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JC Master Legal News Issue 904

Release Date:

2020-01-12 17:21

Key Takeaways for This Issue

Public Notice on the Acceptance and Review of Administrative License Applications by Securities and Fund Management Institutions

In accordance with the requirements for implementing the Administrative Licensing Law of the People’s Republic of China and the Regulations on the Procedures for Implementing Administrative Licenses of the China Securities Regulatory Commission, and with the aim of further standardizing administrative licensing practices, serving investors, and adhering to the principles of openness, fairness, impartiality, and convenience, we hereby make public the status of acceptance and review of administrative license applications submitted by securities and fund management institutions.

China will fully open its oil and gas exploration and production market.

China will fully open its oil and gas exploration and production market, allowing capital from private enterprises, foreign offices, and other sectors of society to enter the oil and gas exploration and development sector, thereby shifting away from the previous situation in which this field was dominated by state-owned companies.

The National Tax Work Conference was held in Beijing.

On January 6, the National Tax Work Conference was held in Beijing. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the conference thoroughly implemented the spirit of the Fourth Plenary Session of the 19th CPC Central Committee and the Central Economic Work Conference, reviewed the work of 2019, examined ways to strengthen tax governance and advance the modernization of taxation in the new era, and outlined tasks for 2020.

The Ministry of Human Resources and Social Security has revised three departmental regulations.

To implement the spirit of the Foreign Investment Law, which came into effect on January 1, 2020, the Ministry of Human Resources and Social Security, in consultation with the National Development and Reform Commission, the Ministry of Commerce, and the State Administration for Market Regulation, has undertaken a special revision of three departmental regulations: the Regulations on the Administration of the Talent Market, the Interim Regulations on the Administration of Sino‑Foreign Joint Venture Talent Agencies, and the Interim Regulations on the Establishment and Administration of Sino‑Foreign Joint Venture and Sino‑Foreign Cooperative Employment Agencies.

China’s “FAST” has officially begun operations after passing national acceptance.

Vision shapes perspective. On January 11, the 500-meter Aperture Spherical Radio Telescope—known as “China’s Sky Eye”—passed national acceptance and officially began operations, becoming the world’s largest and most sensitive radio telescope. This milestone signifies that humanity’s vision for exploring the unknown reaches of the universe has grown deeper, and our horizons have broadened considerably.

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission and the Monetary Authority of Singapore convened the Fourth China–Singapore Securities and Futures Regulatory Roundtable in Wuhan.

Public Notice on the Acceptance and Review of Administrative License Applications by Securities and Fund Management Institutions

Notice Regarding Matters Pertaining to the Regular Quarterly Adjustment of Securities Eligible for Margin Trading and Short Selling in the Fourth Quarter of 2019

The Shanghai Stock Exchange has released information on the handling of information disclosure violations by listed companies in the Shanghai market in 2019.

Yitian Co., Ltd. is listed on the Shenzhen Stock Exchange.

Corporate & Commercial

China will fully open its oil and gas exploration and production market.

DAMO Academy Releases the Top Ten Technology Trends of 2020

Intelligent social governance requires intelligent technological tools.

In 2019, Shaanxi’s total value of technology contract transactions exceeded RMB 140 billion.

The Consumer Electronics Show in Las Vegas Opens

Taxation

Interpretation of the “Announcement of the State Taxation Administration on the Entry into Force and Implementation of the Agreement between the Government of the People’s Republic of China and the Government of New Zealand for the Elimination of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, and its Protocol”

Interpretation of the “Announcement of the State Taxation Administration on the Entry into Force and Implementation of Protocol No. 5 to the Arrangement between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income”

The National Tax Work Conference was held in Beijing.

State Taxation Administration: Further Enhancing the Effectiveness of Tax Governance in 2020

Last year, new tax and fee reductions exceeded 2 trillion yuan, boosting GDP by approximately 0.8 percentage points.

Litigation & Arbitration

If wages owed to rural migrant workers are not paid within the statutory time limit, an additional compensation of at least 50% must be paid.

The Ministry of Human Resources and Social Security has revised three departmental regulations.

A Brief Commentary on the “Interim Measures for the Supervision and Administration of Financial Leasing Companies (Draft for Public Comment)”

The Regulations of Jiangxi Province on Traditional Chinese Medicine have officially come into effect!

The “Administrative Measures of Shandong Province on E-Government and Government Data Management” Have Been Issued.

Other

China’s “FAST” has officially begun operations after passing national acceptance.

Finance & Capital Markets

The China Securities Regulatory Commission and the Monetary Authority of Singapore convened the Fourth China–Singapore Securities and Futures Regulatory Roundtable in Wuhan.

On December 27, 2019, the China Securities Regulatory Commission and the Monetary Authority of Singapore successfully hosted the Fourth China–Singapore Securities and Futures Regulatory Roundtable in Wuhan. The meeting was co-chaired by Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission, and Wang Zongzhi, Deputy Managing Director of the Monetary Authority of Singapore. The roundtable serves as an important platform for implementing the outcomes of President Xi Jinping’s visit to Singapore in November 2015, fostering dialogue between the regulatory authorities and industry representatives of both countries, and deepening practical cooperation in the capital markets between China and Singapore.

This roundtable featured a wide range of topics and yielded positive results. The two sides exchanged experiences in the opening-up, development, and regulation of their respective securities, futures, and derivatives markets, and reached important consensus on further deepening mutually beneficial cooperation between the Chinese and New Zealand capital markets and strengthening regulatory collaboration.

Assistant Managing Directors of the Monetary Authority of Singapore, Li Wenye and Xie Fuxing, attended the roundtable. The meeting was also attended by heads of relevant departments from the China Securities Regulatory Commission and the Monetary Authority of Singapore, as well as representatives from the Shenzhen Stock Exchange, the Shanghai Futures Exchange, the Dalian Commodity Exchange, the Zhengzhou Commodity Exchange, China Securities Depository & Clearing Corporation Limited, and the Singapore Exchange, totaling approximately 50 participants.

Public Notice on the Acceptance and Review of Administrative License Applications by Securities and Fund Management Institutions

1. The public notice shall include information on the applicant and the application matter, the receipt and acceptance of application materials, the review process and feedback, the administrative licensing decision, and explanations regarding related matters.

2. The public notice presents the review progress of administrative licenses for securities and fund management institutions in tabular form.

3. The public notice table is updated weekly, with each update superseding the previous week’s progress. With respect to administrative license applications that have been approved as of the date of this notice, they will no longer be published on the next notice date.

4. Regarding acceptance: The date of receipt of the application materials shall be the date on which the accepting authority issues the receipt to the applicant. The date of supplementary submission shall be the date on which the accepting authority issues the notice requiring the applicant to submit supplementary materials. The date of the acceptance decision shall be the date on which the accepting authority renders its decision to accept the application. If the supplementary materials submitted by the applicant are not filed within the prescribed time limit, or if the supplementary materials are incomplete or do not conform to the legally prescribed form, the application shall not be accepted.

5. Regarding review: The time limit for administrative licensing review shall be calculated from the date on which the decision to accept the application is made. The period between the date the reviewing authority issues its feedback and the date it receives a written response that meets the requirements shall not be included in the review period. If the reviewing authority conducts an on-site inspection of the application materials or verifies relevant complaint materials, the period from the date the inspection decision is made to the date the inspection is completed shall not be counted within the review period. The period from the date the reviewing authority, in accordance with the law, notifies experts to attend the review meeting to the date the review meeting concludes shall not be included in the review period. Similarly, the period from the date the reviewing authority formally notifies the applicant of the suspension of the review to the date it formally notifies the applicant of the resumption of the review shall not be counted within the review period.

In the review column of the public notice, “Circumstances Requiring Clarification” shall specify the start and end dates for matters such as the submission of written feedback by the reviewing authority and the suspension of the review; the date on which the applicant withdrew the administrative licensing application; and any new circumstances or issues arising in the application that require further study and clarification of relevant policies.

6. Regarding decisions: Specify the date on which the reviewing authority issued the decision to terminate the review, the decision to grant an administrative license, or the decision to deny an administrative license.

