JC Master Legal News Issue 886

Key Takeaways for This Issue

The China Securities Regulatory Commission has guided stock exchanges and other self-regulatory organizations in issuing the “Administrative Measures for the Non-Public Issuance of Convertible Corporate Bonds by Non-Listed Companies.”

The China Securities Regulatory Commission has guided the Shanghai Stock Exchange and the Shenzhen Stock Exchange, in collaboration with the National Equities Exchange and Quotations Co., Ltd. and China Securities Depository & Clearing Corporation Limited, respectively, to issue the “Administrative Measures for the Non-Public Issuance of Convertible Corporate Bonds by Non-Listed Companies,” thereby expanding the scope of the pilot program for innovation‑and‑entrepreneurship bonds, supporting non‑listed companies in issuing convertible corporate bonds through non‑public offerings, and strengthening financial services for private enterprises.

Hualing Steel plans to acquire Yangchun New Steel for RMB 1.655 billion.

Hualing Group, the controlling shareholder of Hualing Steel, holds indirect control over Yangchun New Steel, giving rise to potential intra‑industry competition with the listed company. In November 2017, Hualing Group pledged to inject its equity stake in Yangchun New Steel into the listed company within five years. Moreover, as early as April this year, Hualing Steel stated that it aimed to complete the cash acquisition of a controlling interest in Yangchun New Steel by the end of 2019.

Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Value-Added Tax End-of-Period Credit Refund Policy for Certain Advanced Manufacturing Industries

To further promote the high-quality development of the manufacturing sector, we hereby announce the policy regarding the refund of incremental input VAT credits to certain taxpayers in advanced manufacturing.

Maritime courts nationwide have fully implemented cross-jurisdictional case filing.

On August 30, 2019, with the successful integration of the data‑request module of the Wuhan Maritime Court—the last unit to undergo debugging—into China Mobile’s Micro‑Court system, maritime courts nationwide achieved full cross‑jurisdictional case filing. On the same day, the Guangzhou Maritime Court, which had completed its system integration ahead of schedule, collaborated with the Haikou, Qingdao, and Xiamen Maritime Courts to jointly process cross‑jurisdictional filings for three cases.

Starting September 16, the reserve requirement ratio will be lowered, releasing RMB 900 billion in long-term liquidity.

To support the development of the real economy and reduce the actual cost of social financing, the People’s Bank of China has decided to implement a across-the-board reduction of 0.5 percentage points in the reserve requirement ratio for financial institutions, effective September 16, 2019 (excluding finance companies, financial leasing companies, and auto finance companies).

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission has guided stock exchanges and other self-regulatory organizations in issuing the “Administrative Measures for the Non-Public Issuance of Convertible Corporate Bonds by Non-Listed Companies.”

The Shenzhen Stock Exchange and the Budapest Stock Exchange have signed a Memorandum of Understanding on cooperation.

The China Securities Regulatory Commission has clarified the requirements for non-listed commercial banks issuing preferred shares.

Pharmaceutical companies posted net profits exceeding RMB 250 million, with analysts noting “strong growth prospects.”

The Shanghai Stock Exchange has, in accordance with the law, terminated its review of Guoke Huanyu’s application for an IPO on the STAR Market.

Corporate & Commercial

The plan to acquire the remaining 51% equity stake in Dingpai Mechanical & Electrical has been unveiled, and Estun will resume trading on September 9.

Controlling shareholder removes director; second-largest shareholder of Aowei Communications files a lawsuit in opposition.

Hualing Steel plans to acquire Yangchun New Steel for RMB 1.655 billion.

New highs atop new highs: Why has Hudiang Shares become the leading PCB stock?

Fourteen tin producers have jointly cut production by 20,000 tonnes; tin prices may rise.

Taxation

Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Value-Added Tax End-of-Period Credit Refund Policy for Certain Advanced Manufacturing Industries

Continuously optimizing the business environment to ensure that tax and fee reductions take root and deliver tangible results.

Tax and fee reductions boost confidence and strengthen the capabilities of foreign trade enterprises.

Positive developments for advanced manufacturing, with certain conditions for VAT credit refunds relaxed.

Tax and fee reductions empower Jiangsu’s unicorn enterprises, injecting new vitality into their development.

Litigation & Arbitration

The Supreme People’s Court and the Supreme People’s Procuratorate have issued the “Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving Organizing Examination Cheating, etc.”

Maritime courts nationwide have fully implemented cross-jurisdictional case filing.

The province’s first public-interest lawsuit has been filed in a case involving multiple individuals who infringed upon personal information.

Reply of the Supreme People’s Court on the Examination of Applications for Filing an Execution Objection Case Regarding the Addition of a Party as an Enforced Person

The Zhejiang High People’s Court, in collaboration with 13 departments, has issued an action plan to actively promote the facilitation of bankruptcy proceedings.

Other

Starting September 16, the reserve requirement ratio will be lowered, releasing RMB 900 billion in long-term liquidity.

Finance & Capital Markets

The China Securities Regulatory Commission has guided stock exchanges and other self-regulatory organizations in issuing the “Administrative Measures for the Non-Public Issuance of Convertible Corporate Bonds by Non-Listed Companies.”

To implement the CPC Central Committee and the State Council’s directives on strengthening financial services for private enterprises, the China Securities Regulatory Commission has guided the Shanghai Stock Exchange and the Shenzhen Stock Exchange, in collaboration with the National Equities Exchange and Quotations Co., Ltd. and China Securities Depository & Clearing Corporation Limited, respectively, in issuing the “Administrative Measures for the Non‑Public Issuance of Convertible Corporate Bonds by Non‑Listed Companies” (hereinafter referred to as the “Measures”). These measures expand the scope of the pilot program for innovation‑and‑entrepreneurship corporate bonds, support non‑listed companies in conducting non‑public issuances of convertible corporate bonds, and enhance financial services for private enterprises.

The private sector plays an irreplaceable role in stabilizing growth, fostering innovation, creating jobs, and improving people’s livelihoods. However, many private enterprises continue to face significant challenges in accessing affordable financing. To facilitate bond issuance by private offices, the China Securities Regulatory Commission launched a pilot program for innovative and entrepreneurial corporate bonds in July 2017. As of the end of July this year, a total of 58 such bonds have been issued, raising RMB 8.2 billion at an average coupon rate of 6.1%. Among these, seven innovative and entrepreneurial companies—entirely private—conducted private placements of convertible corporate bonds, with an average coupon rate of 4.9%. By combining equity and debt, these private‑placement convertible bonds have broadened financing channels for private enterprises, reduced borrowing costs, and further diversified mechanisms for capital formation.

The Implementation Measures do not impose specific restrictions on the conversion price or its determination method, thereby allowing issuers to reasonably set the conversion price in accordance with market‑based principles and disclose it in the offering prospectus. For innovative and entrepreneurial companies issuing convertible corporate bonds through a non‑public offering, the provisions of the “Guiding Opinions of the China Securities Regulatory Commission on Piloting Bonds for Innovative and Entrepreneurial Companies” (CSRC Announcement [2017] No. 10) shall continue to apply.

Going forward, the China Securities Regulatory Commission will guide stock exchanges and other self-regulatory organizations to promote the use of non‑publicly issued convertible corporate bonds as a financing tool through training, on-site visits, and other measures, thereby strengthening capital market support for private enterprises’ financing and enhancing the exchange‑bond market’s capacity to serve real‑economy financing.

The Shenzhen Stock Exchange and the Budapest Stock Exchange have signed a Memorandum of Understanding on cooperation.

On September 5, the Shenzhen Stock Exchange and the Budapest Stock Exchange signed a memorandum of understanding on cooperation and held a symposium, marking a new phase in their collaboration. This represents another significant step forward in the Shenzhen Stock Exchange’s efforts to leverage the capital market to support the Belt and Road Initiative and to deepen and expand pragmatic cross-border cooperation in the capital markets.

According to the memorandum, the two parties will further strengthen personnel exchanges and mutual learning of best practices, facilitate the alignment of market resources and the sharing of information, and advance innovative cooperation such as the development of cross-border indices. Building on the Shenzhen Stock Exchange’s Innovation and Entrepreneurship Investment and Financing Service Platform (V-Next), the two sides will jointly establish a China–Hungary science and technology innovation investment and financing service platform, creating an ecosystem to connect innovative SMEs in both countries with capital. This initiative will foster broader cooperative linkages between the two economies through capital‑driven channels, thereby better supporting the real‑economy development of both nations.

This year marks the 70th anniversary of the establishment of diplomatic relations between China and Hungary. Leveraging their respective advantages as pioneers in jointly building the Belt and Road Initiative, the two countries have continued to expand practical exchanges across various fields and strengthen mutually beneficial cooperation among enterprises, thereby creating new opportunities for bilateral capital market collaboration. The Shenzhen Stock Exchange has long regarded serving the national innovation-driven development strategy as a core mission, working to optimize and enhance its financial services framework for technology‑focused small and medium‑sized enterprises and cultivating distinctive market characteristics. Meanwhile, the Budapest Stock Exchange has in recent years actively explored ways to deepen the cultivation of innovation‑related resources and improve investment and financing services for SMEs. Both sides enjoy broad prospects for cooperation in areas such as supporting the growth of innovative enterprises, aligning investment and financing services, and developing technological systems.

For a long time, the Shenzhen Stock Exchange has proactively aligned itself with the national strategy of opening up to the world, actively promoting multi‑level exchanges and cooperation with capital markets along the Belt and Road. Going forward, the Shenzhen Stock Exchange will earnestly implement the “Opinions of the CPC Central Committee and the State Council on Supporting Shenzhen in Building a Pilot Demonstration Zone for Socialism with Chinese Characteristics,” continue to follow the China Securities Regulatory Commission’s overall plan to further expand the opening-up of the capital market, leverage the exchange’s role as an infrastructure platform, deepen pragmatic cooperation with overseas exchanges across multiple sectors, enhance its capacity for cross‑border resource allocation, and strive to foster a cross‑border service ecosystem for the capital market.

The China Securities Regulatory Commission has clarified the requirements for non-listed commercial banks issuing preferred shares.

On September 6, the website of the China Securities Regulatory Commission published the “Regulatory Q&A for Non‑Listed Public Companies—Relevant Requirements for the Issuance of Preferred Shares by Non‑Listed Commercial Banks” (hereinafter referred to as the “Q&A”). The Q&A clarifies that non‑listed commercial banks that are not listed on the National Equities Exchange and Quotations System and have more than 200 shareholders, when applying to issue preferred shares, must, in addition to complying with the relevant provisions of the Measures for the Pilot Administration of Preferred Shares and the Measures for the Supervision and Administration of Non‑Listed Public Companies, also meet four specific requirements.

First, for applications to issue preferred shares for the first time, applicants must meet the relevant requirements set forth in the “Regulatory Guidance No. 4 for Non‑Listed Public Companies—Review Guidelines on Matters Relating to Administrative Licensing Applications by Unlisted Joint‑Stock Companies with More Than 200 Shareholders,” and the proportion of shares that have been duly registered must be at least 80% (inclusive). However, submission of the application documents listed in that guidance is not required. Intermediary institutions shall verify whether the applicant satisfies the review criteria and provide a clear opinion in the application dossier for the issuance of preferred shares.

