JC Master Legal News Issue 896

Key Takeaways for This Issue

The China Securities Regulatory Commission is soliciting public comments on the “Administrative Measures for the Registration of Securities Issuance by Companies Listed on the STAR Market (Trial).”

The Party Committee of the China Securities Regulatory Commission has implemented the major decisions and arrangements of the CPC Central Committee and the State Council to establish the STAR Market and pilot the registration-based IPO system. The CSRC has drafted the “Administrative Measures for the Registration of Securities Issuance by Listed Companies on the STAR Market (Trial)” (Draft for Public Comment) (hereinafter referred to as the “STAR Market Refinancing Measures”). Public comments are now being solicited.

5G chips are being launched in rapid succession at year’s end—so who will emerge as the true winner?

Recently, both Qualcomm and MediaTek have announced that they will launch their own 5G chip products by the end of this year. In the baseband chip sector, the world’s most critical players currently include Qualcomm and Samsung, while domestically, they comprise MediaTek, Huawei HiSilicon, and Unisoc, among others. Meanwhile, the two industry giants, Qualcomm and MediaTek, are focusing on next year’s 5G smartphone market and have both chosen to release their 5G chips at the end of 2019.

Announcement of the Ministry of Finance and the State Taxation Administration on Matters Relating to Tax Credit Restoration

To encourage and guide taxpayers in enhancing their awareness of lawful and honest tax compliance and proactively rectifying any breaches of tax integrity, the following matters regarding tax credit restoration are hereby announced.

The 13th National People’s Congress and its Standing Committee have released information on legislative work over the past 20 months.

13 laws were enacted, 60 laws were amended, and 18 relevant decisions were adopted.

The third reserve requirement ratio cut of the year took effect today, potentially releasing RMB 60 billion in liquidity.

The central bank’s second round of targeted reserve requirement ratio cuts has been fully implemented, taking effect in two phases on October 15 and November 15, with each phase reducing the RRR by 0.5 percentage points. With this move, the central bank’s third RRR cut of the year has now been completed.

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission is soliciting public comments on the “Administrative Measures for the Registration of Securities Issuance by Companies Listed on the STAR Market (Trial).”

The Shenzhen Stock Exchange hosted the Third China–Bangladesh Capital Markets Cooperation and Matching Conference, advancing the establishment of regularized cooperation between the two countries’ capital markets.

The 16th Meeting of the China Securities Regulatory Commission’s International Advisory Committee was held in Beijing.

The Shanghai Stock Exchange has issued and implemented the “Guidelines on Information Disclosure for Temporary Reports of Asset-Backed Securities.”

The Shenzhen Stock Exchange strictly adheres to the new regulations on share reductions in overseeing ETF stock subscription activities.

Corporate & Commercial

5G chips are being launched in rapid succession at year’s end—so who will emerge as the true winner?

The number of cities cutting prices is rising, and in October, housing prices across first-, second-, and third-tier cities in China all cooled down.

Commodity swaps help enterprises overcome hedging challenges.

Taxation

Announcement of the Ministry of Finance and the State Taxation Administration on Matters Relating to Tax Credit Restoration

Interpretation of the “Announcement of the State Taxation Administration on Matters Relating to the Restoration of Taxpayer Credit”

The State Taxation Administration has introduced eight new measures to facilitate tax filing and payment for small and micro enterprises.

Jiangsu: Setting a Benchmark for Tax and Fee Reductions, Injecting Real-World Momentum with Tangible Benefits

Multilateral consultations on the Belt and Road Tax Administration Cooperation Mechanism were held in Beijing.

Litigation & Arbitration

The 13th National People’s Congress and its Standing Committee have released information on legislative work over the past 20 months.

Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Adjudication of Civil Disputes Involving Food Safety (Draft for Public Comment)

Opinions of the Supreme People’s Court on Lawfully and Properly Adjudicating Cases Involving Objects Thrown or Falling from High Places

The judicial interpretation on the crime of throwing objects from high places contains notable provisions, but effective deterrence still requires stringent legislation.

The Minutes of the National Courts’ Conference on Civil and Commercial Trials Have Been Released.

Other

The central bank: The third reserve requirement ratio cut of the year has been fully implemented today, potentially releasing RMB 60 billion in liquidity.

Finance & Capital Markets

The China Securities Regulatory Commission is soliciting public comments on the “Administrative Measures for the Registration of Securities Issuance by Companies Listed on the STAR Market (Trial).”

The Party Committee of the China Securities Regulatory Commission has implemented the major decisions and arrangements of the CPC Central Committee and the State Council regarding the establishment of the STAR Market and the pilot registration-based system. In accordance with the specific requirements set forth in the “Implementation Opinions on Establishing the STAR Market at the Shanghai Stock Exchange and Piloting the Registration-Based System,” the CSRC has drafted the “Administrative Measures for the Registration of Securities Issuance by Listed Companies on the STAR Market (Trial)” (Draft for Public Comment) (hereinafter referred to as the “STAR Market Refinancing Measures”). The public is now invited to submit comments.

The draft “Measures for Refinancing on the STAR Market,” currently open for public comment, sets out the following key provisions: First, it establishes basic issuance requirements to standardize listed companies’ refinancing activities and effectively safeguard the legitimate rights and interests of investors and the public interest. Second, it refines and adjusts the institutional framework for non‑public offerings, thereby facilitating the admission of strategic investors by listed companies. Given that non‑public offerings are primarily directed at qualified investors with a high capacity to identify and bear risks, the measures adopt a relatively streamlined negative‑list approach to basic issuance conditions—lower than those applicable to public offerings—in order to protect the interests of listed companies, the legitimate rights and interests of investors, and the broader public interest. At the same time, by encouraging listed companies to bring in strategic investors, the framework enhances the convenience of non‑public equity offerings. Third, it introduces a streamlined and efficient registration process to improve financing efficiency. On the one hand, it significantly shortens the review and registration timelines: the Shanghai Stock Exchange’s review period is capped at two months, and the CSRC’s registration period is limited to 15 working days. On the other hand, it empowers the Shanghai Stock Exchange to, based on the overall operational performance of STAR Market refinancing and actual market needs, formulate business rules governing small‑scale financings.

We welcome valuable feedback from all sectors of society on the Measures for Refinancing on the STAR Market. The China Securities Regulatory Commission will, based on the results of the public consultation, further revise the Measures and, after completing the requisite procedures, promulgate and implement them.

The Shenzhen Stock Exchange hosted the Third China–Bangladesh Capital Markets Cooperation and Matching Conference, advancing the establishment of regularized cooperation between the two countries’ capital markets.

On November 7, 2019, the Third China–Bangladesh Capital Markets Cooperation and Matching Conference, co-hosted by the Shenzhen Stock Exchange (hereinafter referred to as the SZSE) and the Dhaka Stock Exchange of Bangladesh (hereinafter referred to as the DSE), was successfully held in Shenzhen. Centered on supporting the Belt and Road Initiative and the Digital Bangladesh 2021 strategy, the conference featured in-depth discussions on China–Bangladesh financial market cooperation and investment opportunities in Bangladesh, and included a roadshow showcasing Bangladeshi‑specific enterprises, further advancing the institutionalization of China–Bangladesh capital market collaboration. Wang Jianjun, General Manager of the SZSE, and Abul Hashem, Chairman of the DSE, attended the event and delivered remarks. Nearly 170 representatives from exchanges, investment institutions, listed companies, and financial offices in both China and Bangladesh took part.

Bangladesh is a strategic partner of China. The two countries have continuously deepened cooperation in trade, investment, finance, and other fields, while also forging new growth drivers in emerging technologies and business models. Since May 2018, when the Shenzhen Stock Exchange led a Chinese consortium to acquire a strategic stake in the Dhaka Stock Exchange, both sides have worked together to upgrade Bangladesh’s critical financial infrastructure. They have engaged in pragmatic collaboration across multiple fronts—including technological system modernization, the development of an SME board, and cross-border capital matchmaking—thereby providing sustainable financial support for the construction of the China–Bangladesh–India–Myanmar Economic Corridor.

At the Second China–Bangladesh Capital Markets Cooperation Matchmaking Conference held in May this year, the Shenzhen Stock Exchange and the Dhaka Stock Exchange jointly launched the Bangladesh portal of the SZSE Innovation and Entrepreneurship Investment and Financing Service Platform (V-Next), creating a more standardized, transparent, convenient, and efficient channel for cross-border alignment between the two sides’ industries and capital. During this event, approximately 15 Bangladeshi companies from sectors such as information and communications, advanced manufacturing, and Internet Plus leveraged the V-Next platform to conduct roadshows in a hybrid format—combining on-site meetings with online live streaming—enabling precise matchmaking with Chinese investment institutions and listed companies and achieving strong promotional results.

In recent years, under the leadership of the China Securities Regulatory Commission, the Shenzhen Stock Exchange has leveraged its market‑based, technological, service‑oriented, and geographically advantageous strengths to strengthen cooperation with capital markets along the Belt and Road. Moving forward, the Exchange will continue to support the national Belt and Road Initiative, serve the development of the Guangdong–Hong Kong–Macao Greater Bay Area and the pilot demonstration zone for socialism with Chinese characteristics, and pragmatically advance its internationalization strategy. It will further enhance its role as a platform for resource allocation, expand connectivity and cooperation, refine its cross‑border capital services system, and, in accordance with the principles of extensive consultation, joint contribution, and shared benefits, institutionalize innovation‑capital cooperation between China and Bangladesh. By doing so, it aims to establish a model for exchange‑level collaboration in emerging markets and make a positive contribution to the high‑quality economic development of both countries.

The 16th Meeting of the China Securities Regulatory Commission’s International Advisory Committee was held in Beijing.

The 16th Meeting of the China Securities Regulatory Commission’s International Advisory Committee (IAC) was held in Beijing from November 10 to 11, 2019. During the meeting, Liu He, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, met with the IAC members and guests in attendance. Relevant officials from the Ministry of Finance, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange also attended the meeting.

The theme of this Advisory Committee meeting was “Strengthening the Development of Fundamental Institutional Frameworks and Deepening Reform and Opening-Up in the Capital Market.” The meeting was attended by 13 members of the Advisory Committee, including Chairman Howard Davies and Vice Chairwoman Laura Cha, as well as invited guests. China Securities Regulatory Commission (CSRC) Chairman Yi Huiman and Vice Chairman Fang Xinghai also attended, while Pan Gongsheng, Deputy Governor of the People’s Bank of China and Director of the State Administration of Foreign Exchange, was invited to participate and deliver a keynote address. Key officials from relevant units within the CSRC system and from internal departments of the Commission were present at the meeting.

The meeting focused on the current international economic and financial landscape, as well as China’s capital market reform and development and key regulatory priorities. Discussions covered topics such as the STAR Market and the reform of the registration-based issuance system, the monitoring and regulation of cross-border capital flows in an open environment, the effective deterrence provided by securities‑market enforcement, and investor protection. Participants highly commended the significant achievements made in China’s capital market reform and development since the beginning of this year, unanimously agreeing that China’s steadfast commitment to advancing the reform and opening-up of its capital markets will inject strong momentum into building a capital market that is standardized, transparent, open, dynamic, and resilient. The delegates shared experiences and put forward numerous well‑targeted recommendations on how to better leverage the capital market’s role in direct financing and promote optimization of the financial structure; how to further advance the development of the STAR Market and the registration‑based reform, while fostering the innovation capabilities of leading enterprises; how to improve legislation and ensure effective law enforcement, strengthen compliance culture and integrity, and safeguard investors’ legitimate rights and interests; and how to enhance technology‑driven regulation and regulatory cooperation, and refine mechanisms for monitoring and regulating cross‑border capital flows.

