% over 10 trading days, peaking at RMB 92.47 per share—a four-year high. Year-to-date, Ping An’s A‑share price has gained 55.9%, while the Shanghai Composite Index has advanced 13.23% over the same period.

Under the previously announced share‑repurchase plan, Ping An Insurance Group intends to use its own funds to repurchase A‑shares in an amount ranging from no less than RMB 5 billion to no more than RMB 10 billion, with the repurchase period running from April 29, 2019, to April 28, 2020. As of July 30, Ping An had already accumulated over RMB 5 billion in share repurchases through centralized bidding transactions.

As the repurchase amount has reached its lower limit, whether Ping An of China will continue its share buyback has become a topic of concern for investors.

“The company has already executed RMB 5 billion of its RMB 10 billion share‑repurchase program, and whether additional repurchases will be undertaken in the future will depend on market conditions and volatility,” said Yao Bo, Chief Financial Officer of Ping An Insurance Group. He added that share buybacks are not a routine practice for the company and must be aligned with its dividend payout levels.

Previously, Ping An of China’s share‑repurchase program had already been adjusted once to reflect dividend payouts. According to the announcement, the original upper limit on the repurchase price was set at RMB 101.24 per share; following the distribution of a RMB 1.10 per‑share cash dividend for 2018 at the beginning of the year, the cap was revised to RMB 100.14 per share. Based on this calculation, with Ping An planning to distribute an interim dividend of RMB 0.75 per share, the repurchase price ceiling could be further adjusted to RMB 99.39 per share. The company’s board secretary’s office stated that any specific adjustments would be disclosed in a public announcement after the shareholder dividend notice is issued.

As of August 16, Ping An’s A-share closing price stood at RMB 87.46 per share, leaving a 14.5% upside from the current buyback price ceiling of RMB 100.14 per share. If the buyback cap were adjusted to RMB 99.39 per share, there would still be a 13.64% margin relative to the current share price.

Regarding the stock price trend, Yao Bo stated that, from the management’s perspective, the priority is to strengthen the company’s fundamentals, solidify its operations, ensure sustained and stable earnings growth, and demonstrate the company’s investment value to investors. In the first half of this year, Ping An of China delivered particularly strong results: benefiting from a one-time impact of RMB 10.453 billion stemming from new policies on handling fees, commissions, and taxes, the company’s net profit for the period exceeded RMB 100 billion for the first time, up 63.3% year over year.

According to Ping An Insurance Group’s interim report, in the first half of this year, the company’s total payouts through cash dividends and share buybacks amounted to RMB 17.101 billion. Specifically, it plans to distribute an interim cash dividend of RMB 0.75 per share, up 21.0% year over year, with a total payout of RMB 13.68 billion; meanwhile, as of the end of June, the company had repurchased A‑shares worth RMB 3.421 billion through centralized bidding transactions.

Against the backdrop of industry structural adjustments, the company is transitioning its traditional business lines toward higher‑value offerings. The new business value margin for life and health insurance reached 44.7%, up 5.7 percentage points year over year. Meanwhile, Ping An’s technology‑driven businesses have posted rapid growth in recent years. In the first half of 2019, total revenue from these technology segments rose 33.6% year over year to RMB 38.431 billion. Specifically, Ping An Good Doctor reported a 102.4% year‑on‑year increase in operating income to RMB 2.273 billion, with net loss narrowing by 38.3% to RMB 274 million; Autohome’s first‑half revenue totaled RMB 3.921 billion, up 24.2% year over year, while its net profit reached RMB 1.556 billion, a 23.1% year‑on‑year improvement.

Kangmei Pharmaceutical engaged in long-term financial fraud; the China Securities Regulatory Commission plans to impose market bans on six individuals.

Recently, the China Securities Regulatory Commission (CSRC) issued administrative penalties and a notice of market ban against Kangmei Pharmaceutical. CSRC spokesperson Gao Li stated that Kangmei Pharmaceutical engaged in deliberate, organized, long-term, and systematic financial fraud, deliberately deceiving investors, with extremely adverse impacts and particularly grave consequences. The CSRC has served advance notices to all parties involved, and, in accordance with the law, proposes to impose administrative penalties on Kangmei Pharmaceutical and 22 individuals, including Ma Xingtian, while also imposing securities market bans on six additional individuals.

At the end of 2018, the China Securities Regulatory Commission (CSRC) discovered that Kangmei Pharmaceutical, a listed company, was suspected of financial fraud involving an enormous sum of money. Following the initiation of an investigation, the CSRC mobilized substantial resources to conduct a thorough probe. Based on the preliminary investigation and review, the Commission is currently preparing to impose disciplinary measures on the company and the individuals held accountable.

Upon investigation, it was found that, between 2016 and 2018, Kangmei Pharmaceutical allegedly inflated its operating revenue by means such as fabricating and altering value-added tax invoices, and boosted its cash holdings through the forgery and alteration of large‑denomination time deposits. The company also included project undertakings that did not meet the accounting criteria for recognition and measurement in its financial statements, thereby artificially inflating fixed assets, among other practices. In addition, Kangmei Pharmaceutical is suspected of failing to disclose, in its relevant annual reports, the non‑operational misappropriation of funds by its controlling shareholder and related parties. These actions resulted in false entries and material omissions in the annual reports filed by Kangmei Pharmaceutical.

Gao Li stated that companies such as Kangmei Pharmaceutical have acted with reckless disregard, showing no respect for the rule of law or for investors, abandoning the bottom line of integrity, crossing the red lines of the legal system, and undermining the very foundation of the information disclosure regime for listed companies.

It is worth noting that the China Securities Regulatory Commission has initiated an investigation into Zhengzhong Zhujiang Accounting Office, the auditor of Kangmei Pharmaceutical, on suspicion of failing to exercise due diligence. To date, no definitive conclusion has been reached. Gao Li stated that the integrity, trustworthiness, and diligent performance of duties by intermediary institutions constitute a crucial institutional mechanism for addressing information asymmetry between listed companies and the broader investor base. By rigorously fulfilling their statutory obligations to conduct due diligence and provide professional oversight, securities offices, law offices, and other types of intermediaries can significantly enhance the quality of information disclosure by listed companies. The CSRC consistently cracks down on illegal and derelict conduct by intermediary institutions, continuously urging them and their practitioners to discharge their duties in accordance with the law, thereby safeguarding the sound development of the capital market and protecting the legitimate rights and interests of small and medium-sized investors.

Gao Li stated that, going forward, the CSRC will maintain a stringent enforcement stance against violations of information disclosure laws and regulations, intensify punitive measures, and bolster regulatory deterrence. It will employ a comprehensive accountability framework—encompassing administrative penalties, criminal prosecution, civil compensation, and integrity‑based record‑keeping—to raise the cost of non‑compliance. Through sustained, targeted oversight, the regulator aims to ensure that listed companies and their controlling shareholders disclose truthful information and maintain accurate financial records, while urging intermediary institutions to fulfill their duties and responsibilities, thereby jointly safeguarding information disclosure as the “lifeline” of the capital market.

Taxation TAXATATION

The public consultation on the Land Value-Added Tax Law has concluded, but certain details still require clarification and refinement.

