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JC Master Legal News Issue 905

Release Date:

2020-01-19 17:22

Key Takeaways for This Issue

The China Securities Regulatory Commission has issued four supporting rules for the New Third Board reform, including “Guideline No. 3 on the Content and Format of Information Disclosure by Non-Listed Public Companies—Prospectus for Targeted Issuance and Report on the Issuance.”

To ensure the smooth implementation of various reform measures on the New Third Board, the China Securities Regulatory Commission has revised “Guideline No. 3 on Content and Format of Information Disclosure by Non‑Listed Public Companies—Prospectus for Targeted Issuance and Report on the Results of Issuance” and “Guideline No. 4 on Content and Format of Information Disclosure by Non‑Listed Public Companies—Application Documents for Targeted Issuance” (hereinafter collectively referred to as the Targeted Issuance Format Guidelines).

Per capita GDP has surpassed US$10,000.

On the 17th, Ning Jizhe, Director of the National Bureau of Statistics, stated at a press conference held by the State Council Information Office that China’s gross domestic product in 2019 reached 99.0865 trillion yuan, approaching the 100-trillion-yuan mark.

Notice of the Ministry of Finance, the Ministry of Industry and Information Technology, the General Administration of Customs, the State Taxation Administration, and the National Energy Administration on Issuing the Measures for the Administration of Import Tax Policies for Major Technical Equipment

Notice of the Ministry of Justice on Issuing the Measures for Implementing the Ministry of Justice’s Comprehensive Promotion of the Administrative Law Enforcement Publicity System, the Full-Process Recording System for Law Enforcement, and the Legal Review System for Major Law Enforcement Decisions.

To implement the “Guiding Opinions of the General Office of the State Council on Fully Implementing the Administrative Law Enforcement Publicity System, the Full-Process Recording System for Law Enforcement, and the Legal Review System for Major Law Enforcement Decisions,” which was deliberated and adopted at the Fifth Meeting of the Central Commission for Comprehensively Deepening Reform and promulgated by the General Office of the State Council.

The People’s Bank of China conducted a reverse repo operation totaling RMB 200 billion.

On the 17th, the People’s Bank of China conducted a 200-billion-yuan 14-day reverse repurchase operation through interest-rate bidding. No reverse repos matured on that day, resulting in a net injection of 200 billion yuan by the central bank.

Table of Contents

Finance & Capital Markets

The Ministry of Science and Technology and the Shanghai Stock Exchange have signed a memorandum of cooperation.

Overview of the Shenzhen Stock Exchange’s M&A and Restructuring Market and Regulatory Services in 2019

“The first high-speed rail stock” ushers in a wave of railway asset securitization.

The U.S. Treasury has revoked its designation of China as a “currency manipulator,” sending the renminbi surging by 300 points.

Corporate & Commercial

Per capita GDP has surpassed US$10,000.

From January to December 2019, nationwide real estate development investment increased by 9.9% year on year.

National Bureau of Statistics: In December 2019, the CPI rose 4.5% year on year.

In 2019, China’s total retail sales of consumer goods will surpass RMB 40 trillion for the first time.

In 2019, China’s foreign trade grew by 3.4%, with private enterprises emerging as the largest trading entities.

Taxation

Announcement of the State Taxation Administration on Matters Relating to the Comprehensive VAT Invoice Service Platform and Other Issues

Interpretation of the “Announcement of the State Taxation Administration on Matters Relating to the Comprehensive VAT Invoice Service Platform, Among Others”

China has achieved the electronic filing of tax registration for outbound payments.

Japan plans to abolish the policy that grants a 50% tax reduction on entertainment expenses incurred by large corporations.

Litigation & Arbitration

The Measures for the Handling of Reports on Illegal Acts by Banks and Insurance Institutions will come into effect on March 1.

Community Corrections Law: Ushering in a New Era of Rule-of-Law-Based Community Corrections Work

An Analysis of the Key Highlights of the Basic Medical and Health Care and Health Promotion Law

The National Health Commission, in collaboration with relevant departments, has organized the drafting of the “Administrative Measures for the National List of Shortage Drugs (Trial) (Draft for Public Comment).”

Other

The People’s Bank of China conducted a reverse repo operation totaling RMB 200 billion.

Finance & Capital Markets

To ensure the smooth implementation of various reform measures on the New Third Board, in accordance with the Measures for the Supervision and Administration of Non‑Listed Public Companies (hereinafter referred to as the “Public Company Measures”) and the Measures for the Information Disclosure of Non‑Listed Public Companies (hereinafter referred to as the “Information Disclosure Measures”), the China Securities Regulatory Commission has revised the Guidelines on the Content and Format of Information Disclosure for Non‑Listed Public Companies No. 3—Prospectus and Report on the Offering for Directed Issuance—and No. 4—Application Documents for Directed Issuance (hereinafter collectively referred to as the Directed Issuance Format Guidelines). At the same time, it has formulated the Guidelines on the Content and Format of Information Disclosure for Non‑Listed Public Companies No. 9—Annual Report of Companies Listed on the Innovation Layer—and No. 10—Annual Report of Companies Listed on the Basic Layer (hereinafter collectively referred to as the Innovation‑Layer and Basic‑Layer Annual Report Format Guidelines), which shall take effect from the date of their promulgation.

This revision of the guidelines on targeted issuance is primarily based on the Measures for Public Companies and adjusts the following aspects: First, it standardizes the requirements for targeted issuances by extending the scope of information disclosure and filing‑document requirements to all public companies. Second, it enhances the content of information disclosure by clarifying disclosure obligations in areas such as share‑issuance‑for‑asset acquisitions and refining disclosure requirements regarding the use of raised funds. Third, it reinforces the duty of due diligence on intermediary institutions by adding requirements for them to issue opinions. Fourth, it continues to streamline administration and delegate power by stipulating that, where a listed company’s application for a targeted issuance requires administrative approval, the National Equities Exchange and Quotations Co., Ltd. shall first issue a self‑regulatory opinion, which shall serve as a mandatory document for the administrative‑approval application.

This revision of the annual report format guidelines for the Innovation and Basic tiers is primarily based on the Measures for Information Disclosure, with a focus on refining the annual reporting disclosure requirements for companies listed on these tiers. First, it clarifies the differentiated disclosure obligations for Innovation‑tier and Basic‑tier companies while appropriately streamlining the content to be disclosed. Second, drawing on the reforms implemented on the STAR Market and placing investor needs at the core, it seeks to enhance the readability and practical utility of annual report disclosures. Third, taking into account the characteristics of small and medium-sized enterprises, it strengthens the disclosure of risk factors that have a significant impact on the operating performance of companies in the Innovation and Basic tiers.

The China Securities Regulatory Commission will further strengthen oversight of annual report disclosure by companies listed on the Innovation and Basic tiers, as well as those issuing shares through targeted offerings, to enhance the quality of information disclosure and safeguard investors’ legitimate rights and interests.

The Ministry of Science and Technology and the Shanghai Stock Exchange have signed a memorandum of cooperation.

　On December 26, 2019, the Ministry of Science and Technology and the Shanghai Stock Exchange signed a memorandum of cooperation to jointly promote the sound development of the STAR Market and strengthen support for major national innovation initiatives. Li Meng, member of the Party Leadership Group and Vice Minister of the Ministry of Science and Technology, and Huang Hongyuan, Secretary of the Party Committee and Chairman of the Shanghai Stock Exchange, witnessed the signing ceremony. At the same time, the Ministry of Science and Technology and the Shanghai Stock Exchange co-hosted a symposium with science and technology enterprises to solicit views and suggestions on fostering the STAR Market’s healthy and rapid growth, as well as on the direction of national scientific and technological innovation during the 14th Five-Year Plan period.