The International Advisory Committee is an expert advisory body to the China Securities Regulatory Commission. Established in June 2004 with the approval of the State Council, it comprises overseas financial regulators, senior executives of financial institutions, and renowned scholars and experts. The Committee convenes annually to review developments in China’s securities and futures markets, share the latest international market trends and regulatory practices, and provide advice and recommendations to the CSRC. It continues to play a constructive role in helping the CSRC draw on international experience and in advancing the reform, opening-up, and stable, sound development of the capital market.

The Shanghai Stock Exchange has issued and implemented the “Guidelines on Information Disclosure for Temporary Reports of Asset-Backed Securities.”

In recent years, the Shanghai Stock Exchange has continuously refined the institutional framework for asset-backed securities, strengthened frontline supervision and risk management, and ensured the high-quality, steady development of corporate asset securitization, thereby further enhancing its ability to serve the real economy. To further improve the regulatory framework for the asset-securitization market, elevate the quality of information disclosure for asset-backed securities, and effectively safeguard investors’ legitimate rights and interests, the Exchange, drawing on practical experience and extensive market feedback, issued and implemented the “Guidance on Temporary Report Information Disclosure for Asset-Backed Securities” (hereinafter referred to as the “Guidance”) on November 1.

The Guidelines exhibit the following key features in terms of content and requirements: First, they clearly define the responsibilities and timeframes for information disclosure, emphasizing that fund managers and rating agencies are the direct obligors, while participating entities such as original right holders and key cash‑flow providers have a duty to cooperate, thereby enhancing the timeliness and transparency of disclosures. Second, they refine and expand the scope of material‑event disclosures by adding new categories—such as changes to the principal terms of a special‑purpose plan, failure to fulfill commitments, interception of cash flows or freezing of accounts, and significant adverse market reports—to ensure that disclosures are more targeted and effective. Third, they strengthen arrangements for ad hoc disclosures, further standardizing procedures related to the revolving purchase of underlying assets, holder meetings, exercise of securities rights, and suspension or resumption of trading, thus providing investors with richer reference information to support their investment decisions. Fourth, drawing on experience from credit‑bond regulation, they have developed model formats for interim reports, establishing a total of 25 report templates to facilitate use by participating institutions and enhance the consistency and standardization of disclosures.

According to a responsible official at the Shanghai Stock Exchange, under the unified deployment of the China Securities Regulatory Commission, the Exchange initiated work on drafting the Guidelines as early as 2018 and subsequently sought input from market institutions and relevant entities on multiple occasions. During these consultations, managers, original right holders, investors, and related parties all afofficeed the necessity of formulating the Guidelines and their significant importance for enhancing the quality of information disclosure for asset-backed securities, improving the overall disclosure framework, and strengthening investor protection. At the same time, they put forward specific suggestions for revising certain details pertaining to the disclosure requirements for interim reports. Following numerous specialized meetings and careful analysis of several rounds of feedback, the Shanghai Stock Exchange made supplementary revisions to key provisions—such as the definition of material matters and the frequency of disclosures related to revolving purchases—resulting in a more clearly defined and refined set of regulatory standards. These enhancements are expected to improve market acceptance and bolster the effectiveness of regulatory oversight.

The issuance and implementation of the Guidelines represent a key measure by the SSE to further advance its core regulatory philosophy on information disclosure. The effective application of these provisions will enhance the quality of disclosure, strengthen the information‑disclosure framework for asset‑backed securities, help ensure that market participants assume their principal responsibilities for disclosure, and raise awareness across all stakeholders. This, in turn, will enable investors to make more informed investment decisions and bolster the risk‑management capabilities of market participants. Going forward, the SSE will organize specialized training sessions and promptly release XBRL templates for interim reports, guiding market participants to deepen their understanding of the relevant rules and carry out related tasks. By ensuring the seamless alignment and effective implementation of these foundational systems, the Exchange aims to foster the high‑quality, orderly development of asset‑securitization activities in its market.

The Shenzhen Stock Exchange strictly adheres to the new regulations on share reductions in overseeing ETF stock subscription activities.

Recently, a small number of listed-company shareholders have participated in the subscription of ETFs using their shareholdings, drawing market attention.

An ETF is an open-ended fund listed and traded on a stock exchange, employing a unique mechanism for in-kind creation, subscription, and redemption. It offers high transparency, strong liquidity, convenient trading, and low costs, combining the characteristics of both equities and index funds, making it an efficient tool for indexed investing. In recent years, ETF products have grown rapidly, with their market size expanding steadily.

Stock subscription is an issuance mechanism unique to ETFs, allowing investors to subscribe for ETF shares during the offering period by contributing either a single stock or a basket of constituent stocks from the ETF’s underlying index. By using stock subscriptions, ETF issuances can help mitigate the market impact of direct share disposals, optimize investors’ asset allocation, and contribute to the expansion of equity‑type ETF assets under management, thereby attracting more medium- and long-term capital into the market through ETF investments.

In May 2017, the “Several Provisions on Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies” and the “Detailed Rules for the Implementation of Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies of the Shenzhen Stock Exchange” (hereinafter collectively referred to as the new share‑reduction regulations) were officially promulgated. In strict accordance with these new regulations, the Shenzhen Stock Exchange has imposed regulatory oversight on transactions in which relevant shareholders subscribe for ETF shares using their own listed shares. Specifically, the shares used by major shareholders and designated shareholders to subscribe for ETF units are counted toward the share‑reduction quota stipulated under the new regulations; that is, the total number of shares paid for through ETF subscriptions combined with the shares sold on the secondary market may not exceed the shareholder’s allowable reduction limit for the current period.

In the course of its day-to-day operations, the Shenzhen Stock Exchange has implemented a range of measures—such as requiring fund managers and shareholders to make prior commitments, conducting ex‑ante reviews, and enforcing post‑event oversight—to ensure that the number of shares used by relevant shareholders to subscribe for ETFs does not exceed the prescribed reduction limits. Consequently, the practice of listed‑company shareholders using shares to subscribe for ETFs does not constitute disguised or non‑compliant share reductions. Moreover, since the implementation of the new regulations on share reductions, the scale of share‑based ETF subscriptions has remained limited, with the corresponding subscription amounts accounting for a small share of total share sales during the same period, thereby exerting only a minor impact on the secondary market as a whole.

A relevant official from the Shenzhen Stock Exchange stated that, in the next phase, the Exchange will, in accordance with the CSRC’s deployment and requirements, further strengthen regulatory oversight of ETFs’ compliant operations, refine the underlying institutional framework, expand the range of product offerings, enhance trading supervision, bolster risk‑management capabilities, and ensure the stable and sound development of the ETF market. The Exchange will also actively encourage medium- and long-term capital to enter the market and strive to build a capital market that is standardized, transparent, open, dynamic, and resilient.

Commercial & Corporate

5G chips are being launched in rapid succession at year’s end—so who will emerge as the true winner?

Due to long development cycles and high costs, the mobile‑chip market has traditionally been a domain dominated by industry giants. Beyond the fierce competition over flagship 5G‑chip performance, the ability to be the first to launch a cost‑effective 5G chip could prove to be a decisive factor in reshaping the industry landscape.

Recently, both Qualcomm and MediaTek have announced that they will launch their own 5G chip products by the end of this year. In the baseband chip sector, the world’s most critical players currently include Qualcomm and Samsung, while domestically, they comprise MediaTek, Huawei HiSilicon, and Unisoc, among others. Meanwhile, the two industry giants, Qualcomm and MediaTek, are focusing on next year’s 5G smartphone market and have both chosen to release their 5G chips at the end of 2019.

According to industry sources, MediaTek will unveil its first 5G mobile processor, the MT6885, on November 27. The chip is manufactured using TSMC’s 7nm process. Analysts note that this is MediaTek’s flagship offering, with a key advantage being a significantly lower price compared to Qualcomm’s and Huawei’s top-tier 5G chips, targeting devices in the 3,500-yuan price segment. Meanwhile, Qualcomm plans to introduce the Snapdragon 865 at its December Qualcomm Technology Summit, aiming to meet demand for high-end 5G smartphones over the coming year. At present, Qualcomm has not disclosed which smartphone manufacturers will launch the first devices equipped with this processor.

Meanwhile, the 5G chips launched by MediaTek and Qualcomm will undoubtedly support both standalone (SA) and non‑standalone (NSA) networking, thereby ending Huawei’s monopoly in the dual‑mode baseband chip market. Smartphone manufacturers are also set to roll out a flurry of flagship models equipped with dual‑mode baseband chips in the first half of next year. At that time, the launch of multiple dual‑mode 5G phones will help bring down the average price of 5G smartphones.

Industry insiders believe that as the 5G market continues to mature, 5G chip solutions will also diversify. Meanwhile, 5G smartphones are set to enter an increasingly fierce price‑competition landscape. According to industry analysts, given current average smartphone prices, chips account for roughly 30% to 40% of a device’s cost—making this one of the most profitable segments in the 5G value chain. As a result, many technology‑savvy chipmakers and even terminal manufacturers are eager to capture a share of the chip‑design and production stages. Earlier this month, Samsung and vivo jointly unveiled the Exynos 980. According to reports, this 5G chip is built on an 8nm process, supports dual‑mode 5G, and will make its commercial debut in vivo’s X30 5G smartphone in December.

Previously, domestic smartphone manufacturers—including OPPO, Xiaomi, and vivo—tended to procure mature processor chips from Qualcomm and MediaTek. However, this approach has made new‑model launch schedules heavily reliant on chipmakers’ supply chains. Some industry insiders remain skeptical about the path of in‑house chip development. Unisoc CEO Chu Qing noted that the biggest challenge facing 5G today is tight upstream resource constraints, making it difficult for new players to enter the baseband‑chip market.

The number of cities cutting prices is rising, and in October, housing prices across first-, second-, and third-tier cities in China all cooled down.

Driven by factors such as intensified discount promotions by property developers, real estate markets in many parts of China have seen a rise in sales volume accompanied by falling prices; while sales area has rebounded, the pace of home-price increases has further decelerated.

According to data released on the 15th by China’s National Bureau of Statistics, in October, among 70 large and medium-sized cities in China, 50 saw month-on-month increases in new commercial residential prices, three fewer than the previous month, marking the fifth consecutive month of declining growth; meanwhile, the number of cities experiencing month-on-month price declines rose to 17.

The cooling trend in secondhand home prices has been even more pronounced. In October, among 70 major and medium-sized cities, the number of cities where secondhand home prices rose fell to 31, down from 40 in September, while the number of cities experiencing price declines increased to 35. Zhang Dawei, chief analyst at Centaline Property, noted that this marks the first time in 55 months that more than half of the 70 cities have seen secondhand home prices decline.

Looking at cities across different tiers, in October, among China’s 70 major and medium-sized cities, both new‑home and existing‑home sales prices saw a moderation in month‑on‑month growth across first-, second-, and third‑tier cities.