Notice Regarding Matters Pertaining to the Regular Quarterly Adjustment of Securities Eligible for Margin Trading and Short Selling in the Fourth Quarter of 2019

To all member institutions and other market participants:

To promote the sound and sustainable development of margin trading and short‑selling activities and to optimize the structure of eligible securities, in accordance with the relevant provisions of the Detailed Rules for the Implementation of Margin Trading and Short‑Selling on the Shanghai Stock Exchange (hereinafter referred to as the “Detailed Rules”) and the periodic evaluation and adjustment mechanism for eligible securities under margin trading and short‑selling (hereinafter referred to as “eligible securities”), the Shanghai Stock Exchange (hereinafter referred to as “the Exchange”) conducts an evaluation of eligible securities at the end of each quarter and implements adjustments as appropriate. The following matters concerning the regular adjustments for the fourth quarter of 2019 are hereby notified:

I. The adjustment to the scope of eligible stocks for margin trading and short selling (hereinafter referred to as “eligible stocks”) shall, as a general principle, give priority to retaining the existing eligible stocks. For A‑shares listed on this exchange that meet the criteria set forth in Article 24 of the Implementing Rules, new eligible stocks will be selected by ranking them according to a weighted evaluation index, from highest to lowest. Following this adjustment, the total number of eligible stocks on this exchange will be 800 (the specific list is attached).

The weighted evaluation index is calculated as follows: Weighted Evaluation Index = 2 × (the stock’s average free‑float market capitalization over a specified period / the Shanghai Stock Exchange A‑share average free‑float market capitalization over the same period) + (the stock’s average trading value over the specified period / the Shanghai Stock Exchange A‑share average trading value over the same period).

II. The adjustment to the scope of exchange-traded open-end index funds eligible for margin trading and short selling is made in accordance with Article 25 of the Implementation Rules, taking into account factors such as fund type. Following this adjustment, the number of exchange-traded open-end index funds eligible for margin trading and short selling on this exchange stands at 59 (the specific list is provided in the Appendix).

III. All member institutions are required to attach great importance to this matter and diligently carry out the necessary business and technical preparations for the adjustment of the scope of eligible securities, thereby ensuring the smooth implementation and secure operation of this initiative.

IV. All member institutions shall further refine their risk‑monitoring metrics and, based on relevant information such as listed companies’ financial indicators, compliance‑related operational status, and market trading conditions, strengthen risk identification and differentiated management of underlying securities. They should also implement appropriate monitoring measures to rigorously control risks in margin‑financing and short‑selling activities and effectively safeguard investors’ interests.

V. The scope of securities eligible for margin trading and short selling on the STAR Market is not subject to the provisions of this Notice.

VI. This Notice shall take effect as of January 13, 2020. The “Notice on Matters Relating to the Regular Third-Quarter 2019 Adjustment of Securities Eligible for Margin Trading and Short Selling” (SSE Document No. [2019] 102), issued by this Exchange on October 18, 2019, is hereby repealed concurrently.

The Shanghai Stock Exchange has released information on the handling of information disclosure violations by listed companies in the Shanghai market in 2019.

In 2019, the Shanghai Stock Exchange actively implemented the CPC Central Committee and the State Council’s directives on capital market reform and development, as well as the China Securities Regulatory Commission’s unified deployment. Focusing on the paramount goal of enhancing the quality of listed companies, and guided by the principle that “less but more refined regulation leads to better governance,” the Exchange rigorously carried out disciplinary actions for information disclosure violations, further reinforcing the responsibilities of listed companies’ directors, supervisors, senior management, major shareholders, and actual controllers—the “key few.” It also urged listed companies and relevant accountable parties to officely uphold the “four respects” and adhere to the “four bottom lines.” By sanctioning various market irregularities, cracking down on illegal and non-compliant conduct, safeguarding the order of information disclosure, and protecting the interests of small and medium-sized investors, the Exchange worked to foster a sound market environment.

The Exchange has maintained rigorous ongoing oversight and faithfully fulfilled its self-regulatory duties. In 2019, in response to violations of information disclosure requirements, the SSE issued 40 public censures, 103 written criticisms, and 106 regulatory alerts—representing year-on-year increases of 25%, 63%, and 33%, respectively. Disciplinary actions and regulatory alerts collectively involved 110 listed companies, 533 directors, supervisors, and senior executives, and 39 personnel from intermediary institutions.

We will adhere to a categorized regulatory approach, focusing on companies mired in disorder and those posing systemic risks. For major risk‑bearing offices such as ST Furun and *ST Yida, we will hold violators strictly accountable, imposing the maximum penalties—public designation of non‑compliance and public censure—on both the companies and their principal responsible persons, thereby addressing market concerns. With respect to four Shanghai‑listed delisted companies—Delisted Hairun, Delisted Dakong, Delisted Huaye, and others—we will promptly address any related violations, ensuring that the market’s exit mechanism functions effectively.

Adhering to precision‑based regulation, we maintain a office stance on holding violators accountable to the highest standards. In handling cases, we place greater emphasis on the “key few,” particularly in addressing serious, egregious violations—such as controlling shareholders or actual controllers appropriating the interests of listed companies—that cross red lines. We impose stringent penalties on principal offenders, including publicly deeming 15 cases involving 25 individuals ineligible, up 114% and 14%, respectively, year over year. Furthermore, for two individuals whose misconduct was exceptionally grave, we have publicly declared them permanently disqualified from serving as directors, supervisors, or senior executives of listed companies. As for other responsible parties, we adopt differentiated measures tailored to the specific circumstances, with the aim of providing educational warnings.

We have consistently pursued a dual approach of regulation and service, stepping up compliance training for listed companies and the “key minority.” In 2019, we organized nearly 20 compliance‑related training sessions on disciplinary measures, using case studies to clarify the law and analyze underlying principles, promptly communicating regulatory stances, guiding companies to strengthen governance and standardize operations, and thereby enhancing their overall management capabilities.

Specifically, in 2019, the following six categories of illegal and non-compliant activities were subject to targeted enforcement.

First, there are acts that encroach upon the interests of listed companies, such as misappropriation of funds and unauthorized guarantees. In recent years, the operating environment—both internal and external—for listed companies has grown increasingly complex, and some controlling shareholders and de facto controllers have sought to cross the line by resorting to fund misappropriation, illegal guarantees, and other means to undermine corporate interests. While strengthening ex‑ante and ongoing oversight, the Shanghai Stock Exchange has rigorously held accountable the “key few” responsible for such misconduct, thereby deterring future violations. Over the course of the year, it handled 22 major cases involving fund misappropriation and unauthorized guarantees, including 13 cases resulting in public censure or public designation; these figures represent year‑on‑year increases of 120% and 333%, respectively. Notable examples include ST Furun, where substantial funds were misappropriated by its controlling shareholder and related parties, and ST Antong, where the de facto controller bypassed internal procedures to transfer funds from a subsidiary to affiliated entities. Because these companies failed to promptly rectify their violations, their shares were subject to additional risk alerts, and they were publicly censured; moreover, the respective de facto controllers were publicly designated as ineligible to serve as directors, supervisors, or senior executives of listed companies for periods exceeding five years.

Second, performance commitments following “three-high”‑type restructurings have not been fulfilled. With the expiration of the commitment periods for earlier “three-high”‑type transactions, certain post‑transaction adverse effects have gradually surfaced. The target assets have been poorly managed, the counterparties have failed to meet their compensation obligations, and some companies have lost control over the target entities. Even worse, in order to evade compensation, a few counterparties have resorted to egregious practices such as financial fraud. This year, relevant violations have been rigorously investigated and prosecuted, with concerted efforts to safeguard the integrity of the M&A and restructuring market. Throughout the year, 13 cases were handled, involving 143 instances of market participants. Typical examples include: in the Yellow River Cyclone restructuring, the counterparty failed to disclose objective performance forecasts for the target asset, did not ensure that the target disclosed its true financial results, and ultimately resulted in the loss of control over the target company, leading to public censure; and in the Shengjitang restructuring, the counterparty artificially inflated operating revenue and net profit to “fulfill” its performance commitments, resulting in public condemnation of the counterparty.

Third, commitments to increase shareholdings have not been fulfilled. When major shareholders and directors, supervisors, and senior executives announce plans to buy back shares, it signals their intrinsic confidence in the company’s valuation and conveys a positive market outlook—issues that attract close attention from investors. In practice, some entities have engaged in violations by failing to implement these pledged increases. To regulate such commitments and prevent insiders from using “deceptive” buyback schemes to prop up stock prices, 12 cases involving major shareholders and 5 cases involving directors, supervisors, and senior executives have been addressed. Notable examples include the actual controller of Yue Tai Shares, the controlling shareholder of Jiangquan Industrial, and the second-largest shareholder of Wen Tou Holdings, all of whom announced substantial share‑buyback plans but failed to execute even a single share upon expiration of the commitment period, resulting in public censure.