The highly anticipated “Land Value-Added Tax Law of the People’s Republic of China (Draft for Public Comment)” (hereinafter referred to as the “Draft”) closed its public consultation period on August 15, with the scope of taxation, the tax calculation method, and tax rates emerging as key points of discussion.

Conditions for the liquidation of real estate development enterprises have been tightened.

The most significant change in this draft for public comment is the elevation of the previous interim regulations to the status of law, along with adjustments to the scope of taxation.

For example, in alignment with the national land‑system reform, collective land and the buildings on it were, for the first time, brought within the scope of the land value‑added tax; concurrently, the subsequent abolition of the land value‑added‑income adjustment fee ensured that the overall tax burden on collectively owned real estate remained broadly stable before and after the legislation.

To maintain the existing tax system framework and overall tax burden, this round of tax rates continues to apply the original four-tier progressive tax rates. However, adjustments to the exemption and reduction provisions for ordinary residential properties, clarification of tax payment deadlines, and changes to the collection and administration model will nonetheless continue to affect real estate development enterprises.

For example, previously, the tax authorities could directly stipulate as conditions for requiring taxpayers to file an early settlement those circumstances in which a taxpayer is obligated to undertake such settlement—for instance, when the floor area of transferred real estate accounts for 85% or more of the project’s total salable floor area—under which the taxpayer must submit a settlement return to the tax authorities within 90 days, without the need for prior notification from the tax authorities.

Industry insiders generally believe that measures such as the tightening of settlement procedures, while having little impact on tax‑related costs, have narrowed companies’ operational flexibility, thereby increasing overall funding pressures. It is expected that adjustments to the land value‑added tax will have a more pronounced effect on developers with large land reserves, long development cycles, and high product price premiums, while exerting relatively limited influence on fast‑turnover offices.

The draft for public comment also introduces a tax exemption for affordable housing projects with a value-added rate of less than 20%, while granting local governments certain decision-making powers.

“Elevating the regulations to the level of law will make them more rigorous, helping to further standardize tax administration in the real estate sector, prevent tax revenue losses, and boost local government revenues. Granting local governments appropriate authority to grant tax reductions or exemptions will enable them to tailor policies to specific circumstances, thereby fostering local economic development and safeguarding the stability of the real estate market,” said Li Xuhong, Director of the Institute for Fiscal and Tax Policies and Applications at the National Accounting Institute in Beijing, in an interview with the Shanghai Securities News.

Whether individuals will continue to be exempt remains the focus of attention.

Whether individuals will continue to be exempt from taxation remains a focal point of public attention.

According to the earlier “Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting Tax Policies Related to Real Estate Transactions,” “land value-added tax is temporarily exempted for individuals selling residential housing.” However, the draft for public comment now released does not include this provision in its relief measures.

The draft for public comment specifies that only four scenarios qualify for reductions or exemptions from the land value-added tax. However, it also “grants the State Council the authority to prescribe additional circumstances under which the land value-added tax may be reduced or exempted.” The primary rationale is that the State Council should, in light of economic and social development trends, flexibly adopt temporary, transitional preferential policies—such as those governing land value-added tax in corporate restructuring and reorganization, as well as measures related to real estate market regulation. Industry insiders interpret this provision as leaving considerable room for future adjustments to the real estate market.

However, several experts told the Shanghai Securities News that it is currently unlikely that a comprehensive “land value-added tax” will be imposed on individual residential property transactions, though they did not rule out the possibility of introducing such a tax under certain conditions in the future.

Certain details have also sparked debate. For instance, in the past, some local jurisdictions have treated equity transfers as de facto real estate transfers, thereby imposing land value-added tax. This has raised controversy over whether, in the absence of anti‑avoidance provisions within the land value-added tax regulatory framework, the legal form of a transaction can be recharacterized. Notably, the current draft for public comment does not include any anti‑avoidance provisions.

The Ministry of Finance has stated that it will accelerate the legislative process for multiple tax types.

Recently, Finance Minister Liu Kun wrote that it is necessary to closely coordinate with the relevant departments of the National People’s Congress to accelerate legislative work on taxes including the resource tax, deed tax, urban maintenance and construction tax, stamp tax, value-added tax, land appreciation tax, customs duties, and consumption tax. Several experts have stated that improving the legislation for these taxes does not necessarily mean an increase in the tax burden.

Zhang Bin, a researcher at the Tax Research Office of the Institute of Financial Strategy at the Chinese Academy of Social Sciences, stated that accelerating the pace of tax legislation is a task being advanced in accordance with established procedures and is currently being carried out intensively.

In 2015, a spokesperson for the Legislative Affairs Commission of the Standing Committee of the National People’s Congress, responding to questions on the “Implementation Opinions on Putting the Principle of Tax Legalism into Practice,” stated that, in order to “implement the principle of tax legalism,” the Opinions, based on the progress of relevant reform tasks, set out arrangements for completing the corresponding legislative work by 2020. Specifically, with respect to taxes related to tax‑system reform, the relevant tax regulations will be elevated to laws in due course, in tandem with the reform process, and the corresponding tax regulations will be repealed accordingly.

Professor Liu Jianwen of Peking University Law School stated that improving the tax system and refraining from increasing taxpayers’ tax burden are not mutually exclusive. By refining the tax framework, taxpayers can enjoy greater benefits, as reflected in adjustments to tax rates and preferential policies, while also achieving further enhancements in both authority and efficiency.

Experts note that the effects of various tax and fee reduction policies implemented in the first half of this year are gradually becoming apparent. Zhang Bin stated that this can be seen in the changes observed in relevant data.

Liu Jianwen cited as an example that, for businesses, lowering the VAT rate and reducing social security contributions would enable them to operate with greater flexibility and better navigate the current economic environment.

According to data released by the Ministry of Finance, in the first half of this year, amid the implementation of a more vigorous and efficient proactive fiscal policy, national fiscal revenue increased by 3.4% year-on-year, with growth of 6.2% in the first quarter and 0.8% in the second quarter.

Liu Jinyun, Director of the Central Treasury Payment Center of the Ministry of Finance, stated at a press conference that tax‑reduction policies have had a pronounced impact on sectors such as manufacturing, leading to a marked decline in tax revenues in the first half of the year compared with the first quarter. National tax revenues grew by 0.9% in the first half, a slowdown of 4.5 percentage points from the first quarter. In particular, tax revenues fell by 3.3% in the second quarter; notably, since May, the effects of the deepened VAT reform have become even more evident, with tax revenues declining for two consecutive months.

Minister of Finance Liu Kun wrote that, going forward, the Ministry will work with relevant departments to continue implementing all tax and fee reduction measures with meticulous attention to detail. First, it will strengthen communication, coordination, and oversight; second, it will enhance budgetary management of fiscal revenue and expenditure, urging and guiding local governments to expand revenue sources while curbing spending, mobilize income through multiple channels, further reduce general expenditures, and support the effective implementation of tax and fee reduction policies. For localities facing difficulties in meeting their annual revenue‑expenditure targets, guidance will be intensified, and budgets will be adjusted in accordance with laws and regulations when conditions for such adjustments are triggered. Third, it will bolster publicity and training efforts, innovating outreach methods and providing targeted training for corporate finance personnel to help businesses fully and effectively leverage these policies. Fourth, it will promptly develop contingency plans, drawing on extensive research to address emerging situations and challenges as policies are rolled out, ensuring that tax burdens across all sectors are reduced rather than increased.

Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on the Pilot Program to Extend the Qualification of General VAT Taxpayers to Comprehensive Bonded Zones

State Taxation Administration Announcement No. 29 of 2019

In accordance with the “Several Opinions of the State Council on Promoting High-Level Opening-Up and High-Quality Development of Comprehensive Bonded Zones” (Guofa [2019] No. 3), the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs have decided to launch a pilot program to extend the eligibility for general VAT taxpayer status to entities operating within comprehensive bonded zones. Relevant matters are hereby announced as follows:

I. The pilot program for granting general taxpayer status under the value-added tax regime in comprehensive bonded zones (hereinafter referred to as the “general taxpayer qualification pilot”) shall be subject to filing-based administration. Comprehensive bonded zones that meet the following conditions may, upon filing with the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs—after the provincial tax and finance authorities and the directly affiliated customs authority at the zone’s location have submitted an implementation plan for the general taxpayer qualification pilot (including the name of the comprehensive bonded zone, enterprises’ application requirements, and the readiness of policy‑implementation conditions)—proceed with the pilot:

(1) Enterprises within the comprehensive bonded zone have a genuine need to pilot the general taxpayer qualification program;

(2) The people’s government of the city (or prefecture-level city) where the zone is located has established a working mechanism for coordinated implementation of the pilot program, with the administrative management authority of the comprehensive bonded zone, along with tax and customs departments, jointly advancing the initiative.

(3) The tax authorities and customs authorities responsible for the bonded zone have established a joint supervision and information-sharing mechanism related to the pilot program for granting general taxpayer status.

(4) The tax authority responsible for the comprehensive bonded zone shall be equipped to carry out its functions within the zone and designate a dedicated department or personnel to oversee taxpayer services, tax collection and administration, and other related tasks.

II. After a comprehensive bonded zone has completed its filing, enterprises within the zone that meet the relevant provisions on the registration and administration of general VAT taxpayers may, on a voluntary basis, apply to the competent tax authority and customs authority at the location of the comprehensive bonded zone to become pilot enterprises, and, in accordance with applicable regulations, complete the registration for general VAT taxpayer status with the competent tax authority.

III. From the date on which a pilot enterprise’s status as a general VAT taxpayer takes effect, the following tax policies shall apply:

(1) When enterprises import equipment for their own use—including machinery, construction materials, and office supplies—import duties, as well as value-added tax and consumption tax levied at the import stage (hereinafter referred to as import taxes), shall be temporarily exempted.

The aforementioned temporary exemption from import duties shall be allocated evenly across the years within the customs‑supervised period applicable to the imported equipment for domestic use. At year‑end, the exempted import duties for the current year shall be apportioned according to the ratio of domestic to foreign sales for that year: the portion attributable to foreign sales shall be subject to the tax policies in force in the special customs‑supervised zone where the pilot enterprise is located, while the portion attributable to domestic sales shall be taxed in accordance with the tax policies applicable outside the special customs‑supervised zone (hereinafter referred to as “outside the zone”), with any additional duties assessed accordingly.

(2) Except for imported equipment for self-use, the following goods purchased shall be subject to the bonded‑warehouse policy:

1. Goods purchased from outside and brought into the pilot zone;

2. Bonded goods purchased in customs special regulatory zones (excluding pilot areas) or at customs‑bonded supervision sites and subsequently brought into the pilot area;
3. Bonded goods purchased by non‑pilot enterprises within the pilot zone;
4. Unprocessed bonded goods purchased from other pilot enterprises within the pilot zone.

(3) The following goods sold shall be subject to the declaration and payment of value-added tax and consumption tax to the competent tax authority:

1. Goods sold to areas outside the境内 (domestic territory);

2. Goods sold to bonded zones or bonded supervision sites that do not have export tax rebate functions (excluding unprocessed bonded goods);

3. Goods sold to other pilot enterprises within the pilot zone (excluding unprocessed bonded goods).

For pilot enterprises that sell the aforementioned goods containing bonded goods, they shall declare and pay import duties to the customs authorities in accordance with the status of the bonded goods at the time of their entry into the customs special supervision zone, and shall, as prescribed, make up for any deferred‑duty interest.

(4) Unprocessed bonded goods sold to special customs supervision zones or customs‑bonded supervision sites shall continue to be subject to the bonded‑goods regime.

(5) The following goods sold—excluding unprocessed bonded goods—are subject to the export refund (exemption) tax policy. The competent tax authority shall, on the basis of the electronic data of the corresponding export customs declaration provided by the customs authorities, review and process the export refund (exemption) tax applications submitted by pilot enterprises.

1. Goods exported upon departure;

2. Goods sold to customs special supervision zones (excluding pilot zones and bonded zones) or to customs bonded supervision sites (excluding bonded supervision sites that do not offer tax refund services);

3. Goods sold to non‑pilot enterprises within the pilot zone.

(6) Processed bonded goods exported from the territory are exempt from value-added tax and consumption tax.

(7) Unless otherwise provided by the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration, pilot enterprises shall be subject to the existing laws and regulations governing tariffs, value-added tax, and consumption tax applicable to areas outside the pilot zone.

IV. Processing trade goods sold to pilot enterprises from outside the bonded zone shall continue to be governed by the existing tax policies; other goods sold to pilot enterprises (including water, steam, electricity, and gas) will no longer be eligible for export tax rebates and shall be subject to value-added tax and consumption tax in accordance with applicable regulations.

V. The tax and customs authorities shall strengthen information exchange on tax collection and administration and goods supervision. For goods eligible for the export tax rebate policy, customs shall transmit to the tax authorities electronic data on the clearance of export customs declarations.

VI. This Announcement shall take effect from the date of its issuance. The “Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Launching a Pilot Program to Grant Value-Added Tax General Taxpayer Status to Enterprises in Special Customs Supervision Zones” (State Taxation Administration, Ministry of Finance, General Administration of Customs Announcement No. 65 of 2016), the “Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Expanding the Pilot Program to Grant Value-Added Tax General Taxpayer Status to Enterprises in Special Customs Supervision Zones” (State Taxation Administration, Ministry of Finance, General Administration of Customs Announcement No. 5 of 2018), and the “Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Further Expanding the Pilot Program to Grant Value-Added Tax General Taxpayer Status to Enterprises in Special Customs Supervision Zones” (State Taxation Administration, Ministry of Finance, General Administration of Customs Announcement No. 6 of 2019) are hereby repealed simultaneously. The 48 special customs supervision zones listed in the aforementioned announcements, including the Kunshan Comprehensive Bonded Zone, shall continue to implement the general taxpayer qualification pilot program in accordance with this Announcement.

Hereby announced by the State Taxation Administration.