General Secretary Xi Jinping attaches great importance to the development of the STAR Market, emphasizing that its establishment and the pilot implementation of the registration-based IPO system must stay true to their intended purpose, enhance the quality of listed companies, and support and encourage “hard‑tech” enterprises to go public. The signing of a memorandum of cooperation between the Ministry of Science and Technology and the Shanghai Stock Exchange is a key measure to implement General Secretary Xi Jinping’s relevant instructions, and it holds significant importance for deepening the integration of science, technology, and finance and for guiding financial capital to focus on and support major scientific and technological innovations.

Overview of the Shenzhen Stock Exchange’s M&A and Restructuring Market and Regulatory Services in 2019

Mergers and acquisitions (M&A) and corporate restructuring are crucial mechanisms for optimizing the allocation of existing resources in the capital market. In 2019, in line with the China Securities Regulatory Commission’s overarching plan to comprehensively deepen capital market reform, the Shenzhen Stock Exchange actively implemented the “Four Reverences and One Synergy” guiding principles, deepened market‑oriented reforms in M&A and restructuring, strengthened end‑to‑end regulatory oversight across the entire M&A and restructuring value chain, and provided robust support for the high‑quality development of listed companies. These efforts helped enhance the functionality of the market platform, improve resource allocation efficiency, and contribute to building a capital market that is standardized, transparent, open, dynamic, and resilient.

Improving quality and boosting efficiency, with new highlights emerging one after another.

In 2019, Shenzhen‑listed companies actively leveraged mergers and acquisitions (M&A) and restructuring to enhance corporate quality and drive transformation and upgrading, achieving notable results and numerous highlights. Throughout the year, a total of 1,628 M&A and restructuring transactions were completed in the Shenzhen market, with aggregate deal value reaching RMB 1.08 trillion, accounting for 55.47% and 54.00% of the national market, respectively. In the realm of major asset restructurings, 150 restructuring plans were disclosed, involving a total transaction value of RMB 513.426 billion, up 8.62% year over year; 97 major asset restructurings were finalized, with a combined deal value of RMB 432.573 billion (excluding accompanying financing), representing an 87.50% year‑on‑year increase. On the acquisition front, listed companies disclosed 604 acquisition deals during the year, a 22.52% year‑over‑year rise, with a total value of RMB 287.313 billion, up 18.94% compared with the previous year.

It mainly exhibits the following characteristics:

First, companies are returning to their core businesses and focusing on their primary operations, thereby generating new momentum. Acquisitions by listed offices driven by industrial logic have become the norm, with industry‑integrated restructuring emerging as the dominant trend—accounting for over 60% of both deal volume and value—and exhibiting increasingly clear industry‑specific and real‑economy‑oriented characteristics. Valuations in restructuring deals have further normalized, with the average premium of target assets standing at approximately 1.8 times, a substantial year‑on‑year decline of 55.93%. Specifically, on the Shenzhen Stock Exchange’s Main Board, SME Board, and ChiNext, the average premiums were 1.3x, 1.7x, and 2.4x, respectively, reflecting a more rational and pragmatic approach to M&A and restructuring.

Second, supply-side structural reform in market‑based service provision has opened up new prospects. Throughout the year, 37 major asset‑restructuring transactions were planned by state‑controlled listed companies on the Shenzhen Stock Exchange, with a total transaction value of RMB 287.02 billion. The positive impact of mergers and acquisitions and restructurings continued to emerge, giving rise to a number of exemplary cases—such as China Merchants Group’s platform‑based consolidation of its property‑management assets, CITIC Group’s securitization of its special‑steel assets, and Red Star Macalline’s participation in state‑owned enterprise mixed‑ownership reform through a restructuring‑led IPO—thereby driving deeper progress in SOE reform. China Merchants Shekou successfully completed a capital increase and acquisition deal worth RMB 145.817 billion, marking the largest single‑deal restructuring of the year on the A‑share market. Meanwhile, companies in the cement, nonferrous metals, steel, and chemical sectors listed on the Shenzhen Stock Exchange—including Daye Special Steel and *ST Hehua—have pressed ahead with M&A and restructuring initiatives, achieving further advances in industrial optimization and capacity reduction, and elevating their development to a new level.

Third, by helping private enterprises overcome financial difficulties and achieve growth, new opportunities have been unlocked. In 2019, 87 privately‑controlled listed companies, including Hainan Haiyao and *ST Huangtai, attracted strategic investors through equity transfers, pooling resources from multiple stakeholders to reverse their liquidity crises. Meanwhile, 29 Shenzhen‑listed, privately‑controlled companies—such as Yiatong and Aider—integrated state capital, advancing mixed‑ownership reform. Additionally, 113 Shenzhen‑listed private offices disclosed restructuring plans involving nearly RMB 250 billion, leveraging market‑based mechanisms to alleviate financial distress and foster development.

Fourth, we support the innovation and upgrading of cross-border transactions, fostering new drivers of growth. An increasing number of Shenzhen‑listed companies are enhancing their technological capabilities and core competitiveness through both “bringing in” and “going out,” thereby achieving industrial upgrading. In 2019, a total of 52 Shenzhen‑listed companies disclosed overseas M&A and restructuring deals. China Mineral Resources plans to gain control of globally scarce cesium resources by acquiring Tanco and other companies, while Unisoc intends to strengthen its smart security chip business through the acquisition of Linsenx.

Fifth, by clarifying the market’s entry and exit points for existing listed companies, we have injected new vitality into the market. Since 2019, a number of Shenzhen‑listed companies have revitalized market resources, mitigated risks among listed offices, and refined the mechanism of survival of the fittest through measures such as absorption mergers, restructuring‑based listings, and clean‑out asset swaps. Throughout the year, the Shenzhen market disclosed nine restructuring‑and‑listing proposals; for instance, Red Star Macalline, valued at RMB 36 billion, completed a backdoor listing via Wuhan Zhongshang, further deepening its presence in the home‑furnishings new‑retail sector. Meanwhile, 15 companies carried out major asset disposals, shedding underperforming, loss‑making assets to lighten their burdens and move forward.

Moreover, market‑based bargaining has become more robust. Many restructuring plans not only include performance‑based earnout commitments but also incorporate incentive arrangements for exceeding targets; some even stipulate ancillary rights. For instance, in the case of Suning.com’s acquisition of Carrefour China, the agreement grants both the seller and the buyer separate “put options” and “call options” on the remaining 20% stake in Carrefour China, thereby further strengthening market‑driven negotiation dynamics.

A three-pronged approach ushers in a new outlook.

In 2019, the Shenzhen Stock Exchange continued to deepen reform, strengthen regulatory oversight, and enhance its services, optimizing institutional frameworks to invigorate market dynamism. It encouraged and guided listed companies to improve their quality through mergers and acquisitions and restructuring, while advancing categorized regulation, precision‑based supervision, and “end-to-end” oversight, thereby continuously enhancing regulatory effectiveness and fully leveraging the market’s role in M&A and restructuring.