Fourth, some companies failed to implement their share‑repurchase plans as scheduled. Share repurchases are an important means for listed companies to reward investors. By disclosing and executing such plans, companies send positive market signals, which help stabilize their stock prices. Following the issuance and implementation of detailed rules on share repurchases, many offices promptly announced corresponding plans, with over 90 percent having fulfilled their commitments. However, a small number of companies, upon expiration of their repurchase periods, defaulted on their obligations and withdrew without following through. To deter breaches of trust and ensure corporate compliance, regulatory authorities promptly initiated proceedings against more than ten listed companies, including Jinfafa Technology, for failing to honor their repurchase commitments, and publicly censured particularly egregious cases, such as that of Delisted Huaye.

Fifth, violations such as financial fraud in annual reports and failure to disclose on time. Periodic reports are the primary vehicle for conveying a listed company’s operating performance and constitute critical information for investors’ decision-making. Combating financial fraud and the failure to timely disclose annual reports has consistently been one of the key priorities for enhancing the overall quality of corporate information disclosure. Since the beginning of this year, 14 cases involving such violations have been handled, a 133% increase year over year; among them, 10 were publicly censured, with 141 individuals held accountable. Notable examples include Xiangyi Rongtong, which improperly recognized investment income, and *ST Yangfan, which artificially inflated its annual revenue and profits by overstating sales revenue—both were publicly censured. Additionally, *ST Yida and *ST Xinyi failed to disclose their annual reports on time, resulting in public censure of the companies and their relevant directors, supervisors, and senior management.

Sixth, intermediary institutions failed to exercise due diligence. Securities intermediaries are a vital component of the securities market ecosystem, playing a critical role in enhancing capital market governance through rigorous verification and professional oversight. To ensure that these intermediaries strictly fulfill their “gatekeeper” responsibilities, since the beginning of this year, 13 cases have been handled, involving four types of entities—financial advisors, accounting offices, and valuation agencies—and 39 responsible personnel, representing year-on-year increases of 33.33% and 387.5%, respectively. Notable examples include: the annual audit accountant for Delisted Huaye, who, in relation to the company’s substantial debt‑investment transactions, failed to conduct audits and verifications in strict accordance with professional standards and was publicly criticized; and the valuation agency and appraisers engaged in *ST Baoqian’s restructuring, whose valuation activities clearly violated professional standards, whose reports contained inaccuracies, and whose working papers exhibited significant omissions, resulting in public censure.

In 2019, the Shanghai Stock Exchange continued to strengthen the standardization and timeliness of its disciplinary actions, promote regulatory transparency, and enhance the credibility of its oversight. Moving forward, the Exchange will actively implement the requirements of the new Securities Law, prioritize the overarching goal of improving the quality of listed companies, and fully leverage the role of self-regulatory oversight within the market-wide system for holding violators accountable. It will further refine the effective coordination between self-regulatory and administrative supervision, maintain steadfast regulatory discipline, foster synergistic efforts, and fulfill its self-regulatory duties in accordance with laws and regulations. By working in concert to enhance the effectiveness of regulatory enforcement, the Exchange will earnestly safeguard the legitimate rights and interests of investors and contribute to fostering a sound ecosystem in the capital market.

Yitian Co., Ltd. is listed on the Shenzhen Stock Exchange.

Yitian Co., Ltd. (stock code: 300812) will be listed on the ChiNext Board on January 9, 2020.

Yitian Co., Ltd. is issuing 19.38 million shares in this public offering, all of which are new shares at an issue price of RMB 21.46 per share, raising RMB 416 million. Following the offering, the company’s total share capital will stand at 77.511683 million shares. Yitian Co., Ltd. primarily provides customers with specialized, high-performance, domestically produced electronic equipment. In 2018, the company reported operating revenue of RMB 432 million and a net profit of RMB 73.3321 million.

Commercial & Corporate

China will fully open its oil and gas exploration and production market.

On the 9th, a responsible official from the Ministry of Natural Resources stated here that, in accordance with the Ministry’s “Opinions on Several Matters Concerning the Advancement of Mineral Resource Management Reform (Trial),” both domestic and foreign-invested companies registered within the territory of the People’s Republic of China and with net assets of no less than RMB 300 million are eligible to obtain oil and gas mining rights as prescribed. Taking into account the distinct exploration and extraction characteristics of oil and gas compared with non‑oil and gas minerals, a unified system for oil and gas exploration and production is implemented: once an oil and gas exploration right holder discovers commercially viable oil and gas resources, they may commence production after reporting to the competent natural resources authority with registration jurisdiction, and must enter into a mining rights transfer contract within five years and complete the statutory procedures for mining rights registration.

According to reports, the comprehensive liberalization of market access—including prospecting and mining rights—will break the longstanding pattern in the oil and gas exploration and production sector, where a handful of state-owned enterprises have held a monopoly. The participation of foreign-invested offices, private enterprises, and other types of market players will further invigorate the market, attract capital from a wider range of sources, and help establish a market system centered on national oil companies but open to diverse economic actors, thereby strengthening the country’s energy security.

The Ministry of Natural Resources has issued the “Opinions on Several Matters Concerning the Advancement of Mineral Resource Management Reform (Trial),” primarily to implement the central government’s decisions and arrangements regarding the reform of the mineral rights transfer system, the oil and natural gas management system, and the property rights system for natural resource assets. The document aims to deepen the “delegation, regulation, and service” reform, fully leverage the market’s decisive role in allocating resources while enhancing the government’s role, and intensify efforts in oil and gas exploration and development.

DAMO Academy Releases the Top Ten Technology Trends of 2020

Recently, Alibaba Group’s cutting-edge research institute, DAMO Academy, unveiled its Top 10 Technology Trends for 2020, covering前沿 technologies and hot topics such as artificial intelligence, quantum computing, and blockchain. Industry experts believe that the trends highlighted by DAMO Academy focus on emerging technologies that are rapidly becoming part of everyday life, offering a valuable roadmap for related sectors.

The ten major technology trends of 2020 include: the evolution of artificial intelligence from perceptual intelligence to cognitive intelligence; breakthroughs in integrated computing and storage that address AI’s computational bottlenecks; hyper‑convergence in the industrial internet, enabling large‑scale inter‑machine collaboration; modularity lowering the barriers to chip design; the widespread adoption of production‑ready blockchain applications; quantum computing entering a critical phase of development; new materials driving innovation in semiconductor devices; accelerated deployment of AI technologies that safeguard data privacy; and the cloud emerging as the central hub of IT innovation.

Taking the trend of “AI technologies for protecting data privacy will accelerate their deployment” as an example, the report argues that compliance costs associated with data circulation are steadily rising. Leveraging AI to safeguard data privacy is emerging as a new technological frontier, enabling participating parties to perform specific computations while ensuring the security and privacy of all data, thereby addressing the challenges of data silos and low trust in data sharing and unlocking the value of data.

Intelligent social governance requires intelligent technological tools.

“In the future, city leaders, aided by artificial intelligence systems, will be able to directly monitor every move of the sprawling urban ecosystem—much like a pilot seated in the cockpit, with eyes on all sides and ears attuned to every sound, sensing environmental changes and making real-time decisions.” When discussing the technological underpinnings of social governance, artificial intelligence is invariably cited; given time, AI technologies will permeate every facet of governance.

“Intelligence is the advanced stage of the evolution of an information-based society,” Huang Tiejun emphasized. “We now have the preliminary conditions in place to leverage intelligent technologies for more effective social governance.”

The use of artificial intelligence is both inevitable and essential. Smart security safeguards our safety; smart justice helps uphold social fairness and justice; smart elderly care directly addresses the pressing challenges of an aging society… Wang Guoyin, Vice President of the Chinese Association for Artificial Intelligence and Dean of the Graduate School at Chongqing University of Posts and Telecommunications, cited numerous examples of AI being applied to social governance. “Today,” he said, “cyberspace, the physical world, and the social sphere have become inextricably intertwined. People are no longer just entities in physical space—they are also online, data‑driven beings.” Consequently, the tools of social governance must evolve accordingly. The experts interviewed all agreed that AI has already begun to be deployed in social governance, albeit on a preliminary scale. Nevertheless, leveraging intelligent technologies for social governance remains a highly challenging endeavor. As Wang Guoyin noted, while AI offers more sophisticated instruments for managing society, it also introduces problems that have never been encountered before.