Second, prepare and submit the application documents in accordance with “Guideline No. 7 on the Content and Format of Information Disclosure for Non‑Listed Public Companies—Prospectus and Offering Report for the Directed Issuance of Preferred Shares” and “Guideline No. 8 on the Content and Format of Information Disclosure for Non‑Listed Public Companies—Application Documents for the Directed Issuance of Preferred Shares.”

Third, following the issuance of preferred shares, they shall be registered and held in custody with the China Securities Depository & Clearing Corporation.

Fourth, information disclosure is not subject to the National Equities Exchange and Quotations System’s special provisions on preferred‑stock disclosure.

Pharmaceutical companies posted net profits exceeding RMB 250 million, with analysts noting “strong growth prospects.”

Among the 28 companies already listed on the STAR Market, three are related to the pharmaceutical sector: Heartway Medical, Nanwei Medical, and MicroPort Bio. In terms of performance, according to an announcement by the Shanghai Stock Exchange, industries with prominent science-and‑technology innovation characteristics—such as biopharmaceuticals—have all posted varying degrees of growth, reflecting a generally favorable development trend. Calculations show that the combined net profit attributable to shareholders of the parent company for these three offices totaled RMB 253 million.

In this regard, some analysts note that, based on the interim reports, STAR Market–listed companies generally demonstrate solid growth prospects, particularly those in sectors such as biopharmaceuticals and aerospace.

Based on the first-half results of the three STAR Market‑listed companies mentioned above, HeartVascular Medical reported operating revenue of RMB 171.9451 million for January–June 2019, up 41.64% year over year; operating profit of RMB 98.8409 million, up 38.94% year over year; total profit of RMB 98.8710 million, up 38.99% year over year; net profit attributable to shareholders of the parent company of RMB 85.0133 million, up 40.54% year over year; and net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses of RMB 76.8997 million, up 38.66% year over year.

The company stated that the primary reason for the growth in the aforementioned accounts was the steady expansion of its product sales during the first half of 2019, which resulted in a continued increase in sales revenue.

In the first half of 2019, Nanwei Medical reported total operating revenue of RMB 617.6694 million, up 40.14% year over year. This growth was primarily driven by increased domestic and international sales of the company’s core products. Net profit attributable to shareholders of the parent company reached RMB 150.1803 million, a 30.61% increase compared with the same period last year. Meanwhile, net profit attributable to shareholders of the parent company, excluding non-recurring gains and losses, stood at RMB 148.7141 million, up 45.26% year over year.

In the first half of this year, the company’s net profit attributable to shareholders of the parent company increased compared with the same period last year, primarily due to a 40.14% year-on-year rise in operating revenue during the first half of 2019. Additionally, from January to June 2019, the proportion of main‑business revenue derived from hemostatic and closure products—segments characterized by higher gross margins—increased from 40.98% in the same period last year to 45.65%, resulting in an overall gross margin that was 2.86 percentage points higher than in the corresponding period of the previous year.

In the first half of 2019, MicroPort Bio reported operating revenue of RMB 81.9175 million, up 12.77% year over year; net profit attributable to shareholders of the listed company was RMB 17.5101 million, down 2.33% year over year.

In the first half of 2019, net profit attributable to parent company shareholders, excluding non-recurring items, increased by RMB 3.5878 million compared with the same period last year, a growth rate of 31.60%. Similarly, basic earnings per share, also excluding non-recurring items, rose by 31.75% year over year. The substantial increase was primarily driven by higher operating income resulting from an uptick in revenue, coupled with a decline in non-recurring gains and losses—such as government subsidies received and utilized, and investment‑product yields—compared with the corresponding period in 2018.

The chief analyst for small- and mid-cap growth stocks and the STAR Market at Huaxi Securities believes that MicroPort Bio is a platform‑based biopharmaceutical company driven by innovative drug R&D. If its pipeline expands into new indications and its new products are successfully brought to market, the company could, within five to ten years, grow into a leading original‑innovation pharmaceutical giant with annual revenues and net profits both in the billion‑yuan range. Given these characteristics, MicroPort Bio is one of the few STAR Market stocks that holds genuine potential to scale into a very large enterprise.

Meanwhile, considering the broader A-share market, a research report released by Guosheng Securities indicates that, excluding non-comparable samples, in the first half of 2019 the pharmaceutical sector posted revenue growth of 14.97%, net profit growth of 9.13%, and non‑recurring‑item‑adjusted net profit growth of 4.55%, with overall earnings growth under pressure.

Some analysts believe that the pharmaceutical sector is driven primarily by domestic demand and is relatively less affected by external market uncertainties, which has attracted a concentration of risk-averse capital. At the same time, listed companies in the pharmaceutical industry boast high technological content, face more rigid demand, and enjoy robust growth prospects supported by these factors.

Notably, the State Council recently issued the “Opinions of the State Council on Implementing the Healthy China Initiative,” which clearly outlines the guiding principles of the initiative and sets forth the overarching goals for China’s healthcare sector from 2022 to 2030. This has once again drawn market attention to the biopharmaceutical industry.

In light of this, brokerage offices have been issuing a flurry of strategy reports, expressing optimism about the biopharmaceutical sector and noting that valuations of biotech stocks remain at historically low levels, offering long-term investment appeal.

The Shanghai Stock Exchange has, in accordance with the law, terminated its review of Guoke Huanyu’s application for an IPO on the STAR Market.

On September 5, 2019, the Listing Committee of the STAR Market of the Shanghai Stock Exchange held its 21st review meeting to deliberate on the issuance and listing application of Beijing Guoke Huanyu Technology Co., Ltd. (hereinafter referred to as “Guoke Huanyu”). Following deliberation, the committee reached a consensus to reject the company’s application for issuance and listing. In accordance with the Rules for the Review of Issuance and Listing of STAR Market Stocks of the Shanghai Stock Exchange, the Exchange, taking into account the committee’s deliberative opinion, decided to terminate the review of Guoke Huanyu’s STAR Market issuance and listing.

On April 12, 2019, the Shanghai Stock Exchange accepted Guoke Huanyu’s application for an IPO on the STAR Market and conducted three rounds of review inquiries. Throughout the review process, the Exchange remained centered on information disclosure, adopting an open, inquiry‑based review approach that focused on three key areas: First, the issuer’s ability to operate independently and sustainably in direct competition with the market. One of the issuer’s primary business models involves undertaking major national research projects. Such projects are allocated under the planning arrangements of relevant state authorities; tasks are broken down and assigned by an affiliated entity (Entity D—whose name the issuer did not disclose pursuant to information‑disclosure exemption rules), with research funding disbursed hierarchically through designated authorities and Entity A (also undisclosed under the same exemption rules). No formal contracts were executed in this arrangement. Revenue from these major project‑undertaking activities is derived entirely from government‑allocated funds, accounting for 35.38%, 25.08%, and 31.84% of the issuer’s total revenue over the most recent three fiscal years, respectively. Second, the soundness of the issuer’s accounting practices and the effectiveness of its internal control systems. In its audited 2018 parent‑company financial statements disclosed during a March 2019 financing round on the Beijing Equity Exchange, the issuer reported net profit of RMB 27.86 million. By April 2019, when filing for the STAR Market, the parent‑company financial statements showed net profit of RMB 17.91 million—a discrepancy of RMB 9.96 million. The primary reason for this difference was the issuer’s decision to reclassify previously received corporate income tax refunds for prior years—originally recognized as a one‑time adjustment to 2018 profit or loss—as deferred tax assets to be matched against the corresponding accounting periods within the reporting period. This resulted in an increase of RMB 3.58 million in 2018 income tax expense and RMB 6.81 million in deferred tax expense, collectively reducing 2018 net profit by RMB 10.39 million. Furthermore, the issuer’s classification of accounts receivable by age and its allocation of costs and expenses lacked sufficient precision, leading to variances across multiple line items in the financial statements submitted in the two filings. Notably, the two submissions were filed only one month apart, and both were audited by the same office. Third, the fairness of related‑party transactions. The issuer’s operations exhibit substantial reliance on affiliated entities—Entity A and Entity D. Over the most recent three fiscal years, related‑party sales to Entity A amounted to RMB 42.17 million, RMB 32.49 million, and RMB 60.51 million, representing 66.82%, 25.73%, and 32.35% of total sales, respectively. However, the issuer failed to adequately demonstrate the arm’s‑length nature of pricing in these related‑party transactions.

The Listing Committee of the STAR Market concluded that: the issuer has a high proportion of related-party transactions and exhibits significant reliance on related parties in its business operations; it has been unable to demonstrate the fairness of related-party transaction pricing; its major special‑project research and development business model was obtained through non‑market‑based means, with revenue derived from allocated funds; accordingly, the issuer fails to meet the requirements for business integrity and the ability to operate independently and sustainably in a market‑oriented manner. Furthermore, at the time of its initial filing, the issuer did not adequately disclose its major special‑project R&D business model, omitted disclosures regarding related parties, and failed to provide sufficient information necessary for investors to form value judgments and make investment decisions. In March 2019, the issuer was listed on the Beijing Stock Exchange, and there are material discrepancies between its financial data at that time and the financial data submitted in this application. Moreover, the issuer’s financial figures underwent substantial adjustments within a short period, and the parent company’s reported net profit differs by RMB 9.9591 million, indicating deficiencies in internal controls and weak accounting fundamentals.

Under the relevant regulatory framework, during the review of IPO applications on the STAR Market, the SSE is required to assess and determine, in light of the STAR Market’s positioning, whether issuers meet the issuance criteria, listing requirements, and information disclosure obligations. The Measures for the Registration Administration of Initial Public Offerings on the STAR Market (Trial) stipulates that issuers seeking to list on the STAR Market must satisfy certain issuance conditions, including having a complete business structure and the ability to operate independently and sustainably directly in the market; maintaining sound accounting practices; and possessing robust internal control systems that are effectively implemented. The interpretation and enforcement of these issuance conditions must be informed by the factual circumstances disclosed by the issuer through information disclosure and other means. The decision to terminate the review of Guoke Huanyu’s IPO was reached after a prudent assessment—based on the information provided in the prospectus and the responses to review inquiries—of such matters as the issuer’s business independence and the standardization of its accounting practices.

Guoke Huanyu represents the first case since the STAR Market’s pilot implementation of the registration-based system in which an IPO review was terminated due to disagreement with the issuer’s application. Previously, eight companies that had filed for listing on the STAR Market had, after undergoing one or more rounds of inquiry, voluntarily withdrawn their applications, resulting in the termination of their reviews. Under the existing rules and procedures governing IPO reviews on the STAR Market under the registration-based system, whether the review concludes in approval or disapproval, or is terminated due to voluntary withdrawal or other reasons, such outcomes are all considered normal within the review process.

The Shanghai Stock Exchange will continue to advance along the paths of marketization and rule of law, steadfastly uphold the STAR Market’s positioning, place information disclosure at the core, and effectively implement the inclusive institutional arrangements governing the STAR Market’s issuance and listing. At the same time, it will fully leverage the role of its transparent, inquiry‑based review process in enhancing both issuers’ information‑disclosure quality and the professional standards of intermediary institutions, thereby rigorously safeguarding the market’s “entry gate.” This is a practical requirement for the Shanghai Stock Exchange to fulfill its statutory duties of reviewing and approving issuances and listings under the registration‑based system.