In the current month, new commercial residential sales prices in the four first-tier cities rose 0.1% month-on-month, with the increase narrowing by 0.3 percentage points compared to the previous month. Secondhand residential sales prices increased 0.1% month-on-month, a rise that eased by 0.2 percentage points from the prior month. In the 31 second-tier cities, new and secondhand residential sales prices climbed 0.5% and 0.1%, respectively, both down 0.1 percentage point from the previous month. Meanwhile, in the 35 third-tier cities, new and secondhand residential sales prices rose 0.6% and 0.5%, respectively, with both increases easing by 0.2 percentage points compared to the prior month.

Guo Shiyin, a data analyst at Zhuge Zhaofang, noted that in October, the number of cities experiencing rising home prices continued to decline. During the “Golden September and Silver October” period, property developers accelerated sales and cash recovery by slashing prices or offering discounts, prompting more cities to see new‑home prices fall. On the secondary‑residence market, influenced by the downward pressure from new‑home price cuts, some buyers eager to trade up opted to sell their existing homes at reduced prices, often opting for deeper discounts.

Zhang Bo, deputy director of the Research Institute at 58 Anjuke, pointed out that real estate market activity declined in tandem during October. Against the backdrop of persistently stringent regulatory measures, homebuyers’ expectations have clearly shifted to a “wait-and-see” stance, and in many cities and regions, it will be difficult to boost sales without adopting a strategy of trading price for volume. Zhang Bo believes that the effects of policy adjustments—ranging from shifts in regulatory approaches to changes in urban dynamics and interest-rate policies—are already evident, while property developers continue to pivot their investment strategies and enhance their competitive edge. As a result, the cooling trend in China’s housing market is unlikely to reverse before the 2020 Spring Festival.

Commodity swaps help enterprises overcome hedging challenges.

Commodity swaps, along with futures and options, rank among the world’s three major derivative instruments. By engaging in commodity index swaps, companies can effectively hedge against the risks of sharp price fluctuations. Moreover, swap transactions typically entail lower costs than futures, eliminating the need for frequent cash‑flow adjustments and helping to stabilize corporate financial statements, thereby delivering significant benefits in terms of operational stability and enhanced overall competitiveness. At present, however, both industrial clients and institutional investors continue to face relatively high funding costs when participating in China’s domestic commodity swap and other derivatives markets, underscoring the need for further improvements.

“We chose to engage in commodity swaps because it aligns with the principle of mutual advantage. ‘Enterprises have physical inventory but lack working capital, while banks have liquidity but need to hedge risks. Yong’an Capital’s strength lies in its risk‑hedging capabilities; this swap effectively combines the strengths of all three parties,’ said Song Shiwei.”

Commodity swaps, along with futures and options, rank among the world’s three major derivative instruments. Today, all of the world’s leading derivatives exchanges offer commodity swap products. A commodity swap is a contractual arrangement in which two parties agree to exchange specified assets at a future date. In bilateral transactions between clients and dealers, the underlying asset is typically a particular commodity price or index, and the parties stipulate that, at a predetermined future point, one party will pay a fixed price while the other pays a floating price. Upon maturity, the parties simply settle the difference between these two prices through a cash payment.

Commodity swaps are widely used for risk management by industrial enterprises, with most applications occurring in the over-the-counter (OTC) market. However, OTC trading suffers from opaque transaction information and significant credit and liquidity risks. Consequently, the market is calling for exchanges to offer on‑exchange clearing services for OTC derivatives.

On December 18, 2018, the Dalian Commodity Exchange became the first in China to launch commodity swap trading. This marked the official entry of Chinese futures exchanges into the over-the-counter derivatives market as financial infrastructure providers, offering comprehensive services—including trade registration and clearing—for commodity OTC transactions undertaken by financial institutions and real‑world enterprises. Over the past year, the commodity swap business has operated smoothly; as of November 12, the DCE had onboarded 66 traders and 57 clients, with 97 executed trades totaling a notional principal of RMB 963 million.

Currently, China’s industries and enterprises are experiencing growing demand for customized risk‑hedging solutions, and the flexibility of swap transactions can better address the personalized risk‑management needs of real‑economy offices. As a futures exchange, the Dalian Commodity Exchange provides regulatory frameworks, platform support, and trade‑registration and clearing services for commodity‑swap activities. It has also pioneered a dealer‑based trading model, enabling banks, securities offices, and risk‑management subsidiaries of futures companies to serve as market participants, thereby fostering seamless integration between on‑exchange and over‑the‑counter derivatives markets.

“In the DCE’s commodity swap business model, each trader serves as the hub, connecting with multiple clients to form distinct ‘trading circles’ for commodity swaps. Traders with strong reputations and robust risk‑management frameworks can offer clients sophisticated exposure‑management solutions. At the same time, leveraging their technological expertise, these traders enter the futures market to hedge their own risks, or capitalize on their credit strengths to engage in offsetting transactions with other financial institutions, thereby transferring risk outward,” said Jiang Lihan, Deputy General Manager of Yong’an Capital.

“The cost of commodity swaps is lower than that of futures. Moreover, since swap transactions are settled in a single lump sum at maturity, they help avoid frequent cash‑flow operations, and the margin remains in the company’s own bank account—no funds leave the office—thereby contributing to more stable financial statements. By engaging in commodity index swaps, companies can effectively hedge against the risk of sharp price swings, with demonstrable benefits for operational stability and enhanced overall competitiveness,” says Chai Tiesong, General Manager of the Plastics and Chemicals Division at Hangzhou Zhongjing, who speaks from firsthand experience.

The survey also revealed that, having been in operation for just under a year, commodity swaps face several bottlenecks that require addressing: for instance, the concept of swaps remains difficult to grasp and calls for more extensive outreach and education; the operational framework could be further refined; and the effectiveness of traders’ on‑exchange hedging and position‑rollover strategies still needs to be strengthened. At present, commodity swaps lack a sufficiently broad client base and trading volume, underscoring the need to boost market activity.

For end‑users in the commodity swap market, the primary objectives of participating in commodity swaps are to reduce financing costs and to hedge against exposure to commodity price volatility. The survey also revealed that, in a market environment where the credit system remains incomplete, both industrial clients and institutional investors continue to face relatively high funding costs when engaging in domestic commodity swaps and other derivatives markets. Although banks are currently barred from participating in futures trading, they can enhance their credit‑related functions and gradually ease restrictions on their involvement. Furthermore, by offering margin concessions and reducing account‑opening fees, it is possible to lower participation costs for industrial clients and risk‑management institutions, thereby improving overall convenience.

Taxation TAXATATION

Announcement of the State Taxation Administration on Matters Relating to the Restoration of Taxpayer Credit

To encourage and guide taxpayers in strengthening their awareness of lawful and honest tax compliance and proactively rectifying any breaches of tax integrity, and in accordance with the “Guiding Opinions of the General Office of the State Council on Accelerating the Development of a Social Credit System and Establishing a New Regulatory Mechanism Based on Credit” (Guobanfa [2019] No. 35), the following matters concerning tax credit restoration are hereby announced:

I. Enterprise taxpayers subject to tax credit management may, upon meeting any one of the following conditions, apply to the competent tax authority for tax credit restoration within the prescribed time limit.

(1) Where a taxpayer has failed to file tax returns, remit taxes, or file supporting documentation within the statutory time limits, but has subsequently rectified such deficiencies.

(2) Taxpayers whose tax credit rating has been directly assigned to Grade D due to failure to pay, or to pay in full, the taxes, late payment penalties, and fines as determined by the tax authorities—where such failure does not constitute a criminal offense—may, within 60 days after the expiration of the period specified in the tax authority’s decision, make full payment or remit any outstanding amounts.

(3) Where the taxpayer has fulfilled the relevant legal obligations and the tax authority has, in accordance with the law, lifted the abnormal account status.

II. Where a taxpayer meets the conditions set forth in paragraph (1) of Article 1 of this Announcement and the relevant untrustworthy conduct has already been incorporated into the tax credit evaluation, the taxpayer may submit a request for credit restoration to the competent tax authority by the end of the year following the year in which the untrustworthy conduct was recorded by the tax authorities. The tax authority shall, in accordance with the “Scope and Standards for Tax Credit Restoration,” adjust the score assigned to the relevant tax credit evaluation indicator and re‑assess the taxpayer’s tax credit rating. Where a taxpayer meets the conditions set forth in paragraph (1) of Article 1 of this Announcement but the untrustworthy conduct has not yet been included in the tax credit evaluation, no application is required; the tax authority shall, pursuant to the “Scope and Standards for Tax Credit Restoration,” adjust the score for the relevant tax credit evaluation indicator and carry out the tax credit evaluation.

Taxpayers who meet the conditions set forth in Items (2) and (3) of Article 1 of this Announcement may, before the end of the year following the year in which their tax credit was directly assigned Grade D, submit an application to the competent tax authority. The tax authority shall, based on the taxpayer’s remediation of the untrustworthy conduct, adjust the status of the relevant tax‑credit evaluation indicator and re‑assess the taxpayer’s tax‑credit rating; however, the taxpayer may not be rated as Grade A.

A taxpayer who has been classified as an abnormal account may apply for credit restoration only once per tax year. The tax year runs from January 1 to December 31 of the Gregorian calendar.

Taxpayers whose tax credit rating has been restored to a level other than D may, through their directly responsible person, apply to the competent tax authority to have any previously imposed D‑level association lifted for other taxpayers registered under or managed by that same individual.

III. Taxpayers who wish to submit an application for tax credit restoration to the competent tax authority shall complete the “Tax Credit Restoration Application Form” and make a commitment regarding the authenticity of the corrective measures taken to address their untrustworthy conduct.

If the tax authority discovers that a taxpayer has made a false commitment, it shall revoke the corresponding tax credit restoration and impose a corresponding deduction in accordance with the “Adjustment Table for Tax Credit Evaluation Indicators and Evaluation Methods (Trial).”

IV. Within 15 working days from the date of acceptance of the tax credit restoration application, the competent tax authority shall complete the review and notify the taxpayer of the outcome of the credit restoration.

V. Upon completion of tax credit restoration, taxpayers shall be subject to the corresponding tax policies and administrative service measures applicable to their restored tax credit rating; any tax policies and administrative service measures previously applied shall not be retroactively adjusted.