For example, there’s the issue of open data sharing. “How to manage and share data—this is a global challenge,” he notes. Then there’s privacy: as cyberspace becomes increasingly intertwined with physical and social spaces, should we revise the very definition of privacy? “It’s fair to say that we’re still in the ‘primitive stage’ of cyberspace,” says Wang Guoyin. “The theoretical framework for cyberspace governance remains underdeveloped, and the patterns of human behavior in cyberspace have yet to be fully understood.”

“The problems brought about by technology must be addressed through technology itself. We must continue to encourage technological exploration,” Huang Tiejun emphasized. He noted that the development of human society is, in essence, a process in which technology continually reshapes social structures and ethical norms. “At the same time, it is indeed crucial to pay close attention to societal and ethical implications and to guide artificial intelligence in harnessing its positive potential.”

In traditional societies, governance was organized around physical human actions; today, a significant portion of human activity takes place in the information space and is increasingly mediated by artificial intelligence. Policymakers must equip themselves with appropriate technological tools to coexist with this more intelligent and powerful entity. “When certain institutions and individuals can leverage advanced AI to engage in social activities, failure to adopt equally sophisticated regulatory technologies will inevitably lead to problems,” Huang Tiejun stated.

In fact, the problems brought about by technology must ultimately be addressed through technology itself. For example, people worry that facial recognition may lack accuracy and that clever tricks could easily fool even relatively unsophisticated systems. To mitigate these technological risks, relying solely on regulations is insufficient. “In reality, once a vulnerability is identified, many researchers will inevitably work to patch it at the technical level,” says Huang Tiejun. He argues that this is precisely why “the one who tied the knot must also untie it.”

In 2019, Shaanxi’s total value of technology contract transactions exceeded RMB 140 billion.

According to the Shaanxi Provincial Department of Science and Technology, in recent years, Shaanxi Province has fully tapped into and leveraged its scientific and educational resources, accelerated the commercialization of scientific and technological achievements, and facilitated the integration of science and technology with the economy. The province currently hosts 1,340 research institutions and has established 21 national-level technology transfer demonstration centers. In 2019, the province’s total technology transaction value reached RMB 146.783 billion.

According to Zhao Yan, Director of the Shaanxi Provincial Department of Science and Technology, in 2019, Shaanxi Province’s comprehensive science and technology innovation index reached 67.04%, while the province’s annual turnover from technology contracts grew by more than RMB 10 billion on average, rising from RMB 63.998 billion in 2014 to RMB 146.783 billion in 2019.

Among these efforts, Shaanxi Province has been vigorously promoting the close integration of science and technology with the economy and the seamless alignment of innovation outcomes with industrial development, thereby ensuring effective commercialization of scientific and technological advances. The Science and Technology Transfer Guidance Fund uses government R&D funding as its mother fund, attracting private capital to co‑establish sub‑funds that support technological innovation and the translation of research results into practical applications. To date, 16 sub‑funds have been set up, with a total size of RMB 4.646 billion; they have invested in more than 270 technology‑focused enterprises, whose combined valuation now exceeds RMB 27.3 billion. Zhao Yan stated that Shaanxi Province is leveraging specific projects to accelerate the commercialization of scientific and technological achievements. On one hand, it has launched a Science and Technology Transfer Program that prioritizes four categories of projects: those that have won national or provincial science and technology awards, those transferred through technology markets, those involving equity participation via technology contributions, and those primarily promoted through demonstration and scaling-up initiatives. In 2019, over 130 projects were approved, receiving nearly RMB 30 million in funding. On the other hand, in October 2019, Shaanxi Province initiated the “Action Plan for the Commercialization of One Hundred Scientific and Technological Achievements,” outlining eight key measures—such as project incubation and database building, platform‑based services, and pre‑IPO guidance—to explore new pathways and models for technology transfer. To date, more than 60 projects have been identified, and 20 high‑quality technology‑transfer projects have been selected for inclusion in the database.

In addition, Shaanxi Province has continued to refine its technology‑market service system by establishing the “Northwest Center” of the National Technology Transfer Center and developing the “TechPeople” technology‑transfer social platform. The province now hosts 21 national‑level technology‑transfer demonstration institutions, 85 provincial‑level ones, and 14 technology‑contract verification and registration agencies, thereby laying the groundwork for a well‑structured, multi‑tiered service network characterized by rational sectoral coverage, clear functional differentiation, a comprehensive transfer chain, distinctive features, and complementary capabilities.

The Consumer Electronics Show in Las Vegas Opens

On January 9, at the Consumer Electronics Show in Las Vegas, which opened this week, China’s business environment and opportunities became a central topic of discussion. During his keynote address at the show, Michael P. Winkelmann, Chairman and CEO of Canada’s Ballard Power Systems, stated that the Chinese market is vast and places a strong emphasis on innovation.

Ballard Power Systems, headquartered in Canada, is a global leader in fuel cell technology and currently operates several joint ventures and collaborative partnerships in China, engaged in market development and related activities for hydrogen fuel cells. Speaking at the event, Michael McAllister emphasized that understanding the Chinese market begins with recognizing its sheer scale: data show that China accounts for 30% of the global automotive market; it also boasts more than 30,000 kilometers of high-speed rail—more than the combined total of the rest of the world—and possesses the world’s largest manufacturing base, supported by an exceptionally robust supply chain. He noted that China has significantly strengthened intellectual property protection and emerged as an innovation-driven nation, urging foreign investors not to shy away from entering this world’s largest market out of concern over IP issues. “In my view,” he said, “China has undergone profound changes in the realm of intellectual property protection, and its market has grown so large that it can no longer be ignored.”

Markus Maier stated that while people often worry about intellectual property infringement, in his company’s case and within his industry, he sees in China opportunities for the paid transfer of IP as well as chances to collaborate with local partners on R&D. “Many claim that China is a market that merely imitates without any capacity for innovation—yet this couldn’t be further from the truth,” he said, citing three lines of evidence: China produces nearly ten million university graduates each year, providing an exceptionally strong and highly skilled workforce; it ranks among the world’s leaders in international patent filings and R&D investment; and it boasts a remarkably favorable entrepreneurial ecosystem, as evidenced by the rapid growth of numerous start-ups in a short span of time. Maier also offered examples relevant to his company’s business: China has pioneered numerous innovations in the new‑energy vehicle sector, serving as a leading manufacturer of lithium‑iron battery packs for NEVs, and holding a dominant position in hydrogen‑fuel‑cell technology and battery‑powered vehicle production.

Taxation TAXATATION

The Agreement between the Government of the People’s Republic of China and the Government of New Zealand for the Elimination of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as the “Agreement”) and its Protocol were formally signed in Beijing on April 1, 2019. The principal provisions of the Agreement and the Protocol are set out below:

I. On the Scope of “Person”

The Agreement incorporates provisions on tax transparency, which stipulate that, with respect to any entity or arrangement that is treated as fully or partially transparent under the tax laws of either Contracting State, the portion of income derived by such entity or arrangement, or through it, that is taxed in the first-mentioned Contracting State as if it were income of a resident of that State, shall be deemed to be income derived by a resident of that Contracting State, and the other Contracting State shall accord treaty treatment to that portion of income.

Furthermore, the Agreement expressly provides that it shall not affect a Contracting State’s taxation of its residents, except as otherwise provided in specific articles listed in the Agreement.

II. Scope of Tax Types

The Agreement and the Protocol shall apply in China to personal income tax and corporate income tax, and in New Zealand to income tax.

III. Regarding Permanent Establishments

A construction site, or a building, assembly, or installation project that lasts for more than 12 months, constitutes a permanent establishment. An enterprise that provides services, including consulting services, through its employees or other persons it employs, where such activities—relating to the same project or to related projects—continue for, or cumulatively exceed, 183 days in any 12‑month period, also constitutes a permanent establishment. Furthermore, if an enterprise of one Contracting State carries out, in the other Contracting State, activities involving the exploration, extraction, or related operations concerning natural resources located in that other Contracting State—including the operation of large‑scale equipment—and such activities continue for, or cumulatively exceed, 183 days in any 12‑month period, this likewise constitutes a permanent establishment.