Commercial & Corporate

The plan to acquire the remaining 51% equity stake in Dingpai Mechanical & Electrical has been unveiled, and Estun will resume trading on September 9.

Following a suspension of trading on August 26 due to plans for a major asset restructuring, Estun disclosed on the evening of September 6 a preliminary proposal for an associated transaction involving the issuance of shares and convertible bonds to acquire assets and raise accompanying funds. The company intends to acquire a 51% stake in Dingpai Mechanical & Electrical from its controlling shareholder, Pailai Te, by issuing shares and convertible bonds, while also raising supplementary financing through a non‑public offering of shares or convertible bonds. Meanwhile, the company’s shares will resume trading on September 9.

It is reported that the offering price for the shares is RMB 8.00 per share, and each convertible bond has a face value of RMB 100. The initial conversion price is set in accordance with the share pricing standard applicable to the equity‑based asset acquisition component of this offering, namely RMB 8.00 per share. The proceeds from the accompanying financing are intended to replenish the working capital of both the company and the target company, repay bank loans, fund the construction of ongoing projects at the target company, and cover transaction‑related intermediary fees and associated taxes and levies.

Dingpai Mechanical & Electrical is a special-purpose company established for the Cloos transaction, with its principal asset being an indirect 100% equity interest in the German company Cloos. Prior to this transaction, the company held a 49% stake in Dingpai Mechanical & Electrical; upon completion of the transaction, Dingpai Mechanical & Electrical will become a wholly owned subsidiary of the company.

According to available data, Cloos has been independently developing welding robots since 1981, making it one of the earliest companies in the world to possess fully proprietary welding robot technology and products. It is a renowned industry leader in robotic welding. This acquisition will enable the company to capture a leading position in a high‑end segment of the robotics industry.

Eston stated that Dingpai Mechanical & Electrical indirectly holds shares in Cloos, a company engaged in robotics‑based welding, which creates potential intra‑industry competition with the Company. Upon completion of this transaction, the Company will acquire 100% equity interest in Dingpai Mechanical & Electrical, thereby eliminating any potential competitive overlap with its controlling shareholder. At the same time, the Company’s asset base and revenue scale are expected to expand significantly, further strengthening its overall competitiveness and risk resilience, and enhancing both its asset quality and profitability while bolstering its ability to sustain ongoing operations.

Controlling shareholder removes director; second-largest shareholder of Aowei Communications files a lawsuit in opposition.

Ovi Communications recently disclosed a litigation announcement. Dissatisfied with the controlling shareholder’s decision to remove Li Jifang, a long-serving executive of the company, Du Fang—formerly one of the actual controllers and chairman, and now the second-largest shareholder—has filed a lawsuit against the listed company and the current controlling shareholder, Ruili Bay Tourism Development Co., Ltd. of Ruili City (hereinafter referred to as “Ruili Bay”), seeking a court order to rescind the removal.

According to the public notice, Du Fang has petitioned the court to annul the resolution adopted at the defendant’s Second Extraordinary Shareholders’ Meeting held on August 5, 2019. Upon investigation, it was found that the meeting approved the “Proposal to Remove Ms. Li Jifang from her position as a director.” Du Fang contends that both the convening procedures and the content of the resolution violated applicable laws and the company’s Articles of Association, and respectfully requests the court to set aside the resolution.

Looking back at the public announcements, after the controlling shareholder of Ovi Communications, Ruilai Bay, changed hands in March this year to the couple Dan Chuan and Wu Qiong, Ruilai Bay—claiming its aim was “to gain control of Ovi Communications’ board of directors”—submitted motions on June 19 and June 30 to both the board of directors and the supervisory board to remove director Li Jifang, but these motions were not approved. On August 5, Ruilai Bay convened another shareholders’ meeting, intending to join forces with minority shareholders to delist Li Jifang from the board. Judging from the final vote tally, among the roughly 100 million shares cast in favor, the vast majority came from Ruilai Bay itself.

According to available records, Li Jifang has been with the Marketing Department of Aowei Communications since July 2005 and currently serves as Vice President and Chief Financial Officer. She has maintained a long-standing working relationship with Du Fang. In January of this year, Li Jifang, along with Lü Qi, Li Ye, and others, was elected as a member of the fifth-term Board of Directors.

Regarding the matter of his removal, Li Jifang previously stated in a public announcement that he does not fall under any circumstances rendering him unable to perform his duties as a director. Should he be removed, he will continue to fulfill his duties and obligations as a director— including, but not limited to, regularly attending board meetings—until a new director assumes office.

The announcement indicates that on August 30, Du Fang filed an application with the court for interim measures. The court ruled as follows: pending the entry into force of the judgment in this case, Aowei Communications shall not enforce the resolution adopted at the Second Extraordinary Shareholders’ Meeting held on August 5, 2019; and, pending the entry into force of the judgment in this case, the company shall not, on the basis of the aforementioned resolution, proceed with the industrial and commercial registration or filing of any changes to the members of the board of directors.

Upon verification, Du Fang joined Ovi Communications in 2008 and, together with Wang Chongmei and Du Anshun, exercised de facto control over the company. Since 2008, he has served as both Chairman and President of Ovi Communications. In September 2017, Du Fang and others transferred control of the listed company to Ruilii Bay for a transaction price of RMB 1.677 billion, representing 27.95% of the company’s total share capital. At that time, the controlling shareholder of Ruilii Bay was Yunnan Jingcheng Group, and Dong Lecheng was the actual controller of Yunnan Jingcheng Group.

According to Ovi Communications’ semi-annual report this year, Ruilii Bay holds a 27.95% stake in the company, making it the controlling shareholder, while Du Fang holds a 19.02% stake, ranking as the company’s second-largest shareholder.

At the time of the transfer of control in 2017, Du Fang and others did not enter into any special agreements with Ruilii Bay. According to the public announcement, following this change in equity interests, Ruilii Bay may, in accordance with applicable laws, regulations, and the articles of association of the listed company, exercise its shareholder rights and make appropriate adjustments to the members of the board of directors, the supervisory board, and the senior management of the listed company.

However, it is worth noting that, in April 2018, the revised Articles of Association of Aowei Communications stipulated that directors are elected or replaced by the shareholders’ meeting for a term of three years. Upon expiration of their term, directors may be re‑elected for successive terms. Furthermore, before the expiration of their term, the shareholders’ meeting may not remove a director without just cause.

When Ruilii Bay previously proposed to the board of directors the removal of Li Jifang, all four directors abstained, with the exception of Li Jifang himself, who cast a “no” vote.

Hualing Steel plans to acquire Yangchun New Steel for RMB 1.655 billion.

Following the China Securities Regulatory Commission’s approval of a multi-billion‑yuan restructuring to acquire a stake in “Sansteel,” Hualing Steel (000932) is pressing ahead, planning to bring Yangchun New Steel under its umbrella as well. According to an announcement released on the evening of September 6, its subsidiary Hualing Xianggang intends to acquire a 51% equity interest in Yangchun New Steel for RMB 1.655 billion in cash.

Hualing Group, the controlling shareholder of Hualing Steel, holds indirect control over Yangchun New Steel, giving rise to potential intra‑industry competition with the listed company. In November 2017, Hualing Group pledged to inject its equity in Yangchun New Steel into the listed company within five years. Moreover, as early as April this year, Hualing Steel stated that it aimed to complete a cash acquisition of a controlling stake in Yangchun New Steel by the end of 2019.

The announcement indicates that Yangchun Xingang’s construction materials and wire-drawing products consistently rank among the highest in sales prices within Guangdong Province, enjoying strong competitiveness and significant brand influence in the regional market, and have now become one of the leading brands in the area. From 2016 to 2018, Yangchun Xingang’s operating revenue grew from RMB 6.535 billion to RMB 11.856 billion, while net profit increased from RMB 86 million to RMB 1.024 billion, with compound annual growth rates of 34.69% and 244.48%, respectively, demonstrating robust and sustained profitability.

According to information from Tianyancha, Xiangtan Iron and Steel Group holds an 83.5% stake in Yangchun New Steel, and Xiangtan Iron and Steel Group is a wholly owned subsidiary of Hualing Group; accordingly, Yangchun New Steel is a company indirectly controlled by Hualing Group.

In its announcement, Hualing Steel stated that, in order to fulfill the aforementioned commitments and avoid potential同业 competition with the listed company, and following mutual agreement with Hualing Group, the company’s controlling subsidiary, Hualing Xianggang, plans to acquire a 51% equity stake in Yangchun Xinsteel for RMB 1.655 billion in cash. On September 6, Hualing Xianggang signed a conditional acquisition agreement with Xianggang Group.

Hualing Steel also noted that, upon completion of this acquisition, Yangchun New Steel will become a controlling subsidiary of Hualing Xianggang, which will help the listed company further refine and diversify its existing product portfolio, optimize its market presence in the economically developed coastal regions, and boost both its revenue scale and profitability. This, in turn, will strengthen the company’s financial performance and enhance its overall competitiveness and capacity for sustainable growth.

The revised draft disclosed by Hualing Steel in April this year indicates that the company plans to issue shares to nine counterparties, including Hualing Group and Lianggang Group, in exchange for their collectively held minority equity interests in the “Three Steel” entities—namely, a 13.68% stake in Hualing Xianggang, a 44.17% stake in Hualing Lianggang, and a 43.42% stake in Hualing Steel Pipe. In addition, the listed company intends to acquire, for cash, the entire 100% equity interest in Hualing Energy Conservation held by Lianggang Group. Following amicable consultations among all parties, the aggregate valuation of the assets subject to this restructuring is approximately RMB 10.466 billion.

At the time, Hualing Steel stated that it would accelerate the cash‑based acquisition of a controlling stake in Yangchun New Steel, aiming to complete the transaction within 2019.

New highs atop new highs: Why has Hudiang Shares become the leading PCB stock?

Recently, the share price of Hudiang Co., Ltd. has strengthened, beginning with three consecutive daily limit-up rallies from June 27 to June 30. Behind this sharp rise lies solid earnings performance. Looking back at Hudiang’s stock trajectory over the past year, both of its recent limit-up moves were tied to the release of quarterly results.

On the evening of June 26, HuaDian Shares released a performance forecast, projecting first-half net profit of RMB 440 million to RMB 500 million, up 123.86% to 154.39% year over year. The following day, the stock hit the daily upper limit with no trading below it, and continued to do so for the next two trading days.

On August 28, Shanghai Electric Circuit Co., Ltd. officially released its semi-annual report, two months after it had issued its earnings forecast. Since then, the company’s stock price has surged, nearly doubling. According to the financial results, the company posted first-half revenue of RMB 3.122 billion, up 26.72% year over year, and net profit of RMB 478 million, a year-on-year increase of 143.4%.

From a performance perspective, HuaDian Shares’ net profit for the first half of the year met expectations. The company’s PCB gross margin improved markedly, and with its forecast of 800 million to 900 million yuan in profits for the first three quarters—up 108.76% to 134.86% year over year—the stock once again hit the daily upper limit on August 29. Since then, it has steadily gained ground, reaching new highs over several consecutive trading days.