VI. This Announcement shall take effect as of January 1, 2020.

Interpretation of the “Announcement of the State Taxation Administration on Matters Relating to the Restoration of Taxpayer Credit”

To implement the “Guiding Opinions of the General Office of the State Council on Accelerating the Development of a Social Credit System and Establishing a New Regulatory Mechanism Based on Credit” (Guobanfa [2019] No. 35), and to encourage and guide taxpayers to strengthen their awareness of lawful and honest tax compliance and proactively rectify any breaches of tax‑related integrity, the State Taxation Administration has issued the “Announcement of the State Taxation Administration on Matters Relating to Tax Credit Restoration” (hereinafter referred to as the “Announcement”), which clarifies relevant issues concerning the implementation of tax credit restoration. The main contents of the Announcement are hereby interpreted as follows:

I. Background of the Announcement

Since the implementation of the Measures for the Administration of Taxpayer Credit (Trial) (Announcement No. 40 of 2014 issued by the State Taxation Administration) and the Measures on Taxpayer Credit Evaluation Indicators and Methods (Trial) (Announcement No. 48 of 2014, as amended by Announcements No. 9 of 2016 and No. 31 of 2018), a taxpayer credit management system featuring incentives for trustworthiness and penalties for untrustworthiness has been preliminarily established. The scope of applications for taxpayer credit has continued to expand, with favorable credit standing conferring numerous benefits to taxpayers, while adverse credit may result in various restrictions. Consequently, an increasing number of taxpayers seek to promptly restore their credit standing through proactive rectification, thereby minimizing credit-related losses. Meanwhile, in July 2019, the General Office of the State Council issued the Guiding Opinions on Accelerating the Development of a Social Credit System and Establishing a New Regulatory Mechanism Based on Credit (Document No. 35 [2019] of the General Office of the State Council), which called for exploring the establishment of a credit‑repair mechanism. Under this framework, market entities that have engaged in untrustworthy conduct may undertake credit repair by making public commitments or completing corrective measures within prescribed time limits, thereby rectifying their misconduct and mitigating any adverse effects. In light of these developments, drawing on past taxpayer credit evaluation practices and following extensive research, consultations, and solicitation of taxpayers’ views and suggestions, the State Taxation Administration has formulated this Announcement, providing for the implementation of taxpayer credit repair for corporate taxpayers subject to taxpayer credit management.

II. Circumstances Eligible for Tax Credit Restoration Applications

Credit restoration is neither a simple “clean‑up” of records nor a straightforward “exit from sanctions.” In line with the principle of limited‑scope restoration, Article 1 of the Notice specifies 19 types of tax‑credit‑related breaches that are either minor in nature or have not caused significant adverse social impact, along with their corresponding restoration conditions. These include 15 instances of failing to file tax returns, remit taxes, or submit supporting documentation within the prescribed time limits, as well as 4 circumstances that automatically result in a D‑level rating. Based on past tax‑credit evaluation data, such violations have historically incurred frequent point deductions and affected a broad range of taxpayers. Following the implementation of this Notice, eligible taxpayers may apply to the tax authorities for tax‑credit restoration.

Conditions and Standards for Tax Credit Restoration

Taxpayer credit restoration is predicated on the rectification of untrustworthy conduct. Taxpayers may apply for tax credit restoration only after correcting such conduct within the prescribed time limit; the specific criteria for restoration corresponding to each scenario are set forth in the “Scope and Standards for Taxpayer Credit Restoration.”

If a taxpayer fails to file tax returns, pay taxes, or submit supporting documents within the statutory deadlines but subsequently rectifies the deficiency, the additional points awarded shall be determined based on the time interval between the date of rectification and the date the taxpayer’s default was recorded by the tax authorities. Specifically, corrections made within 30 days, within the current year, or within the following year will respectively recover 80%, 40%, and 20% of the deducted points. For cases involving failure to file or pay taxes as required, where the amount involved does not exceed RMB 1,000 and the taxpayer promptly remedies the deficiency within 30 days of the default being recorded, 100% of the deducted points will be restored.
Taxpayers who, without constituting a criminal offense, have failed to pay or fully remit the taxes, late payment penalties, and fines as determined by the tax authorities shall, within 60 days after the expiration of the deadline specified in the tax authority’s decision, make full payment of the outstanding taxes, late payment penalties, and fines in order to apply for tax credit restoration.
Taxpayers classified as “abnormal accounts” must fulfill their corresponding legal obligations and, only after the tax authorities have legally lifted the abnormal status, may they apply for tax credit restoration. For taxpayers with abnormal‑account status, a request for tax credit restoration may be submitted only once per tax year. The tax year runs from January 1 to December 31 of the Gregorian calendar.
Time Limits and Procedures for Tax Credit Restoration
For taxpayers who meet the conditions set forth in Article 1, Paragraph (1) of the Announcement and whose untrustworthy conduct has already been incorporated into the tax credit evaluation, such taxpayers may submit a request for credit restoration to the competent tax authority before the end of the year following the year in which the untrustworthy conduct was recorded by the tax authorities. If the untrustworthy conduct has not yet been included in the tax credit evaluation, no application is required; the tax authorities shall, in accordance with the “Scope and Standards for Tax Credit Restoration,” adjust the taxpayer’s score for the relevant tax credit evaluation indicator and carry out subsequent tax credit evaluations as prescribed. The term “incorporated into the tax credit evaluation” refers to the situation where the tax authorities have initiated the tax credit evaluation process for the applicable year and the point deductions attributable to the relevant untrustworthy conduct have been reflected in the annual tax credit evaluation indicator scores.
For taxpayers who meet the conditions set forth in items (ii) and (iii) of Article 1 of this Announcement, they may submit an application to the competent tax authority before the end of the year following the year in which their tax credit rating was directly assigned Grade D. The tax authority shall, based on the taxpayer’s remediation of the untrustworthy conduct, adjust the status of the relevant tax credit evaluation indicator and re-evaluate the taxpayer’s tax credit rating; however, the taxpayer may not be rated as Grade A.
Taxpayers whose tax credit rating has been restored to a level other than D may, if their directly responsible persons or other taxpayers under their registration or management have been assigned a D‑level rating as a result of such restoration, apply to the competent tax authority for removal of the D‑level association.
Taxpayers applying for tax credit restoration shall submit the “Tax Credit Restoration Application Form” to the competent tax authority and make a commitment to the authenticity of the corrective measures taken. The competent tax authority shall complete the review within 15 working days from the date of acceptance of the tax credit restoration application and notify the taxpayer of the outcome of the restoration.
Regarding the Results of Tax Credit Restoration

The adjustments to the remediation indicators will be aligned one-to-one with the corresponding point deductions and direct rating‑determining indicators. Where post‑remediation adjustments to the taxpayer’s credit rating are involved, the tax authorities will also record the changes to the evaluation results. Once the taxpayer credit remediation is completed, the taxpayer shall be subject to the applicable tax policies and administrative service measures corresponding to the revised credit rating; any tax policies and administrative service measures previously applied will not be retroactively adjusted. If the tax authorities discover that a taxpayer has failed to honor its commitment to credit remediation—such as by submitting false information in an application for credit remediation—they shall, upon verification, revoke the completed remediation and impose a 5‑point deduction in the annual taxpayer credit assessment for each such instance.

VI. On the Relationship Between Tax Credit Remediation and Tax Credit Reassessment

Taxpayer credit restoration applies when a taxpayer, having engaged in conduct that resulted in loss of trustworthiness, proactively rectifies the situation and eliminates any adverse effects, then submits an application to the tax authorities to reinstate their taxpayer credit. Taxpayer credit re‑evaluation is a mechanism available to taxpayers who dispute the results of their taxpayer credit assessment—whether they believe that deductions to certain credit indicators or the assigned rating were erroneous, or that the circumstances giving rise to such outcomes were beyond their control—thus enabling them to safeguard their rights. A prerequisite for taxpayer credit restoration is that the taxpayer does not contest the annual evaluation result issued by the tax authorities; if a dispute exists, the taxpayer must first undergo a taxpayer credit re‑evaluation before applying for credit restoration.

VII. Effective Date of the Announcement

This announcement shall take effect as of January 1, 2020.

The State Taxation Administration has introduced eight new measures to facilitate tax filing and payment for small and micro enterprises.

To thoroughly study and implement the spirit of the Fourth Plenary Session of the 19th CPC Central Committee, consolidate the achievements of the thematic education campaign on “Staying True to Our Original Aspiration and Keeping Our Mission Officely in Mind” within the tax system, and further deepen the “delegation, regulation, and service” reform, the State Taxation Administration recently issued the “Notice on Implementing New Measures to Facilitate Tax Filing and Payment for Small and Micro Enterprises,” introducing eight new initiatives designed to better support and serve the development of small and micro businesses, ensuring more targeted guidance, streamlined procedures, and an enhanced taxpayer experience.

— Expanding online service offerings to enhance tax‑administration convenience. The new measures introduce two specific initiatives: establishing direct online channels for businesses to voice their concerns and submit feedback, and optimizing access to information on tax‑related violations and non‑compliance. Building on existing offline direct‑communication mechanisms, tax authorities at all levels are leveraging information technology to create online platforms that enable direct communication with small and micro enterprises, thereby enabling broader data collection, more precise analysis, and timely feedback on these businesses’ actual needs, further improving the efficiency of responding to their requests and opinions. Provincial tax bureaus will, through the electronic tax bureau, provide small and micro enterprises with online access to records of tax‑related violations and non‑compliance, helping them promptly understand their own situation, mitigate tax‑related risks, and promote greater compliance with tax laws.

The Notice states that tax authorities in all provinces should actively explore the provision of online services for small and micro enterprises that are classified as “normal accounts” and have no pending matters, enabling them to complete intra‑provincial cross‑district relocation and deregistration procedures electronically, thereby further reducing the time required for these businesses to handle tax-related matters. At present, some regions, including Beijing, have already implemented online processing for intra‑provincial (or intra‑municipal) cross‑district relocation. Wang Ni, General Manager of the Financial Management Department at Capital Medical Industry Group Co., Ltd., remarked: “Now, by simply completing an online form, uploading the necessary documents, and submitting the application, businesses can finalize a cross‑district relocation within Beijing, making the process far more efficient and convenient from the perspective of normal market entity mobility.”

— Enhancing the precision of tax‑filing guidance and reducing tax‑filing costs. To better help small and micro enterprises understand and carry out tax filing accurately, the new measures introduce two specific initiatives: the development and issuance of tax‑filing guidance materials tailored for small and micro enterprises, and the compilation and publication of a list of tax‑benefit items. The State Taxation Administration will, in accordance with the “National Tax Service Standards (Version 3.0),” revise the “Taxpayer’s Guide to Tax Filing” and, focusing on the day‑to‑day tax‑filing needs of small and micro enterprises, produce the “One‑Stop Handbook for Small and Micro Enterprises’ Tax Filing.” In addition, it will prepare, release, and dynamically update a list of tax‑benefit items; the first batch of this list includes 491 preferential measures across 18 categories relevant to small and micro enterprises, enabling them to fully and promptly benefit from applicable policies.

The tax authorities are also exploring expanding the scope of the bulk zero‑return filing service—from non‑normal accounts applying for deregistration to all non‑normal accounts—thereby reducing redundant, repetitive procedures for supplementary zero‑return filings. Ma Hongwei, the legal representative of a decoration engineering design company in Shenyang, said: “When our company processed the removal of its non‑normal account status, we were required to file supplementary zero returns for the past three years. The tax authorities’ one‑time, bulk supplementary zero‑return filing service has saved us a great deal of time.”

The Notice requires tax authorities in all provinces to strengthen collaboration with government departments and leverage government service platforms to enable “one-time data entry and online submission” for tax-related matters associated with the establishment of newly registered enterprises. “With just a single visit, all registration procedures for new businesses can be completed, and the process is streamlined and highly efficient,” said Xu Futao, head of Zhejiang Beihang Environmental Protection Technology Co., Ltd., who recently benefited from this convenient service.