First, we deepened reform. In advancing regulatory innovation, we provided policy recommendations on major reforms such as the pilot program for spin-off listings, the optimization of restructuring‑and‑listing standards, and the pilot program for targeted convertible bonds. To strengthen effective regulation, we consolidated numerous memoranda, handling guidelines, and notices pertaining to the Shenzhen Stock Exchange’s Main Board, SME Board, and ChiNext, thereby standardizing regulatory criteria and issuing guidelines on information disclosure for major asset restructurings to promote orderly market development. In implementing reform measures, we facilitated the successful rollout of targeted convertible bonds by establishing processing procedures, activating designated code ranges, and upgrading system workflows, thereby supporting Xinjingang in completing the registration for the first targeted convertible bond issuance on the A‑share market. To date, a total of 29 companies listed on the Shenzhen Stock Exchange have disclosed restructuring plans involving the issuance of targeted convertible bonds. We also rigorously enforced the new rules on suspension and resumption of trading, resulting in a 73.67% year‑on‑year reduction in the number of companies suspending trading for restructuring; 46 companies directly disclosed their restructuring plans without prior suspension. Furthermore, we supported corporate restructuring by providing financing to replenish working capital—16 companies, including FAW Car, disclosed plans to use raised funds to repay debt or bolster liquidity, totaling RMB 13.709 billion, thereby meeting the capital needs of listed companies.

Second, we deepened our service efforts. Centered on state‑owned enterprise (SOE) reform, we worked to help Shenzhen’s main board companies strengthen and enhance their competitiveness. Throughout the year, we conducted nearly 100 visits, surveys, and exchanges with SOEs and state‑owned entities, organized or participated in nearly 30 training sessions and lectures on SOE reform, and provided robust support to a number of SOEs—including China Merchants Shekou, CITIC Special Steel, FAW Car, and Dongfang Energy—in leveraging mergers and acquisitions and restructuring to bolster their performance. Focusing on private‑sector development, we continued to foster the steady growth of the ChiNext market. Over the course of the year, we hosted multiple symposiums and training programs bringing together regulators, market experts, and listed companies, actively assisting private‑listed offices in addressing liquidity challenges. We also ensured proper disclosure and handled key matters—such as equity transfers, changes in control, and the introduction of strategic investors—for 179 private enterprises, including share suspensions and resumptions of trading and equity registration. In total, we helped reduce the number of companies with high‑ratio pledge ratios by 135, and supported 114 private offices in overcoming developmental and transformational hurdles through M&A and restructuring, with ChiNext‑listed private companies accounting for the majority. Guided by entrepreneurship and innovation, we proactively supported the growth and maturation of the ChiNext market. We promoted the deep integration of capital and technology, offering end‑to‑end services encompassing policy advice, scheme adjustments, training guidance, and technical support. In 2019, more than half of the target companies that ChiNext‑listed offices planned to acquire belonged to strategic emerging industries; for example, Jiangfeng Electronics enhanced its product portfolio through the acquisition of Soleras Holdco, thereby further solidifying its market position in the sputtering target materials sector.

Third, we deepened regulatory oversight. On the one hand, we strengthened categorized supervision and made more efficient use of regulatory resources. We refined the review process for restructuring proposals: in principle, no further inquiries are issued for restructuring plans; fewer inquiries are directed toward proposals aligned with industrial consolidation, transformation, and upgrading; and pre‑ and ongoing supervision is intensified for key companies and high‑risk transactions, with repeated follow‑up inquiries when necessary. Throughout the year, a total of 145 restructuring inquiry letters were issued, including 31 cases where two rounds of inquiries were required. On the other hand, we reinforced “end-to-end” regulatory oversight to foster orderly market development. In 2019, amid the overlapping impact of multiple internal and external factors, risks related to unfulfilled commitments by listed companies and impairment of goodwill became particularly pronounced. For example, Tian Shen Entertainment recognized a goodwill impairment charge of RMB 4.06 billion on its acquired target, resulting in a net loss of RMB 7.15 billion. Similarly, companies such as Dongfang Jingong and Tanaka Seiki faced situations where the acquired targets failed to meet expected performance levels, or where disputes arose between the parties over performance‑based compensation. The Shenzhen Stock Exchange continuously monitored the implementation of restructuring transactions, conducting individual inquiries into every company involved in such issues, strengthening inter‑agency regulatory coordination, and, when necessary, requesting on-site inspections and enforcement investigations. Additionally, disciplinary actions were imposed on 11 companies that had failed to honor their performance‑compensation commitments.

In 2020, the domestic M&A and restructuring market remained robust. The Shenzhen Stock Exchange will steadfastly adhere to a market‑oriented and law‑based approach, earnestly study and implement the new Securities Law, and, in line with the unified deployment of the China Securities Regulatory Commission, focus on advancing the Action Plan for Enhancing the Quality of Listed Companies. It will push forward the implementation of measures to deepen market‑based reforms in M&A and restructuring, refine foundational systems, enhance regulatory effectiveness, elevate service standards, and invigorate market dynamism. By leveraging its role as the primary channel for optimizing resource allocation, the Exchange will foster technological innovation, drive industrial transformation and upgrading, and support listed companies in achieving high‑quality development through M&A and restructuring, thereby striving to provide higher‑quality, more efficient financial services to the real economy.

“The first high-speed rail stock” ushers in a wave of railway asset securitization.

When it comes to high-speed rail worldwide, China takes the lead; and within China, the Beijing–Shanghai line stands out. At 9:30 a.m. on January 16, 2020, with the sound of a gong, the Beijing–Shanghai High-Speed Railway—the “first high-speed rail stock in China”—made its debut on the Shanghai Stock Exchange. The shares surged 43.2% at the open, boosting the company’s market capitalization by RMB 103.6 billion in a matter of seconds. By the close, the gain had pared back to 38.73%, with the share price settling at RMB 6.77 and the total market value reaching RMB 332.451 billion.

As China’s most profitable high-speed rail line, what are the prospects for further growth of the Beijing–Shanghai High-Speed Railway? Liu Hongrun, Chairman of the Beijing–Shanghai High-Speed Railway Co., Ltd. (hereinafter referred to as “Beijing–Shanghai HSR Company”), stated that the company expects even stronger performance. Looking ahead, it will transition from a route‑based enterprise to a network‑based one. In terms of capital operations, the company will closely monitor merger and acquisition as well as restructuring initiatives.

It is worth noting that the successful listing of the Beijing–Shanghai High-Speed Railway on the A-share market not only signals that the railway has reached a new milestone in its development, but also marks a significant breakthrough in the capitalization, securitization, and equity‑ization of China’s railway assets. This represents an important step forward for state-owned railway enterprises in accessing direct financing, and paves the way for a wave of IPOs among railway‑related assets.

The U.S. Treasury has revoked its designation of China as a “currency manipulator,” sending the renminbi surging by 300 points.

On the morning of January 14, the U.S. Treasury Department released its semiannual currency policy report on the 13th, removing its designation of China as a “currency manipulator.” On the same day, both onshore and offshore renminbi–U.S. dollar exchange rates hit new highs in nearly five and a half months, breaking through the 6.90 level. Specifically, the onshore renminbi appreciated by 348 basis points, while the offshore renminbi gained 315 basis points.

The three major U.S. stock indexes all rose, with the Nasdaq and the S&P 500 both hitting record closing highs.