In its semi-annual report, Huadian Shares stated that the company continues to deepen its presence in key application markets such as 5G base stations, enterprise communications, automotive electronics, industrial control, and cloud computing. Its performance growth has benefited from steadily rising demand for 5G technologies, next-generation high-speed networking equipment, high-performance computing servers, and industrial control products.

Meanwhile, the company’s strong fundamentals have also drawn a large number of institutional investors to conduct on-site research. From September 4 to 6, Hudiang Co., Ltd. released four investor‑relations activity reports in just three days, with 22 institutions—including Zhongtai Securities, Guotai Junan, Boda Fund, and China Life Insurance—turning up in person. The topics covered included the company’s communications‑board business, its automotive‑board operations, the impact of trade disputes, and its major competitors.

On September 5, during trading hours, Shanghai Electric Circuit Co., Ltd. hit an all-time high of RMB 28.58 per share, with a total market capitalization of RMB 49.3 billion—up roughly RMB 37 billion from the start of the year.

During the period this year when Hudiang Shares’ stock price nearly tripled, the company issued a total of four announcements regarding trading anomalies: consecutive daily limit-ups over three days from June 26 to 28, a limit-up on August 29, another limit-up on September 3, and a pullback of more than 7% on July 2. A review of these announcements reveals that institutional investors, Shenzhen Stock Connect accounts, and two well-known brokerage branches appeared on the list multiple times.

Institutional‑only seats traded heavily during periods of significant volatility in Hudi Electric, appearing repeatedly on both the buy and sell sides. Their typical strategy was to “sell high and buy low,” as evidenced by cumulative sales of RMB 260 million when Hudi Electric hit the daily upper limit for three consecutive days at the end of June, and purchases totaling RMB 82.27 million on July 2 following a sharp plunge. Overall, institutional accounts netted roughly RMB 180 million in sales across the four instances where Hudi Electric appeared on the Dragon and Tiger List.

Shenzhen Stock Connect has been the leading buyer during periods of unusual trading activity in Shanghai Electric Shares. Statistics show that, across the four aforementioned episodes of trading volatility, Shenzhen Stock Connect accumulated net purchases totaling approximately RMB 270 million. Notably, on August 29—the day Shanghai Electric Shares hit the daily upper limit—Shenzhen Stock Connect purchased shares worth RMB 220 million, accounting for 7.5% of the day’s total turnover.

In fact, since the second quarter of 2018, the Shenzhen Stock Connect has been steadily increasing its holdings in Shanghai Electric. In the first quarter of this year, it reduced its stake by 11.57 million shares, but then added another 3.69 million shares in the second quarter. As of June 30, the Shenzhen Stock Connect’s shareholding ratio reached 6.51%, making it the third-largest shareholder.

Speculative capital has also been one of the driving forces behind the rally in Shanghai Electric Circuit Co., Ltd. shares. As of June 30, Zhao Qiang held 7.4625 million shares. If he did not reduce his stake in the third quarter, the market value of this holding has now doubled.

As Shanghai Electric’s shares continued to climb, Shenzhen Stock Connect investors and institutional investors began to gradually exit. Shenzhen Stock Connect had previously been the primary buying force behind Shanghai Electric; on August 29, when the stock hit its daily limit-up, Shenzhen Stock Connect net‑purchased over RMB 200 million that day. However, on September 3—another day of limit‑up—the same channel appeared simultaneously on both the buy and sell sides: it bought RMB 110 million and sold RMB 167 million, resulting in a net sell-off of RMB 56.32 million.

Institutional investors have also been gradually reducing their holdings. In addition to withdrawing RMB 180 million from the top‑ten shareholder list of Shanghai Electric Circuit Co., Ltd. across four trading sessions, they have frequently appeared in block trades. According to block‑trade data, from the end of 2018 through July 2019, Shanghai Electric Circuit executed eight block transactions, with all sellers being institutional accounts. The selling price rose steadily from around RMB 7.60 per share to RMB 13.87, resulting in cumulative sales of RMB 113 million.

During a recent institutional investor briefing, Huodian Co., Ltd. stated that in the first half of 2019, its 5G products were already being supplied in volume to major global telecommunications equipment manufacturers. Despite the rapid growth of its 5G product line, since 5G network deployment remains in its early stages, 5G products still accounted for a relatively small share of the company’s revenue during the same period.

In its semi-annual report, the company also noted that the deployment and commercialization of 5G will not happen overnight. At this stage, 5G network rollout continues to face significant challenges, including high deployment costs, as well as the need to cultivate and expand a robust application ecosystem. Widespread commercial use of 5G will still take time, global 5G deployment rates remain uncertain, and risks across the industry chain are steadily mounting.

In the block-trade list for Shanghai Electric Shares, a mysterious brokerage branch has also surfaced—Huatai Securities’ Kunshan Heilongjiang North Road. Since 2012, this branch has been gradually selling off its holdings in Shanghai Electric Shares, only to make a comeback this year and step in to take over again.

Statistics show that, since 2012, Huatai Securities’ Kunshan Heilongjiang North Road branch has purchased shares of Hudi Electric worth RMB 164 million while cumulatively selling a total of RMB 1.086 billion. The sell‑side prices were mostly in the range of RMB 3–6 per share, and all block trades were executed at premiums to the closing price. Notably, nine block transactions conducted in February and September 2012, as well as in August 2014, were all matched with the same brokerage branch as the counterparty.

Based on a comparison of the company’s executive share‑sale announcements with the details of block‑trade transactions, it was found that the brokerage branch through which the affiliated companies of Wu Ligang’s family—Wu Ligang being the actual controller of Hudi Shares—executed their sales was Huatai Securities’ Kunshan Heilongjiang North Road branch. For example, Bi Jing (British Virgin Islands) Holdings Co., Ltd., an affiliate of Wu Ligang, sold shares of Hudi Shares over three consecutive days, from June 27 to 29, 2016. Post‑closing block‑trade data for those days showed that all sell orders were routed through Huatai Securities’ Kunshan Heilongjiang North Road branch, and the volume sold matched the amounts disclosed in the company’s executive‑sale announcements. Similarly, Hepai Youlian Co., Ltd., an entity associated with Wu Chuanbin, a member of the Wu Ligang family, also executed its share sales via Huatai Securities’ Kunshan Heilongjiang North Road branch.

At the beginning of this year, Huatai Securities’ Kunshan branch reappeared in block trades on Heilongjiang North Road, with all transactions recorded as purchases. Over three days, from January 7 to 9, it cumulatively acquired 10.58 million shares, totaling RMB 80.7854 million in transaction value.

Fourteen tin producers have jointly cut production by 20,000 tonnes; tin prices may rise.

On September 5, Chinese tin industry enterprises issued a joint statement, in which 14 Chinese tin producers agreed to cut refined tin output by 20,200 tonnes this year, thereby heeding the call for “high-quality development” in the sector and committing to strictly control new capacity while phasing out outdated production facilities.

Several domestic and international tin producers, including Yunnan Tin, have voluntarily cut supply, further reversing the supply‑demand balance and making expectations of a rise in tin prices quite clear.

According to an announcement by Xiyue Shares, in order to actively respond to the joint production-cutting initiative of Chinese tin industry enterprises, address the industry’s challenges—including tight raw-material supplies—and promote the sustained, healthy development of China’s tin sector, the company will implement a production reduction. It is expected that the company’s refined‑tin output for 2019 will be approximately 10% lower than its annual production plan.

Notably, recently, Indonesia’s Tin Mine Company, one of the world’s leading refined‑tin suppliers, announced it will cut production by more than 10,000 tonnes, bringing total cuts to over 30,000 tonnes. Global annual output is expected to shrink by more than 10 percent. Indonesia’s tin‑ore production ranks second only to China, accounting for 24 percent of global supply. In addition, Indonesia has signed an energy ministerial decree imposing an early ban on nickel‑ore exports, prompting speculation about possible restrictions on tin exports. Should Indonesian tin‑ore supplies tighten, the global tin market could face further supply‑demand imbalances.

In recent years, tin has seen expanding applications, such as replacing carbon anodes in lithium‑ion batteries, substituting for chromium and nickel in stainless steel, and taking the place of lead in PVC.

Taxation TAXATATION

Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Value-Added Tax End-of-Period Credit Refund Policy for Certain Advanced Manufacturing Industries

To further promote the high-quality development of the manufacturing sector, the following policy regarding the refund of incremental input VAT credit to eligible advanced manufacturing taxpayers is hereby announced:
I. Effective June 1, 2019, certain taxpayers in advanced manufacturing who simultaneously meet the following conditions may, starting with the tax filing period of July 2019 and thereafter, apply to their competent tax authorities for a refund of the incremental input VAT credit:
1. The incremental input VAT credit is greater than zero;
2. The taxpayer’s credit rating is Grade A or Grade B;
3. No instances of fraudulently obtaining input VAT credit refunds, export tax rebates, or issuing false special VAT invoices have occurred within the 36 months preceding the application for a tax refund.
4. Within the 36 months preceding the application for a tax refund, the taxpayer must not have been penalized by the tax authorities for tax evasion on two or more occasions.
5. Since April 1, 2019, the entity has not benefited from the policies of immediate collection and immediate refund or collection first followed by refund (or rebate).
II. For the purposes of this announcement, “certain advanced manufacturing taxpayers” refers to taxpayers whose sales of non-metallic mineral products, general-purpose equipment, special-purpose equipment, and computers, communications equipment, and other electronic equipment account for more than 50% of their total sales, as determined in accordance with the National Economic Industry Classification.
The aforementioned proportion of sales revenue is determined based on the taxpayer’s sales revenue for the continuous 12 months preceding the refund application; if the taxpayer’s operating period prior to the refund application is less than 12 months but at least 3 months, the proportion shall be calculated on the basis of the sales revenue attributable to the actual operating period.
III. The incremental input VAT credit referred to in this announcement means the increase in the end-of-period input VAT credit compared with the balance as of March 31, 2019.
IV. The incremental input VAT credit refundable for certain advanced manufacturing taxpayers in the current period shall be calculated according to the following formula:
Refundable incremental input VAT credit = Incremental input VAT credit × Proportion of input tax components
The input tax composition ratio is the proportion of the VAT amount indicated on the special VAT invoices (including the unified invoices for motor vehicle sales under tax control), the special customs import VAT payment receipts, and the tax payment certificates for settled taxes—among which the VAT has already been credited—relative to the total amount of input VAT credited during the period from April 2019 up to the tax period immediately preceding the application for a tax refund.
V. Other provisions regarding the application by certain taxpayers in advanced manufacturing for a refund of the incremental input VAT credit shall be implemented in accordance with the “Announcement of the Ministry of Finance, the State Taxation Administration, and the General Administration of Customs on Policies Related to the Deepening of the Value-Added Tax Reform” (Ministry of Finance, State Taxation Administration, General Administration of Customs Announcement No. 39 of 2019, hereinafter referred to as Announcement No. 39).
VI. With respect to the provisions governing applications by taxpayers other than certain advanced manufacturing taxpayers for refunds of incremental input VAT credit, the relevant rules shall continue to be implemented in accordance with Announcement No. 39.
VII. Taxpayers who meet the requirements set forth in Announcement No. 39 and this Announcement shall submit their applications for refund of outstanding input VAT credits to their competent tax authorities. For those who satisfy the conditions for such refunds, the tax authorities, upon completing the review, shall issue a Tax Revenue Refund Certificate and forward it directly to the treasury at the same level for processing the refund. The tax authorities shall, on a regular basis, transmit the list of refunds to the corresponding fiscal departments. All relevant departments shall strengthen coordination and close collaboration to ensure that the work related to the refund of outstanding input VAT credits is carried out in a steady and orderly manner.