At the same time, the Protocol incorporates anti-abuse provisions aimed at preventing the fragmentation of contracts, stipulating that, solely for the purpose of determining whether the threshold periods referred to above have been exceeded, an enterprise of one Contracting State carrying out the activities mentioned in those provisions in the other Contracting State shall be deemed to have exceeded such thresholds if the aggregate duration of those activities across one or more periods exceeds 30 days but does not exceed the threshold periods specified above; furthermore, if one or more closely related enterprises of that enterprise carry out activities corresponding to those mentioned in the aforementioned provisions in the other Contracting State, with each such period lasting more than 30 days, all such periods shall be counted toward the aggregate duration of the activities carried out by that enterprise.

IV. Regarding Dividends

(1) Tax Rate

Dividends paid by a company that is a resident of one Contracting State to a resident of the other Contracting State may be taxed in that other Contracting State. However, if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 5 per cent of the gross amount of the dividends where the beneficial owner is a company and directly holds at least 25 per cent of the capital of the company paying the dividends; in all other cases, the tax shall not exceed 15 per cent of the gross amount of the dividends.

With respect to the requirement that a shareholder directly hold at least 25% of the capital of the dividend‑paying company, the Agreement incorporates a 365‑day holding period: during any 365‑day period that includes the date on which the dividend is paid—without taking into account changes in shareholding resulting directly from corporate reorganizations of either the holding company or the dividend‑paying company, such as mergers or spin‑offs—the shareholder must have directly held at least 25% of the capital of the dividend‑paying company throughout that entire 365‑day period.

(II) Tax Exemption Provisions

With respect to dividends paid by a company that is a resident of one Contracting State, if the beneficial owner of the dividends, together with its associated enterprises, directly or indirectly holds no more than 25 percent of the voting rights in the company paying the dividends, and if such beneficial owner is the government of the other Contracting State, then such dividends shall not be taxed in the first-mentioned Contracting State.

At the same time, the Agreement expressly defines “the other Contracting Party’s government” as, in China, including China Investment Corporation, the Silk Road Fund Co., Ltd., the National Council for Social Security Fund, and any statutory institutions or entities wholly owned by the Chinese Government and performing governmental functions that may be approved from time to time by the competent authorities of both Contracting Parties; and in New Zealand, including the New Zealand Superannuation Fund, the New Zealand Superannuation Fund Regulator, the Earthquake Commission, the Accident Compensation Corporation, and any statutory institutions or entities wholly owned by the New Zealand Government and performing governmental functions that may be approved from time to time by the competent authorities of both Contracting Parties.

V. Regarding Interest

(1) Tax Rate

Interest arising in one Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State. However, if the beneficial owner of the interest is a resident of the other Contracting State, the tax so imposed shall not exceed 10 per cent of the gross amount of the interest.

(II) Tax Exemption Provisions

Interest arising in one Contracting State and derived by a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State, provided that the beneficial owner of such interest is wholly independent in its dealings with the payer, and that the beneficial owner is the other Contracting State (including its administrative subdivisions and local authorities), the central bank of the other Contracting State, an institution listed in the Agreement, or any other statutory body of the first Contracting State performing governmental functions as may be agreed from time to time by the competent authorities of both Contracting States.

Under the Agreement, the institutions listed in the tax exemption provisions include, in China: the China Development Bank, the Agricultural Development Bank of China, the Export-Import Bank of China, the China Export & Credit Insurance Corporation, China Investment Corporation, the Silk Road Fund Co., Ltd., the National Council for Social Security Fund, as well as any other institution wholly or predominantly owned by the Chinese Government that may be approved from time to time by the competent authorities of both Contracting States; and in New Zealand: the New Zealand Export Credit Agency, the New Zealand Superannuation Fund, the New Zealand Superannuation Fund Supervisor, the Earthquake Commission, the Accident Compensation Corporation, as well as any other institution wholly or predominantly owned by the New Zealand Government that may be approved from time to time by the competent authorities of both Contracting States.

However, the Agreement imposes limitations on the application of this tax exemption: if the beneficial owner of the interest referred to in the aforementioned provision is, in China, the China Development Bank, the Agricultural Development Bank of China, the Export-Import Bank of China, or the China Export & Credit Insurance Corporation, and in New Zealand, the New Zealand Export Credit Agency, and holds directly or indirectly at least 10% of the voting rights in the interest payer; or, if the beneficial owner is another institution listed in the tax‑exemption provision and, together with its associated enterprises, holds directly or indirectly at least 10% of the voting rights in the interest payer, then such interest may also be taxed in the Contracting State where it arises, provided that the tax so imposed does not exceed 10% of the gross amount of the interest.

VI. Regarding Royalty Fees

Royalty payments arising in one Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State. However, if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

VII. Regarding the Transfer of Property

Gains derived by a resident of one Contracting State from the alienation of shares or similar interests (such as interests in a partnership or trust) may be taxed in the other Contracting State if, at any time during the 365 days preceding the alienation, more than 50 per cent of the value of such shares or similar interests was directly or indirectly attributable to immovable property situated in that other Contracting State, as defined in Article 6.

Income or gains derived by a resident of one Contracting State from the alienation of shares in a company that is a resident of the other Contracting State may be taxed in that other Contracting State if, during the 12-month period preceding the alienation, the recipient directly or indirectly held at least 25 percent of the shares of such company.

VIII. On Non-Discriminatory Treatment

The non-discrimination treatment provision is not limited to the categories of taxes listed in Article II of the Agreement and shall apply to all types of taxes. At the same time, the Protocol stipulates that the non-discrimination treatment provision shall not apply to the following provisions of the domestic law of a Contracting Party:

(1) Provisions in the laws of one Contracting State aimed at preventing tax avoidance or tax evasion, including measures to address base erosion and transfer pricing, rules governing controlled foreign corporations and foreign investment funds, as well as measures designed to ensure the effective collection and refund of taxes (including precautionary measures);

(2) The types of provisions to which the non‑discrimination treatment clause does not apply, as referred to in the commentary to Article 24 (Non‑Discriminatory Treatment) of the 15 July 2014 edition of the OECD Model Convention;

(3) Other provisions not subject to the non-discrimination treatment, as agreed upon by both Contracting States through an exchange of notes.

IX. Determination of Eligibility for Treaty Benefits

To prevent the abuse of the Agreement, it incorporates a “qualification‑determination” provision—namely, the “principal purpose test”—under which any person seeking treaty benefits shall not be entitled to such benefits if obtaining those benefits constitutes one of the principal purposes of the arrangement or transaction.

China and Singapore have completed the respective domestic legal procedures required for the entry into force of the Agreement and its Protocol. The Agreement and the Protocol entered into force on December 27, 2019, and apply to taxes withheld at source on amounts paid on or after January 1, 2020, as well as to other taxes levied on or after January 1, 2020, in respect of any tax year beginning on or after that date.

The Fifth Protocol to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter referred to as the “Fifth Protocol”) was formally signed in Beijing on July 19, 2019. The Fifth Protocol amends the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, as well as its related protocols (hereinafter referred to as the “Arrangement”). Its main provisions are as follows:

I. Incorporation of the BEPS Outcomes

Protocol V incorporates certain outcomes of the Base Erosion and Profit Shifting (BEPS) Action Plan, reflecting the latest developments in international tax rules.

(1) Regarding the Preamble

Protocol No. 5 amends the original preamble of the Arrangement. The revised preamble states that the purpose of concluding the Arrangement is to develop economic relations between the two sides and to strengthen cooperation in tax matters. The Arrangement’s functions include eliminating double taxation and preventing non‑taxation or under‑taxation resulting from tax evasion.

(II) Regarding Residents

Protocol No. 5 amends the attribution rules for dual‑resident entities, providing that, with respect to any person other than an individual who is a resident of both Contracting States, such person shall be treated as a resident of only one of those States for the purposes of applying the provisions of the Arrangement.

Under the original provisions of the Arrangement, any person who is a resident of both Contracting States, other than an individual, shall be deemed to be a resident of the Contracting State in which its place of effective management is situated. The Fifth Protocol amends this provision to stipulate that, for any person who is a resident of both Contracting States, other than an individual, the competent authorities of both Contracting States shall make every effort to determine the person’s residency through mutual consultation; if the competent authorities fail to reach agreement, such person shall not be entitled to any tax benefits or relief under the Arrangement, unless the competent authorities have otherwise agreed on the extent and manner in which the person may benefit from the Arrangement.