— “Bank‑Tax Collaboration” is further upgraded to bolster enterprise development. The Notice focuses on the financing challenges that constrain the growth of small and micro enterprises, calling on tax authorities in all provinces to actively coordinate with banking and insurance regulatory bodies to expand the eligibility for “bank‑tax collaboration” loans from taxpayers rated A or B to those rated M. On the premise of maintaining controllable risks, it encourages the exploration of innovative working‑capital loan models—such as “rollover without principal repayment”—for small and micro enterprises with A or B tax credit ratings, thereby effectively alleviating the difficulties and high costs of financing and stimulating the endogenous momentum driving their development.

“Earlier this year, our company faced severe cash-flow challenges. Thanks to our law-abiding and honest tax compliance, we successfully secured a 2-million-yuan loan from the Pu’er Branch of China Construction Bank, which helped us address our most pressing needs,” said Wang Ziqiang, head of Yunnan Dexiang Construction Engineering Co., Ltd., one of the beneficiaries of the “Bank-Tax Collaboration” initiative.

Professor Xu Zhengzhong of the Party School of the CPC Central Committee (National Academy of Governance) believes that the aforementioned new measures to facilitate tax filing and payment for small and micro enterprises, as one of the outcomes of the tax authorities’ second batch of thematic education on “Staying True to Our Original Aspiration and Keeping Our Mission Officely in Mind”—which combines learning with rectification—focus on the most pressing, direct, and practical tax-related issues facing these businesses. By introducing concrete measures, delivering tangible results, and addressing real challenges, these initiatives will help further improve the tax‑related business environment and boost high‑quality economic development.

Jiangsu: Setting a Benchmark for Tax and Fee Reductions, Injecting Real-World Momentum with Tangible Benefits

“We’ve caught a favorable moment,” said Xu Zhirong, assistant to the president of Jiangsu Kaibo Information Technology Co., Ltd. As a company dedicated to developing 5G application scenarios, it faces intense industry competition, and R&D expenses represent a significant investment. “At one point, even the management team lost confidence in pressing ahead. But at this critical juncture, the successive rollout of national tax‑cut and fee‑reduction policies brought us much‑needed relief.”

Reduced VAT rates, an increased rate of additional deductions for R&D expenses, one-time write-offs for newly purchased equipment, and new personal income tax policies. Since 2019, the Jiangsu tax authorities have established a “Party Member Vanguard Team to Support 5G Tax Policies,” compiling a series of tax incentives—including those for high-tech enterprises, R&D expense add-back deductions, and technology transfers—thereby ensuring that tax benefits are effectively passed along the industrial value chain.

Jiangsu is a major manufacturing province, and tax and fee reductions have benefited 480,000 manufacturing enterprises. At this stage, the relaxation of criteria for identifying small and micro businesses covers more than 92% of income‑tax‑paying enterprises across the province, 99% of which are privately owned. “According to preliminary estimates by the fiscal and taxation authorities, implementing policies such as lowering the value‑added tax rate, providing universal tax relief for small and micro businesses, introducing special additional deductions for individual income tax, reducing social security contribution rates, and cutting government‑mandated fees will ease the tax and fee burden on enterprises throughout the province by approximately RMB 200 billion,” said Shen Yifeng, Deputy Director of the Jiangsu Provincial Department of Finance.

“Between 2010 and 2018, our company benefited from a total of RMB 56 million in income tax incentives for high-tech enterprises, including the additional deduction for R&D expenses. Of this amount, more than RMB 11 million was attributable to the R&D expense additional deduction,” said Gao Yanmin, CFO and Vice Chairman of Xin Hongtai. He added that, following the increase in the R&D expense additional deduction rate to 75%, the company has been even more motivated to ramp up its R&D investment.

This year, the implementation of a larger‑scale tax and fee reduction policy has brought enterprises even more tangible financial benefits. “From the one‑time deduction for real estate to the carryforward VAT refund, from export tax rebates to corporate income tax incentives… this round of tax and fee cuts has delivered substantial gains to our company,” said Gao Yanmin, listing each measure. As of the end of August, the company had already benefited from a 620,000 yuan one‑time deduction for real estate and an export tax rebate of 780,000 yuan, with an estimated annual tax benefit of 5.2 million yuan under the corporate income tax preferential policies for high‑tech enterprises.

“Only by gaining a thorough understanding of an enterprise’s production conditions, asset allocation, and development plans, and by providing tailored, long-term support, can we help businesses accurately track the tangible benefits of tax and fee reductions, thereby better fostering their growth and expansion,” says Tang Chunhui, Deputy Director of the Huishan District Tax Bureau in Wuxi, who has maintained close ties with frontline manufacturing enterprises. In his view, Huishan District is one of the birthplaces of township and village enterprises in southern Jiangsu; helping these enterprises carry forward the spirit of reform and achieve sustained, healthy development is a key mission for the tax authorities. It is essential to ensure that tax and fee cuts effectively alleviate business burdens, stabilize economic growth, and invigorate market vitality.

Multilateral consultations on the Belt and Road Tax Administration Cooperation Mechanism were held in Beijing.

From November 6 to 8, the Multilateral Consultations of the Belt and Road Tax Administration Cooperation Mechanism (hereinafter referred to as the “Cooperation Mechanism”) were held in Beijing. Participants focused on the theme of “tax administration informatization” and reached broad consensus on a range of issues, including the implementation of the Wuzhen Action Plan adopted at the first Belt and Road Tax Administration Cooperation Forum, the establishment of an alliance to enhance tax administration capacity, and preparations for the second Belt and Road Tax Administration Cooperation Forum. Wang Jun, Chairman of the Cooperation Mechanism’s Governing Council and Director of the State Taxation Administration of China, attended the consultations and delivered a keynote address. Sun Ruibiao, Deputy Director of the State Taxation Administration of China, and Auditor General Wang Daoshu also took part in the event.

In his address, Wang Jun noted that at the opening ceremony of the Second China International Import Expo held in Shanghai, Chinese President Xi Jinping emphasized the need to promote high-quality development of the Belt and Road Initiative. Over the years, China’s tax authorities have remained committed to strengthening exchanges and cooperation with the tax administrations of countries and regions along the Belt and Road. In particular, the successful hosting of the first Belt and Road Tax Administration Cooperation Forum in Wuzhen, Zhejiang, this spring marked the formal establishment of the Belt and Road Tax Administration Cooperation Mechanism. Over the past six months, the mechanism has translated its initial vision into concrete actions, turning aspirations into reality. Participating parties have worked together to forge a path of deepened dialogue and mutually beneficial cooperation, achieving significant progress and milestone results in areas such as the development of the Belt and Road Tax Academy, the enhancement of tax administration capacity, the resolution of tax disputes, and the advancement of tax‑related information technology.

Wang Jun stated that the consultations proceeded smoothly and yielded substantial results, with all major participants actively offering constructive suggestions and speaking freely, thereby adding another significant milestone to the advancement of the cooperation mechanism. The State Taxation Administration of China stands ready to work together with all participating parties to propel the cooperation mechanism toward broader scope, wider fields, and higher levels.

It is understood that this round of consultations marks the first formal meeting among the key participants of the cooperation mechanism since the inaugural Belt and Road Tax Administration Cooperation Forum. The parties engaged in a comprehensive exchange of views, articulated their positions fully, carefully formulated concrete measures, and reached multiple consensuses. They pledged, within the framework of the cooperation mechanism, to address challenges through joint efforts and to foster greater mutual trust and cooperation with sincere commitment, thereby creating a growth‑friendly tax environment that promotes the liberalization and facilitation of trade and investment.

Tuma Adama Jabbu, Vice Chair of the Cooperation Mechanism Council and Commissioner of the Sierra Leone Revenue Authority, along with the heads of the working groups and some representatives of the Expert Advisory Committee, attended the consultation. Tuma Adama Jabbu stated that the consultation was both necessary and successful, and of great significance for deepening tax administration cooperation under the Belt and Road Initiative. She also highly commended China’s large-scale tax and fee reduction policies, noting that they were timely and would help optimize the business environment, enhance taxpayers’ compliance with tax laws, nurture tax bases, and stimulate economic growth.

Maksat Koshenbayev, Deputy Director of the International Department of Kazakhstan’s State Revenue Committee, stated that these consultations have provided a valuable platform for mutual exchange and learning, opened a window for broadening perspectives on international taxation, and will help all parties to the cooperation mechanism further leverage the role of taxation in promoting trade, investment, and economic development.

LITIGATION & ARBITRATION

The 13th National People’s Congress and its Standing Committee have released information on legislative work over the past 20 months.

The 25th National Symposium on Local Legislation was held in Kunming, Yunnan Province, from the 13th to the 14th. At today’s plenary session, Shen Chunyao, Director of the Legislative Affairs Commission of the Standing Committee of the National People’s Congress, presented an overview of the legislative work of the 13th National People’s Congress and its Standing Committee over the past 20 months. Shen Chunyao stated: “Under the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, the 13th National People’s Congress and its Standing Committee have upheld the organic unity of Party leadership, the people being masters of the country, and governance according to law, exercising the state’s legislative power in accordance with the law. As a result, legislative work has become more substantial, faster-paced, and subject to higher standards. The year 2018 saw the highest number of bills deliberated and adopted in the first year of any previous term of the National People’s Congress and its Standing Committee, marking a promising start.”

Statistics show that, as of the end of October 2019, the 13th National People’s Congress and its Standing Committee had adopted one constitutional amendment, enacted 13 laws, amended existing laws on 60 occasions, and adopted 18 decisions on legal and major issues. Additionally, the NPC Standing Committee was reviewing 12 draft laws. At present, there are 275 currently effective laws nationwide, including: 1 Constitution, 44 laws related to the Constitution, 34 civil and commercial laws, 89 administrative laws, 71 economic laws, 24 laws on the organization of state organs, 1 criminal law, and 11 laws on litigation and non-litigation procedures.

Shen Chunyao provided a detailed overview of the relevant legislative work. In advancing the development and improvement of laws related to the Constitution, legislation was enacted on the Supervision Law, the Law on the Protection of Heroes and Martyrs, and the Law on People’s Assessors; the Organic Laws of the People’s Courts and the People’s Procuratorates were revised; and decisions were adopted concerning a special amnesty for certain prisoners on the occasion of the 70th anniversary of the founding of the People’s Republic of China, the conferment of state medals and honorary titles, the formulation of supervisory regulations by the National Supervisory Commission, and the authorization of the Macao Special Administrative Region to exercise jurisdiction over the Macao side of the Hengqin Port and its related extension areas. To promote high-quality development, the Foreign Investment Law, the E‑Commerce Law, and the Cryptography Law were enacted, and the Rural Land Contracting Law was amended. To safeguard and improve people’s livelihoods, the Soil Pollution Prevention and Control Law and the Vaccine Administration Law were enacted, and the Drug Administration Law was revised. To strengthen the legal framework governing litigation, the Criminal Procedure Law was amended, the Law on International Criminal Judicial Assistance was enacted, and decisions were adopted on several issues concerning procedural rules in patent and other intellectual property cases, as well as on the establishment of the Shanghai Financial Court. To refine the tax legal system, the Individual Income Tax Law was amended, and the Laws on Cultivated Land Occupation Tax, Vehicle Acquisition Tax, and Resource Tax were enacted. To enhance the legal regime for public officials, the Civil Service Law, the Judges Law, and the Prosecutors Law were revised, and the Regulations on Firefighting and Rescue Ranks were promulgated. Meanwhile, work on the compilation of the Civil Code has been steadily advanced; over the past year and more, the draft provisions of the Civil Code have been divided into several sections and deliberated separately, and the process is currently progressing toward its intended objectives.