According to Wind data, at the close, the Dow Jones Industrial Average gained 83.28 points, ending the session at 28,907.05, a rise of 0.29%. The S&P 500 advanced 22.78 points to 3,288.13, up 0.70%. Meanwhile, the Nasdaq Composite climbed 95.07 points to 9,273.93, a gain of 1.04%. Most popular Chinese stocks listed in the U.S. posted gains. China Cycle Energy surged 24.12%, leading the pack; Ruitu Ecology, CnFinance, Asia Times, Ninth City, Hong Kong Dagong Exchange, Liulishuo, KBS FASHION, New Ocean Concrete, Weibo, and 12 other Chinese stocks all rose by more than 10%.

International oil prices fell on the 13th. At the close of trading that day, February-delivery light sweet crude oil futures on the New York Mercantile Exchange dropped $0.96, settling at $58.08 per barrel, a decline of 1.63%. March-delivery Brent crude oil futures in London fell $0.78, closing at $64.20 per barrel, down 1.20%. On the New York Mercantile Exchange, the most actively traded February gold contract declined $9.5 from the previous session, ending at $1,550.60 per ounce, a drop of 0.61%. Analysts said that the New York stock market’s rebound on the 13th helped curb risk-aversion sentiment, pushing gold futures lower.

On the day, silver futures for March delivery fell 10.9 cents to close at $17.996 per ounce, a decline of 0.6%; platinum futures for April delivery dropped $3.90 to settle at $982.10 per ounce, down 0.4%.

The U.S. dollar index, which measures the greenback against six major currencies, fell 0.02% on the day, closing at 97.3470 in late trading.

As of the close of trading in the New York foreign-exchange market, the euro was at $1.1138, up from $1.1123 on the previous trading day; the British pound was at $1.2998, down from $1.3063; and the Australian dollar was at $0.6906, lower than the previous day’s $0.6911. The U.S. dollar was at 109.91 Japanese yen, higher than the prior day’s 109.52; it was at 0.9706 Swiss francs, below the previous day’s 0.9726; and at 1.3047 Canadian dollars, down from the prior day’s 1.3058.

Commercial & Corporate

Per capita GDP has surpassed US$10,000.

On the 17th, Ning Jizhe, Director of the National Bureau of Statistics, stated at a press conference held by the State Council Information Office that in 2019, China’s gross domestic product reached 99.0865 trillion yuan, approaching the 100-trillion-yuan mark. When converted at the annual average exchange rate, this amounted to 14.4 trillion U.S. dollars, maintaining China’s position as the world’s second-largest economy. Per capita GDP stood at 70,892 yuan, equivalent to 10,276 U.S. dollars at the annual average exchange rate, surpassing the 10,000-dollar threshold and marking a new milestone.

Ning Jizhe stated that, throughout 2019, the economy maintained overall stability, with steadily improving quality of development and satisfactory achievement of major projected targets. The year’s economic performance exhibited six key characteristics:

First, the economy maintained moderate-to-high growth. In 2019, China’s GDP reached 99.0865 trillion yuan, up 6.1% year on year—meeting the target of 6%–6.5% set at the beginning of the year and significantly outpacing global economic growth, ranking first among economies with a GDP exceeding one trillion U.S. dollars.

Second, employment continued to expand. In 2019, the monthly surveyed urban unemployment rate nationwide remained between 5.0% and 5.3%, below the year‑beginning target of around 5.5%. Throughout the year, 13.52 million new urban jobs were created, significantly exceeding the initial target of over 11 million and marking the seventh consecutive year that annual job creation surpassed 13 million.

Third, prices remained broadly stable. In 2019, the consumer price index rose 2.9% year on year, in line with the target of around 3% set at the beginning of the year.

Fourth, foreign trade and foreign investment grew against the trend. In 2019, the total value of goods imports and exports increased by 3.4% year on year, with exports up 5% and imports up 1.6%, achieving steady progress in quality and meeting the targets set at the beginning of the year. As for the utilization of foreign capital, despite a sharp decline in global cross-border investment, the annual inflow of foreign investment is expected to exceed US$130 billion. At year-end, foreign exchange reserves stood at US$3.1079 trillion, an increase of US$35.2 billion compared with the end of the previous year.

Fifth, growth in residents’ incomes was broadly in line with economic growth. In 2019, GDP expanded by 6.1% year on year, while the population grew by more than 3 per thousand, resulting in per capita GDP increasing by approximately 5.8%. This achieved the annual target of keeping growth in residents’ incomes broadly synchronized with economic growth.

Sixth, the quality and efficiency of growth have improved. With the advancement of supply-side structural reform, the achievements of the “three reductions, one lowering, and one supplementation” initiative have been consolidated.

Ning Jizhe stated that throughout 2019, all major macroeconomic indicators remained in line with expectations and within the targets set at the beginning of the year. In particular, November and December saw positive developments in key macroeconomic metrics.

He stated that in the fourth quarter of 2019, GDP grew 6% year on year, unchanged from the third quarter and better than expected. On the production side, value added by industrial enterprises above designated size increased 6% year on year in the fourth quarter, up 1 percentage point from the third quarter. On the demand side, total retail sales of consumer goods rose 7.8% year on year in the fourth quarter, accelerating by 0.2 percentage points compared with the third quarter. From January to December, fixed asset investment (excluding rural households) expanded by 5.4%, picking up 0.2 percentage points from the January–November period. In December, the total value of goods imports and exports increased by 12.7%, a pace 10.7 percentage points faster than in November. Looking at market expectations, the manufacturing PMI stood at 50.2% in December, remaining above the boom-bust threshold for two consecutive months, while the non-manufacturing business activity index was 53.5%, consistently in a relatively robust range.

“China’s economy is transitioning from a phase of rapid growth to one of high-quality development, and we are no longer pursuing economic growth rates at all costs. The overarching trend of steady progress and long-term improvement remains unchanged, and we can expect stable, high‑quality, and efficient economic growth in 2020,” said Ning Jizhe.

From January to December 2019, nationwide real estate development investment increased by 9.9% year on year.

From January to December 2019, nationwide real estate development investment totaled RMB 13.2194 trillion, up 9.9% year on year. The growth rate declined by 0.3 percentage points compared with the January–November period but accelerated by 0.4 percentage points versus the previous year. Among these, residential investment reached RMB 9.7071 trillion, an increase of 13.9%, with the growth rate falling by 0.5 percentage points from January to November and rising by 0.5 percentage points year on year.

In 2019, real estate development investment in the eastern region totaled RMB 6.9313 trillion, up 7.7% year on year, with the growth rate declining by 0.6 percentage points compared to January–November; in the central region, investment reached RMB 2.7588 trillion, an increase of 9.6%, with the growth rate falling by 0.1 percentage point; in the western region, investment stood at RMB 3.0186 trillion, up 16.1%, with the growth rate accelerating by 0.8 percentage point; and in the northeastern region, investment amounted to RMB 510.7 billion, up 8.2%, with the growth rate decelerating by 0.7 percentage point.

In 2019, the total floor area of housing under construction by real estate developers reached 893.821 million square meters, up 8.7% year on year. The growth rate remained unchanged from January–November and was 3.5 percentage points faster than the previous year. Of this, residential construction accounted for 627.673 million square meters, an increase of 10.1%. Newly started housing construction totaled 227.154 million square meters, up 8.5%; the growth rate declined by 0.1 percentage point compared with January–November and by 8.7 percentage points year on year. Residential new construction amounted to 167.463 million square meters, up 9.2%. Housing completions reached 95.942 million square meters, a 2.6% increase—compared with a 4.5% decline in January–November and a 7.8% decline in the previous year. Residential completions stood at 68.011 million square meters, up 3.0%.

