JC Master Legal News Issue 884

Key Takeaways for This Issue

The China Securities Regulatory Commission has imposed administrative penalties, in accordance with the law, on five insider trading cases.

Recently, the China Securities Regulatory Commission imposed administrative penalties, in accordance with the law, on Yang Xuechu for insider trading involving “Zhongqingbao.”

Acquisition of Maxin Bio: *ST Huaye Pioneers a Path for Private‑Enterprise Bankruptcy Reconciliation

Recently, *ST Huaye issued an announcement stating that the company plans to resolve its current debt through a bankruptcy settlement. This move represents a proactive effort by privately held, controlling‑shareholder‑listed companies to mitigate debt risks.

Environmental protection tax rose 70.4% year on year—ecological tax system continues to improve.

According to the latest data released by the Ministry of Finance, in the first seven months of this year, environmental protection tax revenue reached 16.5 billion yuan, up 70.4% year on year. This indicates that China’s ecological tax system is becoming increasingly robust.

A criminal gang in Ningbo engaged in “fraudulent construction site” schemes has been sentenced.

Recently, the People’s Court of Beilun District, Ningbo City, Zhejiang Province, conducted a public trial in accordance with the law and handed down a verdict in the extortion case involving an organized crime group known as the “fraudulent construction site” syndicate.

Retaliation! China has decided to impose additional tariffs on approximately $75 billion worth of goods originating in the United States.

On August 23, 2019, in response to the U.S. imposition of an additional 10% tariff on approximately US$300 billion worth of Chinese imports, and with the approval of the State Council, the Customs Tariff Commission of the State Council decided to impose additional tariffs ranging from 5% to 10% on 5,078 tariff lines originating in the United States, covering about US$75 billion worth of goods. These measures were implemented in two phases, taking effect at 12:01 a.m. on September 1, 2019, and at 12:01 a.m. on December 15, 2019.

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission has launched a special investor education campaign targeting private equity funds.

The China Securities Regulatory Commission has imposed administrative penalties, in accordance with the law, on five insider trading cases.

The China Securities Regulatory Commission has issued the “Special Provisions on Major Asset Restructuring of Companies Listed on the STAR Market.”

Only five trust companies have raised capital this year, as the wave of capital increases has subsided because most offices now have sufficient capital.

The securities industry has once again seen a hefty “one‑for‑three” penalty: Jin Yuan Securities was fined and had its illicit gains confiscated totaling RMB 40 million for a fraud case.

Corporate & Commercial

Xunyou Technology: All shares of the company held by one of its actual controllers have been subject to a judicial freeze.

JiQiang Bio plans to partner with Sinopharm Investment.

Acquisition of Maxin Bio: *ST Huaye Pioneers a Path for Private‑Enterprise Bankruptcy Reconciliation

All members of the board of directors of Haiyin Co., Ltd. have been disciplined by the Shenzhen Stock Exchange.

Langjiu Embarks on Its IPO Journey—Which Other Prominent Liquor Brands Are “Waiting to Make Their Move”?

Taxation

Enterprises in 96 comprehensive bonded zones have received a “big package” of relief measures.

Precise Governance of Illegal Fees Imposed on Enterprises

Environmental protection tax rose 70.4% year on year—ecological tax system continues to improve.

Tax and fee reductions boost the vitality of small and micro enterprises.

The scope of the income tax preferential policy in Zhuhai’s Hengqin New Area has been expanded, with tourism enterprises within the zone now subject to an enterprise income tax rate of 15%.

Litigation & Arbitration

A netizen who edited an entry on Baidu was found to have infringed upon another’s reputation, and Baidu was ordered to bear civil liability.

Bentley Ltd. has filed a request to invalidate the “B and Design” trademark, and Oriental Co., Ltd. has brought the matter before the court.

Pleading guilty and accepting punishment with leniency does not amount to buying one’s way out of criminal liability.

Online sellers help vehicles with excessive emissions pass annual inspections; environmental group sues manufacturers.

A criminal gang in Ningbo engaged in “fraudulent construction site” schemes has been sentenced.

Other

Retaliation! China has decided to impose additional tariffs on approximately $75 billion worth of goods originating in the United States.

Finance & Capital Markets

The China Securities Regulatory Commission has launched a special investor education campaign targeting private equity funds.

With the promulgation and implementation of the Interim Measures for the Supervision and Administration of Private Investment Funds, coupled with the CSRC’s ongoing inspection and enforcement efforts, the level of compliant operations in the private fund sector has continued to improve. Nevertheless, as the industry expands rapidly, certain issues and risks persist: some private‑fund managers engage in fraudulent practices, compliance standards remain uneven, and violations of laws and regulations occur from time to time. Moreover, individual risk cases and “pseudo‑private funds” engaged in illegal fundraising have adversely affected the industry’s development.

To further help investors accurately understand private equity funds, strengthen their risk awareness, and enhance their ability to protect themselves, the China Securities Regulatory Commission has recently launched a nationwide special education campaign on private equity funds, themed “Distinguish Truth from Deception, Recognize Risks, and Become Rational Private Equity Investors.” The initiative aims to promote public knowledge of private equity funds, reinforce risk warnings, guide investors toward rational decision-making, and foster the sound development of the private equity industry.

The key components of this event include: First, broadly disseminating knowledge about private equity funds to help investors understand their structure and operations, familiarize themselves with the criteria for qualified investors, identify associated risks, and strengthen their risk‑awareness. Second, vigorously promoting relevant laws, regulations, and self‑regulatory rules governing private equity funds, so that all market participants clearly grasp the regulatory requirements and correctly interpret the nature of registration and filing, thereby enhancing their conscious commitment to fulfilling their rights and obligations in accordance with the law. Third, publicly exposing typical cases of illegal or non‑compliant conduct by private equity funds, enabling investors to distinguish between legitimate private equity offerings and illicit fundraising schemes—often disguised as “pseudo‑private equity”—and to clearly understand their lawful rights and obligations, as well as the legal avenues available to protect those rights when they are infringed.

This targeted campaign has pioneered innovative approaches to investor education, making active use of print, audiovisual, and online media. Through formats such as infographics, animations, and video‑audio content, it has published case studies and Q&A sections for investors, broadcast risk‑related advisories, and aired public service announcements—bringing private‑fund knowledge and investment‑risk warnings directly to investors, reaching a broad audience and fostering a positive social climate. At the same time, by fully leveraging the role of market participants, the initiative has encouraged private‑fund management offices to implement suitability‑assessment requirements, continuously strengthen investor‑protection mechanisms, safeguard the legitimate rights and interests of investors—particularly small and medium‑sized investors—and promote the long-term stability and sound development of the capital market.

The China Securities Regulatory Commission has imposed administrative penalties, in accordance with the law, on five insider trading cases.

Recently, the China Securities Regulatory Commission (CSRC) imposed administrative penalties in accordance with the law on the following cases: In the insider‑trading case involving “Zhongqingbao,” Yang Xuechu was ordered to forfeit illegal gains totaling RMB 197,188,114.7 and was fined an equal amount; In the insider‑trading case involving “Dingli Shares,” Xu Weiqiang was ordered to forfeit illegal gains of RMB 5,442,513.48 and was fined RMB 10,885,026.96; In the insider‑trading case involving “Jinfafa Technology,” Yuan Zhimin and Wang Zongming were each ordered to dispose of their illegally held shares in accordance with the law; Yuan Zhimin and Wang Zongming were also ordered to forfeit illegal gains of RMB 327,294.99, and were respectively fined RMB 589,130.98 and RMB 392,753.99; In the insider‑trading case involving “Weili Medical,” Sun Xianming was ordered to forfeit illegal gains of RMB 130,916.85 and was fined RMB 392,750.55. Meanwhile, the Jilin Securities Regulatory Bureau imposed administrative penalties in accordance with the law on the insider‑trading case involving “China Travel United,” ordering Xiao Weidong and Zhang Yongqiang to dispose of their illegally held shares and fining them RMB 200,000 and RMB 300,000, respectively. (For details of the administrative penalty decisions, please refer to the websites of the CSRC and the relevant local securities regulatory bureaus.)

In the aforementioned cases, before the inside information was made public, Yang Xuechu engaged in frequent communications with Li Moujie, an insider, controlled multiple accounts, and employed various means—including leveraged financing, mortgage loans, and short selling—to raise substantial funds, using them to purchase large quantities of “Zhongqingbao” shares and subsequently sell them for profit. His trading behavior was clearly abnormal and lacked any legitimate justification. Similarly, prior to the disclosure of the inside information, Xu Weiqiang contacted Zheng Mouzhou, who was privy to the inside information, and used his own account as well as that of his wife, Wang Moumei, to build a heavy position in “Dingli Shares.” His trading activity was likewise markedly abnormal and devoid of any valid rationale. Before the inside information was disclosed, Yuan Zhimin, as a legally designated insider, provided the funds, while Wang Zongming executed trades through the accounts involved; their joint trading in “Jinfafa Technology” was conspicuously abnormal, closely aligned with the inside information, and without any reasonable explanation. Furthermore, prior to the release of the inside information, Sun Xianming contacted Zhou Mouhai, another insider, and utilized Yao Moufang’s securities account to make sudden, concentrated purchases of “Weili Medical.” His trading behavior was clearly irregular and lacked any justifiable basis. Lastly, Xiao Weidong and Zhang Yongqiang, before the inside information was made public, communicated with Shi Mou, an insider, and each controlled their own accounts to trade “China Travel United.” The timing of their purchases and the periods during which funds were moved closely coincided with the formation and public disclosure of the inside information, resulting in trading patterns that were markedly abnormal and without any plausible explanation.

Insider trading seriously undermines a fair and equitable market order and infringes upon the legitimate rights and interests of the broad investor base. The China Securities Regulatory Commission will maintain unwavering vigilance and persistently crack down on illegal insider‑trading activities, continuously purifying the capital market environment and safeguarding the lawful rights and interests of small and medium‑sized investors.

The China Securities Regulatory Commission has issued the “Special Provisions on Major Asset Restructuring of Companies Listed on the STAR Market.”

To implement the pilot reform requirements of the registration-based system for mergers and reorganizations of companies listed on the STAR Market (hereinafter referred to as “STAR Market companies”), establish an efficient M&A and restructuring framework, and standardize the M&A and restructuring activities of STAR Market companies, the China Securities Regulatory Commission has issued the “Special Provisions on Major Asset Restructuring of Companies Listed on the STAR Market” (hereinafter referred to as the “Special Provisions”).

The Special Provisions adhere to the principles of market‑based and law‑based governance, emphasizing the inclusiveness and adaptability of the STAR Market system. They set forth provisions on key issues such as the criteria for identifying material asset restructurings by STAR Market companies, the issuance‑pricing mechanism, and the merger and acquisition restructuring of innovative pilot red‑chip enterprises. The Special Provisions stipulate that, for STAR Market companies issuing shares to acquire assets, a registration‑based regime shall apply, with review conducted by the Shanghai Stock Exchange. Upon receipt of the Exchange’s review opinions and related documents, the China Securities Regulatory Commission shall, within five trading days, issue a decision approving or rejecting the registration application. The implementation of the registration‑based system will effectively enhance the efficiency of M&A and restructuring activities among STAR Market companies.

The China Securities Regulatory Commission will continue to deepen reforms of the M&A and restructuring institutional framework, advance the development of systems governing M&A and restructuring for science and technology innovation enterprises, and support the development of the real economy.

Only five trust companies have raised capital this year, as the wave of capital increases has subsided because most offices now have sufficient capital.