Ministry of Finance

General Administration of Customs
August 8, 2019

Interpretation of the “Announcement by the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Piloting the Granting of General VAT Taxpayer Status in Comprehensive Bonded Zones”

To promote the high‑level opening-up and high‑quality development of comprehensive bonded zones and to support enterprises within these zones in expanding into both domestic and international markets, the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs have decided to launch a pilot program in comprehensive bonded zones to grant enterprises the status of general VAT taxpayers (hereinafter referred to as the “General Taxpayer Qualification Pilot”). They have jointly issued the “Announcement on the Promotion of the General VAT Taxpayer Qualification Pilot in Comprehensive Bonded Zones” (hereinafter referred to as the “Announcement”). To facilitate understanding and implementation of this policy, the following is an interpretation of the Announcement:

I. Background to the Issuance of the Announcement

On January 12, 2019, the State Council issued the “Several Opinions on Promoting High-Level Opening-Up and High-Quality Development of Comprehensive Bonded Zones” (Document No. 3 [2019] of the State Council), which proposed “actively yet prudently piloting the qualification of general VAT taxpayers in comprehensive bonded zones.” To implement the decisions and arrangements of the State Council, promote innovation and upgrading of comprehensive bonded zones, build new high grounds for opening up to the outside world, and help enterprises in these zones better coordinate and leverage both international and domestic markets and resources—thereby fostering and enhancing new competitive advantages on the global stage—the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs have decided to roll out a pilot program granting general taxpayer status in comprehensive bonded zones.

II. Main Contents of the Announcement

(1) The pilot program for general taxpayer qualification shall be implemented under a filing‑based management system. Comprehensive bonded zones that meet the following conditions may launch the general taxpayer qualification pilot, provided that the provincial tax and finance authorities and the directly affiliated customs authority of the zone submit a pilot implementation plan—detailing the name of the comprehensive bonded zone, enterprises’ application requirements, and the readiness of policy‑implementation conditions—to the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs for recordal:

First, enterprises within the comprehensive bonded zone do indeed have a need to pilot the general taxpayer qualification.

Second, the people’s government of the city (or prefecture) where the zone is located has taken the lead in establishing a working mechanism that brings together administrative management agencies, tax authorities, customs, and other relevant departments to jointly advance the pilot program.

Third, the tax authorities and customs authorities responsible for the comprehensive bonded zones have established a pilot mechanism for coordinated collaboration on the qualification of general taxpayers.

Fourth, the tax authority responsible for the comprehensive bonded zone must have the necessary operational conditions to carry out its functions and designate a dedicated department or personnel to oversee taxpayer services, tax collection and administration, and related matters.

(II) Policy provisions of the pilot program. The pilot will continue to adhere to the principle of voluntary participation by enterprises, and tax policies will be implemented in accordance with the relevant regulations established by the State Council during the earlier phase of the pilot. Specifically:

First, pilot enterprises in customs special regulatory zones are granted the status of general VAT taxpayers. For goods sold domestically— including those sold to other pilot enterprises—such enterprises may issue special VAT invoices in accordance with applicable regulations and file and pay VAT and consumption tax as required.

Second, pilot enterprises that purchase goods from outside the customs special regulatory zone (hereinafter referred to as “outside the zone”) may obtain special VAT invoices, which can be used as supporting documents for deducting input VAT or for claiming export tax rebates. For goods purchased by pilot enterprises from outside the zone under the processing trade regime, the existing tax policies shall continue to apply.

Third, pilot enterprises’ imported goods shall continue to be subject to the bonded‑goods regime. Where domestic sales include bonded goods, or where unprocessed bonded goods are sold directly outside the zone, import duties, value‑added tax, and consumption tax on such bonded goods shall be declared and paid to customs in accordance with their status at the time of entry into the customs special supervision zone, and any deferred‑tax interest shall be paid as prescribed. When pilot enterprises purchase goods from non‑pilot enterprises within the pilot zone, the applicable tax treatment shall be the same as that for imported goods. Sales of unprocessed bonded goods among enterprises within the pilot zone shall be exempt from taxation, with the purchaser continuing to benefit from the bonded‑goods regime.

Fourth, pilot enterprises may apply for export tax rebates after the goods have actually departed the country; when such enterprises sell goods to non‑pilot enterprises within the pilot zone—except for unprocessed bonded goods—the transactions shall be treated as exports for the purpose of obtaining tax rebates.

Fifth, when pilot enterprises import equipment for their own use—including machinery and equipment, infrastructure materials, and office supplies—import duties, value-added tax at the import stage, and consumption tax (hereinafter referred to as “import taxes”) shall be temporarily exempted. The aforementioned temporary exemption from import taxes shall be allocated evenly across the years corresponding to the customs supervision period of the imported equipment. At year-end, the import taxes temporarily exempted during the year shall be apportioned according to the enterprise’s domestic‑to‑export sales ratio: the portion attributable to exports shall be subject to the tax policies applicable in the special customs‑supervised zone where the pilot enterprise is located, while the portion attributable to domestic sales shall be taxed in accordance with the tax policies prevailing outside such zones, with any additional tax due being collected accordingly.

(3) Other provisions. The “Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Launching a Pilot Program to Grant Value-Added Tax General Taxpayer Status to Enterprises in Special Customs Supervision Zones” (State Taxation Administration, Ministry of Finance, General Administration of Customs Announcement No. 65 of 2016), the “Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Expanding the Pilot Program to Grant Value-Added Tax General Taxpayer Status to Enterprises in Special Customs Supervision Zones” (State Taxation Administration, Ministry of Finance, General Administration of Customs Announcement No. 5 of 2018), and the “Announcement of the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs on Further Expanding the Pilot Program to Grant Value-Added Tax General Taxpayer Status to Enterprises in Special Customs Supervision Zones” (State Taxation Administration, Ministry of Finance, General Administration of Customs Announcement No. 6 of 2019) are hereby repealed simultaneously. The 48 special customs supervision zones listed in the aforementioned announcements, including the Kunshan Comprehensive Bonded Zone, shall continue to implement the general taxpayer qualification pilot program in accordance with this announcement.

III. Time of Execution

This Announcement shall take effect from the date of its issuance.

Interpretation of the “Decision of the State Taxation Administration on Abolishing the Measures for the Administration of Vehicle Acquisition Tax Collection”

To implement the Vehicle Acquisition Tax Law of the People’s Republic of China (hereinafter referred to as the “Vehicle Acquisition Tax Law”), the State Taxation Administration has formulated and promulgated the Decision of the State Taxation Administration on the Repeal of the Measures for the Administration of the Collection of Vehicle Acquisition Tax. The relevant details are hereby explained as follows:

　The Vehicle Acquisition Tax Law was adopted at the seventh meeting of the Standing Committee of the 13th National People’s Congress on December 29, 2018, and entered into force on July 1, 2019. At the same time, the Interim Regulations of the People’s Republic of China on Vehicle Acquisition Tax (hereinafter referred to as the “Regulations”) were repealed.

On December 2, 2014, the State Administration of Taxation promulgated the Measures for the Administration of the Collection of the Vehicle Acquisition Tax (promulgated as Order No. 33 of the State Administration of Taxation and subsequently amended by Orders No. 38 and No. 44; hereinafter referred to as the “Measures”), which were formulated on the basis of the Regulations and other laws and administrative regulations. Since its implementation, the Measures have played an important role in standardizing tax collection and administration and strengthening taxpayer services. With the enactment of the Vehicle Acquisition Tax Law, the Measures no longer meet the new management requirements of the vehicle acquisition tax. To implement the Vehicle Acquisition Tax Law, the State Administration of Taxation has decided to repeal the Measures.