In 2019, real estate developers acquired 258.22 million square meters of land, down 11.4% year on year. The decline narrowed by 2.8 percentage points compared with the January–November period, whereas the previous year had seen a 14.2% increase. Land transaction payments totaled RMB 1.4709 trillion, a decrease of 8.7%, with the decline narrowing by 4.3 percentage points compared with January–November; the prior year had recorded an 18.0% rise.

National Bureau of Statistics: In December 2019, the CPI rose 4.5% year on year.

In December 2019, the national consumer price index rose 4.5% year on year. Specifically, urban areas recorded a 4.2% increase, while rural areas saw a 5.3% rise; food prices increased by 17.4%, and non-food prices rose by 1.3%; consumer goods prices climbed 6.4%, and service prices advanced 1.2%.

In December, the national consumer price index remained unchanged month-on-month. Specifically, urban areas were flat, while rural areas declined by 0.1%; food prices fell by 0.4%, and non-food prices rose by 0.1%; both consumer goods and services prices were unchanged.

For the full year 2019, the national consumer price index rose by 2.9% compared with the previous year.

In 2019, China’s total retail sales of consumer goods will surpass RMB 40 trillion for the first time.

Wang Bin, Deputy Director-General of the Department of Market Operations at the Ministry of Commerce, stated yesterday at a media briefing during the ministry’s year-end work conference that this year China’s total retail sales of consumer goods will surpass 40 trillion yuan for the first time, reaching 41.1 trillion yuan—an increase of approximately 8% over the previous year. The sector’s contribution to economic growth is expected to exceed 60%, making it the primary driver of economic expansion for the sixth consecutive year.

Even more noteworthy is the upgrading and quality improvement of China’s consumption structure. First, imports of consumer goods have been growing rapidly. In the first three quarters, cumulative imports of consumer goods reached RMB 1.04 trillion, up 15.3% year on year—a pace some 3 percentage points faster than in the same period last year and 15.4 percentage points higher than the overall import growth rate for the same period. Second, products such as cosmetics and telecommunications equipment have posted particularly strong growth. In the first 11 months, retail sales of these two categories rose 13.9% and 8.5% year on year, respectively—both outpacing the overall growth rate of total retail sales of consumer goods during the same period.

Chen Lifen, Director of the Service Industry Division at the Center for Promoting the Circulation Industry under the Ministry of Commerce and a researcher, told the Shanghai Securities News that consumption growth in cosmetics and telecommunications has remained robust, owing to the substantial market potential of these upgraded‑type products. In particular, the purchasing power of lower‑tier markets should not be overlooked, as consumption in small towns linking urban and rural areas plays a catalytic role. Meanwhile, demand for services continues to be strong. According to Wang Bin, in the first three quarters, per capita spending on services by Chinese residents rose 10.2%, and services now account for more than half—50.6%—of total final consumption expenditure.

“Next year, there will be two key priorities in the services‑consumption sector: first, boosting catering consumption and elevating the scale and sophistication of the restaurant industry; second, fostering the integrated development of business models within the community‑based lifestyle services sector and advancing the ‘delegation, regulation, and service’ reform to improve convenience‑oriented consumer service centers,” said Xian Guoyi, Director-General of the Department of Trade in Services at the Ministry of Commerce. This year, catering consumption has posted encouraging growth: in the first 11 months, national catering revenue rose 9.4% year on year, outpacing the growth rate of retail sales of goods by 1.5 percentage points. Xian Guoyi added that national catering revenue is expected to reach RMB 4.6 trillion in 2019.

Automobile consumption has been a major pain point in China’s consumer sector over the past two years. According to data from the China Association of Automobile Manufacturers, from January to November, the country’s automobile production and sales reached 23.038 million and 23.11 million units, respectively, down 9% and 9.1% year on year. Industry analysts expect that automobile consumption this year may continue last year’s year-on-year decline. However, Wang Bin pointed out that automobile spending accounts for a significant share of total retail sales and represents an important component of consumption upgrading. Many Chinese households still harbor an “automobile dream,” and with per‑capita car ownership far below that of developed countries, there remains considerable room for growth. Looking ahead, China’s automotive market continues to enjoy substantial prospects for development.

“The next step will be to accelerate the transition from conventional vehicles to new-energy vehicles, further improve the driving environment, expand parking facilities, and rationally plan roads and other infrastructure supporting automobile use,” said Wang Bin.

According to the “Report on the High-Quality Development of China’s Automotive Trade” recently released by the Department of Foreign Trade of the Ministry of Commerce, imported vehicles are increasingly meeting domestic demand for greater diversity. As China’s level of opening-up continues to rise, the scale of the automotive import market has steadily expanded, with an increasingly diverse and rapidly evolving lineup of imported brands and models. Meanwhile, parallel‑imported vehicles—primarily high‑end luxury models—have emerged as a new growth driver.

“Overall, China’s total retail sales of consumer goods this year are expected to reach 41 trillion yuan, roughly equivalent to 5.9 trillion U.S. dollars, bringing the country very close in size to the U.S. consumer market,” said Chen Lifen.

In 2019, China’s foreign trade grew by 3.4%, with private enterprises emerging as the largest trading entities.

According to data released by the General Administration of Customs on the 14th, China’s total value of goods trade in 2019 reached 31.54 trillion yuan, up 3.4% from 2018; for the first time, private enterprises became the largest players in foreign trade.

At a press conference held that day by the State Council Information Office, Deputy Director-General Zou Zhiwu of the General Administration of Customs stated that in 2019, China’s exports totaled 17.23 trillion yuan, up 5%; imports reached 14.31 trillion yuan, an increase of 1.6%; and the trade surplus stood at 2.92 trillion yuan, expanding by 25.4%.

According to him, China’s foreign trade volume showed a quarter-by-quarter upward trend in 2019. In December alone, the country’s total imports and exports reached 3.01 trillion yuan, up 12.7% year on year, with monthly totals for overall trade, exports, and imports all hitting record highs.

Notably, in 2019, private enterprises recorded foreign trade totaling RMB 13.48 trillion, up 11.4% year on year, accounting for 42.7% of China’s total foreign trade—3.1 percentage points higher than in 2018. According to Zou Zhiwu, this data indicates that, for the first time, private enterprises have surpassed foreign-invested enterprises to become China’s largest foreign trade operators.

Another piece of data is equally noteworthy. In 2019, the ranking of China’s major trading partners shifted, with ASEAN becoming the country’s second-largest trading partner. Specifically, in 2019, China’s trade with its top trading partner, the European Union, totaled RMB 4.86 trillion, up 8%; trade with ASEAN reached RMB 4.43 trillion, an increase of 14.1%; and trade with the United States stood at RMB 3.73 trillion, down 10.7%. During the same period, China’s trade with countries along the Belt and Road Initiative amounted to RMB 9.27 trillion, growing by 10.8%—7.4 percentage points faster than the overall growth rate. “Overall, despite a marked rise in domestic and international risks and challenges, China’s foreign trade achieved steady quantitative growth and sustained qualitative improvement throughout the year,” said Zou Zhiwu. He added that, as global economic growth continues to slow and instability and uncertainty mount, customs authorities will keep optimizing the business environment at ports, advance higher‑level opening-up, and foster stable growth and high‑quality development in foreign trade.