To ensure that legislation plays a leading, driving, and normative role in advancing reform, over the past year and more, the Standing Committee of the National People’s Congress has, through timely amendments to laws and the adoption of relevant decisions, safeguarded the steady and orderly implementation of pertinent reforms within the framework of the rule of law. First, it undertook package amendments to related laws to align with the deepening institutional reform, the “delegation, regulation, and service” reform, and the transformation of government functions, comprehensively revising 316 provisions across 32 laws, including the Law on Frontier Health Quarantine. To improve and optimize the business environment, at its tenth session in April this year, the Standing Committee amended 52 provisions in eight laws, including the Building Law. Second, it adopted decisions addressing issues such as the adjustment of administrative agency responsibilities under relevant legal provisions arising from the State Council’s institutional reform, the exercise by the China Coast Guard of its powers to enforce maritime rights and law, and the functions of the Constitution and Laws Committee of the National People’s Congress, thereby clarifying the respective duties and powers of the relevant institutions. Third, it issued decisions extending the period for piloting the marketing authorization holder system in certain localities, as well as decisions extending the temporary suspension of the application of certain legal provisions in the administrative areas of 33 pilot counties and county-level cities, including Daxing District of Beijing. In addition, it adopted a decision authorizing the State Council to temporarily adjust the application of relevant legal provisions within the free trade pilot zones, thus providing a legal basis for the smooth implementation of the “separation of licenses and permits” reform pilot program.

Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Adjudication of Civil Disputes Involving Food Safety (Draft for Public Comment)

In order to ensure the proper adjudication of civil disputes involving food safety, safeguard public health and life safety, and regulate the order of the food market, this Interpretation is formulated in accordance with the provisions of the Food Safety Law of the People’s Republic of China, the Consumer Rights Protection Law of the People’s Republic of China, the Tort Liability Law of the People’s Republic of China, the Contract Law of the People’s Republic of China, the Civil Procedure Law of the People’s Republic of China, and other relevant laws, and in light of civil judicial practice.

I. Subjects of Civil Liability for Food Safety

Article 1 [Scope of the Principal Responsibility System]

[Option One] Where a consumer suffers harm due to food that does not meet food safety standards and brings a claim for damages against the producer or the seller pursuant to Article 148, Paragraph 1 of the Food Safety Law, any defense raised by the defendant producer or seller asserting that liability should be borne by the other party—either the producer or the seller—shall not be upheld by the people’s court. If the liability rests with the producer, the seller, after making compensation, shall have the right to seek reimbursement from the producer; if the liability rests with the seller, the producer, after making compensation, shall have the right to seek reimbursement from the seller.

[Option Two] Where a consumer suffers harm due to food that does not meet food safety standards and brings an action pursuant to Article 148 of the Food Safety Law seeking compensation for losses or punitive damages from either the producer or the seller, any defense raised by the defendant—claiming that liability should be borne by the other party—shall not be sustained by the people’s court. If the liability rests with the producer, the seller, after making compensation, shall have the right to seek reimbursement from the producer; if the liability rests with the seller, the producer, after making compensation, shall have the right to seek reimbursement from the seller.

Article 2 [Liability of Online Food Trading Platforms for Operating Private‑Label Businesses] If food sold by an online food trading platform under a “private‑label” designation, or food sold through private‑label operations even if not so designated, fails to meet food safety standards, and a consumer, pursuant to Article 148 of the Food Safety Law, seeks to hold the online food trading platform liable as a seller for damages, the people’s court shall uphold such claim.

Article 3 [Liability of Online Food Trading Platforms for Failure to Fulfill Review Obligations] If an online food trading platform provider fails, in accordance with Articles 62 and 131 of the Food Safety Law, to conduct real-name registration and license verification of food sellers on its platform, or fails to perform obligations such as reporting violations and ceasing to provide online trading platform services, thereby causing harm to consumers, the people’s court shall uphold the consumer’s claim that the online food trading platform provider and the food sellers on the platform bear joint liability.

Article 4 [Liability of Carriers for Providing Unsafe Food] If food provided by a public transportation carrier to passengers fails to meet food safety standards, and the passenger seeks to hold the carrier liable for damages as a producer or seller in accordance with Article 148 of the Food Safety Law, the people’s court shall uphold such claim. A carrier’s defense asserting exemption on the grounds that it is neither a producer nor a seller of the food, or that the food was provided free of charge, shall not be sustained by the people’s court.

Article 5 [Determination of “Other Conditions” under Article 123 of the Food Safety Law in Civil Cases] Where a relevant entity or individual, knowing that a producer or seller is engaging in any of the unlawful acts specified in Paragraph 1 of Article 123 of the Food Safety Law, nevertheless provides it with equipment, technology, raw materials, sales channels, transportation, storage, or other facilitating conditions, and a consumer seeks to hold such entity or individual jointly and severally liable with the producer or seller pursuant to Paragraph 2 of Article 123 of the Food Safety Law, the people’s court shall uphold such claim.

II. Determination and Assumption of Civil Liability for Food Safety

Article 6 [Determination of a Seller’s “Knowledge”] Where a food seller falls under any of the following circumstances, and the consumer claims that such circumstances constitute the “knowledge” required under Article 148 of the Food Safety Law, the people’s court shall uphold such claim:

(1) Food that has passed its labeled shelf life but is still being sold;

(2) Failure to provide legitimate sources of procurement, or procurement at unreasonably low prices without a justifiable reason;

(3) Where a seller falsely indicates the production date or batch number of food products;

(4) Transferring, concealing, or illegally destroying records of the purchase and sale of food involved in the case, financial ledgers, or providing false information;

(5) Those who have previously been subject to administrative or criminal penalties for engaging in conduct that endangers food safety and subsequently engage in the same type of conduct again;

(6) Other circumstances that may be deemed to constitute knowledge.

Article 7 [Handling of Unsafe Food and Fraud] Where a consumer claims that a producer or seller should bear liability for damages pursuant to Article 148 of the Food Safety Law on the ground that the food does not comply with food safety standards, and the people’s court, after trial, finds that the food does comply with such standards, it shall dismiss the consumer’s claim. If the consumer alleges that the producer or seller has engaged in fraudulent conduct and, in accordance with the provisions of the Consumer Rights Protection Law, brings a separate action seeking compensation from the producer or seller, the people’s court shall accept the case.

Article 8 [Handling of Unsafe Food and Fraud] Consumers have the right to choose, in accordance with Article 148, Paragraph 2 of the Food Safety Law or Article 55 of the Consumer Rights Protection Law, to hold producers or sellers liable for punitive damages; however, people’s courts shall not support a consumer’s claim for double punitive damages.

Article 9 [Treatment of Cases Where the Promised Compensation Standard Exceeds the Statutory Standard] If a seller sells food that it knows to be non‑compliant with food safety standards, but has promised consumers a compensation standard higher than that prescribed in Article 148 of the Food Safety Law, and the consumer seeks compensation in accordance with such promise, the people’s court may uphold the consumer’s claim.

Article 10 [Handling of Cases Where the Promised Quality Standards Exceed Food Safety Standards] If a food product complies with food safety standards but fails to meet the quality standards promised by the producer or seller, and the consumer seeks to hold the producer or seller liable for damages pursuant to Article 148 of the Food Safety Law, the people’s court shall not grant such claim. However, if the consumer invokes Articles 24, 52, and 55 of the Consumer Rights Protection Law, as well as Articles 107, 111, and 112 of the Contract Law, to hold the producer or seller accountable, the people’s court shall uphold such claims.

Article 11 [Punitive Damages for Food Safety Do Not Require Personal Injury] Where food does not comply with food safety standards, and a consumer seeks to hold the producer or seller liable for punitive damages pursuant to Article 148, Paragraph 2 of the Food Safety Law, the people’s court shall not uphold the defense raised by the producer or seller on the ground that no personal injury has been suffered by the consumer.

Article 12 [Liability for Omissions on Prepackaged Food Labels] Where prepackaged food is produced and sold without indicating the producer’s name, address, date of production, shelf life, or list of ingredients or配料表, and a consumer seeks to hold the producer or seller liable for damages pursuant to Article 148, Paragraph 2 of the Food Safety Law, the people’s court shall uphold such claim, unless otherwise provided by law.

Article 13 [Liability for Compensation in the Sale of Imported Food] If imported food or food additives do not comply with China’s national food safety standards or with standards that the State Council’s health administrative department has temporarily authorized for application, and a consumer seeks compensation from the seller pursuant to Article 148 of the Food Safety Law, the people’s court shall not uphold the seller’s defense based solely on the claim that the imported food or food additives meet the food safety standards of the exporting country or have been certified as compliant by China’s entry‑exit inspection and quarantine authorities.

III. Other

Article 14 [Public Interest Litigation on Food Safety] Where the production or sale of food that does not comply with food safety standards infringes upon the legitimate rights and interests of numerous consumers, poses a risk to consumers’ personal health, or harms the public interest, and where organs and relevant organizations prescribed by laws such as the Civil Procedure Law and the Consumer Rights Protection Law bring public interest litigation in accordance with the law, the people’s courts shall accept such cases.

Where organs and relevant organizations bring public interest litigation in accordance with the provisions of the Civil Procedure Law, the Consumer Rights Protection Law, and other laws, such actions shall not preclude consumers from bringing suit pursuant to Article 119 of the Civil Procedure Law.

Article 15 [Referral of Materials Suspected of Criminal Offenses] During the adjudication of civil disputes involving food safety, if a people’s court discovers evidence suggesting a criminal offense, it shall promptly refer the relevant materials to the public security authorities.

Article 16 [Supplementary Provisions] This Interpretation shall come into force as of [Year] [Month] [Day].

After the entry into force of this Interpretation, it shall apply to first-instance and second-instance cases that are currently being heard by the people’s courts.

Cases that had already been finally adjudicated prior to the entry into force of this Interpretation, and for which a party applies for retrial or a retrial is ordered pursuant to the trial supervision procedure after the entry into force of this Interpretation, shall not be subject to this Interpretation.

Any judicial interpretations previously issued by the Supreme People’s Court that are inconsistent with this Interpretation shall no longer be applicable.

Opinions of the Supreme People’s Court on Lawfully and Properly Adjudicating Cases Involving Objects Thrown or Falling from High Places

　In recent years, incidents of objects being thrown or falling from high altitudes have occurred with increasing frequency, seriously endangering public safety, infringing upon the legitimate rights and interests of the people, and undermining social harmony and stability. To fully leverage the punitive, regulatory, and preventive functions of judicial adjudication, properly handle cases involving objects thrown or falling from heights in accordance with the law, effectively safeguard the “safety above our heads,” ensure that the people can live and work in peace and contentment, and uphold social fairness and justice, the following guidelines are hereby issued, based on the Criminal Law of the People’s Republic of China, the Tort Liability Law of the People’s Republic of China, and other relevant laws.

　I. Strengthen governance at the source, supervise and support law-based administration, and effectively prevent and punish acts of objects being thrown or falling from heights.