(3) Regarding Permanent Establishments

Protocol No. 5 introduces the following amendments to the permanent establishment provisions of the Arrangement: First, it revises the rules governing the establishment of an agent‑type permanent establishment. Specifically, where a person, acting on behalf of an enterprise in a Contracting State, regularly enters into contracts or plays a principal role in the conclusion of such contracts—without the enterprise making any substantial modifications to the contracts as customarily concluded—and where those contracts are concluded in the enterprise’s name, involve the transfer of ownership or the granting of rights of use over property owned by or at the disposal of the enterprise, or relate to services provided by the enterprise, any activity carried out by that person on behalf of the enterprise shall be deemed to constitute a permanent establishment of the enterprise in that Contracting State. Second, it modifies the exclusion criteria for independent agents, providing that a person who engages, either exclusively or almost exclusively, in activities on behalf of one or more enterprises closely associated with him or her shall not be regarded as an independent agent of any of those enterprises. Third, it sets out the circumstances under which a person shall be considered to be closely associated with an enterprise.

(4) Regarding Property Income

Under the original provisions of the Arrangement, gains derived from the transfer of shares in a company could be taxed in the source country if, during the three years preceding the transfer, at least 50% of the company’s assets had consisted, directly or indirectly, of immovable property situated in that source country. The Fifth Protocol amends this provision to state: Gains derived by a resident of one Contracting State from the transfer of shares or interests similar to shares (such as interests in a partnership or trust) may be taxed in the other Contracting State if, at any time during the three years immediately preceding the transfer, more than 50% of the value of those shares or interests was, directly or indirectly, attributable to immovable property situated in that other Contracting State.

(5) Determination of Eligibility for Arrangement Benefits

Protocol No. 5 abolishes the “principal purpose test” for dividends, interest, royalties, and capital gains as set out in Protocol No. 4, and introduces in the Arrangement a provision on the determination of eligibility for preferential treatment under the Arrangement—namely, a “principal purpose test” applicable to all arrangements and transactions. Under this provision, if one of the principal purposes of a taxpayer’s arrangement or transaction is to obtain preferential treatment under the Arrangement, such taxpayer shall not be entitled to that preferential treatment.

II. Inclusion of the “Teachers and Researchers” Provision

To promote educational and scientific‑research exchanges between the mainland and Hong Kong and to advance the development of the Guangdong–Hong Kong–Macao Greater Bay Area, the Fifth Protocol incorporates a provision on “teachers and researchers.” The main contents are as follows:

(1) Any individual employed by a university, college, school, or government‑recognized educational or research institution of one Contracting Party who is, or was immediately prior to his or her departure for the other Contracting Party, a resident of that first‑mentioned Contracting Party, and who remains in the other Contracting Party primarily for the purpose of teaching or conducting research at a university, college, school, or government‑recognized educational or research institution there, shall be exempt from tax in that other Contracting Party on the portion of any remuneration derived from such teaching or research that is paid by, or on behalf of, his or her employer in the first‑mentioned Contracting Party, provided that such remuneration is taxable in the first‑mentioned Contracting Party. For the purposes of this provision, “universities, colleges, schools, or government‑recognized educational or research institutions” shall mean those specified in Article 1 of the State Administration of Taxation’s Announcement No. 91 of 2016 on Further Improving the Implementation Provisions Relating to the Teacher and Researcher Articles in Tax Treaties, and in Article 2 of the State Administration of Taxation’s Notice No. 37 of 1999 on Clarifying the Scope of Application of the Teacher and Researcher Articles in China’s Tax Treaties with Foreign Countries.

(2) For the purposes of this Article, the term “three years” shall be calculated from the later of the date on which the teacher or researcher first arrives in the other Party for teaching or research purposes, or the date on which this Protocol enters into force.

(3) The tax exemption provisions set forth in this Article shall not apply to income derived from research conducted primarily for the private benefit of an individual or certain individuals, rather than in the public interest. Although teachers and researchers may engage in research at eligible educational or scientific institutions, if such research is not undertaken in the public interest, the income derived therefrom shall not be entitled to the tax exemption provided under this Article.

The Mainland and the Hong Kong Special Administrative Region have completed their respective domestic legal procedures necessary for the entry into force of the Fifth Protocol. The Fifth Protocol entered into force on December 6, 2019, and, in the Mainland, applies to income derived in tax years beginning on or after January 1, 2020; in the Hong Kong Special Administrative Region, it applies to income derived in tax years beginning on or after April 1, 2020.

The National Tax Work Conference was held in Beijing.

The meeting noted that in 2019, the vast majority of Party members and cadres across the national tax system thoroughly studied and implemented Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and General Secretary Xi Jinping’s important expositions on tax work. They carried out in earnest the thematic education campaign “Remain True to Our Original Aspiration and Keep Our Mission Officely in Mind,” strengthened their “four consciousnesses,” bolstered their “four confidences,” and upheld the “two safeguards,” thereby achieving new successes in Party building within the tax system and in exercising full and rigorous self‑governance. Tax authorities at all levels conscientiously implemented the decisions and arrangements of the CPC Central Committee and the State Council, ensuring with concrete actions and unwavering determination that policies and measures for tax and fee reductions took root; they collected tax and fee revenues in accordance with laws and regulations; continuously optimized tax enforcement practices and improved the tax supervision system; effectively enhanced taxpayer services and the tax‑related business environment; actively supported the country’s major development strategies; and steadily strengthened the cadre workforce. As a result, all aspects of tax work achieved new accomplishments, fully demonstrating the fresh image of the newly reformed tax administration.

State Taxation Administration: Further Enhancing the Effectiveness of Tax Governance in 2020

According to a report by China National Radio’s “National News Broadcast,” State Taxation Administration Director Wang Jun stated at the National Tax Work Conference held on January 6 that last year saw significant results in implementing tax and fee reductions, with cumulative new tax and fee cuts exceeding RMB 2 trillion for the year. This year, the national tax system will coordinate efforts to both reduce taxes and fees and ensure stable revenue collection, continue to optimize the tax-related business environment, and further enhance the effectiveness of tax governance.

Wang Jun stated that last year’s tax and fee reductions exceeded expectations, with cumulative tax and fee cuts totaling over RMB 2 trillion—more than 2% of GDP—boosting annual GDP growth by approximately 0.8 percentage points. Tax burdens across all sectors declined to varying degrees, effectively invigorating market entities and bolstering confidence in economic development. He added: “Following the deepening of VAT reform, the number of general taxpayers increased by an average of 88,800 per month. Meanwhile, the year‑long personal income tax cuts generated more than RMB 300 billion in additional consumption, contributing roughly one percentage point to the growth of total retail sales of consumer goods.”

Last year, tax and fee revenues achieved steady growth in both volume and quality. Wang Jun stated that the tax authorities rigorously adhered to the principle of collecting tax and fee revenues in accordance with the law—fully implementing tax reductions and fee cuts where applicable, while also ensuring that all due revenues were collected in compliance with legal and regulatory requirements, thereby securing genuine, substantive growth in tax and fee collections. Wang Jun added: “Last year, tax authorities nationwide collected 18.3 trillion yuan in tax and fee revenues, including 14 trillion yuan in tax revenue (after deducting export tax rebates), up 1.8% year on year, providing a solid financial foundation for economic and social development.”

Wang Jun pointed out that this year, efforts should be focused on coordinating tax and fee reductions with the effective collection of tax and fee revenues, thereby actively supporting the “six stabilizations” and high-quality development. He stated: “In implementing tax and fee reductions, the priority is to consolidate and expand their effectiveness by proactively providing services, streamlining procedures, and maintaining rigorous fiscal accountability. We must promptly address any new issues that arise during policy implementation to ensure full and effective execution. At the same time, we will strive to achieve steady growth in the volume of tax and fee revenues while steadily enhancing their quality, leveraging the role of taxation to create a more favorable environment that supports the development and expansion of private enterprises.”

Last year, new tax and fee reductions exceeded 2 trillion yuan, boosting GDP by approximately 0.8 percentage points.