Taxation TAXATATION

To the Finance Departments (Bureaus) and the competent departments of industry and information technology of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan; to the Finance Bureau of the Xinjiang Production and Construction Corps; to the Guangdong Sub‑Administration of the General Administration of Customs and all directly affiliated customs offices; to the tax bureaus of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan under the State Taxation Administration; to the local supervisory bureaus of the Ministry of Finance; and to the resident commissioner offices of the State Taxation Administration in various localities:

To continue supporting the development of China’s major technological equipment manufacturing industry, the Ministry of Finance, in collaboration with the Ministry of Industry and Information Technology, the General Administration of Customs, the State Taxation Administration, and the National Energy Administration, has formulated the “Administrative Measures for the Import Tax Policy on Major Technological Equipment” (see attachment). These measures are hereby promulgated and shall take effect from the date of issuance. At the same time, the “Notice of the Ministry of Finance, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the General Administration of Customs, the State Taxation Administration, and the National Energy Administration on Adjusting the Import Tax Policy for Major Technological Equipment” (Cai Guan Shui [2014] No. 2) and the “Notice of the Ministry of Finance, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the General Administration of Customs, the State Taxation Administration, and the National Energy Administration on Adjusting the Relevant Catalogues and Provisions of the Import Tax Policy for Major Technological Equipment” (Cai Guan Shui [2015] No. 51) are hereby repealed.

Announcement of the State Taxation Administration on Matters Relating to the Comprehensive VAT Invoice Service Platform and Other Issues

I. The State Taxation Administration has upgraded the VAT invoice selection and conofficeation platform to the Comprehensive VAT Invoice Service Platform, providing taxpayers with services such as invoice purpose conofficeation, risk alerts, and information download. After obtaining special VAT invoices, unified invoices for motor vehicle sales, or electronic ordinary VAT invoices for toll road fees, taxpayers who intend to use these invoices to declare input VAT credit, apply for export tax rebates, or arrange agency tax rebates must log in to the Comprehensive VAT Invoice Service Platform to conoffice the invoice’s intended use. The login address for the Comprehensive VAT Invoice Service Platform shall be determined and publicly announced by the tax authorities of each province, autonomous region, municipality directly under the central government, and cities separately listed on the national plan (hereinafter referred to as “provincial tax authorities”).

Taxpayers shall, in accordance with the invoice’s declared purpose, either claim input VAT credit or apply for export tax rebates or agency‑handled tax rebates. For invoices that have already been claimed for input VAT credit, if they are subsequently to be used for export tax rebates or agency‑handled tax rebates, the taxpayer must submit an application to the competent tax authority, which will verify the circumstances and adjust the invoice’s designated purpose. If a taxpayer has already designated an invoice for export tax rebate or agency‑handled tax rebate purposes, but later wishes to use it for input VAT credit, the taxpayer must also submit an application to the competent tax authority. Upon verification that the invoice has not yet been used to claim an export tax rebate and after the electronic invoice data has been returned, the taxpayer may then adjust the invoice’s designated purpose.

II. The electronic standard VAT invoices issued by taxpayers through the VAT Electronic Invoice Public Service Platform (sample attached) are invoices supervised by the tax authorities. They use an electronic signature in lieu of the official invoice seal, and their legal validity, basic purposes, and fundamental usage rules are identical to those of conventional VAT invoices.

The format of the electronic standard VAT invoice is OFD. Organizations and individuals may log in to the National VAT Invoice Verification Platform (https://inv-veri.chinatax.gov.cn) to download the OFD‑format reader and view electronic standard VAT invoices.

III. With respect to the approval of invoice types for value-added tax (VAT) standard invoices, VAT electronic standard invoices, VAT electronic standard invoices for toll road fees, unified invoices for motor vehicle sales, and unified invoices for used‑car sales, the competent tax authority shall process such applications on an immediate basis, except in cases where the tax authority has identified high‑risk circumstances as prescribed.

IV. Where a taxpayer has simultaneously lost both the invoice copy and the credit copy of an issued special VAT invoice or a unified motor vehicle sales invoice, the taxpayer may, by presenting a photocopy of the corresponding accounting copy bearing the seller’s official invoice seal, use it as proof for deducting input VAT, claiming a tax refund, or recording the transaction in its books.

If a taxpayer loses the credit copy of an issued special VAT invoice or a unified motor vehicle sales invoice, they may use a photocopy of the corresponding invoice’s sales copy as proof for deducting input VAT or claiming a tax refund. If a taxpayer loses the sales copy of an issued special VAT invoice or a unified motor vehicle sales invoice, they may use a photocopy of the corresponding invoice’s credit copy as accounting voucher.

V. This Announcement shall take effect from the date of its issuance. Article 3 of the “Announcement of the State Taxation Administration on Issues Concerning the Simplification of Procedures for Obtaining and Using Value-Added Tax Invoices” (No. 19 of 2014, as amended by Announcement No. 31 of 2018 of the State Taxation Administration) is hereby repealed concurrently.

This is hereby announced.

Interpretation of the “Announcement of the State Taxation Administration on Matters Relating to the Comprehensive VAT Invoice Service Platform, Among Others”

To implement the decisions and arrangements of the CPC Central Committee and the State Council, further optimize the tax-related business environment, deepen the “delegation, regulation, and service” reform within the tax system, and facilitate taxpayers in issuing and using value-added tax invoices, the State Taxation Administration has issued the “Announcement of the State Taxation Administration on Matters Relating to the Comprehensive Service Platform for Value-Added Tax Invoices, among Others” (hereinafter referred to as the “Announcement”). The following is an interpretation:

I. What high-quality, convenient services can taxpayers access through the Comprehensive VAT Invoice Service Platform?

To meet the needs of tax modernization, innovate invoice‑service delivery, and enhance the quality and efficiency of invoice management, the tax authorities have upgraded the original VAT invoice selection and conofficeation platform, establishing the Comprehensive VAT Invoice Service Platform (hereinafter referred to as the “Comprehensive Service Platform”). Through this platform, taxpayers can access the following high‑quality, convenient services:

First, a “one-stop” invoice‑use conofficeation service. Taxpayers can perform a one‑stop conofficeation of the intended use for the special VAT invoices, unified invoices for motor vehicle sales, and electronic standard VAT invoices for toll road fees they have obtained, thereby effectively enhancing the level of refined, standardized, and information‑based management of VAT credit‑certifying documents. In accordance with the State Taxation Administration’s Announcement No. 33 of 2019 on Matters Relating to VAT Invoice Management, starting February 1, 2020, taxpayers who obtain eligible customs import VAT payment certificates may also conduct use‑conofficeation through the integrated service platform. Second, an “integrated” invoice‑risk‑alert service. Taxpayers can query and compile statistics on the transactional status of invoices—including issuance, filing, tax payment, and use conofficeation—as well as their administrative statuses such as cancellation, red‑invoice reversal, and anomalies. Based on the risk‑alert information retrieved, taxpayers can promptly take appropriate risk‑mitigation measures, effectively avoiding tax‑related and financial‑management risks arising from information asymmetry between tax authorities and enterprises, or between buyers and sellers. Third, a “full‑invoice‑type” invoice‑information‑download service. Taxpayers can download in bulk the detailed information of the invoices they have received, enabling them to carry out batch verification, statistical analysis, and other related tasks, thus helping to enhance their level of electronic invoice management. At present, the invoice types eligible for bulk downloading include special VAT invoices, standard VAT invoices, electronic standard VAT invoices, electronic standard VAT invoices for toll road fees, unified invoices for motor vehicle sales, and unified invoices for used‑car sales.