Huabao Trust recently received approval for a capital increase, making it the fifth trust company to raise its capital this year. According to statistics, five trust offices—Everbright Trust, Dongguan Trust, Industrial Bank Trust, Zhongyuan Trust, and Huabao Trust—have increased their registered capital, with a total of RMB 9.6 billion. With the exception of Industrial Bank Trust and Everbright Trust, whose shareholders contributed generously—RMB 5 billion and RMB 3 billion, respectively—the remaining increases were all RMB 1 billion or less, reflecting relatively modest capital hikes.

Since 2018, trust companies have entered a phase of declining capital-raising activity. Industry observers generally agree that the registered capital of most trust offices has reached a “sufficient” level, leaving little need for further increases. According to real-time data from UseTrust.com, the median registered capital of trust companies now exceeds RMB 3 billion.

However, the draft Trust Companies Regulations previously stipulated a minimum registered capital of RMB 1 billion for trust companies. To date, three trust companies still have registered capitals below this threshold.

Huabao Trust has increased its capital to RMB 4.744 billion.

Recently, the Shanghai Banking and Insurance Regulatory Bureau approved Huabao Trust’s request to increase its capital, authorizing an increase in its registered capital from RMB 3.744 billion to RMB 4.744 billion, while maintaining the existing shareholders and their respective equity proportions.

Public records indicate that Huabao Trust is a member company of the industrial finance sector under China Baowu Steel Group Co., Ltd. (hereinafter referred to as “China Baowu”), with China Baowu holding a 98% stake and Zhoushan State-owned Assets Investment and Operation Co., Ltd. holding a 2% stake (the relevant business registration amendment was completed on February 2, 2019).

In this regard, some market observers believe that Huabao Trust’s substantial capital increase may signal new developments in the listing plan discussed last year. In 2018, China Baowu stated that, to further advance mixed-ownership reform in its financial sector, it intended to transfer its entire 98% stake in Huabao Trust—free of charge—to its wholly owned subsidiary, Huabao Investment Co., Ltd., and subsequently list Huabao Investment on the capital markets.

However, a source close to Huabao Trust has refuted this claim, stating that the capital increase is not intended to support an IPO. Founded in 1999, Huabao Trust has undergone three rounds of capital increases, propelling it into the top 20 players in the industry.

The benefits of capital increases for trust companies are clear: industry insiders note that replenishing capital not only helps meet regulatory requirements for net capital but also enables offices to expand their business scale and enhance their risk‑resilience.

Great Wall, Zhongtai, and Huachen Capital are under capital pressure.

Since 2018, the pace of capital increases among trust companies has slowed. According to data from Puyi Standard, in 2016 a total of 21 trust companies completed capital-raising transactions, with aggregate registered capital rising by RMB 36.495 billion; in 2017, 18 trust companies raised capital, adding RMB 30.865 billion to their registered capital. Incomplete statistics indicate that throughout 2018, 13 trust companies increased their capital, for a combined total of approximately RMB 25 billion. Looking at annual capital‑raising volumes, the trend since 2016 has been steadily declining, and as of mid‑2019, the total amount raised had fallen short of RMB 10 billion.

As for why trust companies are scaling back capital increases, Shuai Guorong, a researcher at UseTrust, notes that, on the one hand, under the new asset‑management regulations, the trust industry’s conduit business has been steadily curtailed, and, coupled with the regulators’ stringent oversight of real‑estate‑related trusts this year, this signals that trust companies will place greater emphasis on high‑quality, internally driven growth going forward. On the other hand, “based on trust companies’ risk indicators in 2018, all met the requirements of full net‑capital coverage of risk capital and a net‑capital‑to‑net‑asset ratio exceeding 40%, indicating that most trust companies now have registered capital levels that are ‘sufficient’.”

This year, calls for the promulgation of the Trust Companies Regulations have grown louder. The previously released draft of these regulations explicitly sets a minimum registered capital requirement: “The minimum registered capital for a trust company shall be RMB 1 billion or its equivalent in freely convertible currency, and such capital must be paid-up in cash.” By this standard, as of now, three trust companies still fall short of the RMB 1 billion threshold: Huachen Trust (RMB 800 million), Zhongtai Trust (RMB 517 million), and Great Wall Trust (RMB 300 million). Among them, Huachen Trust raised its capital in 2017, increasing its registered capital from RMB 572 million to RMB 800 million, yet it still fails to meet the RMB 1 billion floor; Great Wall Trust disclosed in 2016 plans to raise an additional RMB 1 billion, boosting its registered capital to over RMB 1.3 billion. Huachen Trust has stated that, going forward, it will focus more on leveraging resources from Great Wall Group, particularly emphasizing coordination with Great Wall’s branch offices. However, three years later, no concrete progress has been observed. Meanwhile, Zhongtai Trust remains mired in the issue of making its ultimate controller transparent and has yet to undertake any capital increase.

The securities industry has once again seen a hefty “one‑for‑three” penalty: Jin Yuan Securities was fined and had its illicit gains confiscated totaling RMB 40 million for a fraud case.

On August 16, the China Securities Regulatory Commission imposed two administrative penalties on Jin Yuan Securities for failing to exercise due diligence in its ongoing supervision of Yabait: confiscation of RMB 10 million in business income and a fine of RMB 30 million, as well as warnings and fines of RMB 100,000 each for the directly responsible senior executives, Chen Mianfei and Li Xi.

In this penalty, the China Securities Regulatory Commission identified two major issues at Jinyuan Securities: First, in discharging its ongoing supervisory duties for a major asset restructuring, Jinyuan Securities failed to exercise due diligence, resulting in false statements in documents such as the “2015 Ongoing Supervision Opinion of Jinyuan Securities Co., Ltd. on Jiangsu Yabait Technology Co., Ltd.’s Major Asset Swap and Share Issuance for Asset Acquisition, Together with Related Party Transactions” (hereinafter referred to as the “2015 Ongoing Supervision Opinion”). Second, Jinyuan Securities again failed to exercise due diligence, with its verification opinions submitted to the Jiangsu Securities Regulatory Bureau containing false statements.

This year, there have already been four cases of disciplinary and regulatory violations in the securities industry. According to incomplete statistics, the four offices involved have collectively been fined and had illicit gains confiscated totaling RMB 135.6795 million, with a single penalty reaching as high as RMB 44.7 million.

He was heavily fined for maintaining false records.

The false‑accounting case that led to the penalty against Jin Yuan Securities is none other than the high‑profile, multinational accounting fraud involving Yabait.

In 2015, Shandong Yabait completed a backdoor listing. Following the completion of the major asset restructuring, Jin Yuan Securities assumed ongoing supervisory responsibilities within the time limits prescribed by law.

According to the administrative penalty decision, in 2015, Yabait fabricated the Multan project in Pakistan, artificially inflating its operating revenue and current-period operating profit, and also misrepresented domestic building-materials trading. As the financial advisor, Jin Yuan Securities retained only the construction contract for the Multan project in its working papers. In accordance with relevant business management regulations, Jin Yuan Securities failed both to conduct the required due diligence on this project and to verify the fulfillment of the company’s earnings‑commitment obligations; consequently, its work was insufficient to support the 2015 ongoing supervision opinion it issued. Furthermore, the verification opinions submitted by Jin Yuan Securities to the Jiangsu Securities Regulatory Bureau in June 2016 and October 2016 also contained false statements.

As a financial advisor, the office bears significant responsibility for its involvement in Yabait’s cross-border financial fraud scheme. Industry insiders note that the 40-million-yuan fine and confiscation imposed on Jinyuan Securities represents only a “one‑for‑three” penalty, underscoring the severity of such sanctions under regulatory guidelines.

Article 223 of the Securities Law provides that if a securities service institution fails to exercise due diligence and the documents it prepares or issues contain false records, misleading statements, or material omissions, it shall be ordered to make corrections, have its business income confiscated, have its license to engage in securities services suspended or revoked, and be subject to a fine ranging from one to five times its business income.

Based on this, Jinyuan Securities reported full-year 2018 operating revenue of RMB 1.176 billion and net profit attributable to shareholders of the parent company of RMB 119 million (all financial figures are consolidated). Among 131 securities offices, its performance ranked around the median. The RMB 40 million fine nearly wiped out one-third of Jinyuan Securities’ annual profit.

Securities offices were fined RMB 136 million this year.

In fact, since the beginning of this year, regulatory authorities have maintained a stringent enforcement stance, rigorously penalizing violations by intermediary institutions. This year alone, several securities offices have been investigated or sanctioned for their roles as financial advisors.

According to incomplete statistics, as of August 18, four securities offices and one individual have been penalized this year for reasons including “violations in subsidiary business operations” and “failure to exercise due diligence in financial advisory services related to mergers and reorganizations.” In terms of the total penalties imposed, these four offices had their illegal gains confiscated totaling RMB 41.6811 million, while fines amounted to RMB 93.9984 million, bringing the combined total of fines and confiscations to RMB 135.6795 million.

In June, the China Securities Regulatory Commission imposed a fine of RMB 44.7 million on New Era Securities for failing to exercise due diligence in providing financial advisory services and for issuing misleading financial advisory reports—currently the highest penalty levied against a securities office this year.

According to the administrative penalty decision issued by the China Securities Regulatory Commission, New Era Securities failed to exercise due diligence in providing financial advisory services for Meili Ecology’s acquisition of the Bada Landscape project, and the documents it prepared contained misleading statements regarding the project’s progress.

In addition, this year, securities professionals have been penalized with fines and confiscations totaling as much as RMB 21.87 million for engaging in activities such as handling securities subscriptions and trading on behalf of clients.

In fact, the fines imposed by the China Securities Regulatory Commission (CSRC) not only entail substantial monetary penalties but also directly affect the annual classification ratings of major securities offices. The CSRC has repeatedly emphasized that regulatory authorities will continue to crack down on all types of illegal activities, impose strict sanctions on violators, promote the sound and stable development of the securities and futures markets, and effectively safeguard the legitimate rights and interests of investors.

Commercial & Corporate

Xunyou Technology: All shares of the company held by one of its actual controllers have been subject to a judicial freeze.

 Xunyou Technology (300467) announced on the evening of August 23 that all 21.85 million shares held by Yuan Xu, one of the company’s controlling shareholders and actual controllers—representing 9.78% of the company’s total share capital—have been subject to a judicial freeze. Yuan Xu stated that, as of now, he has not received any legal documents, notices, or other information regarding the judicial freeze, nor is the reason for the freeze currently known. This matter has no direct impact on the company’s production and operations and, for the time being, will not affect the company’s control.

Recently, Xunyou Technology released its financial results for the first half of 2019. During the reporting period, the company reported revenue of RMB 264 million, down 25.4% year over year, and net profit attributable to shareholders of the listed company of RMB 105 million, up 1.31% year over year. Within this period, revenue from the Xunyou online gaming accelerator totaled RMB 84.41 million, a year-over-year decline of 11.04%, while revenue from the Xunyou mobile gaming accelerator reached RMB 83.35 million, up 103.18% year over year. Revenue from mobile internet ad‑display services amounted to RMB 96.09 million, down 55.08% compared with the same period last year.

Although Xunyou Technology reported that its PC‑side acceleration business remained broadly stable, revenue actually declined 11.04% year over year to RMB 84.11 million. The overall contraction of the PC gaming market, coupled with PUBG’s decision to terminate its partnership with Xunyou’s online game accelerator, has significantly impacted Xunyou Technology’s PC‑side acceleration operations.