LITIGATION & ARBITRATION

Wielding the “sharp sword” of supervision, a powerful offensive is once again launched—An overview of the second and third rounds of central supervision on eradicating organized crime and evil forces.

On August 6, the Central Supervision Team conveyed its supervisory findings to Heilongjiang and Tibet, marking the comprehensive conclusion of the third round of central supervision on combating organized crime and evil forces.

In April and June this year, the central authorities continued to dispatch supervisory teams to 10 provinces, autonomous regions, and municipalities—including Zhejiang, Tianjin, and Jiangxi—and to 11 other provincial-level units—such as Beijing, Inner Mongolia, and Xinjiang—as well as to the Xinjiang Production and Construction Corps—to carry out the second and third rounds of oversight. With this, the central government’s anti-organized-crime and anti‑evil‑forces supervision has achieved full nationwide coverage.

During the two rounds of supervision, the central supervisory teams fully leveraged the “sharp sword” effect of oversight, stayed focused on established goals, adhered to a problem‑oriented approach, strengthened their spirit of struggle, and dared to tackle tough issues head‑on. Wherever they went, they launched the most vigorous offensive since the campaign’s inception.

Strengthen oversight of accountability and further elevate political awareness.

On June 10, the fifth day after the Central Supervision Team arrived in Heilongjiang Province, four officials in Hulan District were brought down. By the time the supervision concluded, a total of 14 officials—including the former Party Secretary and the former District Mayor of Hulan District—had been investigated and punished for involvement in organized crime, evil forces, corruption, and “protective umbrella” issues. This serves as a microcosm of how the Central Supervision Team has helped bring long‑standing, deeply troubling cases—long ignored by authorities and widely condemned by the public—into the open, exposing their root causes.

In 2019, the first phase of the special campaign achieved a decisive victory. Criminal gangs and evil forces sought to go underground, change their tactics, and evade scrutiny—resulting in mounting difficulties and emerging bottlenecks as the campaign entered its “deep-water phase” and “critical stage,” becoming increasingly complex and challenging.

Political leadership provides the overarching framework and ensures that all efforts are aligned. Only by continuously elevating our political awareness and strengthening our sense of mission and responsibility can we sustain a robust offensive against organized crime and evil forces, address the key challenges and difficult issues in this special campaign, and steadily advance the fight to eradicate organized crime and eliminate evil forces.

The Central Supervision Teams have consistently placed political oversight at the forefront, treating it as their top priority. During the second and third rounds of supervision, the teams convened a total of 1,558 symposiums and held direct conversations with 13,979 Party members and cadres across all five levels—provincial, municipal, county, township, and village.

The central supervision team has continuously urged local authorities to further deepen their political understanding, elevate their political stance, and strengthen their political consciousness, ensuring that the political responsibility for eradicating organized crime and evil forces is officely shouldered and earnestly fulfilled.

The powerful synergy of “five-level secretaries taking the lead” continues to coalesce—

The Party secretaries of the supervised regions personally attended mobilization meetings, briefing sessions, coordination meetings, and other gatherings; conducted in-depth field investigations and on-the-ground guidance; and systematically cascaded pressure at every level, thereby motivating Party secretaries at the municipal, county, township, and village levels to ensure that the special campaign is carried out with rigor and effectiveness.

The vigorous crackdown on organized crime and evil forces, carried out in accordance with the law, continues to be maintained—

During the period of the supervisory team’s on-site presence, Guizhou newly investigated and prosecuted 20 organized crime groups with triad-like characteristics, 45 criminal gangs and groups engaged in evil forces, and apprehended 731 new criminal suspects.

Urgent supervision ensures strict punishment in accordance with the law, marking another breakthrough in case handling.

Under the guidance of the central supervision teams, local authorities have steadfastly upheld a trial‑centered approach and rigorously implemented the criminal policy of combining leniency with severity, neither inflating nor downgrading charges, thereby ensuring that all actions are conducted in strict accordance with law and regulations, with penalties proportionate to the offenses. With the support of the central supervision teams, Shaanxi Province has, in accordance with the law, re‑filed charges in three cases involving Ge Moubao, a former People’s Congress representative from Weiyang District, Xi’an, which had previously been left unprosecuted.

Achieve thorough eradication of evil, making the campaign to dismantle criminal networks and remove protective umbrellas the primary focus—

From the Central Supervision Team’s focused oversight of the Sun Xiaoguo case in Yunnan, to the National Anti-Black-Evil Office’s high-priority supervision and deployment of a special task force to oversee major cases, to the Yunnan High People’s Court’s lawful initiation of a retrial in the Sun Xiaoguo case, the number of public officials and key associates under investigation has risen to 20…

Under intense public scrutiny, the factual truth of the Sun Xiaoguo case has gradually come to light, underscoring the resolute stance of the special campaign and its supervisory efforts: no matter who is involved, every case will be thoroughly investigated to the end, with zero tolerance for leniency.

Since the central supervision teams were deployed, localities across the country have generally accelerated progress and improved the quality and effectiveness of efforts to dismantle criminal syndicates and dismantle their protective networks.

The central supervisory teams have urged local authorities to ensure that the apprehension of suspects and the tracing of illicit assets proceed in tandem, effectively preventing organized crime groups from transferring or concealing their ill-gotten wealth. By employing a range of measures, including the recovery and confiscation of illegal proceeds, they are working to dismantle the economic foundations of these criminal organizations once and for all.

During its tenure in Anhui, the Central Supervision Team alone supervised the seizure, freezing, and impoundment of assets totaling 1.118 billion yuan. In Qinghai, the team spearheaded the initiation of an investigation into the first case involving a department‑level official acting as a “protective umbrella,” resulting in the seizure, freezing, and impoundment of over 100 million yuan in assets—accounting for one quarter of all assets seized or frozen in Qinghai since the launch of the special campaign. Meanwhile, in Ningxia, the Central Supervision Team prompted the rigorous investigation and prosecution of seven department‑level officials, with the value of assets implicated in these cases doubling compared to the level before the team’s arrival.

Tight supervision and comprehensive measures: further deepening source‑level governance.

“We have struck down the criminal gangs that for years have run rampant in our communities and oppressed the people—well done, precisely targeted, and we must keep up the fight, resolutely pressing ahead.” “Thank you for the decisive crackdown on organized crime and evil forces, and thank you to the supervision team and the investigating police officers for their hard work.” “The campaign to eliminate organized crime and evil forces has won the hearts of the people and aligned with public sentiment; the masses applaud and feel relieved and at ease…”

The Central Supervision Team has won the people’s trust through concrete actions, earning their enthusiastic support and sincere confidence. Many citizens have presented banners and letters of gratitude, expressing their appreciation for the CPC Central Committee’s decisions and deployments, as well as for the work of the Central Supervision Team.