II. After a taxpayer has incorrectly reported the intended use of an invoice, how can the tax authorities assist the taxpayer in making corrections and amendments?

In accordance with the requirements of the Announcement, after taxpayers have conofficeed the intended use of an invoice through the Integrated Service Platform, they must carry out the relevant tax‑related procedures based on that conofficeation. Should an error occur in the invoice‑use conofficeation, the tax authorities provide taxpayers with a standardized and convenient correction service. If a taxpayer has mistakenly designated an invoice for input‑tax credit but wishes to change its use to export tax rebates or agency‑handled tax rebates, the taxpayer may submit an application to the competent tax authority. Upon verifying the circumstances, the competent tax authority will adjust the invoice’s designated use accordingly. Similarly, if a taxpayer has incorrectly designated an invoice for export tax rebate or agency‑handled tax rebate, they may file an application with the competent tax authority. After conofficeing that no export tax rebate has yet been claimed and assisting the taxpayer in withdrawing the electronic invoice information, the taxpayer may reconoffice the invoice’s intended use via the Integrated Service Platform.

III. Compared with other channels, what are the advantages of issuing standard electronic VAT invoices through the VAT Electronic Invoice Public Service Platform?

Value-added tax (VAT) electronic standard invoices issued through the VAT Electronic Invoice Public Service Platform (hereinafter referred to as the “Public Service Platform”) offer the following advantages: First, the file format is more standardized. These invoices are generated in the OFD format, which complies with the national unified standard, ensuring uniformity, security, and ease of use. Second, the invoice layout is more streamlined. The label for the “Goods or Taxable Labor and Services” field has been simplified to “Item Name,” and the former “Seller: (Seal)” field has been removed, thereby simplifying the overall invoice design. Third, the authentication and sealing methods are more advanced. A reliable electronic signature has replaced the original special invoice seal, and an electronically stamped supervisory seal—signed with a tax‑related digital certificate—has taken the place of the previous supervisory seal, better meeting the requirements of invoice digitization reform.

It should be noted that electronic standard VAT invoices conforming to the format set forth in Annex 1 of the “Announcement of the State Taxation Administration on Issues Related to the Issuance of Electronic Standard VAT Invoices via the VAT Electronic Invoice System” (No. 84 of 2015, as amended by Announcement No. 31 of 2018 of the State Taxation Administration) shall remain valid until further notice from the State Taxation Administration.

IV. What changes have been made to the processing time for the approval of invoice types?

To further facilitate taxpayers’ invoice acquisition and ensure the smooth continuation of their production and business operations, the State Taxation Administration has decided to reduce the processing time for approving the issuance of standard VAT invoices, electronic standard VAT invoices, electronic standard VAT invoices for toll road fees, unified invoices for motor vehicle sales, and unified invoices for used‑car sales from the previous five working days to immediate completion. While enhancing convenience for law-abiding taxpayers, in order to mitigate tax risks and foster a more standardized and equitable tax‑economic environment, this facilitative measure shall not apply to high‑risk situations as determined by the tax authorities in accordance with relevant regulations.

V. What optimizations have been implemented in the tax and financial management processes for taxpayers who lose their special value-added tax invoices or unified motor vehicle sales invoices?

To implement the CPC Central Committee and the State Council’s directives on streamlining documentation, enhancing convenience for the public, and optimizing services, the tax authorities have continuously strengthened their capacity and capabilities in “information‑based tax administration.” They have now achieved the sharing and mutual use of tax filing information for special value‑added tax invoices and unified motor vehicle sales invoices. When taxpayers lose the invoice copy or the credit copy of an invoice, they are no longer required to visit the tax authority to apply for a “Certificate of Tax Filing for Lost Special Value‑Added Tax Invoice.” Instead, they may use photocopies of the other essential copies of the relevant invoice as supporting documents for deducting input VAT, claiming refunds, or recording accounting entries.

China has achieved the electronic filing of tax registration for outbound payments.

According to the State Taxation Administration, starting this year, the electronic filing of tax records for outbound payments related to services trade and other items has been rolled out nationwide. Relevant enterprises can simply log in to the Electronic Tax Bureau, select the “Tax Filing for Outbound Payments on Services Trade and Other Items” module, complete the required information, and generate an electronic tax‑filing record. This record can then be instantly verified online at the bank, enabling a fully paperless process from start to finish.

“Taxpayers can complete foreign‑payment tax filing without leaving home by logging into the Electronic Tax Bureau website or the online tax service hall,” said a responsible official from the International Taxation Department of the State Taxation Administration. With the full‑process electronic filing now available nationwide, information‑sharing channels have been established among enterprises, tax authorities, foreign exchange regulators, and banks. By accessing the Electronic Tax Bureau or the online tax service hall, businesses and banks can enter, query, and verify foreign‑payment filing information, achieving seamless integration of this administrative process and significantly reducing costs for enterprises, tax authorities, banks, and foreign‑exchange institutions—thereby creating mutual benefits for all parties involved. At the same time, to accommodate taxpayers who prefer in‑person services and consultations, local tax service halls will continue to maintain “one‑stop” service counters, providing comprehensive convenience to taxpayers.

As an important component of the State Council’s measures to facilitate cross-border trade and investment, the full digitalization of tax filing for outbound payments related to services trade and other items has now been launched nationwide, benefiting more than 60,000 enterprises each year.

Japan plans to abolish the policy that grants a 50% tax reduction on entertainment expenses incurred by large corporations.

On the 9th, the Japanese government and the ruling party disclosed that they are considering abolishing the special measure that exempts 50% of hospitality expenses incurred by large corporations from taxation. The government believes that this tax break on hospitality expenses has yielded only limited economic stimulus. The tax reduction for hospitality expenses applicable to large enterprises is set to expire at the end of fiscal year 2019; however, a special extension of the exemption will be applied to small and medium-sized enterprises with substantial spending, and this provision will be included in the outline of the 2020 tax reform package scheduled for release in December.

As a special measure for large corporations, up to 50% of expenses related to business entertainment and hospitality can be deducted from corporate income tax. Following the increase in the consumption tax rate to 8% in April 2014, the Japanese government introduced this temporary provision to mitigate the risk of an economic downturn triggered by the tax hike. Since fiscal year 2014, the measure has been extended twice, every two years; however, as large companies have tightened their controls over entertainment expenditures, its effectiveness has become increasingly limited.

LITIGATION & ARBITRATION

Measures for the Comprehensive Implementation of the Administrative Law Enforcement Publicity System, the Full-Process Recording System, and the Legal Review System for Major Law Enforcement Decisions by the Ministry of Justice

In order to implement the requirements of the “Guiding Opinions of the General Office of the State Council on Fully Implementing the Administrative Law Enforcement Publicity System, the Full-Process Recording System for Law Enforcement, and the Legal Review System for Major Law Enforcement Decisions” (Guobanfa [2018] No. 118, hereinafter referred to as the “Guiding Opinions”), which were reviewed and approved at the Fifth Meeting of the Central Commission for Comprehensively Deepening Reform and promulgated by the General Office of the State Council, this Implementation Measures is formulated to ensure the full implementation within the Ministry of the administrative law enforcement publicity system, the full-process recording system for law enforcement, and the legal review system for major law enforcement decisions—hereinafter collectively referred to as the “Three Systems”—in light of the actual conditions of administrative law enforcement work within the Ministry.