According to available data, since Xunyou Technology listed on the ChiNext board in May 2015, its financial performance deteriorated sharply within two years. To bolster its share price, the company pursued strategic acquisitions—first acquiring a 13.4% stake in Yumo Technology for RMB 217 million, and then completing a high‑profile “snake swallowing elephant” deal to acquire 100% of Lion’s Roar for RMB 2.7 billion. Two years later, despite the transactions having been finalized, Xunyou Technology now faces substantial risks of goodwill impairment. Analysts note that the recent freezing of the controlling shareholder’s shares has further surprised the market, suggesting that the stock’s outlook remains bleak in the near term.

JiQiang Bio plans to team up with Sinopharm Investment to acquire Maxin Bio.

 On the evening of August 22, Jiqiang Bio issued an announcement stating that the company plans to jointly acquire a 95.55% stake in Fuzhou Maxin Biotechnology Development Co., Ltd. from China Pharmaceutical Investment Co., Ltd. by paying cash. This transaction constitutes a major asset restructuring.

According to Tianyancha, Maxin Biotechnology was founded in 1993, with Wang Xiaoya serving as its legal representative. The company has a registered capital of RMB 50 million and is a high-tech biopharmaceutical enterprise primarily engaged in the research, development, and production of immunohistochemical pathology products. In 1995, it was awarded the title of “High-Tech Enterprise of Fujian Province” and has repeatedly received funding from national, provincial, and municipal science and technology innovation funds and industrialization programs.

According to the official website of Maxin Biotech, the company’s business spans four major areas: tumor pathology diagnosis, immunocytochemical diagnosis, molecular pathology diagnosis, and precision medicine diagnostics. Its flagship products include immunohistochemistry instruments and a comprehensive suite of reagents, with a nationwide marketing network.

Further research reveals that Maxin Biotech is the first domestic manufacturer of immunohistochemistry products to obtain a Class III medical device production license from the CFDA, and in 1999 it established China’s first immunohistochemistry quality‑control laboratory. To date, Maxin Biotech holds 18 invention patents, six of which have been granted. In 2013, the company launched independently developed monoclonal antibodies bearing “MX”‑labeled clone numbers, with dozens of such antibodies now available. In 2015, the nation’s first domestically designed fully automated immunohistochemistry staining system, the Titan, was successfully brought to market. In 2016, the company introduced RedBright™ FISH probes—high‑performance molecular pathology diagnostic products.

As of the date of this announcement, Maxin Biotechnology has a total of 10 shareholders. GL, Hangzhou Dinghui New Trend Equity Investment Partnership (Limited Partnership), and Taikang Life Insurance Co., Ltd. rank first, second, and third, holding 21%, 20%, and 15% of the shares, respectively.

It has been disclosed that the parties to the transaction signed a Letter of Intent for the Acquisition on August 22. In accordance with the relevant regulations of the Shenzhen Stock Exchange, Jiqiang Bio will promptly engage independent financial advisors, legal counsel, auditing offices, valuation agencies, and other pertinent intermediaries to carry out the requisite due diligence and related work.

*ST Huaye Takes the Lead in Pioneering a Path for Private Enterprises to Resolve Bankruptcy Through Settlement

Recently, *ST Huaye issued an announcement stating that the company plans to resolve its current debt through bankruptcy reconciliation. Undoubtedly, this represents a proactive effort by a privately‑controlled listed company to mitigate debt risks. If this bankruptcy‑reconciliation initiative succeeds, it could serve as a benchmark case for the market. However, given the current legal framework, bankruptcy reconciliation faces a host of challenges that will require coordinated efforts from multiple stakeholders to address one by one.

Potential Challenges in Bankruptcy Reconciliation

First, in the criminal sphere, it is necessary to overcome the challenge of difficulty in recovering illicit proceeds through economic investigation.

According to information disclosed by the listed company Huaye Capital, the company has fallen into financial distress due to contract fraud. The perpetrator of the fraud against Huaye Capital is Li Shilin, the company’s second-largest shareholder, who allegedly defrauded approximately RMB 10.189 billion; the company has already filed a police report. Based on past handling of similar cases, asset recovery by economic investigation authorities represents the primary remedy for victims in contract fraud cases, though its implementation remains challenging.

Even if the recovery of illicit proceeds is successful, the complexity of the restitution process remains a significant challenge. Before a court renders a judgment in a criminal case, there is still no consensus on whether public security organs have the authority to confiscate, auction, sell off, or return涉案 items to their rightful owners. Moreover, the assets recovered by public security organs encompass movable and immovable property, as well as equity interests and creditor’s rights. While returning cash and movable property is relatively straightforward in practice, restitution involving fixed assets or creditor’s rights becomes considerably more complicated. If the victim is a corporate entity, by the time restitution is finally carried out, the enterprise may already have been liquidated through bankruptcy proceedings.

Secondly, there are issues related to administrative coordination. For instance, balancing the interests of creditors and safeguarding the rights of minority shareholders—challenges that private enterprises already grappling with financial risks find difficult to address on their own—call for guidance and support from government departments and regulatory authorities.

Third, numerous challenges in the judicial sphere have also been addressed. The Enterprise Bankruptcy Law of the People’s Republic of China prescribes reorganization, conciliation, and liquidation procedures for corporate bankruptcy; among these, the reorganization and conciliation procedures are regarded as the enterprise’s “regeneration processes” and constitute the core and preferred procedures under the current bankruptcy law. However, at present, China’s legal framework governing these procedures remains incomplete, and many obstacles persist in their practical implementation.

In bankruptcy reorganization or bankruptcy composition proceedings—particularly those involving listed companies—the people’s courts, upon accepting a case, often must seek the opinions of the competent regulatory authorities or relevant government departments. For example, when a court accepts a bankruptcy reorganization application filed by a listed company, it must obtain a no‑objection letter from the China Securities Regulatory Commission. Moreover, in bankruptcy composition proceedings, due to unclear statutory provisions and a lack of practical precedents, the people’s courts may find themselves without clear procedural guidance when taking up such cases.

The Enterprise Bankruptcy Law stipulates that “a resolution of the creditors’ meeting approving a settlement agreement shall be adopted by a majority of the voting creditors present at the meeting, and the total amount of claims represented by such creditors must exceed two-thirds of the aggregate amount of unsecured claims.” Unlike in bankruptcy reorganization proceedings, it does not provide for the possibility of group‑by‑group voting. Consequently, when the debtor seeks to satisfy creditors through different methods of repayment, whether group‑by‑group voting is permissible remains a matter of dispute.

At present, the contract fraud case involving Huaye Capital remains unresolved, which may preclude its entry into bankruptcy reorganization proceedings. As a result, the company is seeking to resolve its debt crisis through bankruptcy settlement, with the aim of achieving a fresh start. However, Huaye Capital’s bankruptcy settlement process is also confronting the aforementioned myriad challenges. How to innovatively address these difficulties is a pressing issue that Huaye Capital and all relevant parties must confront.

Improve the bankruptcy and composition mechanisms for private enterprises.

First, when a debtor enterprise is the victim in a criminal case, it is essential to address the challenges of difficulty in recovering stolen assets and the complexity of returning them. If investigative authorities and other relevant agencies can recover as much of the victim’s property as possible and return it promptly, this would undoubtedly be highly beneficial in mitigating the victim’s financial risks. It is imperative to abandon the traditional criminal‑procedure mindset that prioritizes apprehending suspects over recovering assets, and to reallocate limited law‑enforcement resources from “capturing criminal suspects” to “recovering illicit proceeds and property.” At the same time, greater investment should be made in institutional structure, staffing, and material support to provide robust backing for criminal asset recovery efforts. Furthermore, with respect to property that has already been recovered, if the rights and obligations are clearly established, the property may be returned to the victim without waiting for a court judgment, thereby minimizing the financial risks faced by the victimized enterprise.

Secondly, the pre‑review procedures and eligibility requirements for filing for bankruptcy settlement or reorganization should be streamlined, particularly in the case of listed companies. At present, China imposes excessively stringent requirements for bankruptcy settlement and reorganization, and the formalities for initiating these processes are overly cumbersome. For a private enterprise facing financial distress, it is extremely challenging to draft a flawless settlement or reorganization plan within a short timeframe, and most offices lack the resources to sustain themselves until the formal commencement of such proceedings. As a result, many financially troubled enterprises find it difficult to access bankruptcy settlement or reorganization, ultimately being forced into liquidation.

Third, it is essential to strengthen the guiding role and sense of responsibility of governments at all levels in addressing debt risks faced by private enterprises through bankruptcy reconciliation or reorganization. On June 22 this year, the National Development and Reform Commission, together with thirteen other ministries and commissions, jointly issued the “Plan for Accelerating the Improvement of the Market Entity Exit System,” which, under the section on refining the bankruptcy legal framework, states: “Improve the coordination mechanism between judicial and administrative authorities. People’s governments at all local levels should actively support enterprises that are in financial distress and meet the statutory conditions for bankruptcy to undergo reorganization or liquidation. Local governments are encouraged to establish regularized mechanisms for judicial–administrative coordination, to exercise their statutory roles in enterprise bankruptcy proceedings, and to address issues such as maintaining social stability, ensuring adequate funding, restoring creditworthiness, and handling enterprise deregistration, while avoiding undue interference in judicial matters related to bankruptcy.” At present, local governments may still lack a full understanding of how best to resolve the debt crises of private enterprises; therefore, it is hoped that efforts will be intensified to enhance their sense of responsibility and improve relevant performance assessments in this regard.

Finally, further refine the laws and regulations governing corporate bankruptcy to address existing regulatory gaps. At the same time, when people’s courts at all levels encounter ambiguities in bankruptcy conciliation or reorganization proceedings, they should be able to adopt innovative approaches to resolve the relevant issues.

It is hoped that Huaye Capital, guided by the law and with the concerted efforts of all stakeholders, will forge a successful path toward financial bankruptcy and restructuring, providing a model for other enterprises seeking to overcome financial distress.

All members of the board of directors of Haiyin Co., Ltd. have been disciplined by the Shenzhen Stock Exchange.

Following the Guangdong Bureau of the China Securities Regulatory Commission’s imposition of penalties on Haiyin Shares over the “miracle cure” fiasco related to African swine fever, a second wave of disciplinary actions from the Shenzhen Stock Exchange has swiftly followed. On the evening of the 20th, Haiyin Shares announced that it had received from the Shenzhen Stock Exchange a notice titled “Announcement on Imposing Disciplinary Measures on Guangdong Haiyin Group Co., Ltd. and Relevant Parties.” The reporter noted that this round of disciplinary measures covers all seven members of Haiyin Shares’ board of directors.

The Shenzhen Stock Exchange is the third regulatory body to step in and oversee this latest debacle at Haiyin Shares, following the Ministry of Agriculture and Rural Affairs’ public criticism on its official website and the Guangdong Bureau of the China Securities Regulatory Commission’s imposition of administrative penalties. At this point, the de facto controllers of Haiyin Shares—the Shao brothers—can only be said to have “lifted a rock only to drop it on their own feet.”

Incredibly, during the disciplinary proceedings, Haiyin Shares defended itself by arguing that “the company’s violations did not have a serious impact on the market” and that “there was no subjective intent, and risks had already been partially disclosed in the cooperation announcement.” Even more absurdly, Director and President Shao Jianjia, who had originally planned to reduce his holdings, justified his position by claiming that “he does not oversee the company’s securities affairs department and therefore bears only secondary responsibility for the violations.”

The defense statements submitted by Haiyin Shares and its senior executives, which clearly contradicted the facts, evidently failed to persuade the Shenzhen Stock Exchange. The Exchange determined that the aforementioned violations by Haiyin Shares and the relevant parties were of a serious nature, giving rise to investor skepticism and extensive negative coverage in the public media. Moreover, the company’s stock price and trading volume exhibited marked volatility around the time the cooperation announcement was disclosed, thereby causing significant adverse market impact. At the same time, while the company only disclosed in the cooperation announcement that the implementation and subsequent performance of the agreement remained subject to uncertainty after its signing, it did not adequately alert investors to the inherent risks associated with the cooperation project itself.