In the campaign to eradicate organized crime and evil forces, we must adopt long-term strategies and take measures to consolidate the foundations. The central supervisory teams have fully leveraged their oversight role to encourage localities to continuously strengthen efforts at the source, fundamentally curbing the emergence and spread of criminal gangs and evil forces, and bolstering society’s “immunity” to such problems.

The supervisory team has focused its efforts on rural areas, advancing the rectification of weak and disorganized village Party organizations, ensuring rigorous vetting of candidates for the newly elected village “two committees,” and conducting follow-up reviews of the “two committees” in villages that have already undergone elections. As a result, the building of grassroots Party organizations has been significantly strengthened.

In response to issues such as sluggish action by some industry regulators and the phenomenon of “one criminal group operating across multiple sectors, with one sector giving rise to multiple criminal activities,” the central supervision team conducted in-depth investigations, urging local authorities to adopt effective measures and launch targeted rectification campaigns—

As the ship reaches the midstream, the currents grow fiercer; we shall not lay down our arms until total victory is achieved.

This is an “open-door supervision” approach that puts the people first and relies on them.

On their very first day in the regions under supervision, each oversight team publicly announced channels for reporting and established dedicated task forces to handle letters and calls from the public. Every tip received is processed and assigned on the same day, with zero errors or oversights… Upholding a profound commitment to the people, the central oversight teams have fulfilled their solemn pledge to put the people first through rigorous, meticulous, and pragmatic action.

This is “face-to-face supervision,” which identifies problems and implements corrective measures as it goes.

Each supervisory team has, in phases, provided feedback on its findings to the supervised regions, ensuring that ongoing supervision and immediate rectification are maintained throughout the process. The Party committees and governments of the supervised regions have attached great importance to this work, adopting a resolute “never repeat the same mistake” approach to thoroughly address and promptly correct the issues identified during supervision.

The central supervision team has stood in solidarity with the people, aligned its efforts with those of the supervised regions, and rallied a powerful force to surmount formidable challenges and tackle tough issues in the special campaign against organized crime and evil forces, driving the initiative ever deeper.

During the second round of supervision, the 10 provinces, autonomous regions, and municipalities directly under the central government dismantled 85 organized crime groups and 915 criminal gangs involved in evil activities. The 10 supervisory teams received nearly 200,000 leads from the public, and more than 15,000 cases were placed under high-priority oversight and focused follow-up. Additionally, 689 individuals implicated in organized crime and evil activities turned themselves in.

During the third round of supervision, the 11 provinces, autonomous regions, municipalities directly under the central government, and the Xinjiang Production and Construction Corps collectively received 270,000 public reports—2.7 times the total number of such reports received since the launch of the special campaign. In some localities, the number of cases involving organized crime and evil forces investigated increased by double digits; in others, the number of “protective umbrellas” uncovered was more than four times the figure recorded prior to the supervisory phase.

Through three rounds of supervisory inspections, by the end of June 2019, a total of 2,104 organized crime groups and 7,274 criminal gangs had been dismantled nationwide, and 33,335 cases involving corruption and “protective umbrellas” linked to organized crime and evil forces had been investigated, with 33,270 individuals held accountable.

The string of victories is yet another testament to the unwavering resolve to carry out relentless, large-scale cleanups.

The string of victories is yet another source of encouragement for the people’s confidence in their fight against organized crime and evil forces.

At present, the second and third rounds of supervisory inspections have entered their “second half”; starting in mid-to-late October, the central supervisory teams will launch “follow-up reviews” to deliver another round of rigorous oversight; the National Anti-Blackmail Office will continue to dispatch task-force supervision teams to ensure tight oversight of high-profile cases; and it will explore a system of specially appointed supervisory commissioners to further leverage the effectiveness of oversight…

The supervisory “sharp sword” will never gather dust, and the people’s war against organized crime and evil forces is sure to achieve unrelenting success!

Xiamen’s Siming District has concluded a series of student‑registration cases involving “gaokao migrants.”

After failing the high school entrance exam, in order to gain admission to a regular high school, seven parents blindly trusted others’ promise that they could transfer their children’s student registration to another region to take the national college entrance examination. They signed agency contracts and paid substantial sums of money, only to discover, as the exam approached, that they had no official student status and could participate in the exam solely as independent candidates. Consequently, the seven parents filed lawsuits against their agents. Recently, the People’s Court of Siming District, Xiamen City, Fujian Province, issued a judgment in this series of “college‑entrance‑exam immigration” student‑registration cases, ruling the agency contracts invalid.

In 2016, seven parents, including Mr. Jia, whose children failed to gain admission to regular senior high schools in Xiamen due to unsatisfactory middle school exam results, engaged Mr. Le and Mr. Chen—both teachers at a tutoring institution—to arrange “gaokao immigration.” This involved obtaining out-of‑province student registration through special channels and then enrolling their children as temporary students at local Xiamen secondary schools. Mr. Jia and the others signed letters of authorization with Mr. Le and Mr. Chen, outlining the relevant arrangements, and paid fees ranging from RMB 70,000 to RMB 100,000 each. Subsequently, Mr. Le assumed full responsibility for his clients’ children’s enrollment, assigning staff to handle tuition payments, organize the academic examination, and manage all aspects of their temporary study. In September 2016, the children were admitted as temporary students to a secondary school in Xiamen. However, as the 2019 gaokao approached, they were informed that they did not possess regular senior high school student status and therefore could not take the exam as graduating seniors; some were even barred from sitting for the exam altogether. Consequently, Mr. Jia and the other parents brought the matter before the court.

Parents including Mr. Jia contend that Ms. Le and Mr. Chen failed to perform their contractual obligations, demanding the return of the entrusted fees together with interest. In response, Ms. Le and others argue that the Power of Attorney merely stipulated assistance in enrolling the students in high school, without undertaking to secure official student registration. They further assert that they have already facilitated the students’ smooth placement at the receiving school, thereby fulfilling the scope of the entrusted task. As for matters such as obtaining student registration, they only arranged for the students to be registered for the senior‑high school graduation examination, having already enrolled them under a secondary school located elsewhere to complete that examination. Accordingly, they maintain that no breach of contract has occurred.

The court found that Le and Chen were instructors at separate educational training institutions, maintaining a cooperative relationship. Acting on behalf of certain students’ parents, they facilitated the temporary enrollment of students who had not met the minimum admission scores for high schools in Xiamen, while simultaneously arranging for these students to obtain school registration at high schools outside the city—commonly referred to as “gaokao immigration.”

The court held that, in light of the parties’ differing understandings of school enrollment, it found that although the Power of Attorney only stipulated arrangements for high school attendance, such arrangements necessarily encompassed the processing of high school student registration. From the perspective of the contract’s purpose, the parents—namely, Jia and others—entered into the agreement with the intention of securing their children regular high school enrollment and enabling them to sit for the national college entrance examination, rather than merely arranging temporary boarding. Moreover, according to established commercial practice, Le acknowledged that the fees he collected covered both boarding and the administrative costs associated with obtaining student registration, and further conofficeed during the proceedings that, prior to 2016, student records could be transferred to high schools outside the local jurisdiction. However, after 2016, because junior high school–registered students could no longer have their records transferred, the registration process ultimately failed. Accordingly, at the time of contracting, Le subjectively understood that the agreed‑upon arrangements for attendance included the handling of high school student registration. Finally, in terms of specific communications, Le and his staff explicitly informed parents via a WeChat group about the status of student registration and the documents required for “high school student registration.” In this context, the term “high school student registration” should be interpreted in its ordinary sense and not narrowly construed as referring solely to “examination registration for the senior secondary school qualification exam.”