According to the State Taxation Administration, in 2019, nationwide tax and fee reductions totaled over RMB 2 trillion, accounting for more than 2% of GDP and boosting annual GDP growth by approximately 0.8 percentage points. Tax burdens across all sectors declined to varying degrees, effectively invigorating market entities and bolstering confidence in economic development. In particular, following the deepening of VAT reform, the number of general taxpayers increased by an average of 88,800 per month—nearly double the pre-reform level.

In 2019, the national tax authorities collected tax and fee revenues totaling RMB 18.3 trillion, of which tax revenue—after deducting export tax rebates—amounted to RMB 14 trillion, up 1.8% year on year. Cumulative export tax rebates reached RMB 1.574 trillion, an increase of 4.8%, providing strong support for foreign trade exports.

To enhance taxpayer services and the business environment, the tax authorities introduced a series of facilitation measures last year. In particular, during the thematic education campaign, they rolled out 36 taxpayer‑friendly measures in four batches, and issued and implemented the new “Tax Collection and Administration Operational Standards” and “Taxpayer Service Standards.” The proportion of tax deregistration procedures that are either exempted or processed on the spot increased by 13 percentage points, reaching over 85%, while nationwide, more than 90% of taxpayers file for refunds paperlessly, accounting for over 90% of the total refund amount.

Results of taxpayer satisfaction surveys conducted by third-party institutions show that in 2019, the taxpayer satisfaction score increased by 1.4 points compared with the previous year; moreover, China’s ranking in the World Bank’s Doing Business indicator on tax payment has improved for three consecutive years.

In 2020, the national tax system will focus on enhancing the quality of tax and fee‑paying services, continuously improving the tax‑related business environment, and thoroughly implementing the Regulations on Optimizing the Business Environment. It will also complete the establishment of a comprehensive “positive–negative feedback” system for government services. By responding to the needs of businesses and the public, it will provide more convenient tax and fee services, further deepen the tax system’s “delegation, regulation, and service” reform, and ensure the effective implementation of the Five-Year Plan for Optimizing the Business Environment. Additionally, it will carry out the seventh year of the “Spring Breeze Action” to facilitate tax administration, refine invoice‑service procedures, boost the efficiency of tax filing and payment, strengthen the protection of taxpayers’ rights and interests, and promote the ongoing improvement of the business environment.

Litigation & Arbitration

If wages owed to rural migrant workers are not paid within the statutory time limit, an additional compensation of at least 50% must be paid.

On January 7, the State Council’s regular policy briefing provided an interpretation of the recently promulgated Regulations on Ensuring Payment of Wages to Rural Migrant Workers. For cases of wage arrears that remain unpaid beyond the prescribed deadline, employers are required to pay workers additional compensation ranging from 50% to 100% of the outstanding wages.

On December 30, 2019, Premier Li Keqiang of the State Council signed State Council Order No. 724, promulgating the Regulations on Ensuring Payment of Wages to Rural Migrant Workers, which came into effect on May 1, 2020.

Wang Zhenjiang, Director-General of the Third Legislative Bureau of the Ministry of Justice, stated that the Regulations clearly define the legal liabilities for wage arrears to rural migrant workers and encourage employers to fulfill their principal responsibilities. Under the Regulations, any violation involving the withholding of wages owed to rural migrant workers shall be subject to enforcement in accordance with relevant laws: the administrative department of human resources and social security shall order payment within a specified time limit; if payment is not made by the deadline, an additional compensation equal to 50% to 100% of the amount due shall be imposed on the worker. Where the conduct is suspected of constituting the crime of refusing to pay labor remuneration, the case shall be promptly referred to the judicial authorities for criminal prosecution. With respect to unlawful practices such as paying wages in kind or in negotiable securities instead of cash, failing to prepare and maintain records of wage payments, failing to provide rural migrant workers with detailed wage statements, or withholding—directly or indirectly—the social security cards or bank cards used for wage disbursement, the administrative department of human resources and social security shall order rectification within a prescribed time limit; if rectification is not carried out by the deadline, in addition to imposing a fine on the employer, fines shall also be levied on the legal representative or principal person in charge, the directly responsible supervisory personnel, and other persons directly liable.

Wang Cheng, Director of the Labor Security Inspection Bureau of the Ministry of Human Resources and Social Security, stated that for a long time, the issues of migrant workers either having no wages to receive or having their wages conflated with project payments have been particularly acute. To address the problems of “no funds available to pay wages” and ensuring that wage funds are used exclusively for that purpose, the Regulations stipulate that general construction contractors must establish dedicated bank accounts for the payment of migrant workers’ wages, while project owners are required to separate labor costs from overall project funds at the source, thereby guaranteeing that labor expenses are disbursed promptly and in full, and preventing such funds from being commingled with or diverted to cover material costs, management fees, or other expenditures.

The Ministry of Human Resources and Social Security has revised three departmental regulations.

To implement the spirit of the Foreign Investment Law, which came into effect on January 1, 2020, the Ministry of Human Resources and Social Security, in consultation with the National Development and Reform Commission, the Ministry of Commerce, and the State Administration for Market Regulation, undertook a special revision of three departmental regulations: the Regulations on the Administration of Talent Markets, the Provisional Regulations on the Administration of Sino‑Foreign Joint Venture Talent Agencies, and the Provisional Regulations on the Establishment and Administration of Sino‑Foreign Joint Venture and Cooperative Employment Agencies. In line with the principle of equal treatment for domestic and foreign investment, these revisions have eliminated foreign‑investment access restrictions in the human resources services sector.

The newly revised three regulations have abolished the requirement that both Chinese and foreign joint‑venture partners in applications to establish foreign‑invested talent agencies and employment agencies must each have at least three years of professional experience; they have also removed the provisions stipulating that the foreign investor’s equity share must be no less than 25% and the Chinese partner’s equity share no less than 51%; furthermore, they have eliminated the prohibition against establishing wholly foreign‑owned human resources service institutions.

The newly revised three regulations further lower the approval threshold for foreign-invested human resources service agencies and streamline the approval procedures. The authority to approve the establishment of foreign‑invested talent intermediary agencies and employment agencies has been devolved from the provincial level to the human resources and social security administrative departments at or above the county level; the requirement that such entities obtain prior approval from the competent commerce authorities has been abolished; and the provision mandating that any changes—such as establishing branch offices, increasing or decreasing registered capital, transferring shares, or changing shareholders—must be approved by the original approving authority has also been eliminated.

The three newly revised regulations will foster a business environment for foreign-invested human resources service enterprises that is more stable, fair, transparent, and predictable, thereby providing legal safeguards for further opening up the human resources services sector.

A Brief Commentary on the “Interim Measures for the Supervision and Administration of Financial Leasing Companies (Draft for Public Comment)”

On January 8, 2020, the China Banking and Insurance Regulatory Commission issued the “Interim Measures for the Supervision and Administration of Financial Leasing Companies (Draft for Comments)” (hereinafter referred to as the “Measures”). The Measures comprehensively regulate financial leasing companies’ business scope, operational rules, regulatory indicators, and supervisory management. Compared with the “Measures for the Supervision and Administration of Financial Leasing Enterprises” issued in 2013 (hereinafter referred to as the “Old Measures”), the new Measures feature clearer and stricter provisions. With respect to operational rules, the Measures explicitly define the business scope of financial leasing companies, requiring them to return to the core of the leasing business while also introducing a new category of fixed-income securities investment activities. In addition to the prohibitions set forth in the Old Measures—such as engaging in deposit-taking, lending, or interbank borrowing—the Measures further stipulate that financial leasing companies may not raise funds or transfer assets through online lending information intermediaries, private equity investment funds, or other channels. Moreover, they are required to conduct leasing business only using leased assets that have clear ownership, genuinely exist, and can generate income; they may not accept as leased assets property that is already mortgaged, subject to ownership disputes, seized or impounded by judicial authorities, or encumbered by defects in title. On the regulatory‑indicator front, the Measures establish a series of quantitative thresholds: the proportion of financing leases and other leased assets must account for at least 60% of total assets; the aggregate amount of risk‑weighted assets may not exceed eight times net assets; and fixed‑income securities investments may not exceed 20% of net assets. With regard to customer concentration and related-party exposure, the Measures adopt corresponding limits modeled on the “Measures for the Administration of Financial Leasing Companies.” In terms of supervisory management, the Measures clarify that the CBIRC is responsible for formulating rules governing the business operations and supervision of financial leasing companies, while the people’s governments of provinces, autonomous regions, and municipalities directly under the central government are tasked with developing policies and measures to promote the development of the local financial leasing industry. Meanwhile, the provincial-level local financial regulatory authorities are specifically charged with overseeing and regulating financial leasing companies within their respective jurisdictions.