The disciplinary announcement further indicates that the aforementioned violations by Haiyin Shares and the relevant parties, as well as the penalties imposed by the Shenzhen Stock Exchange, will be recorded in the listed company’s integrity file and made public.

Langjiu Embarks on Its IPO Journey—Which Other Prominent Liquor Brands Are “Waiting to Make Their Move”?

Following the early listings of Wuliangye, Luzhou Laojiao, Shuijingfang, and Shede Liquor on the A-share market, Langjiu—now one of Sichuan liquor’s “Six Golden Flowers”—has also embarked on its IPO journey. “Our goal in going public is to build a transparent, open brand—one that takes full responsibility to consumers—and, above all, to produce exceptional liquor,” said Wang Junlin, Chairman of Langjiu Group, in a recent interview with reporters.

As Langjiu has begun IPO‑related advisory services and is aiming for an initial public offering, which other well‑known domestic liquor companies remain on the sidelines of the capital markets?

Langjiu Co., Ltd. has entered the listing guidance phase.

According to the latest disclosure by the Sichuan Securities Regulatory Bureau, Langjiu Co., Ltd. (hereinafter referred to as “Langjiu”) filed for guidance on August 16. The company’s registered address is in Gulin County, Luzhou City, Sichuan Province; its legal representative is Wang Junlin, and its sponsor is GF Securities.

In accordance with the relevant procedures, this filing for guidance signifies that Langjiu Co., Ltd. has officially entered the pre-IPO guidance phase.

“In accordance with IPO‑related requirements, we have engaged a securities office, a law office, and an accounting office to carry out all necessary preparations for the listing. We will strictly adhere to the CSRC’s guidelines and ensure that our business is managed soundly and prudently,” said Liu Yi, President of Langjiu Group and Vice Chairman of Langjiu Co., Ltd.

Langjiu Co., Ltd. is a large, modern enterprise whose core businesses are the production and marketing of the renowned “Lang” brand liquor series and equity‑holding investments. Its initial public offering has long attracted widespread attention; however, due to various factors, progress on its listing has been slow. It was not until 2016 that Langjiu Group implemented a major restructuring, consolidating all liquor‑related operations under Langjiu Co., Ltd. in preparation for an IPO. At that time, the company aimed to go public in 2019.

The Luzhou Municipal Government also attaches great importance to Langjiu Co., Ltd.’s planned public listing. In the “Luzhou City Three-Year Action Plan for the 100-Billion-Yuan Baijiu Industry (2018–2020),” issued in June 2018, the municipal government pledged to leverage the unique resources of the city’s two nationally renowned baijiu brands, vigorously cultivating three leading enterprises—Luzhou Laojiao, Langjiu, and other Sichuan‑style baijiu producers—and explicitly designated “the successful IPO of Langjiu Co., Ltd., with its core business revenue exceeding RMB 20 billion” as one of its key objectives.

According to the action plan, Langjiu Co., Ltd. has set revenue targets of RMB 10 billion, RMB 14 billion, and RMB 20 billion for the years 2018, 2019, and 2020, respectively. Industry analysts note that, if these goals are achieved as planned, Langjiu’s anticipated entry into the capital markets would propel it directly into the second tier of publicly listed liquor companies.

Not lacking in funds, hoping to improve quality.

As Langjiu Co., Ltd. presses ahead with its IPO, the Langjiu Quality Research Institute was also established on August 20 this year. This move is seen as a key lever for further elevating Langjiu’s quality and a crucial platform for implementing its quality‑driven strategy.

“Langjiu’s IPO and the establishment of its Quality Research Institute are, in fact, aimed at the same goal—ensuring superior quality. Going public means we welcome scrutiny from society to conoffice that we are truly committed to doing things right,” said Wang Junlin. He added that Langjiu has no funding issues; what it seeks is the company’s scientific and sustainable development, and it stands ready to accept public oversight. “Especially in the liquor and food industries, without a strong sense of responsibility—without accountability for food safety and for consumers—no enterprise can succeed.”

Langjiu boasts a long and storied brewing tradition, dating back over a thousand years to the “Goujiang” liquor of the Western Han Dynasty. Its modern distillery evolved from the “Xuzhi Winery,” a small-scale brewing workshop that emerged in the late Qing period. Today, guided by a brand‑driven growth strategy, Langjiu’s four flagship product lines—Qinghua Lang, Honghua Lang, Langpai Tequ, and Xiaolangjiu—each occupy distinct market segments, targeting well‑defined, high‑value customer groups.

In Wang Junlin’s view, for a company to maintain an unbeatable position in the market, it must return to the fundamentals: delivering superior quality and exceptional service. Short‑term marketing tactics cannot sustain long‑term prosperity. He further noted that competition in the baijiu industry is intensifying and will inevitably converge among the top five players. Moreover, such competition can drive technological advancement and elevate product quality. If companies truly commit to world‑class quality and service, they are bound to grow stronger and larger.

“Over the years, the sauce‑aroma category has evolved, and the top‑tier products—led by Moutai—have all been built on a steadfast commitment to quality. At Langjiu, too, we must work hand in hand with Moutai to deliver excellence, one bottle at a time. As for where Langjiu’s quality should head next, I’m still pondering that question. Right now, our priority is to craft every single bottle to the highest standard,” said Wang Junlin, his words carrying deep meaning. “If Langjiu and other distilleries can elevate their quality to match Moutai’s, consumers will have more choices—and prices will come down. So we’ve got a long road ahead.”

Several well-known liquor companies are already on the path to an IPO.

Following industrial restructuring from 2013 to 2015, the overheating trend in the baijiu sector was brought under control, and industry concentration continued to rise. Since 2016, with growing baijiu import and export volumes and rising corporate profits, the baijiu industry has gradually rebounded.

Some industry insiders believe that competition in the baijiu sector will intensify going forward, with the industry trending toward premiumization and brand‑centricity. Leveraging the capital markets to refine and strategically position product lines has also become a widely shared consensus.

In fact, there are still quite a few baijiu companies that have yet to go public; well-known brands such as Jinjiu, Baiyunbian, and Jiannanchun are all continuing to explore their paths to an IPO.

Among the leading baijiu brands that have yet to list on the capital markets, Xifeng Liquor—one of China’s “Four Great Famous Spirits”—deserves special mention. Beyond its esteemed position in the Chinese baijiu category, another reason is that Xifeng, which had been planning an IPO for nearly a decade, abruptly filed to withdraw its listing application late last year.

Public records show that following its restructuring in 1999, Xifeng Liquor achieved diversified shareholding through two rounds of capital increases and share expansions in 2009 and 2010. In 2010, Xifeng Liquor first announced plans to go public and subsequently filed preliminary prospectuses twice, in 2016 and 2018. However, at the end of last year, as its review status was changed to “termination of examination,” Xifeng Liquor once again missed out on an IPO.

According to the latest data, as the industry recovers, Xifeng Liquor’s business performance has been relatively positive in recent years. From 2015 to 2017, the company’s revenue stood at RMB 2.803 billion, RMB 2.867 billion, and RMB 3.17 billion, respectively, while net profits reached RMB 263 million, RMB 350 million, and RMB 448 million, respectively.

In contrast to Xifeng Liquor’s withdrawal of its IPO application, Guotai Distillery—the second sauce‑aroma baijiu producer in Maotai Town, Guizhou—is stepping up its efforts and gearing up for an IPO. As a dark horse in the sector, filings for listing guidance reveal that after two consecutive capital increases in March and April 2018, Guotai Distillery initiated a shareholding reform in November of the same year, completing it in April this year. In 2018, the company posted revenue of RMB 1.144 billion and net profit exceeding RMB 200 million.

Judging from its description of competitive advantages, Guotai Liquor seems determined to secure a leading position this time around. The company notes that one of the key competitive factors for authentic Daqu‑style sauce‑aroma baijiu is its reserve of base liquor, and this reserve constitutes a major strength. According to information disclosed on its official website, in the first half of this year, Guotai Liquor posted a 66% increase in sales, marking another acceleration in what it has designated as its decisive year for going public.

Taxation TAXATATION

Enterprises in 96 comprehensive bonded zones have received a “big package” of relief measures.

Recently, the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs issued the “Notice on Piloting the Granting of General VAT Taxpayer Status in Comprehensive Bonded Zones” (hereinafter referred to as Notice No. 29), extending the preferential policy—previously implemented in select special customs supervision zones—to grant enterprises general VAT taxpayer status—from 48 such zones to all 96 comprehensive bonded zones nationwide.

Data show that, from 2016 through the end of December 2018, a total of 133 enterprises nationwide applied for the pilot program allowing them to become general taxpayers in customs special regulatory zones, including 88 manufacturing offices and 45 trading companies, leaving room for further expansion.

Mei Qicheng, Managing Partner for Tax Policy Services at PwC China, stated that once the pilot implementation plan for general taxpayer status has been filed with the State Taxation Administration, the Ministry of Finance, and the General Administration of Customs by the provincial tax and finance authorities and the directly affiliated customs offices in the relevant locality, the pilot may proceed, allowing eligible entities to benefit from the corresponding preferential policies and thereby reducing burdens while enhancing efficiency for enterprises within comprehensive bonded zones as well as those engaged in both domestic and international trade.

Mei Qicheng stated that, pursuant to Announcement No. 29, pilot enterprises may, in accordance with applicable regulations, pay value-added tax on domestically sold goods and issue special VAT invoices for customers to claim input‑tax credits. This measure helps customers located outside the bonded zone reduce customs clearance and import‑related costs and administrative burdens, thereby enabling pilot enterprises to expand their domestic business and secure more favorable terms in commercial negotiations.

“Pilot enterprises purchasing goods from within the territory but outside the bonded zone may obtain special VAT invoices, which can be used as proof for deducting input VAT or for claiming export tax rebates,” said Mei Qicheng. He added that this measure eliminates the need for domestic suppliers located outside the bonded zone to file export tax rebate applications themselves, lowers the qualification requirements for suppliers, and enables pilot enterprises to make supplier selections based more on factors such as quality and price.

Li Jun, PwC China’s Managing Partner for Indirect Tax Services, stated that pilot enterprises’ imported goods will continue to be subject to bonded‑area treatment; when such enterprises purchase goods from non‑pilot entities within the pilot zone, the applicable tax regime will mirror that for imported goods; sales of unprocessed bonded goods among enterprises within the pilot zone will be exempt from taxation, with the buyer continuing to benefit from bonded‑area treatment; and when pilot enterprises import equipment for their own use, they will be temporarily exempt from import duties, value‑added tax at the import stage, and consumption tax. Upon determining domestic sales, any outstanding import taxes on designated goods must be declared and paid, together with the prescribed interest on deferred taxes; for duty‑free imported equipment used domestically, the import taxes will be allocated evenly over the customs‑supervised period, with the domestic‑to‑foreign sales ratio calculated at year‑end, and the corresponding import taxes—previously deferred—will be collected based on that ratio.

“Eligible for the export tax rebate policy, the value-added tax embedded in services purchased from domestic enterprises is expected to no longer be capitalized as a cost,” said Li Jun. Under the pilot program, exporting enterprises may apply for a tax rebate after the goods have physically departed the country; and when pilot‑eligible enterprises sell goods to non‑pilot enterprises within the pilot zone—except for unprocessed bonded goods—the transactions are treated as exports for rebate purposes. Currently, services provided by domestic enterprises to customs‑special‑supervision zones are subject to VAT and do not qualify for cross‑border service tax‑exemption or rebate policies. Consequently, the VAT incurred by enterprises within the zone on such purchases is recorded as a cost. With the introduction of the export tax rebate policy, this portion of VAT can now be included as an input tax credit in the rebate calculation.