Continuously optimizing the business environment to ensure that tax and fee reductions take root and deliver tangible results.

Since the beginning of this year, the Taiyuan Municipal Tax Service Bureau of the State Taxation Administration has earnestly implemented the decisions and arrangements of the CPC Central Committee, the State Council, the provincial Party committee, and the provincial government. Officely upholding the principle that tax and fee reductions are both a political and an imperative task, the bureau has rolled out a series of measures—ranging from policy publicity and targeted outreach to service optimization—to fully deliver on a comprehensive package of tax relief for small and micro enterprises and the reduction in VAT rates, thereby continuously enhancing the sense of gain among businesses and the general public. As the saying goes, “How can the channel be so clear? Because it is fed by a living spring.” With the steady release of the benefits of these tax and fee‑cutting policies, an increasing number of enterprises are experiencing renewed vitality and robust growth.

I. Combining point‑based and area‑based approaches, we will carry out multi‑level policy publicity to ensure that all eligible parties are fully informed.

First, face-to-face training. We have extensively carried out publicity and guidance on tax and fee reduction policies, printing illustrated brochures and compiling a series of policy compendiums to distribute to taxpayers. Tax service centers throughout the city have set up dedicated consultation and guidance counters to provide taxpayers with specialized assistance on these policies. In addition, we have organized 190 customized training sessions on tax and fee reductions through physical taxpayer academies, reaching 236,600 small-scale taxpayers, 78,300 small and micro-profit enterprises, and 529,900 individual income tax filers.

Second, targeted, one‑on‑one guidance was provided. In January this year, the Taiyuan Taxation WeChat official account promptly launched a dedicated section on tax and fee reductions. A total of 403 policy articles were published, including 362 reprints and 41 original pieces, with cumulative views reaching 170,000. The department also compiled and organized 76 policy documents related to tax and fee reductions, and swiftly produced an H5‑format “Compilation of Tax and Fee Reduction Policies” issued by the State Taxation Administration Taiyuan Municipal Tax Service. Additionally, it released “A Letter to All General VAT Taxpayers in the City,” explaining key policy provisions, invoicing guidelines, and filing requirements, which was widely welcomed by taxpayers. Starting April 19, five consecutive video episodes of the “In-depth VAT Reform Lecture Series” were recorded and broadcast, covering topics such as reduced tax rates, expanded input‑credit deductions, additional tax credits, refunds of outstanding tax credits, and tax filing procedures. By the end of August, the Taiyuan Taxation WeChat official account had amassed a total of 28,000 subscribers.

Third, one-on-one communication. Tax bureaus in all counties and districts have actively organized “County Mayor Tax Classes,” briefing local Party committees and government leaders on the progress of tax and fee reduction measures or providing relevant educational sessions, thereby raising public awareness and support for these initiatives and fostering a strong culture of widespread understanding and full compliance with tax and fee reduction policies.

II. Go deep into enterprises to conduct face-to-face, targeted matchmaking, ensuring that all eligible benefits are fully realized.

First, leadership took the lead. While actively participating in the province-wide initiative to send 10,000 cadres into enterprises and villages, the Taiyuan Municipal Tax System, focusing on tax and fee reductions, seconded 600 tax officials, organized them into 228 teams, and launched a special campaign titled “Extensive Visits, In-Depth Research, and Comprehensive Services” led by senior officials. During the campaign, they provided on-site services to 470 enterprises, distributed over 500 pieces of promotional materials, and collected and resolved 42 tax-related issues raised by businesses.

Second, Party members take the lead. By fully leveraging the role of Party branches as strong bastions and the exemplary, pioneering role of Party members, we have assembled three “task forces”—the Party Member Vanguard Task Force, the Women’s Vanguard Task Force, and the Youth Vanguard Task Force—comprising young Party members and key professionals. These teams have gone door-to-door to provide on-site training and guidance to small and micro enterprises within our jurisdiction, earning their recognition and approval.

Third, ensuring that legal entities are fully informed about tax matters. We have vigorously advanced the initiative “Legal Entities Know Their Taxes, Calculating Tax Benefits,” meticulously conducting cross-referencing and data matching across different enterprises, tax types, and information categories. We have thoroughly analyzed and systematically categorized exemption and reduction data, carried out multiple rounds of data‑calibration and result verification, and calculated the specific tax incentives each enterprise is entitled to under various tax regimes. This has enabled taxpayers to clearly understand their fiscal gains, with a dedicated “iron‑clad ledger” established for each entity. Through door-to-door delivery, mail, email, and other channels, we have promptly communicated to corporate legal representatives the precise details of the tax and fee reductions they are currently enjoying, receiving highly satisfactory feedback. By quantifying the benefits of tax and fee relief policies, we have actively encouraged enterprises to proactively adjust their investment strategies, promote product upgrades and technological improvements, enhance product quality and competitiveness, and thereby generate greater economic and social value.

III. Optimize services, explore innovation in light of practical conditions, and continuously enhance the taxpayer experience.

First, we have refined our mechanisms to ensure taxpayers experience no bottlenecks or pain points. Focusing on taxpayer concerns—such as cumbersome tax‑processing procedures and difficulties in obtaining invoices—we convened multiple specialized meetings to devise solutions and promptly issued the “Several Measures of the Taiyuan Municipal Tax Service Bureau for Optimizing the Tax‑Related Business Environment.” These measures include ten specific actions: strictly prohibiting arbitrary additions to tax‑filing processes; substantially relaxing invoice‑quantity limits; coordinating assessment and inspection activities; and standardizing on‑site enforcement. We also engaged third parties to conduct quality‑and‑efficiency evaluations of taxpayer services at service halls and expanded online surveys. Furthermore, we established clear follow‑up protocols, including written corrective action reports from underperforming units, interviews with bureau leadership, and targeted expert reviews and oversight, with remediation carried out on a monthly basis. We rigorously implement a rapid response mechanism for tax‑related requests and feedback from small and micro enterprises, ensuring prompt resolution and feedback within three working days. Contact information—including phone numbers—for grassroots leadership teams and department heads, along with four categories of hotline numbers (tax consultation, complaints, reports of tax‑related violations, and reports of official misconduct) at both city and county levels, has been publicly posted at all tax service halls across the city. As of the end of August, we had addressed 55 complaints of various types, achieving a 100% satisfaction rate in taxpayer follow‑up surveys.

Second, we have implemented mobile tax services to help taxpayers “spend less time in person and more time online.” By leveraging our self-developed “Shui Baobao” mobile app, we provide taxpayers with comprehensive, round-the-clock tax‑related services. Tax officials can access taxpayer information within their authorized scope in real time, monitor case‑by‑case status anytime, anywhere, promptly address taxpayer inquiries, and deliver tailored guidance on tax‑reduction and fee‑cutting policies on a one‑to‑one or one‑to‑many basis. The app also allows for conditional filtering, enabling personalized policy outreach and consultation support. Through the “Feedback & Inquiry” module, users can track response statuses in real time and re‑issue information to those who have not yet viewed it, ensuring maximum effective communication. In addition, we have established a Director’s Mailbox to maintain an open channel for complaints and feedback. Taxpayers can directly submit suggestions or file complaints regarding any issues encountered during the implementation of tax‑reduction and fee‑cutting measures. Addressing the persistent bottleneck of long queues at tax service counters, the Shui Baobao app offers end-to-end appointment‑based services—covering appointment scheduling, queue number management, timely reminders, and tax payment. Users can check queue‑status information for all tax service halls across the city, select locations with fewer people, and stagger their visits to avoid peak times. As of the end of August, the Shui Baobao app had registered over 185,000 user accounts, covering more than 70% of all taxpayers under our jurisdiction. Through its effective use, the app has delivered 141 policy‑related push notifications and 591 official announcements, reaching approximately 156,000 taxpayer instances. Meanwhile, the average processing time at city‑wide tax service halls has been reduced from 6 minutes to 3.74 minutes.

Third, tax‑postal cooperation helps taxpayers “spend less time on the road.” A strategic tax‑postal cooperation agreement was signed with the Municipal Post Office, and the province’s first Tax‑Postal Cooperation Service Center was jointly established. The center collaborates on multiple fronts, including online invoice application with postal delivery and entrusted tax collection services. It is equipped with 23 automated processing terminals—10 for blank‑invoice applications and 13 for issuing invoices on behalf of taxpayers—each capable of operating unattended. In the first half of the year, the Taiyuan Tax‑Postal Cooperation Service Center delivered 2.5028 million invoices to 42,500 taxpayer instances and issued 4,220 invoices on behalf of 2,296 taxpayers. The center also proactively undertook the pilot program for the province-wide tax “dual‑agency” information system, selecting suitable outlets—those with high customer traffic, adequate counter space, proximity to commercial markets, and relatively favorable lobby conditions—to launch dual‑agency services. Following a series of preparatory steps—including platform development, system testing, staff training, and preparation of equipment, seals, and supporting documentation—the two services—postal‑based invoice issuance and tax collection—were rolled out across all ten counties and districts in the city. Leveraging the post office’s extensive network, this initiative has enhanced taxpayers’ efficiency while establishing a new platform for collaborative tax administration and joint tax governance. In May, an online service was launched allowing ordinary invoices to be issued and delivered by mail. To date, the postal service has processed 13,000 such requests, involving a total amount of RMB 677 million, and collected RMB 31.44 million in taxes on behalf of the tax authorities.

Fourth, we have promoted bank–tax cooperation to help taxpayers avoid unnecessary detours. By innovatively launching bank–tax collaboration and establishing the “Taiyuan Bank–Tax Information Service Platform,” we have focused on serving small, medium, and micro private enterprises, enabling direct data connectivity between banks and tax authorities. With the enterprises’ authorization, the tax authorities use the platform to share, in real time, key tax‑related information—such as basic company details, tax compliance ratings, filing and payment records, and any violations or infractions—with banks’ credit systems, providing an important reference for credit decisions and enriching banks’ decision‑making resources. Leveraging the tax information shared through the Taiyuan Bank–Tax Information Service Platform, we have transformed taxpayers’ tax compliance into financing credibility, effectively addressing the longstanding challenges of slow, costly, and difficult access to financing faced by small, medium, and micro private enterprises. Meanwhile, in tandem with the Shanxi Provincial Policy‑Based Financing Guarantee Group, Taiyuan’s bank–tax initiative is pioneering a new inclusive finance model: “bank–tax collaboration plus policy‑guaranteed loans.” In recent years, this effort has helped more than 4,223 trustworthy taxpayers secure unsecured credit loans totaling RMB 2.28 billion.

Tax and fee reductions boost confidence and strengthen the capabilities of foreign trade enterprises.

Since the beginning of this year, amid a complex international trade environment, export-oriented enterprises have faced mounting market‑uncertainty risks. At the same time, the larger‑scale tax and fee reduction measures introduced this year have been rapidly implemented and taken effect. The tangible fiscal benefits of these cuts have continuously bolstered business confidence and vitality, broadly enhancing their capacity to withstand international trade risks.