The court held that the Power of Attorney was entered into by Le, acting on behalf of parents including Jia, to assist in arranging for their children who had not met the admission cutoff scores to enroll in regular senior high schools and obtain senior high school student status. However, this entrusted matter contravenes China’s educational policy stipulating that “student records follow the student,” thereby disrupting the normal order of senior high school administration and harming the public interest; accordingly, the contract of entrustment should be deemed invalid. Upon the invalidation of the contract, any property acquired pursuant to it must be returned. In this case, both the parents—including Jia—and Le and Chen all bear fault for the contract’s invalidity and should each assume corresponding liability. Therefore, Le and Chen are required to refund the fees paid by the parents in connection with the entrusted matters, while the losses arising from the occupation of funds during the period of the entrustment shall be borne by the parents themselves.

University Student Sues Shanghai Disneyland, Seeking a Declaration That the Standard Clause Prohibiting Visitors from Bringing Food into the Park Is Invalid

Recently, Xiao Wang, a third-year student at East China University of Political Science and Law in Shanghai, was “searched through his bag and barred from entering Shanghai Disneyland with snacks” by park staff in early 2019. Xiao Wang has since taken Shanghai Disneyland to court.

Although the related lawsuit remains unresolved, the topic “Shanghai Disneyland’s ban on outside food and beverages” quickly climbed to the top of Weibo’s trending list after being widely shared, sparking heated debate among netizens over whether visitors are allowed to bring food and drinks into the theme park.

The plaintiff in the case, a student at the School of International Law of East China University of Political Science and Law, identified as “Xiao Wang,” stated on the 11th that, in the lawsuit against Shanghai Disneyland, he has submitted two claims to the defendant: first, to declare invalid the standard clause prohibiting visitors from bringing food into the park; and second, to seek compensation for his losses, including the cost of food he purchased outside the park but was forced to discard due to the defendant’s unreasonable rules, totaling 46.3 yuan.

The plaintiff stated that on November 15, 2017, Shanghai Disneyland added a new provision to its park guidelines: “The following items are prohibited from being brought into the park: food; alcoholic beverages; non-alcoholic beverages exceeding 600 milliliters…” Prior to this, Shanghai Disneyland had not barred visitors from bringing food that was in its original packaging, sealed, unopened, and requiring no preparation.

“At Disneyland, a storage fee of 80 yuan per day applies to packages of any size. Unless visitors consume their food on the spot at the entrance, they must either use Disney’s on‑site dining options or pay the storage charge,” said Mr. Wang. “I believe that whether to bring your own food or purchase it inside the park should be entirely up to the visitor. Banning outside food amounts to nothing more than forced sales.”

Mr. Wang believes that the park is using hygiene concerns as a pretext to impose this regulation, which he regards as an overbearing clause that directly violates consumers’ rights and harms the public interest.

According to reports, the case has already gone to trial, and the court has not yet issued a verdict. On the 11th, Shanghai Disney Resort, the operator of Shanghai Disneyland, stated that, to its knowledge, the park’s policy on bringing in outside food and beverages is consistent with that of most theme parks in China. Visitors who bring their own food or drinks are welcome to enjoy them in designated rest areas outside the park. In addition, recognizing the special dietary needs of infants and young children, Shanghai Disneyland makes small canned baby foods an exception and permits them to be brought into the park. Furthermore, if visitors have specific health-related reasons requiring them to bring special food items, the park will also allow such items to be brought in.

Professor Liu Junhai of the Law School at Renmin University of China believes that Disney may be infringing on consumers’ rights to choose and to fair trading. “Although Disney claims to offer consumers a wide range of options, it fails to address whether its pricing is reasonable, thus skirting the core issue. We hope Disney will learn to put itself in consumers’ shoes, cultivate a consumer‑friendly corporate image, and earn greater public trust,” he said.

In a traffic accident resulting in death, the defendant is required to compensate for funeral expenses and corpse restoration costs.

The preservation of a deceased body concerns the dignity of the deceased and the mourning rituals of their loved ones. In cases involving deaths resulting from traffic accidents, should the costs of postmortem cosmetic restoration be awarded as a separate item of compensation? Recently, the People’s Court of Tongzhou District, Nantong City, Jiangsu Province, heard such a case and ruled that the defendant, Li, must compensate not only for funeral expenses but also for the cost of postmortem cosmetic restoration.

The court, after trial, found that on the morning of December 4, 2017, Li drove a heavy truck and collided with an electric bicycle driven by Zhou at an intersection in Juegang Town, Rudong County, Nantong City, Jiangsu Province, resulting in Zhou’s skull being shattered and death at the scene. Following an investigation, the traffic police determined that Li bore full responsibility for the accident, while the deceased, Zhou, was not at fault. Subsequently, in accordance with funeral customs, Zhou’s relatives commissioned a professional to fabricate and install a prosthetic skull and to perform cosmetic restoration of the remains, incurring expenses totaling RMB 30,000. In August 2018, Zhou’s close relatives filed a lawsuit, seeking compensation from Li and the insurance company covering the vehicle involved in the accident, for total losses amounting to RMB 344,834.50, including RMB 30,000 for cosmetic restoration of the remains. The insurance company contended that the cost of cosmetic restoration should be subsumed within the funeral expenses of RMB 36,342 and should not be separately claimed, thus refusing to compensate for this item.

After hearing the case, the Tongzhou District People’s Court held that Zhou’s skull was shattered and severely fragmented in the traffic accident, resulting in grave damage to the remains. The relatively high costs incurred by Zhou’s relatives for embalming and restoring the body were neither contrary to customary practices regarding funeral arrangements nor inconsistent with their emotional needs as close family members; accordingly, such expenses were deemed reasonable and necessary. However, given the substantial amount of these costs, including them within the category of funeral expenses would clearly be unfair to Zhou’s relatives. Therefore, the court ruled that, in addition to awarding compensation for funeral expenses, it should also separately recognize and compensate for the costs of embalming and body restoration.

Judicial Perspective: Costs for postmortem cosmetic restoration should be compensated separately.