Li Jun believes that piloting the qualification of enterprises within comprehensive bonded zones to become general VAT taxpayers will provide a significant boost to companies operating—or planning to enter—these zones, enabling them to engage in integrated domestic and international trade. By applying for general taxpayer status, enterprises inside the zone can, while retaining the special treatment previously afforded to such areas, enjoy greater commercial flexibility across more stages of buying and selling, thereby enhancing their adaptability when dealing with suppliers and customers with diverse needs.

Precise Governance of Illegal Fees Imposed on Enterprises

In today’s fiercely competitive market, enterprises are like strongmen pushing a boulder uphill, and policy measures designed to ease their burdens serve as crucial driving forces. The recently issued “Notice on Further Strengthening the Governance of Illegal Fees Imposed on Enterprises” focuses squarely on curbing unlawful charges levied on businesses, thereby further intensifying efforts to cut taxes and fees.

Larger‑scale tax and fee reductions are a key measure for optimizing the business environment and further boosting the vitality of market entities, playing an important role in bolstering market confidence and promoting stable economic performance. Meanwhile, addressing illegal and irregular charges levied on enterprises is crucial to the overall effectiveness of these tax and fee cuts and directly impacts the broader effort to ease the burden on businesses. For enterprises, all tax and fee expenditures are reflected in their financial statements and affect profitability. In this sense, it is imperative to further streamline and standardize enterprise‑related fees and reduce the administrative burden on businesses. The recent joint issuance of a document by multiple departments to tackle unlawful charges underscores the central government’s determination and resolve to ensure the successful implementation of large‑scale tax and fee reduction policies. According to a spokesperson from the State Administration for Market Regulation, the newly released policy aims to clarify specific tasks, set clear deadlines, and introduce concrete measures to effectively address illegal and irregular charges, enhance enterprises’ sense of gain, guarantee the intended outcomes of tax and fee reductions, and invigorate market dynamism.

For the right policy direction to translate into tangible policy outcomes, it requires both sophisticated institutional design and rigorous implementation. In addressing the issue of illegal and arbitrary fees imposed on businesses, many measures are highly targeted and grounded in reality. For instance, in response to the prevalence of hidden charges, the policy mandates full public disclosure of all fee‑related matters—“disclosure without exception”—with the aim of ensuring that business‑related fees are open and transparent, subject to public oversight, and enabling enterprises to pay with full clarity. Furthermore, to guarantee effective enforcement, a set of mechanisms has been put in place, including efficient investigation and handling of leads from complaints about illegal business‑related fees, information sharing, and joint punitive measures, thereby reducing the costs for businesses seeking to protect their rights and fostering collaborative governance across society.

This year’s tax and fee reductions constitute a comprehensive, package‑style policy with rich content and broad interagency involvement, necessitating enhanced coordination and systematic implementation. From the perspective of policy synergy, addressing unauthorized fees levied on businesses has filled a critical gap in the tax‑and‑fee‑cutting agenda. Ongoing efforts—including the systematic reduction of the VAT rate, expanded super‑deductions for R&D expenses, preferential corporate income tax rates for small and micro enterprises, and lower social security contribution rates—have yielded significant results thanks to their sound direction and well‑designed measures, reviving business dynamism. In the first half of this year, nationwide cumulative tax and fee cuts totaled 1.1709 trillion yuan, further lowering enterprises’ tax and fee burdens. As a direct outcome, key tax‑paying offices reported a 1.5% year‑on‑year increase in profits, with the growth rate up 5.5 percentage points from the first quarter.

Economic vitality stems from enterprises and from the entrepreneurial spirit, as businesses are the main force behind innovation and entrepreneurship and serve as the primary drivers of employment, tax revenue, and output. When enterprises thrive, the economy performs well: workers earn incomes, the government collects taxes, and, crucially, offices generate profits. Vigorously advancing tax and fee reductions can invigorate micro‑level economic actors—chiefly enterprises—while addressing the needs of individual offices ultimately serves the broader macroeconomic picture. At present, China’s economic development faces new risks and challenges, with mounting downward pressure on the domestic economy. By implementing policy measures such as tax and fee cuts and lowering financing costs to boost corporate innovation, we can play a pivotal role in countering this downward momentum.

At a recent meeting of the Political Bureau of the CPC Central Committee, while outlining economic priorities for the second half of the year, it was stated that “fiscal policy should be strengthened and made more effective, and tax and fee reduction measures must continue to be implemented in full and with meticulous attention to detail.” In the period ahead, tax and fee reductions will continue to play a pivotal role in economic policy, with an even greater emphasis on ensuring their effective implementation. Building on existing tax-cutting initiatives and complemented by efforts to curb unauthorized charges levied on businesses, further positive outcomes can be anticipated.

Environmental protection tax rose 70.4% year on year—ecological tax system continues to improve.

According to the latest data released by the Ministry of Finance, in the first seven months of this year, environmental protection tax revenue reached 16.5 billion yuan, up 70.4% year on year.

“At present, China has established an ecological tax system comprising eight taxes that cover the five major stages of resource extraction, production, circulation, consumption, and emissions. This system is centered on the environmental protection tax, with the resource tax and the farmland occupation tax as key components, supported by taxes such as the vehicle and vessel tax, the vehicle acquisition tax, the value-added tax, the consumption tax, and the corporate income tax,” said a responsible official from the State Taxation Administration.

Take the environmental protection tax as an example: since the Environmental Protection Tax Law came into effect on January 1, 2018, the introduction of this tax has effectively leveraged a dual mechanism—providing negative incentives for higher emissions and positive incentives for lower emissions—to promote green development. For instance, Anhui Huangshan Shenjian New Materials Co., Ltd., by promptly upgrading its production equipment with advanced technologies, paid over RMB 4 million less in environmental protection taxes in the first half of this year compared with the second half of last year, while its production capacity increased by 50% year over year.

Experts believe that levying an environmental tax not only helps achieve emission-reduction targets for key pollutants but also promotes the optimization of the economic structure and a shift in the development model, while broadening the government’s toolkit for environmental governance and protection.

Meanwhile, a series of tax incentives has injected additional green momentum. Hainan Tibetan Autonomous Prefecture in Qinghai has vigorously developed the new‑energy sector in recent years. According to Hu Tianshun, Director of the Hainan Tibetan Autonomous Prefecture Tax Service Bureau, clean‑energy projects require substantial capital investment; the state’s preferential policies—namely, a three‑year exemption and a three‑year 50% reduction in corporate income tax, immediate VAT refunds upon collection, and benefits under the Western Development Strategy—have effectively boosted the growth of the new‑energy industry. In Hainan Prefecture alone, more than 60 enterprises are now registered in the new‑energy sector. Taking Huanghe Hydropower Longyangxia Water–Solar Complementary Power Generation Co., Ltd. as an example, since the commencement and commissioning of its water–solar complementary photovoltaic project, the company has accumulated input‑tax credits totaling RMB 759 million and received corporate income‑tax reductions and exemptions amounting to RMB 361 million.

According to reports, in April this year, the State Taxation Administration, together with the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Ecology and Environment, jointly issued the “Announcement on Corporate Income Tax Policies for Third-Party Enterprises Engaged in Pollution Prevention and Control,” which reduces the corporate income tax rate to 15% for eligible third-party enterprises in this sector, thereby encouraging such enterprises to increase investment and enhance the effectiveness of pollution prevention and control.

The Vehicle Acquisition Tax Law, which came into effect on July 1 this year, enshrines in statute the exemption from vehicle acquisition tax for public buses and trolleybuses purchased by urban public transport enterprises, thereby underscoring the state’s high priority on the development of public transportation and the well-being of the people.

Continuously improving services also serves as a key lever for advancing the development of a green tax system. According to reports, in recent years, tax authorities across the country have actively promoted the establishment and refinement of collaborative mechanisms for environmental protection tax collection and administration. They have set up taxpayer‑guidance teams, established dedicated service windows for environmental protection tax returns, and designated specialized consultation desks. Through a variety of approaches—including centralized training, on‑site guidance, and simulated filing—these measures ensure that taxpayer services leave no blind spots.

Huang Yali, the financial director of Xiamen Te Fang Construction Engineering Group Co., Ltd., explained that the company has numerous construction projects underway, and its finance team had previously been uncertain about how to file for the construction dust environmental protection tax. After learning of the situation, the Xiamen Municipal Tax Service Bureau dispatched dedicated personnel to provide on-site guidance on tax calculation and online filing. “This kind of ‘point-to-point’ service is truly heartwarming and allows us to devote more energy to environmental protection,” Huang Yali said.

An official from the State Taxation Administration stated that the tax authorities will continue to uphold the development philosophy that “lucid waters and lush mountains are invaluable assets,” fulfill their duties conscientiously, take proactive measures, leverage the tax system as a policy tool, promote the improvement of the green tax framework, support green development, and contribute to winning the tough battle against pollution.

Tax and fee reductions boost the vitality of small and micro enterprises.

At its executive meeting held on August 16, the State Council proposed focusing on addressing the “difficulty of financing” faced by small and micro enterprises. This year, a series of tax and fee reductions—often referred to as “policy bonuses”—have been implemented, enabling these businesses to benefit from favorable policies. Experts recommend further raising the tax threshold for small and micro enterprises to enhance the effectiveness of such tax relief measures.

According to data from the State Taxation Administration, in the first half of this year, inclusive policies for small and micro enterprises resulted in cumulative tax reductions totaling RMB 116.4 billion. Specifically, raising the VAT exemption threshold for small-scale taxpayers generated RMB 34.9 billion in additional tax relief; relaxing the criteria for small and low-profit enterprises and expanding corporate income tax incentives led to RMB 48.1 billion in further tax cuts; and local policies reducing six taxes and two fees added another RMB 33.3 billion in tax reductions.

In the view of Xue Jiahong, General Manager of Xi’an Beigete Data Technology Co., Ltd., inclusive tax and fee reduction policies have injected new momentum into the company’s development. With more funds at its disposal for production, operations, and technological R&D, the company has strengthened its competitive edge. As a private-sector technology enterprise, though classified as a small, low-profit office, it has already obtained six software copyrights and is recognized as a national high-tech enterprise and a “dual-software” enterprise. In the first half of the year, the company benefited from cumulative tax reductions totaling approximately RMB 360,000.

Following the increase in the VAT exemption threshold for small-scale taxpayers from RMB 30,000 to RMB 100,000 per month, the average cumulative VAT relief per taxpayer in the first half of the year rose from RMB 2,325 to RMB 9,491. After the expansion and enhancement of income tax incentives for small and low-profit enterprises, the average cumulative income tax relief per eligible enterprise in the first half of the year increased from RMB 10,148 before the policy adjustment to RMB 20,949. Meanwhile, taxpayers benefiting from the reduced rates on the “six taxes and two fees” saw an average additional cumulative tax reduction of RMB 1,401 per taxpayer.

Cai Zili, Executive Deputy Director of the Tax Reduction Office of the State Taxation Administration, stated that small and micro enterprises are numerous, widely distributed, and diverse in type, playing an irreplaceable role in boosting employment, promoting economic growth, and advancing scientific and technological innovation. The state has introduced universal tax relief measures for small and micro enterprises, aiming to strengthen their development momentum, invigorate market entities, and bolster market confidence.