Lek Electric Co., Ltd., headquartered in Jiangsu, is a well-known manufacturer of vacuum cleaners whose products are sold in more than 100 countries and regions. According to the company’s chief financial officer, in the first half of this year, its profits increased by 163% year over year, with a significant portion attributable to the government’s tax and fee reduction policies. For instance, VAT and related surcharges on domestic sales are expected to cut taxes and fees by RMB 5.52 million for the full year; various import‑export taxes are projected to decline by RMB 10.09 million annually; social security contribution reductions will lower expenses by RMB 7.5 million; and the additional deduction for R&D expenses is anticipated to deliver a tax relief of RMB 7 million.

“The national tax and fee reduction policies have genuinely lowered corporate costs, bolstering our confidence in weathering international trade risks,” said the chief financial officer.

Export operations account for approximately 80% of Zhuhai Nasda Co., Ltd.’s total business. According to Chen Lei, the company’s CFO, “Following the reduction in the VAT rate, we expect the enterprise’s VAT and surcharges to decrease by RMB 10 million in 2019 compared with 2018. The benefits of the tax and fee‑cutting policies have provided us with more financial resources and capacity to focus on innovation and R&D, thereby continuously strengthening our core competitiveness and adaptability in the international market.”

The benefits of tax and fee reductions have warmed businesses, while continuously improved tax services have made them even more at ease. For example, the Zhejiang tax authorities have vigorously implemented differentiated management for export‑tax‑rebate enterprises, enabling end‑to‑end online processing—from filing to refund—and reducing the processing time for all Category I and Category II enterprises to within five working days.

The tax authorities in Foshan City, Guangdong Province, have launched the “Jianshui Bao” system, enabling one-click refunds for large‑value tax payments and significantly reducing taxpayers’ administrative costs. According to statistics, under the previous refund process, processing 10,000 refund records would take a full month; with “Jianshui Bao,” the entire task can now be completed in just two days, resulting in a substantial boost in refund efficiency.

After experiencing the “Tax Reduction Treasure” service, Jiang Xiaoping, General Manager of Guangdong Xinglian Precision Machinery Co., Ltd., couldn’t help but give it a thumbs-up: “The online one-stop tax and fee reduction service not only helps our company effectively cut labor, financial, and time costs, but also accelerates cash recovery, giving us greater confidence in managing trade risks.”

It is understood that, since the issuance last November of the “Notice on Implementing Several Measures to Further Support and Serve the Development of the Private Sector,” which introduced 26 measures across five key areas, tax authorities at all levels nationwide have taken this document as their guiding framework. They have launched a new round of extensive outreach and in-depth research targeting private enterprises, ensuring that the benefits of tax and fee reductions are delivered accurately, promptly, and without compromise. As the tax‑related business environment continues to improve and tax services are steadily upgraded, an increasing number of foreign‑trade‑oriented enterprises are reaping the rewards of these relief measures more quickly and effectively.

With the dividends in hand, confidence has grown even stronger. Many outward‑looking enterprises have channeled these relief‑related bonuses into bolstering R&D investment, enhancing management practices, and attracting top talent, steadily boosting their growth momentum and vitality.

Positive developments for advanced manufacturing, with certain conditions for VAT credit refunds relaxed.

On September 4, the Ministry of Finance and the State Taxation Administration issued the “Announcement on Clarifying the Value-Added Tax End-of-Period Credit Refund Policy for Certain Advanced Manufacturing Industries” (hereinafter referred to as the “Announcement”). Taxpayers in certain advanced manufacturing industries that meet the relevant criteria may, starting from the tax filing period in July 2019 and thereafter, apply to their competent tax authorities for a refund of the incremental input VAT credit.

Li Jun, PwC China’s Managing Partner for Indirect Tax Services in Mainland China and Hong Kong, told Caixin that, compared with the earlier Document No. 39, this new Announcement further relaxes the eligibility criteria for refunding incremental input VAT credits to certain advanced manufacturing taxpayers: the requirement of meeting the relevant standards for six consecutive months has been removed, and the proportional refund provision has also been abolished.

This reflects that, building on the substantial progress made in the first half of the year in cutting taxes and fees, policy‑making authorities have further accelerated the implementation of VAT‑reduction measures and streamlined related requirements to address the challenges faced by certain sectors. Such steps are intended to encourage these industries to expand production and investment, reduce taxpayers’ tax burdens and operating costs, and thereby contribute positively to overall economic growth.

Document No. 39 refers to the “Announcement of the Ministry of Finance, the State Taxation Administration, and the General Administration of Customs on Policies Related to Deepening VAT Reform,” issued in March this year.

Zhang Lijuan, a partner at the Chongqing branch of ShinWing Certified Public Accountants, also told Caixin that, compared with Document No. 39, this new Announcement relaxes the eligibility criteria regarding both the timing and the amount of incremental input VAT credit refunds for advanced manufacturing, and provides full‑amount refunds, which is a favorable development for the sector.

When a VAT taxpayer’s current-period output tax is insufficient to offset its input tax, the resulting balance is referred to as a carryforward VAT credit. Prior to 2018, China did not refund such carryforward credits; instead, taxpayers were required to carry them forward for deduction in subsequent periods. This practice effectively amounted to an advance payment of taxes, tying up corporate cash flow and placing a disadvantageous burden on capital-intensive industries—particularly manufacturing and high‑tech sectors—that had made substantial upfront investments.

In 2018, China launched a pilot program to refund part of the outstanding input VAT credits for certain advanced manufacturing sectors and other industries. Document No. 39 stipulates that, effective April 1, a trial system for refunding end-of-period input VAT credits will be implemented, allowing eligible taxpayers to apply to their competent tax authorities for a refund of the incremental input VAT credit.

The first condition under Document No. 39 is that, starting from the tax period to which the tax pertains in April 2019, the incremental input VAT credit must be greater than zero for six consecutive months (or two consecutive quarters for quarterly taxpayers), and the incremental input VAT credit in the sixth month must be no less than RMB 500,000.

This announcement further abolishes the aforementioned conditions, replacing them with the criterion that the incremental input VAT credit must be greater than zero. This means that the tax rebate for advanced manufacturing is no longer subject to the previous six-month continuous‑period requirement, nor to the minimum threshold of RMB 500,000 in the sixth month.

In addition, whereas Circular No. 39 stipulated that refunds of the incremental input VAT credit would be subject to a 40% discount, this new Announcement clarifies that for advanced manufacturing, refund amounts will be paid in full, without any discount.

According to the Announcement, certain advanced manufacturing taxpayers are those whose sales of non-metallic mineral products, general-purpose equipment, special-purpose equipment, and computers, communications equipment, and other electronic equipment account for more than 50% of their total sales, as defined by the National Economic Industry Classification. Consequently, enterprises in these sectors will benefit from the new regulations.

At the end of August, Finance Minister Liu Kun publicly stated that the next step would be to refine the value-added tax system and to study adjustments to the mechanism for sharing the costs of VAT credit refunds among local governments.

According to data from the State Taxation Administration, as of the end of September 2018, VAT credit refunds totaling RMB 114.85 billion had been issued, with RMB 106.1 billion allocated to advanced manufacturing and modern services, thereby effectively easing enterprises’ financial pressures.

Tax and fee reductions empower Jiangsu’s unicorn enterprises, injecting new vitality into their development.

As quintessential representatives of the new economy, unicorn companies play a pivotal role in fostering emerging business models, cultivating new growth drivers, and pioneering innovative approaches, thereby leading transformative changes across industries. According to the “Q1 2019 Greater China Unicorn Index” released by the Hurun Research Institute, Jiangsu Province currently boasts 14 unicorn enterprises.

In recent years, as the benefits of tax and fee reductions have been realized, the policy-driven effects of optimizing the industrial structure and fostering the development of the new economy have gradually become apparent. Amid this wave of tax and fee cuts, unicorn companies have seen their growth momentum strengthen further.

“Bringing a drug from research and development to commercial production is a long‑term process. As a company just getting off the ground, our immediate priority is to build a solid R&D foundation.” Nanjing Legend Biotech Co., Ltd. is a unicorn in the biopharmaceutical sector. According to its finance director, Xiang Yun, the company’s R&D expenses totaled 100 million yuan last year. Thanks to the policy of increasing the additional deduction rate for R&D expenditures, the company paid more than 3 million yuan less in corporate income tax. “R&D is the ‘engine’ of biopharmaceutical offices and the source of our confidence in an intensely competitive market. Tax and fee reductions have directly lowered our R&D costs, enabling us to invest more boldly and steadily build up our technological edge—so that we can bring hope to patients as soon as possible,” Xiang Yun said.

For unicorn companies, the level of R&D investment largely determines their viability and growth prospects. Tax cuts and fee reductions deliver tangible financial benefits, effectively bolstering corporate cash flow and providing a powerful boost to strengthening their research capabilities.

“The new‑energy vehicle industry is highly technology‑intensive, with R&D playing a pivotal role in corporate strategy,” said Zhu Ping, Chief Financial Officer of Kaiwo New Energy Vehicle Group Co., Ltd. She outlined the financial impact: last year, the revised policy raising the additional deduction rate for R&D expenses resulted in an extra income‑tax relief of RMB 12.59 million, while the high‑tech enterprise tax‑exemption scheme provided an additional RMB 32.98 million in tax savings. This year, the group forecasts sales revenue exceeding RMB 4.5 billion and expects VAT reductions of more than RMB 80 million. “With these substantial cost savings, we can now secure our R&D investments; our heavy‑truck new‑energy project has already broken ground,” she added. Riding the tailwind of the new‑energy vehicle sector, Kaiwo Group has achieved leapfrog growth, officely establishing itself among the top tier of domestic new‑energy bus manufacturers.

From a geographical perspective, Jiangsu Province exhibits a pronounced clustering of unicorn companies: Nanjing alone accounts for 13 unicorns, with a combined valuation of RMB 159 billion. Coupled with the ongoing efforts to build Nanjing into a renowned city of innovation, innovative resources are rapidly converging in the region, giving rise to an increasing number of unicorn enterprises. In the first half of this year, Nanjing welcomed two additional unicorns—Lianshang Literature and Fuyou Truck.

According to data released by the tax authorities, 13 unicorn companies in Nanjing generated operating revenue of RMB 20.37 billion in the first half of this year, up roughly 30% year on year; their tax contributions for the same period totaled RMB 190 million, nearly doubling compared with the previous year.

Beyond the tangible benefits of reduced tax burdens and improved profitability, the deeper‑level effects of tax and fee cuts are also gradually becoming apparent. In Jiangsu, unicorn companies are expanding their industry footprint, moving beyond sectors like the internet and IT to include automotive, healthcare, electronics, and optoelectronic equipment. Many offices have extended their reach from online to offline operations, bolstering the real economy and contributing to stable employment.

Chezhibao is a high-growth unicorn company based in Jiangsu. “The tax and fee reductions have translated into improved corporate performance,” said an accountant from Chezhibao’s finance department. In the first seven months of this year, the company’s sales revenue grew 23.82% year over year. Today, Chezhibao has expanded its operations to 102 cities nationwide, opened more than 130 physical stores, and facilitated the sale of 200,000 used vehicles—marking 26 consecutive quarters of growth with an annual increase of as much as 65%. “While fully benefiting from the dividends of tax and fee reduction policies, Chezhibao’s sales revenue has risen by over 20% this year. Consequently, even as per‑unit tax costs have declined, the company’s tax contribution has still increased by 5.4%,” noted a representative from the tax authorities.