In recent years, as the number of motor vehicles has steadily increased, the frequency and severity of traffic accidents have grown increasingly alarming. In some fatal crashes, victims suffer gruesome injuries and severe bodily trauma, and the sight of their mutilated remains often inflicts profound emotional distress and psychological shock on family members. To console the deceased and express condolences, bereaved relatives frequently hire funeral professionals, in accordance with traditional customs, to perform cosmetic restoration on the body—costs ranging from a few thousand to tens of thousands of yuan. Whether such cosmetic restoration fees are included within funeral expenses or should be compensated separately has long been a contentious issue in judicial practice. Under the relevant provisions of the Supreme People’s Court’s Interpretation on Several Issues Concerning the Application of Law in Adjudicating Personal Injury Compensation Cases, when a victim dies, the party liable for compensation must cover funeral expenses, as well as other reasonable costs incurred by the victim’s relatives in arranging the funeral, including transportation, accommodation, and lost wages. Funeral expenses are calculated based on six months’ worth of the average monthly wage of employees in the jurisdiction of the court hearing the case, as determined by the preceding year. Accordingly, funeral expenses constitute a statutorily prescribed item of compensation, awarded as a fixed sum rather than reimbursed on an actual‑expense basis; this often proves insufficient to cover the genuine and reasonable expenditures associated with conducting a funeral. In this case, Zhou’s remains sustained severe injuries, prompting the family to incur substantial costs for cosmetic restoration, so that the deceased might bid farewell to the world with dignity and the living could find solace. The court held that the law should respect such benevolent folk traditions and attend to the sincere emotional needs of the people; accordingly, it ruled that the cost of cosmetic restoration falls under “other reasonable expenses incurred in arranging the funeral” and should be compensated separately.

The first-instance trial has commenced in the bribery case involving Xing Yun, former vice chairman of the Standing Committee of the People’s Congress of the Inner Mongolia Autonomous Region.

On August 15, 2019, the Intermediate People’s Court of Dalian City, Liaoning Province, held a public first-instance trial in the case of Xing Yun, former deputy director of the Standing Committee of the People’s Congress of the Inner Mongolia Autonomous Region, on charges of accepting bribes.

The People’s Procuratorate of Dalian City, Liaoning Province, brought charges alleging that, from 1996 to 2016, the defendant Xing Yun, while holding such positions as Deputy Secretary of the CPC Yikezhao League Committee and Head of the Yikezhao League Administrative Office, Secretary of the CPC Yikezhao League Committee, Member of the Standing Committee of the CPC Inner Mongolia Autonomous Region Committee and Secretary of the CPC Baotou Municipal Committee, Member of the Standing Committee of the CPC Inner Mongolia Autonomous Region Committee and Secretary of the Political and Legal Affairs Commission, and Vice Chairman of the Standing Committee of the Inner Mongolia Autonomous Region People’s Congress, abused his official position to provide assistance to relevant entities and individuals in matters such as project contracting and personnel appointment and promotion. He directly or through his close relatives illegally accepted property from others, totaling over RMB 449 million.

During the trial, the prosecution presented relevant evidence, which was cross-examined by Xing Yun and his defense counsel. Under the court’s guidance, both sides fully articulated their arguments. Xing Yun also made a final statement, publicly acknowledging his guilt and expressing remorse. More than 50 people—including deputies to the National People’s Congress, members of the Liaoning Provincial People’s Congress, deputies to the Dalian Municipal People’s Congress, CPPCC members, journalists, and members of the public from various sectors—attended the proceedings as observers.

Following the conclusion of the trial, the court adjourned and scheduled a date for the pronouncement of the judgment.

Other

Resolutely counteract and see it through to the end.

On August 15, in response to the Office of the United States Trade Representative’s announcement that it would impose an additional 10% tariff on approximately $300 billion worth of Chinese imports, the Customs Tariff Commission of the State Council of China issued a statement that clearly conveyed Beijing’s position: “This move by the U.S. side gravely violates the consensus reached at the Argentina and Osaka meetings between the leaders of China and the United States, and departs from the proper path of resolving differences through consultation. China will have no choice but to take necessary countermeasures.”

Sino‑U.S. economic and trade tensions have persisted for more than a year, and the United States’ repeated flip‑flops and brazen, overbearing behavior continue to escalate. Faced with China’s unwavering resolve and formidable capabilities in countering trade bullying, they remain bitterly frustrated by their futility and have now launched yet another round of provocative moves. But what good will this do? It will only serve to once again demonstrate that China is undaunted by any extreme pressure, to underscore that there are no winners in a trade war, and to reafoffice that escalating economic and trade friction harms both China and the United States—and the world at large.

There is no doubt that some in the United States have been wielding the tariff club with reckless abandon, and the backlash against the U.S. itself has already reached its breaking point. According to the latest list of additional tariffs released by the Office of the U.S. Trade Representative, the tariff offensive originally slated to begin on September 1 will now proceed in two phases, taking effect on September 1 and December 15, respectively, targeting certain Chinese exports to the U.S. Some U.S. officials have openly acknowledged that they fear a full‑scale imposition of tariffs on $300 billion worth of Chinese imports starting September 1 would drive up prices during the Christmas shopping season, inflicting greater pain on the U.S. side rather than the Chinese. Evidently, they recognize that charging headlong down a dead end can only lead to a wall; hence, they are now choosing to slow their pace, hoping to hit that wall a little later. Yet those who refuse to turn back will ultimately still crash into it.

Some in the United States ought to ask themselves: Why, under the banner of safeguarding American interests, do they lash out at others—only to end up mired in a quagmire that ultimately harms their own interests? In the era of economic globalization, the two largest economies in the global supply chain have long been deeply intertwined, each embedded in the other. Over the past four decades, China and the United States have seen their economic and trade cooperation flourish, forging a community of shared interests—much like a grand edifice painstakingly constructed, brick by brick, by the peoples of both nations. Yet time and again, certain U.S. actors brandish the tariff club; even if such measures leave scars on this edifice and disrupt the efforts of the Chinese and American peoples to strengthen it, they cannot fundamentally shake its foundations. Such retrograde policies will inevitably fail to win popular support.

Is there a definitive solution to China–U.S. economic and trade issues? The answer, of course, is yes. The consensus reached at the Argentina summit and the Osaka summit between the two countries’ heads of state both point to the right direction and the right path. On the basis of equality and mutual respect, the two sides can always, through dialogue and consultation, find solutions that are acceptable to both.

Regrettably, the very scenario that Dr. Henry Kissinger once feared—namely, the United States “sailing into uncharted waters” out of alarm at the rising power of other nations—has now become a shared concern among America’s major trading partners. Yet security and stability hinge not on strength or weakness; no matter how some in the United States choose to act recklessly, there is no justification for American exceptionalism to prevail.

To uphold justice for all, this is the conduct befitting a major country. China will never yield on matters of fundamental principle, no matter how much pressure the U.S. may exert. China stands by its word and will resolutely counter any provocation, possessing ample capability to see it through to the end. Any attempt to wantonly undermine China’s core national interests and the fundamental interests of its people will ultimately fail.

JC Master Law Office

Address: 9th Floor, National Water Resources Building, No. 70 Qingjiang South Road, Nanjing City

Postal Code: 210036

Phone: 025-84503333

Fax: 025-84505533

Website: www.jcmaster.com

This legal notice is provided solely for informational purposes and does not constitute legal advice or a legal analysis of any specific case. The transmission of this legal notice does not establish an attorney–client relationship between JC Master Law Office and the user or reader. JC Master Law Office assumes no responsibility for any third-party content accessible via the internet. If you do not wish to receive this legal notice, please notify us by email at jcm@jcmaster.com.

The copyright in this legal information is owned by JC Master Law Office ©. Without written permission, no organization or individual may reproduce, publish, or cite it in any form.