Most small and micro enterprises are privately owned. In the first half of this year, market entities in the private sector benefited from universal policies for small and micro businesses, resulting in an additional tax reduction of RMB 102.5 billion—accounting for 88% of all new tax cuts, up 2.48 percentage points from the first quarter. This underscores the growing emphasis of these inclusive policies on supporting the development of private enterprises.

The scope of the income tax preferential policy in Zhuhai’s Hengqin New Area has been expanded, with tourism enterprises within the zone now subject to an enterprise income tax rate of 15%.

According to the “Notice on Adding Tourism‑Related Projects to the Catalog of Enterprise Income Tax Preferential Policies for the Hengqin New Area,” recently issued by the Ministry of Finance and the State Taxation Administration, tourism enterprises located in the Hengqin New Area of Zhuhai City, Guangdong Province, will be subject to an enterprise income tax rate of 15%. The policy is effective from January 1, 2019, to December 31, 2020. As a result, this new area has become the second in China—following the Pingtan Comprehensive Experimental Zone in Fuzhou, Fujian Province—to receive approval for preferential tax policies targeting the tourism industry.

According to reports, the newly added list of income tax incentives comprises eight items, covering the operation of amusement parks, aquariums, theme parks, film and television production bases, exhibition halls, and museums; the provision of marine sports, low-altitude flights over sea areas, cruise tourism, yacht tourism, and island tourism; the development of cultural‑creative tourism, live‑action stage productions, and film and music festivals; the management of folk‑culture events and homestays; the preservation and commercialization of cultural heritage; high‑quality international and Guangdong–Hong Kong–Macao sports‑tourism events; the promotion of health‑care and medical tourism as well as convention‑and‑exhibition tourism; the operation of tourist service centers, tourism information websites, and mobile tourism apps; the operation of tourism e‑commerce platforms primarily offering online marketing, online booking, and online payment services; and the establishment and operation of travel agencies specializing in Guangdong–Hong Kong–Macao tourism. With these additions, the district’s corporate income tax incentive catalog now encompasses six major categories and 80 specific measures.

Compared with the Pingtan Comprehensive Experimental Zone, the Hengqin New Area’s tourism‑industry preferential catalog has been expanded to include the operation of exhibition halls and museums, the organization of film and music festivals, as well as the management of tourist service centers, tourism information websites, and mobile tourism applications, thereby aligning the catalog more closely with the actual needs of Hengqin’s leisure‑tourism industry.

The cultural tourism and convention‑exhibition sector is a key pillar of development in the Hengqin New Area. To date, a number of flagship tourism‑and‑cultural‑creative projects, including Chimelong International Ocean Resort and Xingledu Camping Park, have been completed, and a nascent cluster of leisure‑tourism industries has begun to take shape.

Litigation & Arbitration

A netizen who edited an entry on Baidu was found to have infringed upon another’s reputation, and Baidu was ordered to bear civil liability.

Recently, alleging that Baidu users’ edits to the entry for his late father on “Baidu Baike” infringed upon his father’s reputation, the plaintiff, Zhao Moumou, brought a lawsuit against Baidu Inc., the platform operator, before the Beijing Internet Court.

Plaintiff Zhao Moumou alleges that in January and June 2013, Baidu users edited the “Baidu Baike” entry for Plaintiff Zhao’s father on two occasions, inserting the statement that he was a “great literary thief” and removing the opera libretto “Red Coral,” one of his father’s signature works. These edits, which included insulting remarks, were reviewed and published by Baidu Baike editors and remained online until July 2018, while his father’s representative work has never been restored.

Zhao Moumou contends that the conduct has infringed upon the right to reputation of his father and other family members, and that Baidu’s review process for editing the entry was defective, entitling him to hold the company liable for ceasing the infringement, restoring the original state, issuing a public apology, and compensating for losses. After trial, the court held that China’s laws and judicial interpretations expressly confer on the close relatives of a deceased person the right to bring an action for infringement of the right to reputation. Engaging in negative public commentary about a deceased individual not only violates the deceased’s reputation but also impairs the overall reputational standing of the deceased’s close relatives as well as their personal reputations. Any one of the deceased’s close relatives is entitled—and may simultaneously—pursue liability for infringement of their own reputation by virtue of their status as a close relative.

The court held that, in this case, the Baidu user involved sought to conceal the fact that Mr. Zhao’s father was the composer of the opera “Red Coral” by deleting relevant entries, thereby impeding Internet users’ ability to obtain a true and comprehensive understanding of his father’s life and his representative works, and, to some extent, diminishing his father’s social standing. Furthermore, the inclusion at the end of the disputed entry of statements clearly intended to insult and disparage Mr. Zhao’s father’s professional ethics and personal character, coupled with the open‑access nature of “Baidu Baike,” resulted in such content being displayed to an indefinite audience of Internet users for a period of five years, thereby seriously harming Mr. Zhao’s father’s reputation. As Baidu was aware that online users were exploiting its services to infringe upon the civil rights and interests of others, yet failed to take necessary measures and thus neglected its duty of care as a provider of online services, it should bear civil liability to Mr. Zhao.

Ultimately, the court ruled that Baidu must publicly post a notice of apology in a prominent position on the page for the disputed entry, apologize to Mr. Zhao, mitigate the adverse effects, and compensate him RMB 6 as solatium for emotional distress.

Bentley Ltd. has filed a request to invalidate the “B and Design” trademark, and Oriental Co., Ltd. has brought the matter before the court.

Recently, the Beijing Intellectual Property Court accepted an administrative dispute concerning a request for invalidation of the “B and design” trademark.

Oriental Mingri (Jinjiang) Import and Export Co., Ltd. (hereinafter referred to as “Oriental Company”) applied to register the trademark “B and Design” (hereinafter referred to as the “disputed trademark”), which is designated for use on goods in Class 33, including “fruit wines (containing alcohol), aperitifs, and wines.”

Bentley Motors Limited (hereinafter referred to as Bentley) filed a request for invalidation with the defendant in this case, the National Intellectual Property Administration, on the grounds that the trademark at issue is similar to its trademarks “Bentley” and the “B and wing logo,” and that it was registered through other improper means.

Upon examination, the National Intellectual Property Administration has determined that the goods designated for use of the disputed trademark differ from those covered by Bentley’s “B and design” trademark—namely, “automobiles”—in terms of function and intended use, and therefore do not constitute similar trademarks used on identical or similar goods. Furthermore, the evidence submitted by Bentley is insufficient to demonstrate that Bentley had already been using the “Bentley” mark, among others, on goods such as “wine” and “fruit wine” prior to the filing date of the disputed trademark application, nor is it sufficient to establish that such use had attained a degree of distinctiveness or renown. Accordingly, Bentley’s claim that the registration and use of the disputed trademark infringe upon its well-known trademark rights is rejected. In addition, the application for registration of the disputed trademark does not fall within the circumstances specified in Article 10, Paragraph 1, Items (7) and (8) of the Trademark Law. Oriental Company has filed multiple trademark applications that are identical or similar to well-known trademarks owned by others, yet it has failed to provide a reasonable explanation regarding its intent in seeking registration or the origin of its trademark designs. Consequently, Oriental Company’s conduct is deemed to manifest a clear intention to capitalize on established brand names, engage in unfair competition, or seek illicit gains, thereby violating the principle of good faith and disrupting both the orderly administration of trademark registration and the fair and orderly competitive market environment. As a result, the registration of the disputed trademark constitutes an instance of obtaining registration through “other improper means.” Accordingly, the disputed trademark is declared invalid.

Dongfang Company, dissatisfied with the decision, filed an administrative lawsuit with the Beijing Intellectual Property Court, arguing that the trademark at issue was originally created by the plaintiff and possesses a high degree of distinctiveness, thereby demonstrating that its registration does not conflict with prior rights. Furthermore, the registration of the trademark in question does not fall under the category of “obtaining registration by other improper means.” Dongfang Company has engaged in extensive commercial use of the trademark and has achieved a certain level of recognition among relevant consumers; if the trademark were to be invalidated, it would inflict substantial losses on the plaintiff. In the trademark field, other entities have also applied for a large number of trademarks, most of which remain unused and unregistered. Upon examination, it was found that numerous trademarks containing “B and design” have already been approved for registration; in accordance with the principle of consistency in examination, the trademark at issue should likewise be registered. Accordingly, Dongfang Company requests that the court set aside the challenged ruling and order the defendant to issue a new decision.

At present, this case is under further adjudication.

Pleading guilty and accepting punishment with leniency does not amount to buying one’s way out of criminal liability.

The system of leniency for guilty pleas and acceptance of punishment is part of China’s criminal law framework for mitigated sentencing. It encourages suspects to disclose the facts of the case and provide leads to the judicial authorities, thereby facilitating the swift handling of cases, enhancing judicial efficiency, and conserving judicial resources.

The introduction of the system of leniency for those who admit guilt and accept punishment follows a bottom-up approach to judicial reform: drawing on foreign judicial practices, grassroots courts conduct bold pilot experiments; once feasibility is demonstrated, the judiciary as a whole advances the initiative, subjecting it to further pilot testing before elevating it to top-level policy decisions.

The leniency system for guilty pleas and acceptance of punishment places greater emphasis on judicial efficiency, seeking to achieve efficiency within the framework of judicial fairness, whereas the criminal reconciliation procedure prioritizes the restoration of victims’ rights and interests. By integrating criminal reconciliation as an essential component of the leniency system for guilty pleas and acceptance of punishment and by enhancing victims’ participation, this approach helps to ensure oversight over the plea‑bargaining process.

Recently, the People’s Court of Yuanzhou District in Yichun City, Jiangxi Province, heard a case involving the rape of a post‑2000s individual by a post‑1995 defendant. The court sentenced the defendant, Ouyang Mouwen, to four years’ imprisonment for the crime of rape. During the proceedings, Ouyang Mouwen and his relatives compensated the victim 30,000 yuan, thereby obtaining the victim’s forgiveness.

Following media coverage of the case, it sparked widespread skepticism, with most netizens deeming the sentence too lenient. Some also argued that the court’s decision to allow “buying one’s way out of punishment” constituted judicial injustice.

In response to public skepticism, most legal experts hold that the victim’s forgiveness constitutes a discretionary mitigating factor in sentencing, intended to help resolve social tensions and provide the victim and their close relatives with some emotional solace. Accordingly, the court’s ruling does not appear to be manifestly improper. Under the law, where the offender actively compensates the victim for economic losses and obtains the victim’s forgiveness, the base sentence may be reduced by up to 40 percent.

Some experts have noted that cases in which lenient sentencing is granted due to compensation or expressions of remorse frequently become focal points of public attention and are often misinterpreted by netizens as “buying one’s way out of punishment.” In fact, the system of leniency for those who plead guilty and accept punishment is an integral part of China’s criminal law framework for mitigating penalties and forms a key component of institutional reforms within the criminal justice system. Its implementation helps suspects disclose the facts of the case and provide leads to the judicial authorities, enabling faster case resolution, enhancing judicial efficiency, conserving judicial resources, and reducing societal antagonism. Therefore, the proper guidance of public opinion remains essential for the effective functioning of this system.

Criminal reconciliation helps resolve disputes, but is limited to minor criminal cases.

In 2002, the Mudanjiang Railway Transport Court of Heilongjiang Province applied the plea bargaining system in the case of Meng Guanghu’s intentional injury, concluding the trial in just 25 minutes. Ultimately, all parties—prosecutors, defense counsel, the victim, and the defendant—expressed their satisfaction.

Thereafter, the Meng Guanghu intentional injury case was widely regarded by many scholars as “China’s first plea‑bargaining case.”