LITIGATION & ARBITRATION

The Supreme People’s Court and the Supreme People’s Procuratorate have issued the “Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving Organizing Examination Cheating, etc.”

In order to punish, in accordance with the law, crimes such as organizing exam cheating, illegally selling or providing examination questions or answers, and taking exams on behalf of others, and to safeguard the fairness and order of examinations, and pursuant to the provisions of the Criminal Law of the People’s Republic of China and the Criminal Procedure Law of the People’s Republic of China, the following interpretations are hereby issued concerning certain issues relating to the application of law in the handling of criminal cases of this type:

Article 1. The “national examinations prescribed by law” referred to in Article 284-1 of the Criminal Law shall be limited to examinations stipulated in laws enacted by the National People’s Congress and its Standing Committee.

In accordance with relevant legal provisions, the following examinations are classified as “national examinations prescribed by law”:

(1) National educational examinations, including the National College Entrance Examination, the Graduate School Entrance Examination, the Self-Study Examination for Higher Education, and the Adult College Entrance Examination;

(2) Civil service recruitment examinations at the central and local levels;

(3) Professional and technical qualification examinations, including the National Unified Legal Professional Qualification Examination, the National Teacher Qualification Examination, the National Uniform Certified Public Accountant Examination, the Accounting Professional and Technical Qualification Examination, the Asset Appraiser Qualification Examination, the Physician Qualification Examination, the Practicing Pharmacist Qualification Examination, the Registered Architect Examination, and the Construction Engineer Practicing Qualification Examination;

(4) Other national examinations prescribed by law and administered by central or local competent authorities and industry organizations.

The examinations referred to in the preceding paragraph, including special‑type admissions, special skills assessments, interviews, and other such tests, constitute “national examinations prescribed by law.”

Article 2: In national examinations prescribed by law, organizing cheating that falls under any of the following circumstances shall be deemed to constitute “serious circumstances” as stipulated in Paragraph 1 of Article 284‑1 of the Criminal Law:

(1) Organizing exam cheating in the national college entrance examination, the postgraduate entrance examination, or the civil service recruitment examination;

(2) Cases that result in the postponement or cancellation of the examination, or the activation of backup test papers;

(3) Examination staff who organize cheating during the examination;

(4) Organizing examinees to commit cheating across provinces, autonomous regions, or municipalities directly under the central government;

(5) Those who have repeatedly organized exam cheating;

(6) Organizing cheating involving thirty or more participants;

(7) Providing fifty or more pieces of cheating equipment;

(8) Where the illegal gains exceed RMB 300,000;

(9) Other circumstances involving serious misconduct.

Article 3: Any program or tool that possesses security management measures designed to circumvent or bypass examination‑room anti‑cheating safeguards, and that is capable of obtaining, recording, transmitting, receiving, or storing examination questions or answers, as well as any program or tool specifically designed for cheating, shall be deemed to constitute “cheating equipment” as stipulated in Paragraph 2 of Article 284‑1 of the Criminal Law.

Where it is difficult to determine whether an item falls within the scope of “cheating equipment” as defined in paragraph 2 of Article 284‑1 of the Criminal Law, such determination shall be made on the basis of a report issued by a public security organ at or above the provincial level or by the competent examination authority, together with other relevant evidence. With respect to specialized espionage equipment, devices specifically designed for eavesdropping or surreptitious photography, “fake base stations,” and similar items, the determination shall be made in accordance with the applicable provisions.

Article 4: Where a person organizes cheating in an examination and is apprehended before the examination has commenced, but has already illegally obtained examination questions or answers, or engaged in other conduct that seriously disrupts the order of the examination, such conduct shall be deemed to constitute the completed offense of organizing examination cheating.

Article 5: For the purpose of committing examination cheating, the illegal sale or provision of examination questions or answers for national examinations prescribed by law shall be deemed to constitute “serious circumstances” as stipulated in Paragraph 3 of Article 284‑1 of the Criminal Law if any of the following circumstances is present:

(1) Illegally selling or providing examination questions or answers for the national college entrance examination, the postgraduate entrance examination, or the civil service recruitment examination;

(2) Cases that result in the postponement or cancellation of the examination, or the activation of backup test papers;

(3) Examination staff who illegally sell or provide examination questions or answers;

(4) Repeatedly illegally selling or providing examination questions or answers;

(5) Illegally selling or providing examination questions or answers to thirty or more individuals;

(6) Where the illegal gains exceed RMB 300,000;

(7) Other circumstances involving serious violations.

Article 6: For the purpose of committing examination cheating, illegally selling or providing to others examination questions or answers for national examinations prescribed by law—whether the questions are incomplete or the answers do not fully correspond to the standard answers—shall not affect the determination of the crime of illegally selling or providing examination questions or answers.

Article 7: Anyone who takes an examination prescribed by law on behalf of another person, or permits another person to take such an examination in their stead, shall be convicted and punished for the crime of exam substitution in accordance with Article 284-1, Paragraph 4 of the Criminal Law.

Where the offender’s circumstances are relatively minor and there is clear evidence of remorse, and taking into account factors such as the nature of the proxy‑taking conduct and the type of examination, if it is deemed to meet the conditions for probation, probation may be granted; where the offense is trivial, prosecution may be declined or criminal punishment may be waived; and where the circumstances are exceptionally minor and the harm caused is negligible, the conduct shall not be treated as a crime.

Article 8: Where an entity engages in acts such as organizing examination cheating, illegally selling or providing examination questions or answers, the organizers, planners, and perpetrators shall be held criminally liable in accordance with the corresponding sentencing standards set forth in this Interpretation.

Article 9: Where a person illegally obtains, by means of theft, espionage, or bribery, examination questions or answers for national examinations prescribed by law, and simultaneously organizes exam cheating or unlawfully sells or provides such examination questions or answers, and these acts respectively constitute the offenses stipulated in Article 282 and Article 284‑1 of the Criminal Law, the offender shall be punished for multiple offenses, namely, the crime of illegally obtaining state secrets and the crime of organizing exam cheating or the crime of unlawfully selling or providing examination questions or answers.

Article 10: In examinations other than the state examinations prescribed by law, anyone who organizes cheating, provides cheating equipment or other assistance to others for the purpose of organizing cheating, or illegally sells or supplies examination questions or answers—where such conduct meets the constituent elements of crimes such as the crime of illegally obtaining state secrets, the crime of illegally manufacturing and selling specialized eavesdropping or photographic equipment, the crime of illegally using specialized eavesdropping or photographic equipment, the crime of illegally utilizing information networks, or the crime of disrupting the order of radio communication administration—shall be investigated for criminal liability in accordance with the law.

Article 11: Anyone who establishes a website or communication group for the purpose of facilitating examination cheating, or who publishes information related to examination cheating, and whose conduct is serious, shall be convicted and punished for the crime of illegally using an information network in accordance with Article 287‑1 of the Criminal Law. If such conduct also constitutes other crimes, such as the crime of organizing examination cheating, the crime of illegally selling or providing examination questions or answers, or the crime of illegally obtaining state secrets, the offender shall be convicted and punished in accordance with the provision prescribing the heavier penalty.

Article 12: Where a person is sentenced to punishment for an offense specified in this Interpretation, a professional prohibition may, in accordance with the law, be imposed based on the circumstances of the offense and the need to prevent recidivism; where a person is placed under residential surveillance or granted probation, a restraining order may, in accordance with the law, be issued depending on the nature of the offense.

Article 13: Where the conduct specified in this Interpretation constitutes a crime, the court shall, in accordance with the law, impose a fine, taking into account such factors as the degree of harm caused by the offense, the amount of illegal gains, the defendant’s prior criminal record, and the defendant’s attitude of admitting guilt and showing remorse.

Article 14 This Interpretation shall take effect as of September 4, 2019.

Maritime courts nationwide have fully implemented cross-jurisdictional case filing.

On August 30, with the successful integration of the data‑request module of the Wuhan Maritime Court—the last unit to undergo debugging—into China Mobile’s Micro‑Court system, maritime courts nationwide achieved full cross‑jurisdictional case filing. On the same day, the Guangzhou Maritime Court, which had completed its system integration ahead of schedule, collaborated with the Haikou, Qingdao, and Xiamen Maritime Courts to jointly process cross‑jurisdictional filings for three cases.
In June this year, the Supreme People’s Court proposed at a national symposium of chief justices of higher people’s courts to accelerate reforms in cross‑jurisdictional case filing and litigation services. By taking cross‑jurisdictional filing as a breakthrough, it seeks to roll out comprehensive cross‑jurisdictional litigation services, enabling remote handling of litigation matters across regions and coordinated processing across different judicial levels, thereby effectively addressing the inconvenience of litigating in a jurisdiction other than one’s own. Drawing on the distinctive characteristics of maritime cases, the Supreme People’s Court, after piloting cross‑jurisdictional filing in courts across the Beijing–Tianjin–Hebei region and the Yangtze River Delta, selected late July the nationwide implementation of cross‑jurisdictional filing for maritime cases as a new focal point, exploring a unified national mechanism for such filings. Within just one month, all maritime courts nationwide, together with their respective higher people’s courts of appeal, successfully integrated with the China Mobile Micro‑Court’s cross‑jurisdictional filing platform. Moreover, cross‑jurisdictional filing was completed in eight cases among eight of the ten maritime courts, marking the initial success of cross‑jurisdictional filing in maritime adjudication.
According to a responsible official from the Fourth Civil Division of the Supreme People’s Court, compared with other types of cases, maritime cases are subject to jurisdiction that transcends administrative boundaries; maritime disputes are often international in nature; maritime courts have extensive jurisdictions; and parties frequently litigate in locations far from their residences. Consequently, the need for cross‑jurisdictional case filing in maritime matters is both more pronounced and more urgent. At the same time, in light of the unique characteristics of maritime litigation, maritime courts nationwide, leveraging modern technological capabilities, have largely achieved interconnectedness in judicial administration between their main courts and branch tribunals. Moreover, owing to the similarity of their specialties and the homogeneity of their casework, these courts have established relatively close working relationships with one another; cross‑regional assistance has been initiated at an early stage, endowing the establishment of a national mechanism for cross‑jurisdictional case filing in maritime matters with inherent advantages.
On August 19, with the collaborative efforts of the Dalian Maritime Court and the Ningbo Maritime Court, a party to a case successfully filed a maritime claim registration dispute across jurisdictions. The party expressed heartfelt gratitude, noting that cross‑jurisdictional filing had saved them the arduous journey of more than 2,000 kilometers. With the nationwide implementation of cross‑jurisdictional filing, parties can now file their cases at any of the ten maritime courts or the 39 maritime branch tribunals across the country—choosing the nearest location or selecting a court or tribunal of their own choosing—greatly facilitating litigation for the public, reducing litigation costs, enhancing judicial efficiency, and ushering in a new litigation model: “litigation right at your doorstep.”
Cross‑jurisdictional case filing is merely one component of maritime litigation services. According to reports, going forward, maritime adjudication will, building on the cross‑jurisdictional filing system, further refine the mechanism for cross‑jurisdictional maritime litigation services, enabling the swift handling of entrusted matters such as service of process, investigative inquiries, and the detention of vessels. This will enhance inter‑court cooperation among maritime courts and, in turn, improve the efficiency of maritime adjudication and enforcement.
The full implementation of cross-jurisdictional case filing by maritime courts represents a new achievement in the field of maritime adjudication, reflecting the Supreme People’s Court’s earnest efforts to implement General Secretary Xi Jinping’s instructions—delivered at this year’s Central Political and Legal Work Conference—to accelerate reforms in cross-jurisdictional case‑filing and litigation services. It also demonstrates the Court’s proactive response to the diversified judicial needs of the public in the new context, further enhancing the convenience, benefit, and people‑centric nature of litigation services.