1. Establish the fundamental principle of preventing and punishing acts of objects being thrown or falling from high altitudes. People’s courts must earnestly implement the people-centered development philosophy, regard the prevention and punishment of such acts as a key task for the present and the foreseeable future, and fully leverage their judicial functions to safeguard the lives and property of the people. They should actively promote comprehensive and coordinated governance efforts to prevent and address these incidents, promptly identify and eliminate safety hazards, ensure public safety above people’s heads, and continuously enhance the people’s sense of happiness and security. Furthermore, they should strive to achieve an organic integration of lawful sanctions, redress for damages, and the maintenance of public safety, thereby ensuring that the people can live and work in peace and contentment and contributing to social harmony and stability.

2. Actively promote the incorporation of measures to prevent and punish acts of objects being thrown or falling from high altitudes into the framework of source‑level dispute resolution. Fully leverage the people’s courts’ roles in participating in, advancing, standardizing, and safeguarding source‑level governance; strengthen coordination with public security authorities and grassroots organizations; and proactively support and assist relevant departments in refining their strategies for preventing such incidents, thereby fostering effective collaborative efforts. Furthermore, give due weight to judicial recommendations: when adjudicating cases involving objects being thrown or falling from heights, promptly issue judicial recommendations addressing shortcomings, latent risks, or other issues identified among administrative agencies, grassroots organizations, property service providers, and other pertinent entities, and urge timely rectification.

3. Fully leverage the role of administrative adjudication in promoting law-based administration. Emphasize the positive contribution of administrative adjudication to preventing and punishing acts of throwing or dropping objects from high places, effectively safeguarding victims’ right to petition administrative organs to fulfill their statutory duties to protect their personal rights, property rights, and other legitimate interests, and supervising administrative organs in exercising their administrative powers and performing their corresponding obligations in accordance with the law. Where victims or other parties subject to administrative action bring administrative litigation against administrative organs for unlawfully exercising their powers or for failing to act in the course of performing their duties, the people’s courts shall accept such cases promptly and in accordance with the law.

II. Punish, in accordance with the law, acts of throwing or dropping objects from high places that constitute criminal offenses, thereby effectively safeguarding the lives and property of the people.

4. Fully recognize the serious social harm posed by the acts of throwing or dropping objects from high places. Such acts jeopardize the personal safety and property of the public, readily resulting in casualties and property damage, and giving rise to social conflicts and disputes. People’s courts must attach great importance to the real‑world dangers of these behaviors, deeply appreciate the necessity and significance of employing criminal penalties to address cases where the circumstances and consequences are particularly grave, and, in accordance with the law, punish such offenses to effectively prevent and resolutely curb their occurrence.

5. Accurately determine the crime of throwing objects from high places. With respect to such conduct, a comprehensive assessment should be made—taking into account the perpetrator’s motive, the location from which the object was thrown, the nature of the object, and the resulting consequences—in order to gauge the social harm caused, accurately characterize the conduct, appropriately apply the relevant criminal charge, and impose a proportionate sentence.

Whoever intentionally throws objects from a height, without yet causing serious consequences but in a manner sufficient to endanger public safety, shall be convicted and punished for the crime of endangering public safety by dangerous methods, as stipulated in Article 114 of the Criminal Law; if such conduct results in grievous bodily harm, death, or substantial damage to public or private property, it shall be punished in accordance with Paragraph 1 of Article 115 of the Criminal Law. If the aforementioned act is committed with the intent to injure or kill a specific person, the perpetrator shall be convicted and punished for the crimes of intentional injury or intentional homicide, as applicable.

6. Punish the crime of throwing objects from high places more severely in accordance with the law. Where any of the following circumstances exist, a heavier penalty shall be imposed, and probation shall generally not be granted: (1) the offense is committed repeatedly; (2) the offender continues to commit the offense despite being dissuaded; (3) the offender has previously been subjected to criminal or administrative punishment and then commits the offense again; (4) the offense is committed in a densely populated area; (5) other circumstances deemed particularly serious.

7. Accurately determine the crime of objects falling from height. Where negligence causes an object to fall from a great height, resulting in death or serious injury, and the circumstances meet the requirements set forth in Articles 233 and 235 of the Criminal Law, the offender shall be convicted and punished for the crime of causing death by negligence or the crime of causing serious injury by negligence. If, in the course of production or operations, a violation of relevant safety management regulations leads to an object falling from a height, thereby causing a major accident resulting in casualties or other grave consequences, the offender shall be convicted and punished for the crime of major liability accident in accordance with Article 134, Paragraph 1 of the Criminal Law.

III. Uphold the principle of justice for the people and impartial adjudication, and handle civil cases involving objects thrown or falling from high places in accordance with the law and in a proper manner.

8. Strengthen the adjudication of civil cases involving objects thrown or falling from high places. When handling such cases, people’s courts must fully recognize the severe harm that these tortious acts inflict on the lives, health, and property of the public, and place the protection of the legitimate rights and interests of the people above all else. In view of the difficulties in identifying direct perpetrators, the broad scope of impact, and the substantial challenges in resolving these cases, courts should innovate their adjudicatory approaches, adopt a multi‑pronged strategy, impose strict legal penalties on those who engage in throwing objects from heights, and provide robust protection to victims.

9. Enhance litigation services and provide clear guidance on case filing. People’s courts handling cases involving objects thrown or dropped from high altitudes must ensure that every case is filed and every claim is duly adjudicated, facilitating both online and offline filing for victims. When accepting disputes arising from harm caused by objects thrown or falling from buildings, courts should advise parties to identify and provide as much specific and precise information as possible about the tortfeasor, thereby narrowing the scope of “building users who may have been responsible” and alleviating the burden of litigation. Where the tortfeasor remains unidentified and other liable parties cannot be legally added, parties should be guided toward resolving disputes and obtaining compensation through diversified dispute‑resolution mechanisms.

10. Comprehensively apply the rules of evidence in civil litigation. When adjudicating cases under Article 87 of the Tort Liability Law, people’s courts shall, in accordance with the law, exempt from liability those “possible perpetrators among building users” who can prove that they are not the tortfeasor. Efforts to conduct ex officio investigations and gather evidence must be intensified; courts should proactively seek information and verification from property service enterprises, local residents, technical experts, and other relevant parties, while strengthening communication and coordination with public security organs and grassroots organizations. Furthermore, the rules of everyday experience should be fully utilized to the greatest extent possible to identify and establish the direct tortfeasor, who shall then be held liable for the tort in accordance with the law.

11. Distinguish between the different legal rules applicable to falling objects and thrown objects. Where a building, or items placed upon or suspended from it, falls or detaches and causes harm to others, if the owner, manager, or user cannot prove that they were not at fault, the people’s court shall apply the provisions of Article 85 of the Tort Law and render a judgment ordering them to bear tort liability in accordance with the law. If there are other liable parties, the owner, manager, or user, after making compensation, may seek recourse against those other parties, and the people’s court shall uphold such claims. Where an object is thrown from a building and causes harm to others, every effort should be made to identify the direct tortfeasor, and the court shall render a judgment ordering that person to bear tort liability in accordance with the law.

12. Determine the liability of property service enterprises in accordance with the law. If a property service enterprise fails to perform, or does not fully perform, its obligations of repair, maintenance, management, and upkeep as stipulated in the property service contract, prescribed by laws and regulations, or defined by relevant industry standards, and such failure results in the detachment or falling of parts of the building or objects placed on or suspended from it, thereby causing harm to others, the people’s court shall, in accordance with the law, hold it liable for tort. Where other liable parties exist, if, after assuming liability, the property service enterprise seeks recourse against those other parties, the people’s court shall uphold such right of recovery. If a property service enterprise conceals, destroys, falsifies, or refuses to provide the relevant evidence to the people’s court, thereby making it difficult to ascertain the facts of the case, it shall bear the corresponding adverse consequences.

13. Improve relevant trial procedures and mechanisms. When hearing civil cases involving high‑rise object‑dropping or falling incidents that are particularly complex, difficult to adjudicate, or have a significant social impact, people’s courts shall make full use of mechanisms such as people’s jurors, collegial panels, and presiding judge conferences, and ensure that the presidents of the court and the respective tribunals effectively exercise their supervisory duties. Where the application of Article 87 of the Tort Law is involved, the case may be submitted to the court’s adjudication committee for deliberation and decision.

IV. Emphasize diversified dispute resolution, adhere to a multi‑pronged approach, and continuously improve the mechanisms for preventing and mediating disputes arising from objects thrown or falling from heights.

14. Fully leverage the role of diversified dispute-resolution mechanisms. People’s courts should integrate the adjudication of civil cases involving objects thrown or falling from high places into the broader effort to build a one-stop, diversified dispute-resolution system; strengthen pre-litigation and in‑process mediation; effectively resolve conflicts and disputes; and strive to achieve unity between legal outcomes and social impact. In light of the specific circumstances of each case involving objects thrown or falling from height, courts should approach matters with genuine empathy for the victims, address the parties’ difficulties, deliver tangible results, and make every effort to conduct effective mediation, thereby ensuring that cases are resolved, issues are settled, and harmony is restored.

15. Promote the improvement of social assistance efforts. Fully leverage systems for deferring, reducing, or exempting court fees and for judicial assistance to provide timely relief, in accordance with the law, to victims of cases involving objects thrown or falling from heights who are genuinely facing financial hardship. Through judicial rulings and normative guidance, actively encourage parties to participate in social insurance schemes to transfer risks and share losses. Support relevant government departments at all levels in exploring the establishment of a social assistance fund for accidents involving objects thrown from heights or conducting pilot programs to ensure the reasonable allocation of damages among affected parties.

16. Actively refine and improve work measures. Strengthen public legal education through diverse channels, particularly those that are popular and well‑received by the general public; continuously enhance case‑based legal interpretation; and fully leverage the crucial role of judicial rulings in regulating, guiding, evaluating, and shaping societal values. Vigorously promote the core socialist values and foster positive social norms. Conduct in-depth research into the difficult issues arising in the judicial application of cases involving objects thrown or falling from high places, and carefully summarize trial experience. Promptly report to the Supreme People’s Court any new circumstances or problems identified in the adjudication of such cases.

The judicial interpretation on the crime of throwing objects from high places contains notable provisions, but effective deterrence still requires stringent legislation.

Today, “dropping objects from high altitudes” has become a widely recognized urban scourge, with numerous recent cases resulting in serious injuries or fatalities. Recently, in a residential community in Jiaozuo, Henan Province, a drunken man dangerously hurled a liquor bottle from a height. Although no one was injured, the property management company, citing the community’s rules and regulations, imposed a 30-day suspension of electricity service as a penalty.

The incident has sparked heated debate online, with most netizens praising the property management company for “doing a great job.” They argue that tossing objects from high-rise buildings is a reckless gamble with the property and lives of countless people, and such egregious behavior—disregarding public decency and flouting the law—must be met with tough measures; otherwise, the entire community will end up paying a heavy price. After the property management imposed a 30-day power cut on the man, it took only a little over ten days before his wife, unable to bear the inconvenience, called 110 to report the situation and asked the police to intercede with the homeowner—suggesting that the community’s established rules and regulations have indeed proven remarkably effective in real‑world practice.