It is understood that plea bargaining originated as a judicial practice in the United States. Established in the Federal Rules of Criminal Procedure, which were revised and implemented in 1974, this system involves negotiations between prosecutors and defense counsel representing the defendant prior to trial. In exchange for the defendant’s guilty plea, the prosecutor may drop charges, reduce the severity of the charges, or recommend a more lenient sentence. Once the defendant admits to the alleged offense, the judge bypasses a jury‑based hearing and imposes the corresponding penalty directly.

Industry insiders note that official documents rarely refer to plea bargaining, instead using the term “criminal reconciliation.” Criminal reconciliation refers to a procedural mechanism in which, with the assistance of a mediator, victims and offenders engage in direct dialogue and joint negotiations, ultimately reaching an agreement on financial compensation. Based on the specific circumstances of each case, the judicial authorities then determine the appropriate disposition of the offender’s criminal liability. Accordingly, China’s system of criminal reconciliation draws on both the practical experience of plea bargaining and other criminal justice practices, as well as on the country’s own pilot initiatives and explorations in this area.

Beijing lawyer Xiao Dongping argues that, in traditional criminal justice, the focus has historically been on the suspect, often relegating victims to a position of neglect and consigning the restoration of their legal interests to a secondary priority. By contrast, the criminal reconciliation system resolves criminal disputes through direct negotiations between the offender and the victim, thereby addressing the shortcomings of conventional approaches to criminal case resolution. Moreover, criminal reconciliation is subject to oversight and formal conofficeation by judicial authorities, ensuring the effectiveness, legality, and legitimacy of the dispute‑resolution process—clearly distinguishing it from informal “private settlements” among private parties.

According to available information, only minor criminal cases are eligible for criminal reconciliation. Specifically, such cases must fall within the categories of offenses stipulated in Chapters Four and Five of the Special Part of the Criminal Law, constitute civil disputes, and, under the provisions of the Criminal Law, carry a potential sentence of three years’ imprisonment or less. Additionally, the suspect must have committed the offense negligently, and the applicable statutory maximum penalty must be seven years’ imprisonment or less—except in cases involving dereliction of duty.

Cases eligible for criminal reconciliation generally must meet the following conditions: First, the suspect’s conduct violates the Criminal Law, constituting a crime, and criminal liability must be pursued; the facts of the crime must be clear, and the evidence must be solid. Second, both the suspect and the victim must be natural persons. Third, the suspect must demonstrate remorse and fully confess to the criminal act. Fourth, the suspect or defendant must be under effective control. Fifth, the suspect must possess the financial capacity to provide compensation or other remedial measures capable of redressing the actual losses suffered by the victim.

How to define the scope of criminal reconciliation in public prosecution cases was once a legislative gap. This process was advanced by normative documents issued by local judicial authorities, with the people’s procuratorates playing a leading role, as well as by judicial interpretations from the Supreme People’s Court and the Supreme People’s Procuratorate. It was not until 2012 that China incorporated the criminal reconciliation procedure into the Criminal Procedure Law, designating it as a special procedure within criminal proceedings.

Wuhan-based lawyer Chen Yong argues that the 2012 Criminal Procedure Law provides only a very brief legislative framework for criminal reconciliation procedures, which has given rise to numerous new issues in practice. First, the scope of criminal reconciliation remains ill-defined, with ongoing disputes over the interpretation of terms such as “civil disputes” and “may be sentenced to…” Moreover, determining whether a case falls within the scope of reconciliation is inherently difficult. Second, while courts are required to impose more lenient punishments on suspects or defendants who reach a settlement, there is considerable disagreement regarding the specific standards for such leniency. Does “leniency” mean “mitigation,” “reduction,” or both? In the absence of clear guidelines, practitioners across different jurisdictions often interpret these provisions differently, leading to inconsistent sentencing outcomes even in similar cases.

Judicial reform continues to deepen, and leniency may be granted in cases where the defendant pleads guilty and accepts punishment.

On September 21, 2018, the WeChat official account “Lushan Procuratorate” published an article stating that a 16-year-old junior high school student, surnamed Zhao, from Lushan County, forcibly engaged in sexual intercourse with a 17-year-old girl, surnamed Hua, during the summer vacation. The Lushan County People’s Procuratorate subsequently approved the arrest of Zhao.

Subsequently, the investigating prosecutor contacted the local mediation committee and brought both sets of parents together to facilitate a settlement. Ultimately, the parents voluntarily signed a reconciliation agreement, under which Xiao Zhao’s family agreed to compensate Xiao Hua’s parents with RMB 80,000. Just before the start of the new school term in early September, the prosecutor changed Xiao Zhao’s coercive measure from arrest to release on bail, enabling him to return to school when classes resumed.

Following the publication of this article, a major controversy erupted, with critics arguing that the prosecution’s actions exceeded the scope of criminal reconciliation as defined in the Criminal Procedure Law.

In this regard, several legal experts contend that substituting arrest with release on bail does not equate to an acquittal, nor does it constitute an unlawful practice. The approach adopted by the Lushan County Procuratorate appears to be linked to the leniency‑for‑plea‑and‑penalty system currently being promoted as part of ongoing judicial reform. The introduction of this system follows a bottom‑up trajectory: drawing on foreign judicial‑reform experiences, grassroots courts have undertaken bold pilot initiatives; once their viability has been demonstrated, the judiciary as a whole has worked to advance the reform, followed by further pilot testing, ultimately elevating it to top‑level policy decisions.

According to reports, the system of leniency for those who plead guilty and accept punishment is a legal framework that provides more favorable treatment, in accordance with the law, to criminal suspects and defendants who voluntarily and truthfully confess their crimes and sincerely express remorse and acceptance of punishment. It is a comprehensive legal system that integrates substantive norms with procedural safeguards. On October 23, 2014, the Decision of the CPC Central Committee on Several Major Issues Concerning Comprehensively Promoting the Rule of Law, adopted at the Fourth Plenary Session of the 18th CPC Central Committee, first introduced the concept of “leniency for those who plead guilty and accept punishment.”

On February 26, 2015, the Supreme People’s Court issued the “Opinions on Comprehensively Deepening Reform of the People’s Courts.” The document stipulates that, in cases where a suspect voluntarily pleads guilty and accepts criminal punishment and proactively returns illicit proceeds to the public security authorities, judicial organs shall clearly define the procedural framework and the legal basis for imposing penalties, adopt differentiated judicial management approaches, and make rational use of judicial resources.

In July 2016, the 26th meeting of the Central Leading Group for Comprehensively Deepening Reform reviewed and approved the “Pilot Program for Reforming the System of Leniency for Guilty Pleas.” In November of the same year, the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, the Ministry of State Security, and the Ministry of Justice jointly issued the “Measures on Conducting Pilot Work on the System of Leniency for Guilty Pleas in Criminal Cases in Certain Regions,” officially launching the pilot program.

Since then, efforts to advance the plea‑bargaining and leniency system have proceeded without pause. As of July 2018, the courts in the 18 pilot regions had applied this system to conclude 181,177 criminal cases, accounting for 52.3% of all criminal cases adjudicated by the pilot courts during the same period.

On October 26, 2018, the Sixth Meeting of the Standing Committee of the 13th National People’s Congress decided to amend the Criminal Procedure Law of the People’s Republic of China, systematically incorporating the experience gained from pilot programs. The amendment established the principle that guilty pleas and acceptance of punishment may be treated leniently in accordance with the law, and introduced provisions on summary procedures and on-duty lawyers, thereby enshrining the achievements of the reform in legal form.

Some experts contend that the plea‑bargaining and leniency system differs from the criminal reconciliation system. First, the former applies to cases of any nature and to all procedural types, save for four specific circumstances expressly prohibited by law, whereas the latter is primarily confined to minor criminal cases. Second, under the plea‑bargaining system, victims do not enjoy a status as active participants; instead, the accused, by truthfully confessing their offenses to the public security organs and the procuratorate and engaging in negotiations with the latter to determine a sentencing recommendation, secures the procuratorate’s submission of a request for a more lenient disposition to the people’s court. By contrast, in the criminal reconciliation process, both the victim and the accused are the principal actors. “Accordingly, the plea‑bargaining system places greater emphasis on judicial efficiency, seeking to achieve efficiency within the framework of judicial fairness, while the criminal reconciliation procedure prioritizes the restoration of the victim’s rights and interests.”

Compensation is fully provided, and penalties are reduced or waived; vigilance is required to prevent the emergence of judicial corruption.

On January 20, 2018, the Shaanxi Provincial Higher People’s Court issued a final judgment, sentencing Nie Liqiang, the former captain of the Special Operations Detachment of the Shaanxi Emergency Rescue Corps, to death with a two-year reprieve for intentional homicide. Previously, Nie Liqiang had been sentenced to death in the first instance by the Xi’an Intermediate People’s Court.

According to the records, on a late night in January 2016, Nie Liqiang wielded a hammer and carried out an attack, leaving two sisters who were on their way home dead or injured. The surviving sister was determined by forensic examination to have sustained Grade II severe injuries and a Grade VIII disability, resulting in a lifelong impairment.

The judge handling the case stated that, based on the facts, Nie Liqiang’s actions were indeed heinous. The second-instance court sentenced him to death with a two-year reprieve for two reasons: first, he voluntarily surrendered, which warrants a lighter or reduced punishment; and second, his family compensated the victim’s family 900,000 yuan.

From the perspective of the fundamental functions of punishment, in addition to retribution, education, and deterrence, it also serves to mend social relationships. The Supreme People’s Court, in its “Guiding Opinions on Sentencing for Common Crimes,” stipulates that where a defendant actively compensates the victim for economic losses and obtains the victim’s forgiveness, taking into account such factors as the nature of the offense, the amount of compensation, the defendant’s ability to pay, and the degree of admission of guilt and remorse, the baseline sentence may be reduced by a certain percentage.

Some legal scholars argue that, although intentional homicide is not among the common offenses listed in the guiding opinions, judicial practice shows that active compensation can be considered a discretionary mitigating factor and may, in practice, exert a certain influence on the sentencing outcome. “Compensation not only demonstrates the offender’s remorse but also provides financial redress to the victim and their family, helping to mend fractured social ties. However, in many serious criminal cases, offenders are often sentenced to the death penalty, while victims struggle to obtain civil compensation.”

According to related reports, in order to treat the two sisters injured by Nie Liqiang, the family incurred substantial debts, and the hospital even resorted to suing the victims’ parents to recover the outstanding fees. Without compensation, the couple would have had no choice but to rely on borrowing and working to repay their debts; the hardships they endured are surely beyond what outsiders can imagine. Driven by necessity, they ultimately accepted a settlement of 900,000 yuan.

In this case, the second-instance court’s lenient sentencing of the defendant, Nie Liqiang, in a sense constitutes a concrete manifestation of restorative justice.

Some experts contend that the trend toward lighter and more lenient penalties reflects the global evolution of criminal justice, while restorative criminal liability has garnered widespread attention. When an offender voluntarily pleads guilty after committing a crime and willingly provides substantial compensation to the victim, thereby repairing the damaged social relationships, such conduct may warrant a reduced sentence, or even mitigation or exemption from punishment. However, it must also be acknowledged that, under the plea‑bargaining system, there is a risk of condoning crime and abusing official authority, and measures are needed to prevent the emergence of judicial corruption, such as quid pro quo between officials or between officials and those seeking favors. Accordingly, by integrating criminal reconciliation as an integral component of the plea‑bargaining framework and strengthening victims’ participation, we can enhance oversight over the plea‑bargaining process.