The province’s first public-interest lawsuit has been filed in a case involving multiple individuals who infringed upon personal information.

On September 3, the Xinyi City People’s Procuratorate filed a criminal public interest lawsuit with accompanying civil claims against Yuan and 13 other individuals for their involvement in a case of infringement upon citizens’ personal information. This marks Jiangsu Province’s first public interest litigation of its kind.

Between April and June 2018, Yuan, in collusion with Zhan, Xu, Zou, Wang, and others, took advantage of their positions at the Tietong Company in Duchang County, Jiujiang City, Jiangxi Province, to use other people’s identity information to activate branch‑office access rights within the company’s internal system. They then illegally accessed citizens’ mobile phone numbers and sold this information to Yang and others at a price of 70 to 80 cents per record. Yang, Yan, Fang, Jiang, Xiao, and others marked up the prices by 5 to 10 yuan per record before reselling the data online, thereby obtaining illicit profits ranging from 5,000 yuan to over 400,000 yuan.

The actions of Yuan and others disclosed the personal privacy of numerous mobile phone users in Xinyi City, Jiangsu Province, thereby seriously infringing upon their legitimate rights and interests. The case is under the supervision of the Ministry of Public Security and falls under the jurisdiction of the Xinyi Municipal Public Security Bureau. While investigating criminal offenses, the Xinyi Municipal People’s Procuratorate simultaneously initiated a public-interest civil lawsuit.

It is reported that the law authorizes the procuratorial organs to bring public interest litigation in five major categories: protection of the ecological environment and natural resources, food and drug safety, protection of state-owned property, transfer of state‑owned land use rights, and protection of the reputation and honor of martyrs and heroes. Since this case does not fall within any of these five categories, why did the procuratorial organ nonetheless initiate public interest litigation? Ming Guangchao, Chief Prosecutor of the Xinyi City People’s Procuratorate, explained that beyond the enumerated categories there is a catch‑all “and other” provision. This “other” category encompasses issues involving serious harm to the public interest, strong public concern, and a lack of standing for ordinary litigation—yet which have not yet been brought within the scope of such proceedings, including areas such as the internet and workplace safety. “Public attention to personal information security is exceptionally high; by bringing public interest litigation in this field, the procuratorial organs are making a proactive effort to safeguard rights beyond the established categories.”

According to the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Consumer‑Related Public Interest Civil Litigation Cases, in public interest litigation cases involving unspecified victims in the consumer sector, the procuratorial organ may require the defendant to publicly offer an apology.

Reply of the Supreme People’s Court on the Examination of Applications for Filing an Execution Objection Case Regarding the Addition of a Party as an Enforced Person

In the course of enforcement proceedings, the addition of a party as an enforced debtor constitutes a specific category of enforcement‑related objections within the scope of enforcement review cases. Article 9 of the “Opinions of the Supreme People’s Court on Several Issues Concerning the Filing and Conclusion of Enforcement Cases” clarifies the types of enforcement objection cases in accordance with the relevant provisions of the Civil Procedure Law. In addition to objections to enforcement actions and third‑party objections as stipulated in Articles 225 and 227 of the Civil Procedure Law of the People’s Republic of China, it also encompasses jurisdictional objections, applications for the modification or addition of enforced debtors, objections raised by the debtor, and requests for non‑enforcement of arbitral awards or notarized creditor instruments. The “Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Enforcement Objections and Review Cases by the People’s Courts” sets forth rules governing the adjudication of various types of enforcement objection cases, extending beyond mere objections to enforcement actions and third‑party objections; for example, Paragraph 2 of Article 7 addresses objections raised by the debtor, while Article 22 provides for the non‑enforcement of notarized creditor instruments under certain circumstances.

Subsequently promulgated and implemented, the “Provisions of the Supreme People’s Court on Several Issues Concerning the Amendment and Addition of Parties in Civil Enforcement” constitute a specialized judicial interpretation addressing matters related to the amendment and addition of parties in civil enforcement proceedings. These provisions further address and refine the deficiencies in the Civil Procedure Law and earlier judicial interpretations regarding this subject matter, particularly by fully safeguarding the parties’ right to bring suit. In accordance with relevant provisions of other laws, they explicitly confer upon the parties the right to file objections‑in‑action in certain circumstances. Consequently, there is no contradiction or conflict among the “Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Objections and Review Cases by People’s Courts,” the “Provisions of the Supreme People’s Court on Several Issues Concerning the Amendment and Addition of Parties in Civil Enforcement,” and the “Opinions of the Supreme People’s Court on Several Issues Relating to the Filing and Conclusion of Enforcement Cases,” nor between these judicial interpretations and normative documents and the Civil Procedure Law of the People’s Republic of China. The addition of an enforced party, pursuant to the Supreme People’s Court’s “Several Provisions on Case Numbers of People’s Courts,” is filed and reviewed under the case‑type code “Zhiyi,” which complies with the relevant provisions of laws, judicial interpretations, and normative documents; this does not mean that such cases fall within the category of objections to enforcement actions or third‑party objections.

The Zhejiang High People’s Court, in collaboration with 13 departments, has issued an action plan to actively promote the facilitation of bankruptcy proceedings.

To further advance the “at most one visit” reform, comprehensively optimize the business environment, and actively promote greater convenience in bankruptcy proceedings, the Zhejiang Provincial Higher People’s Court recently joined forces with 13 departments—including the Provincial Party Committee Reform Office (Provincial One-Visit Reform Office), the Provincial Development and Reform Commission, the Public Security Department, the Department of Finance, the Department of Human Resources and Social Security, and the Provincial People’s Procuratorate—to jointly formulate and issue the “Zhejiang Province Action Plan for Facilitating Bankruptcy Proceedings to Optimize the Business Environment.”

The Plan requires the Zhejiang High People’s Court to promptly formulate specific normative documents governing the simplified adjudication of bankruptcy cases. In cases where enforcement proceedings are converted into bankruptcy proceedings, full advantage should be taken of the simplicity and speed inherent in the enforcement process, with exploration of using enforcement procedures as a substitute for simplified bankruptcy procedures. For cases involving debtors with limited assets, clear creditor–debtor relationships, and a small number of creditors, it is proposed to establish joint collegial panels composed of designated judges from the enforcement division and those from the bankruptcy adjudication division to hear such cases; to integrate bankruptcy case‑handling platforms with enforcement case‑handling platforms, enabling the latter to access and control the debtor’s assets; to explore conducting asset disposal within the enforcement process so as to enhance the efficiency of bankruptcy adjudication; and to apply enforcement‑related coercive measures in bankruptcy proceedings, thereby promoting closer coordination and deeper integration between enforcement and bankruptcy processes. Furthermore, efforts should be made to pilot a personal bankruptcy system in courts in Wenzhou, Taizhou, and other localities, thus opening up new institutional pathways for bankruptcy adjudication.

The Plan requires courts at all levels across the province to actively explore online auction methods better suited to the characteristics of bankruptcy cases, establish a dedicated section for online auctions of bankruptcy assets, and, as appropriate, formulate rules governing judicial online auctions of such assets to enhance the efficiency of asset disposal. Courts handling bankruptcy cases are encouraged to make extensive use of information technology—such as holding creditors’ meetings online—to facilitate creditor participation. Furthermore, integration between Zhejiang’s case-handling platform and the National Court Bankruptcy and Reorganization Information Platform will be strengthened, and online filing and cross‑jurisdictional filing will be piloted through online appointment channels to reduce filing costs. By leveraging the “One Network, Two Platforms” system, electronic data on bankruptcy proceedings will be generated in real time, thereby increasing transparency in judicial processes. The assessment mechanism for bankruptcy administrators will be refined, with specific evaluation measures established to strengthen oversight by the people’s courts, creditors’ meetings, and other relevant bodies over the work of bankruptcy administrators.

Other

The People’s Bank of China announced that, starting September 16, it will cut the reserve requirement ratio, releasing RMB 900 billion in long-term liquidity.

On September 6, the People’s Bank of China announced that, in order to support the development of the real economy and reduce the actual cost of social financing, it has decided to implement a across-the-board reduction of 0.5 percentage points in the reserve requirement ratio for financial institutions, effective September 16, 2019, excluding finance companies, financial leasing companies, and auto finance companies.

In addition, to further bolster support for small and micro enterprises as well as private businesses, an additional targeted reduction of 1 percentage point will be applied to the reserve requirement ratio for city commercial banks that operate exclusively within provincial administrative regions. This measure will be implemented in two phases, on October 15 and November 15, with each phase involving a 0.5-percentage-point cut.

An official from the People’s Bank of China stated that this RRR cut will release approximately RMB 900 billion in long-term funds, with about RMB 800 billion coming from the across-the-board reduction and roughly RMB 100 billion from the targeted reduction. The required reserve ratios for finance companies, financial leasing companies, and auto finance companies stand at 6%, the lowest among financial institutions and already at a relatively low level; therefore, these three types of institutions are not included in this round of the across-the-board RRR cut.

Regarding how this RRR cut will support the real economy, a responsible official at the People’s Bank of China stated that the measure will release approximately RMB 900 billion in liquidity, effectively bolstering financial institutions’ funding for the real economy. At the same time, it will reduce banks’ funding costs by about RMB 15 billion annually, which, through bank transmission, can help lower actual loan interest rates. The targeted RRR cut is an important step in refining the “three-tier, two‑preference” policy framework that applies lower reserve requirement ratios to small and medium-sized banks, thereby encouraging city commercial banks that serve the grassroots level to increase their support for micro, small, and private enterprises. All of these measures will contribute to fostering the development of the real economy.

This RRR cut does not signify a shift in the prudent stance of monetary policy. According to a responsible official at the People’s Bank of China, the reduction is offset by the tax‑payment period in mid‑September, so overall liquidity in the banking system will remain broadly stable. Moreover, the targeted RRR cut will be implemented in two phases, which helps to release funds in a measured and orderly manner. Therefore, this RRR cut is not an indiscriminate flood of liquidity, and the prudent orientation of monetary policy remains unchanged.

Going forward, the central bank will continue to pursue a prudent monetary policy, refrain from excessive liquidity injections, emphasize targeted adjustments, balance domestic and external factors, strengthen counter-cyclical policy measures, ensure reasonably ample liquidity, and keep the growth rates of broad money (M2) and total social financing broadly in line with nominal GDP growth, thereby fostering an appropriate monetary and financial environment for high-quality development and supply-side structural reform.

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