The issuance of these Measures aims to guide financing‑lease companies toward compliant operations, clarify their market positioning, enforce regulatory accountability, strengthen oversight and supervision, and promote the industry’s orderly development. As evidenced by these Measures, stricter regulation has become an overarching trend in the financing‑lease sector; the regulatory metrics have been aligned with those used for financial leasing companies, and in practice, regulatory approaches may gradually converge with the latter’s framework. The Measures impose specific requirements on corporate governance, internal controls, risk management, and other areas, while also identifying “out‑of‑contact” and “shell” entities as non‑compliant. Local financial regulators are mandated to urge such non‑operational or illegally operating offices to undertake rectification. Consequently, the industry faces a wave of consolidation and market cleansing, with many “zombie enterprises” set to be phased out. For soundly operating financing‑lease companies, greater regulatory standardization and reduced unfair competition will further facilitate business growth. The Measures reduce the leverage ratio for financing‑lease activities from 10× to 8×, thereby curbing financial risks but also imposing significant constraints on many offices—particularly in terms of client concentration limits. This adjustment carries substantial implications for leasing companies specializing in aircraft leasing. To comply with the new regulations, some offices may face pressure to scale back their operations, while the need to bolster equity capital through IPOs or additional share issuances will intensify. At present, the Measures are still under public consultation, with a transitional period in place: established financing‑lease companies must meet the regulatory requirements no later than December 31, 2021.

In summary, the Measures clarify the regulatory requirements for financial leasing companies, signaling a tightening of oversight in the industry. This ongoing industry-wide cleanup will help mitigate financial risks and promote sound, sustainable development. At the same time, the restrictions on regulatory metrics imposed by the Measures, while effective in controlling and preventing financial risks, may also constrain the business expansion of financial leasing offices. As a result, some companies could face pressure to scale back their operations, thereby increasing the need to bolster their net assets through IPOs, capital increases, or equity financing.

The Regulations of Jiangxi Province on Traditional Chinese Medicine have officially come into effect!

A press conference on the implementation of the Jiangxi Province Traditional Chinese Medicine Regulations was held in Nanchang, announcing that the Regulations would officially come into force on January 1, 2020. Ma Zhiwu, Vice Chairman of the Standing Committee of the Jiangxi Provincial People’s Congress, and Sun Jusheng, Vice Governor of Jiangxi Province, attended the meeting and delivered remarks.

Ma Zhiwu urged that people’s congresses, governments, and administrative authorities responsible for traditional Chinese medicine at all levels must earnestly ensure the effective implementation of the Regulations. In accordance with the principle that “statutory duties must be performed,” they should strictly fulfill the obligations set forth in the Regulations and conscientiously discharge their statutory responsibilities. They are also required to formulate and continuously refine supporting systems; for example, the Regulations stipulate that the market supervision and administration department of the provincial people’s government shall, in line with national policies on standardization of traditional Chinese medicine, establish and improve a provincial standardization system for TCM, while people’s governments at or above the county level shall refine mechanisms for tiered protection of medicinal material resources and for tiered conservation of wild medicinal plant species. Furthermore, they must diligently perform their oversight functions, employing such supervisory measures as law enforcement inspections, special inquiries, and deputies’ fact-finding visits to assess the status of study, publicity, and implementation of the Regulations, promptly identify problems, and put forward opinions and recommendations.

Sun Jusheng urged the Jiangxi Provincial Administration of Traditional Chinese Medicine to promptly draft explanatory notes on the Regulations, develop flowcharts, and prepare a toolkit for use in training and capacity‑building across all localities and relevant departments. All localities and relevant departments are to strengthen study, interpretation, and dissemination of the Regulations, incorporating them as key components of cadre and staff training and of the “Seventh Five-Year” plan for legal education. Through diverse approaches—such as organizing lecture teams, conducting training courses, and setting up publicity boards—they should ensure comprehensive, systematic learning. Efforts must be accelerated to formulate supporting measures for the Regulations, swiftly establishing a coherent set of work systems that are scientifically sound, functionally robust, and highly operational, thereby enhancing the rigidity and practicality of law enforcement and effectively advancing the implementation of the Regulations. Furthermore, communication with the media should be strengthened, making full use of broadcast, television, print, and online channels, and employing engaging, lively, and easily understandable formats to widely publicize the Regulations throughout society, thus fostering a favorable legal environment and social atmosphere for the development of traditional Chinese medicine.

The “Administrative Measures of Shandong Province on E-Government and Government Data Management” Have Been Issued.

The Measures of Shandong Province on the Administration of E‑Government and Government Data will come into effect on February 1.

“E‑government and government data management are crucial measures for optimizing the business environment and driving economic transformation, as well as important means of modernizing government governance capabilities. At present, our province has made groundbreaking progress in integrating and sharing government information, with key indicators ranking among the highest nationwide. However, significant challenges remain in areas such as infrastructure development, the division of responsibilities among government departments, the aggregation, integration, sharing, and open‑access utilization of government data, and the capacity of public services—issues that require legislative regulation and resolution,” said Qi Yan’an, a member of the Party Committee and Deputy Director of the Shandong Provincial Department of Justice.

According to reports, the Measures comprise seven chapters and 40 articles. Their main contents and innovative features include: First, they clearly define the entities responsible for e‑government and government data management. In line with the centralized requirements of integrating and sharing government information systems, the Measures specify the respective duties and divisions of responsibility among governments at all levels, the competent authorities for big data, and other relevant departments. Second, they set forth concrete requirements for government data incorporated into management and application. The scope of government data is explicitly defined and subject to catalog-based management, with detailed provisions governing the preparation and updating of data catalogs by all levels and departments, as well as data collection and maintenance, data processing, and data procurement. Third, they establish rules on the sharing and opening of government data, specifying in detail the scope, classification, channels, and procedures for such activities. Fourth, they outline specific measures to advance the “delegation, regulation, and service” reform through e‑government and government data. These measures include establishing a five-tiered system of interconnected and coordinated government services, leveraging a unified government service platform to deliver public services to the public, and creating a working mechanism that integrates online and offline government services. Fifth, they strengthen the security and safeguards for e‑government and government data.

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China’s “FAST” has officially begun operations after passing national acceptance.

Two, eleven, forty-three, ninety-three, one hundred and two… From October 2017, when China’s “FAST” first detected two pulsars, to the national acceptance meeting held on the 11th, at which it was announced that 102 pulsars had been discovered, the telescope has, in just over two years, found more pulsars than the combined total discovered by multiple European and American pulsar‑search teams during the same period.

The sensitivity of China’s “FAST” exceeds 2.5 times that of the world’s second-largest radio telescope, expanding its effective observational volume by a factor of four and enabling scientists to discover more unknown celestial bodies, previously unobserved cosmic phenomena, and as-yet-undiscovered laws governing the universe…

At the acceptance meeting, six experts, including Chinese Academy of Sciences Academician Wu Xiangping, each read out their opinions on process acceptance, radio‑frequency environmental protection, and other matters. Shen Zhulin, Deputy Director‑General of the High‑Technology Department of the National Development and Reform Commission, announced that all performance indicators of the “China Sky Eye” have met or exceeded the approved acceptance criteria, with key performance metrics reaching an internationally leading level, thereby satisfying the conditions for open operation.

Jiang Peng, a researcher at the National Astronomical Observatories and chief engineer of the “China Sky Eye,” believes that passing national acceptance signifies that the telescope has successfully transitioned from engineering to scientific operations, enabling it to embark on full‑scale scientific observations. Over the next two to three years, a series of significant scientific results are expected, while the telescope’s performance will be further stabilized.

Ancient sages marveled that the eye of heaven could pierce ten thousand miles; today, the “Tianyan” can see across hundreds of millions of light-years. It stands as still as a virgin—save for the low rumble of thousands of hydraulic actuators synchronizing when its reflecting surface deforms, it barely moves at all. Yet it also moves with lightning speed, transmitting up to 38 gigabits of baseband data per second and receiving an average of roughly 3.6 terabytes of usable scientific data every hour.

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