Online sellers help vehicles with excessive emissions pass annual inspections; environmental group sues manufacturers.

On August 23, the China Biodiversity Conservation and Green Development Foundation (hereinafter referred to as “Green Development Foundation”) filed a public-interest lawsuit against Shenzhen Sumai Environmental Protection Co., Ltd. and Zhejiang Taobao Network Co., Ltd. for illegally selling an “annual vehicle inspection tool.” The case was heard in the second instance at the Zhejiang Provincial Higher People’s Court.

In June this year, the Hangzhou Intermediate People’s Court issued a first-instance judgment partially upholding the claims of the plaintiff, the Green Earth Volunteers Association, ordering the manufacturer of the so‑called “annual inspection tool” to pay RMB 3.5 million in environmental restoration costs for air pollution. However, the court did not find Taobao.com liable. Dissatisfied with the first-instance ruling, the Green Earth Volunteers Association subsequently filed an appeal with the Zhejiang Provincial Higher People’s Court.

Environmental groups allege that products from the companies in question circumvented mandatory vehicle emissions inspections and have filed a claim for 150 million yuan in damages.

The court hearing lasted only one and a half hours. The appellant, Green Earth Volunteers—the plaintiff in the original trial—and the appellee, Taobao.com—the defendant in the original trial—both sent representatives to attend. Meanwhile, the other original defendant, Shenzhen Sumai Environmental Protection Co., Ltd., was duly summoned by the court but failed to appear.

This appeal originated three years ago. The Green Earth Volunteers organization contends that Shenzhen Sumai Environmental Protection Co., Ltd. publicly sold on Taobao what it termed a “yearly inspection gadget,” thereby circumventing mandatory vehicle exhaust‑emission inspections, in violation of relevant national laws. This practice has severely undermined China’s efforts to prevent and control air pollution, inflicted grave harm on public health and the broader public interest, and posed ongoing environmental risks. For these reasons, in October 2016, the Green Earth Volunteers filed a lawsuit with the Hangzhou Intermediate People’s Court.

According to reports, once the “annual inspection gadget” is installed, compounds in vehicle exhaust are adsorbed, enabling compliance with emission standards. Ma Yong, deputy secretary-general of the Green Development Association, stated: “From the perspective of vehicle‑emission management, it is impermissible to introduce any external intervention—such as adding an additional device or product—to bring emissions into compliance.”

Ma Yong explained that the proposed ecological‑environmental restoration fee of over 150 million yuan was calculated based on Sumai Environmental Protection’s sales data from its Taobao store: “This measure is merely intended to pass the annual vehicle inspection, but in reality it does nothing to reduce vehicle exhaust emissions. In fact, it is misleading the public into using its products to circumvent the state’s regulations on motor‑vehicle emissions. With more than 30,000 units sold, these products—some designed for single use and others potentially reusable—are deployed across a vast number of vehicles, resulting in an extremely large scale of impact. Under the relevant provisions of the Air Pollution Prevention and Control Law, anyone who employs fraudulent devices to pass the national annual inspection shall be subject to a specified fine. We have used this as the baseline to calculate the legal penalties he should bear.”

Following the first-instance ruling, environmental organizations filed an appeal, seeking to hold the e-commerce platform that sold the products jointly liable.

In June of this year, the Hangzhou Intermediate People’s Court issued a first-instance judgment, partially granting the claims of the plaintiff, the Green Earth Volunteers. The court ordered the defendant, Sumai Company, to issue a public apology through national-level media within 15 days of the judgment taking effect. As for the plaintiff, Green Earth Volunteers’ claim for RMB 150 million in damages, the court found that the sales volume of the products involved and the extent of the atmospheric pollution damage were difficult to ascertain. Taking into account the specific circumstances of this case, the court determined that Sumai Company should compensate RMB 3.5 million for ecological and environmental restoration costs and pay RMB 150,000 to cover the plaintiff’s necessary expenses incurred in participating in the litigation. The court dismissed the Green Earth Volunteers’ remaining claims.

As for Taobao’s liability in this case, the court of first instance held that the three products at issue are not, by their very nature, subject to an explicit statutory prohibition on production or sale. The relevant information posted by Sumei Company does not constitute manifestly unlawful content as defined by law and is, moreover, somewhat concealed. Accordingly, as a platform providing an information‑posting service, Taobao does not itself participate in the transaction activities of its member users. Having fulfilled its obligation to conduct prior identity verification and issue appropriate warnings, and having promptly removed the disputed content upon discovery, it cannot be deemed to have assisted Sumei Company in committing an infringement. Therefore, the court ruled that Taobao bears no liability in this matter.

Following the first-instance judgment, the plaintiff, the Green Earth Society, filed an appeal with the Zhejiang Provincial Higher People’s Court. During the trial, the Green Earth Society submitted the following appellate claims: “Our appeal comprises three requests: first, to set aside paragraph 4 of the original judgment; second, to order the appellee to issue a public apology in national-level media; and third, to hold Taobao.com jointly and severally liable for the civil liabilities that Shenzhen Sumai Company was required to bear under the original judgment in this case.”

However, Taobao clearly refuses to assume any liability in this case. According to Taobao, first of all, as determined by the court of first instance, the product in question does not clearly violate relevant national laws and regulations: “With respect to the three products at issue, during the first-instance proceedings, upon the appellant’s request for an expert appraisal, two appraisal institutions reached substantially identical conclusions: two of the products currently lack applicable national standards, while one product cannot meet the requirements for appraisal and thus lacks the necessary conditions for such assessment. In other words, at present, it is impossible to determine whether these three products fall within the scope of mandatory or prohibited regulations.”

Moreover, the three products involved in the case do not fall under the category of goods prohibited from being sold online by national law. As a third-party platform, Taobao maintains that it lacks both the capacity and the obligation to proactively review information on ordinary products, and can only manage such matters through prior warnings and post‑sale oversight. In the sale of the products at issue, Taobao has already fulfilled its corresponding obligations.

The court did not deliver its verdict in open court. At present, no sales information for the products involved can be found on Taobao.

A criminal gang in Ningbo engaged in “fraudulent construction site” schemes has been sentenced.

Recently, the People’s Court of Beilun District, Ningbo City, Zhejiang Province, conducted a public trial in accordance with the law and rendered a judgment in a case involving an organized crime group engaged in extortion. The defendants were sentenced as follows: Defendant Zhao was sentenced to nine years and three months’ imprisonment and fined RMB 100,000; Defendant Zhang was sentenced to nine years’ imprisonment and fined RMB 90,000; Defendant Hu was sentenced to five years’ imprisonment and fined RMB 50,000; co‑defendants Shi and Li were each sentenced to fixed-term imprisonment with probation and fined; and Defendant Wang was sentenced to four years and nine months’ imprisonment and fined RMB 50,000.

From 2016 to 2017, the defendants Zhao and Zhang, in collusion with defendants Hu, Shi, Li, Wang, and others, targeted various construction sites under development in the engineering sector. Leveraging ties of hometown and friendship, they established a criminal syndicate headed by defendants Zhao and Zhang, with defendant Hu as a key member and defendants Shi and Wang as members, systematically carrying out multiple illegal and criminal activities.

Among them, the defendant Zhao was responsible for sourcing small, fragmented construction contracts through online channels and other means. Subsequently, the defendant Zhang instructed the defendant Hu to lead workers such as Shi and Li to the construction site for short-term employment. When these “workers” incurred the dissatisfaction of the employer due to passive work or other issues, the defendants Zhao and Zhang, together with the defendant Wang and others, would go to the site to act as “foremen,” interfering in wage settlements. By resorting to threats—including verbal abuse, persistent harassment, unlawful detention, filing complaints with labor inspection authorities, and even causing the construction site to shut down—they extorted inflated wages and various unreasonable fees from the project contractors. Ultimately, the defendants Zhao and Zhang divided the ill-gotten gains among themselves.

This criminal syndicate committed offenses in Ningbo, Jiaxing, Jinhua, and other locations in Zhejiang Province, extorting a total of RMB 338,000 through the “construction-site scam.” Its actions gravely infringed upon the legitimate rights and interests of numerous victims and disrupted the production and work order of construction projects, thereby causing severe adverse repercussions within the industry.

After trial, the court held that the defendants Zhao and Zhang, in collusion with defendants Hu, Shi, Li, and Wang, extorted property from others through threats, verbal abuse, persistent harassment, and unlawful detention. Their conduct constitutes the crime of extortion and amounts to joint criminality. Furthermore, defendants Zhao, Zhang, Hu, Shi, Wang, and others formed a relatively stable criminal organization for the purpose of jointly committing crimes; they frequently gathered together and, by employing “soft‑violence” tactics such as threats, verbal abuse, harassment, and disruptive behavior, repeatedly engaged in extortion within the construction industry. Their actions were characterized by wrongdoing, oppression of the public, disruption of economic and social order, and the infliction of a severely adverse social impact, thus warranting classification as an evil‑force criminal group. Among them, defendants Zhao and Zhang are the principal offenders of the group and shall be punished in accordance with all offenses committed by the group. In the joint offense, defendant Hu played a leading role and is therefore a principal offender, to be punished for all crimes in which he participated. Defendants Shi, Li, and Wang played secondary or auxiliary roles and are thus accessories. Taking into account each defendant’s circumstances, their remorseful conduct upon surrender, and the restitution they have made, the court rendered the above‑mentioned judgment and ordered each defendant to continue compensating the victims for their illicit gains.

Other

Retaliation! China has decided to impose additional tariffs on approximately $75 billion worth of goods originating in the United States.

On August 15, 2019, the U.S. government announced that it would impose an additional 10% tariff on approximately $300 billion worth of goods imported from China, to be implemented in two phases starting September 1 and December 15, 2019. These measures have led to a continued escalation of Sino-U.S. economic and trade tensions, severely harming the interests of China, the United States, and other countries, while also posing a grave threat to the multilateral trading system and the principles of free trade.

In response to the aforementioned measures taken by the U.S. side, China has been compelled to adopt countermeasures. In accordance with the Customs Law of the People’s Republic of China, the Foreign Trade Law of the People’s Republic of China, the Regulations on Import and Export Tariffs of the People’s Republic of China, and other relevant laws and regulations, as well as the fundamental principles of international law, and with the approval of the State Council, the Customs Tariff Commission of the State Council has decided to impose additional tariffs ranging from 5% to 10% on 5,078 tariff lines—covering approximately US$75 billion worth of goods originating in the United States. These additional tariffs will be implemented in two phases, taking effect at 12:01 a.m. on September 1, 2019, and at 12:01 a.m. on December 15, 2019, respectively.

The Customs Tariff Commission of the State Council will continue to carry out the exclusion process for goods subject to additional tariffs imposed by China on the United States. For the $75 billion list of products, those that have been reviewed and conofficeed for exclusion will, in accordance with the exclusion procedures, not be subject to the additional tariffs China imposed in response to the U.S. Section 301 measures. Products that were not included in the first two batches eligible for exclusion applications will be added to the third batch of eligible items, and the specific application procedures will be announced separately.

China’s decision to impose additional tariffs is a necessary response to the United States’ unilateralism and trade protectionism. China reiterates that, for both China and the United States, cooperation is the only correct choice, and only win‑win outcomes can lead to a brighter future. We hope that both sides will, on the basis of mutual respect, equality, and a commitment to keeping their word and aligning words with actions, resolve their differences in ways acceptable to both parties, and actively work to build a new, balanced, inclusive, and mutually beneficial China‑U.S. economic and trade order. Together, they should safeguard and advance the reform and improvement of the multilateral trading system, and promote mutually beneficial and win‑win cooperation with other countries around the world.

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