However, this seemingly positive “governance outcome” lacks a solid legal foundation. Although the management rules were approved by more than 90 percent of the community’s homeowners and signed off by the man in question—thus complying with provisions of the Property Law, the Regulations on Property Management, and other relevant statutes—the legislation does not grant property management companies the authority to impose power‑cutting penalties on residents. Under electricity‑related regulations, only the power supply enterprise may alter or suspend electricity supply, and it must adhere to prescribed procedures; even in cases where a customer has failed to pay their electricity bill, an unauthorized power cut is prohibited. Moreover, according to the Regulations on Property Management, property management companies are tasked, pursuant to the terms of the property service contract, with “carrying out repairs, maintenance, and management of buildings, associated facilities and equipment, and related premises,” but they have no jurisdiction over the electrical systems within individual households.

As a result, many people point out: after so many years, the scourge of objects being thrown or falling from high altitudes remains unresolved. Just when we finally managed to draft a management regulation that seemed effective, it turned out to be unlawful. So how can we truly tackle this long-standing, intractable problem?

Indeed, property management companies’ use of community regulations to impose “penalties” to some extent highlights the inadequacy of legislation addressing the issues of objects being thrown or falling from high altitudes. For example, in judicial practice, Article 87 of the Tort Liability Law and similar provisions are often applied broadly, with liability assigned to all residents of a building when the actual tortfeasor cannot be identified. However, this “principle of fairness” under civil law is merely a second-best solution and has even earned many courts the reputation of “inaction.” Furthermore, the Public Security Administration Punishment Law does not specifically address the act of throwing objects from heights; such behavior is frequently categorized as “disrupting public order,” which can lead to confusion in law enforcement. In addition, the boundary between criminal and administrative liability remains unclear: it is not explicitly defined when administrative penalties should apply versus when criminal charges should be pursued, resulting in inconsistent and non‑standardized sanctions.

To be fair, the Supreme People’s Court’s recently issued “Opinions on Lawfully and Properly Adjudicating Cases Involving Objects Thrown or Falling from Heights” represents an important step in curbing the widespread problem of such incidents. The provision that “where an item thrown from a building causes harm to others, every effort should be made to identify the direct tortfeasor and hold them liable in accordance with the law” helps to strengthen judicial accountability; the stipulation that “the social harm of the conduct should be assessed comprehensively, taking into account factors such as the perpetrator’s motive, the location from which the object was thrown, the nature of the object, and the resulting consequences, so as to accurately determine the character of the act” facilitates a precise distinction between criminal and non‑criminal behavior; and the clarification that five circumstances—such as repeated offenses or continued conduct despite admonishment—“shall be punished more severely, and probation is generally not applicable”—strengthens penalties for this type of crime, thereby deterring unlawful conduct, among other measures.

Although the “Opinions” are replete with noteworthy innovations and even introduce groundbreaking provisions—such as stipulating that intentional dropping of objects from high altitudes may, depending on the circumstances, be prosecuted and punished as intentional homicide—they nonetheless suffer from an inherent limitation in their nature. While judicial interpretations effectively function as quasi‑legislation and carry guiding and normative force for judicial organs at all levels, they are, strictly speaking, not universally applicable laws. In the long run, it remains essential to further refine relevant legislation, amending the Criminal Law, the Tort Liability Law, the Public Security Administration Punishment Law, and other statutes, in order to better regulate the pervasive problem of objects being thrown or falling from heights and to safeguard the public’s life and property.

The Minutes of the National Courts’ Conference on Civil and Commercial Trials Have Been Released.

On November 14, the “Minutes of the National Courts’ Conference on Civil and Commercial Trials” (hereinafter referred to as the “Minutes”) were officially released. From July 3 to 4 this year, the National Courts’ Conference on Civil and Commercial Trials was held in Heilongjiang Province. During the conference, the draft of the “Minutes of the National Courts’ Conference on Civil and Commercial Trials” was discussed, and public comments were solicited, receiving an enthusiastic response from all sectors of society.

According to the head of the Second Civil Division of the Supreme People’s Court, the “Minutes” were drafted starting in February this year and promulgated in November, a process that spanned more than eight months. During this period, numerous specialized surveys were conducted, expert and academic opinions were solicited, written consultations were held with relevant departments and institutions, and public comments were also sought. The legal issues addressed in the “Minutes” have long been the subject of debate and disagreement within both academic and practical circles. By extensively gathering input, the document seeks to resolve these issues in a manner that accurately reflects the spirit of existing statutory provisions, adheres to fundamental legal principles, and aligns with the realities of China’s economic and social landscape. It strives to adjudicate disputes fairly and impartially, balance the interests of all stakeholders, and achieve the broadest possible consensus among diverse viewpoints. The issuance of the “Minutes” is of great significance for unifying judicial reasoning, standardizing judges’ discretionary powers, enhancing the openness, transparency, and predictability of civil and commercial adjudication, and bolstering public confidence in the judiciary.

The “Minutes” comprise 12 sections and 130 questions, covering virtually all major areas of civil and commercial adjudication, including corporate law, contract law, security interests, financial law, and bankruptcy. They address cutting-edge, complex, and contentious issues in civil and commercial litigation, closely monitor the latest developments in laws currently being drafted or revised—such as the Civil Code, the Company Law, the Securities Law, and the Bankruptcy Law—and keep abreast of the most recent regulatory policies in the financial sector as well as the most advanced theoretical research in civil and commercial jurisprudence.

The “Minutes” adopts a problem‑oriented approach, focusing on unifying adjudicative reasoning with respect to contentious issues arising in the adjudication of corporate disputes, contract disputes, security‑interest disputes, financial disputes, and bankruptcy disputes. The “Minutes” addresses key controversies in corporate litigation—such as “earn‑out agreements,” the acceleration of shareholders’ capital contribution obligations, restrictions on voting rights, the liability of liquidators in limited‑liability companies, piercing the corporate veil, and corporate external guarantees—and clarifies related issues in contract litigation, including contract validity, performance and remedies, as well as certain disputes under loan contracts. With regard to general rules on security interests, real‑property security interests, personal‑property security interests, and atypical forms of security, the “Minutes” provides separate guidance on each. The section of the “Minutes” pertaining to the financial sector covers five areas: protection of financial consumers’ rights, securities law, commercial trusts, property insurance, and the adjudication of negotiable‑instrument disputes, offering clear stipulations on the contentious issues that have emerged in practice. To further improve the handling of bankruptcy cases, the “Minutes” reiterates the overarching principles guiding bankruptcy adjudication and outlines priorities for the next phase of work, while providing detailed explanations and clarifications on matters such as the preservation and enforcement of the debtor’s assets after case acceptance, the debtor’s self‑management during reorganization, the resumption of the exercise of secured rights during reorganization, issues arising during the implementation of reorganization plans, and the adjudication and allocation of liability in cases where liquidation is impossible. In addition, the “Minutes” standardizes procedural issues of particular concern, including third‑party objections to enforcement, actions for the revocation of judgments brought by third parties, and the intersection of civil and criminal law.

With regard to the application of the “Minutes,” the head of the Second Civil Division emphasized that the “Minutes” do not constitute a judicial interpretation and may not be cited as a basis for adjudication. For first-instance and second-instance cases that have not yet been concluded, when the court sets forth its reasoning on the legal issues in the “This Court Holds” section of the judgment, it may draw upon the relevant provisions of the “Minutes” to support its analysis.

Other

The central bank: The third reserve requirement ratio cut of the year has been fully implemented today, potentially releasing RMB 60 billion in liquidity.

The People’s Bank of China has implemented the second round of its targeted reserve requirement ratio (RRR) cuts, bringing to a close the central bank’s third RRR reduction of the year. On September 6, the PBOC announced that, in addition to the across-the-board 0.5 percentage-point cut effective September 16—excluding finance companies, financial leasing offices, and auto finance companies—it would also impose an additional targeted RRR reduction of 1 percentage point for city commercial banks operating exclusively within provincial administrative regions. This measure will be phased in over two stages, on October 15 and November 15, with each phase involving a 0.5-percentage-point cut. According to a PBOC official, the comprehensive RRR cut will release approximately RMB 800 billion in liquidity, while the targeted RRR cut will inject roughly RMB 100 billion.

Regarding today’s (the 15th) targeted reserve requirement ratio cut, Yuan Yacheng, a senior researcher at the Minsheng Bank Research Institute (600016, stock forum), believes that this reduction is likely to release approximately RMB 60 billion in liquidity and is aimed at specific institutions, so its impact on overall liquidity should be limited. Moreover, the cut was announced in early September and had already been largely priced into market expectations. Since 2019, the People’s Bank of China has implemented three RRR cuts: a comprehensive cut carried out in two phases in January; a series of targeted cuts initiated in May, executed in three stages; and another round of comprehensive cuts, along with targeted cuts implemented in two phases, starting in September. Notably, in all three rounds, the central bank emphasized support for the development of the real economy, particularly small and micro enterprises and private offices.

Regarding the targeted reserve requirement ratio cut implemented today (the 15th), the People’s Bank of China stated on September 6 that this measure is an important step in refining the “three-tier, two‑preference” policy framework for applying lower reserve requirements to small and medium-sized banks, helping urban commercial banks that serve the grassroots level to strengthen their support for micro, small, and private enterprises. All of these measures are conducive to bolstering the development of the real economy. On the same day, the central bank reiterated that the prudent monetary policy stance remains unchanged. This RRR cut is offset by the tax‑payment period in mid-September, ensuring that overall liquidity in the banking system will remain broadly stable. Moreover, the fact that the targeted RRR cut will be rolled out in two phases helps to release funds in a measured and orderly manner.

Will the reserve requirement ratio be cut again in the future? On November 5, the People’s Bank of China conducted a medium-term lending facility (MLF) operation totaling RMB 400 billion, roughly matching the amount maturing on the same day. The tenor is one year, with a winning rate of 3.25%, down 5 basis points from the previous round. In response, Mingming, Chief Fixed Income Analyst at CITIC Securities (600030, stock forum), believes that policy space for monetary easing has opened up. Following this MLF rate cut, the central bank is likely to adopt a coordinated approach of both quantity and price adjustments, with a reserve requirement ratio cut expected by year-end or early next year to help stabilize liquidity supply.

On November 14, National Bureau of Statistics spokesperson Liu Aihua pointed out that the CPI rose 3.8% year-on-year in October, an increase of 0.8 percentage points compared with the previous month, and that current price increases continue to exhibit a structurally driven pattern. Liu Aihua stated that as counter-cyclical policies gradually take effect, they will help us progressively leverage our medium- and long-term opportunities and strengths, and that we remain fully confident in the steady, sustained, and healthy development of the economy going forward. Looking ahead, Wang Qing, Chief Macro Analyst at Orient Securities, believes that regulatory authorities will further strengthen counter-cyclical adjustments; he expects the one-year LPR quote to resume a modest downward trend on November 20, and there remains a possibility of another RRR cut around year-end.

In addition, Sheng Songcheng, former director of the Investigation and Statistics Department of the People’s Bank of China, also believes that interest rates could be appropriately cut at this time to partially alleviate the difficulties and high costs of corporate financing. However, such a rate cut would primarily target corporate loan rates, potentially achieved by lowering the Medium-term Lending Facility (MLF) or Loan Prime Rate (LPR). While the possibility of a comprehensive reduction in the reserve requirement ratio cannot be ruled out, banks currently do not face a liquidity shortage; the more pressing task remains reducing financing costs for the real economy and boosting offices’ willingness to borrow.

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