I. Objectives and Requirements

Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, we will earnestly implement the spirit of the 19th National Congress of the Communist Party of China and the Second, Third, and Fourth Plenary Sessions of the 19th CPC Central Committee, advance the rule of law in all respects, and modernize government governance capabilities. We will uphold the principle of law enforcement for the people, ensure that administrative law enforcement at the ministry level is rigorous, standardized, fair, and civilized, effectively enhance law enforcement capacity and standards, comprehensively improve enforcement efficiency, and fully leverage the Ministry of Justice’s leading and exemplary role in the judicial administration system in the comprehensive implementation of the “Three Systems,” thereby significantly raising public satisfaction with administrative law enforcement.

II. Scope of Administrative Law Enforcement

In accordance with laws, administrative regulations, State Council documents, and the Ministry of Justice’s “Three Determinations” provisions, the Bureau of Lawyers’ Affairs and the Administration for Legal Professional Qualification assume administrative enforcement functions, including administrative licensing, administrative inspections, administrative penalties, and administrative coercive measures. In performing their duties related to the administration of lawyers and the management of legal professional qualifications, they shall strictly adhere to the provisions of the “Guiding Opinions” and these Implementation Measures, and comprehensively implement the “Three Systems.”

The judicial departments (bureaus) of provinces, autonomous regions, municipalities directly under the central government, and prefecture-level cities, when performing law enforcement activities such as preliminary and re-examination of administrative permits, administrative inspections, and enforcement of administrative decisions pursuant to laws and regulations and upon delegation by the ministry, shall comply with the provisions of these Implementing Measures.

III. Working Mechanism

(1) Fully implement the administrative law enforcement publicity system.

Public disclosure of administrative law enforcement is an important component of government information transparency. The Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall, in accordance with the Regulations on the Disclosure of Government Information of the People’s Republic of China and the Guiding Opinions, identify the administrative law‑enforcement information that their respective bureaus are required to disclose, specifying the names of enforcement matters, the policy basis, the accepting agency, the reviewing and approving agency, the conditions for acceptance, and the time limits for processing; compile a catalog of major enforcement decision items within their units; establish a list of administrative law‑enforcement personnel who have obtained administrative law‑enforcement qualifications and hold administrative law‑enforcement credentials; prepare flowcharts of enforcement procedures, service guides, or work standards; and be responsible for dynamically adjusting the disclosed content in response to changes in circumstances.

The General Office is responsible for establishing an “Administrative Law Enforcement Information Disclosure Column” under the Government Information Disclosure section of the Ministry’s official website, ensuring that administrative law enforcement information is disclosed comprehensively, accurately, and in a timely manner. Enforcement information proposed for public disclosure by the Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall be submitted to the General Office for review; following such review, the information will be made public on the Ministry’s official website. In principle, administrative law enforcement information involving state secrets, commercial secrets, or personal privacy shall not be disclosed; where disclosure is legally required, appropriate measures must be taken to ensure that such information is released only after due processing.

When carrying out on-site law enforcement activities, administrative law enforcement officers of the Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall proactively present or wear their law enforcement identification, issue relevant enforcement documents, and promptly inform the party concerned of the reasons for enforcement, the legal basis, as well as their rights and obligations.

Information on administrative licenses and administrative penalty decisions issued in the name of the Ministry of Justice shall, within seven working days from the date the enforcement decision is made, be publicly disclosed on the Ministry’s official website under the “Administrative Enforcement Information Disclosure Column,” in accordance with prescribed procedures and requirements, providing basic details such as the subject of enforcement, the type of enforcement, and the enforcement outcome. If a previously disclosed enforcement decision is lawfully revoked, declared unlawful, or ordered to be reissued, it shall be withdrawn from the Ministry’s official website within five working days.

(2) Fully implement the system of recording the entire law enforcement process.

The Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall, by means of written records, audio‑visual recordings, and other documentation, record all stages of law enforcement, including the initiation of proceedings, investigation and evidence collection, review and decision‑making, and service and execution. They shall also comprehensively and systematically file and preserve such records, ensuring that the entire law‑enforcement process is fully traceable and subject to retrospective management.

Where written records of the entire law enforcement process are maintained in paper or electronic form, each agency shall, in light of its specific law enforcement practices, formulate and refine standard templates for the basic formats of various types of enforcement documents, and submit these to the Administrative Law Enforcement Coordination and Supervision Bureau for compilation into a consolidated compendium of standard document formats for the Ministry’s administrative law enforcement.

It is essential to ensure seamless coordination between audio‑visual recordings and written records, giving full consideration to the necessity, appropriateness, and effectiveness of audio‑visual documentation. Where written records can comprehensively and effectively document law enforcement activities, audio‑visual recording may be dispensed with. For cases requiring audio‑visual recording, law enforcement actions may be captured in real time using appropriate equipment—such as cameras, voice recorders, video cameras, body-worn cameras, and video surveillance systems—tailored to the specific category, stage, or phase of the administrative enforcement process. Furthermore, for administrative enforcement activities that are prone to controversy, attract significant public attention, or have nationwide implications—such as on-site enforcement, evidence collection, hearings, service by detention, and service by public notice—full‑process audio‑visual recording must be conducted.

The Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall, within 30 days from the date of conclusion of the enforcement action, compile the written and audiovisual records generated during the enforcement process into case files in accordance with applicable regulations, and file and preserve them. Audiovisual recordings shall have their storage media included in the case file, or their storage location—whether in the administrative law enforcement information system or on a transferable storage device—shall be documented in writing; furthermore, written explanations regarding the recording method, time of creation, and creator shall be filed. The Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall designate dedicated personnel to oversee the filing, preservation, and use of both written and audiovisual materials within their respective jurisdictions. Enforcement record information involving state secrets, commercial secrets, or personal privacy shall be managed strictly in accordance with relevant confidentiality provisions and authorized procedures.

When a party lawfully applies to inspect law enforcement records, or when such records are required to be disclosed for purposes of public opinion management, social publicity, education and training, or when other entities request access to these records, the Lawyers’ Work Bureau and the Legal Professional Qualification Administration shall disclose or permit access in accordance with the procedures prescribed by the regulations on government information disclosure.

(3) Fully implement the legal review system for major enforcement decisions.

Any major enforcement decision that involves significant public interests, may have a substantial social impact or give rise to social risks, directly affects the vital rights and interests of administrative counterparts or third parties, is made following an adversarial hearing procedure, or pertains to complex and difficult cases involving multiple legal relationships, shall be subject to rigorous legal review. No enforcement decision may be issued without such legal review or if it fails to pass the review. The Lawyers’ Affairs Bureau and the Legal Professional Qualification Administration shall, in accordance with the aforementioned principles, consult with the Administrative Law Enforcement Coordination and Supervision Bureau to formulate a catalog of matters requiring major enforcement decisions and publicly disclose it in compliance with relevant provisions on information disclosure.

The Bureau of Legal Services and the Administration for Legal Professional Qualifications shall submit proposed opinions on major enforcement decisions to the Bureau for Coordination and Supervision of Administrative Enforcement for legal review. The review shall primarily cover the following aspects: whether the enforcing authority is lawful and whether the enforcement officers possess the requisite qualifications; whether the enforcement procedures are lawful; whether the facts of the case are clearly established and whether the evidence is lawful and sufficient; whether the applicable laws, regulations, and rules are correctly applied and whether discretionary standards have been appropriately exercised; whether the enforcement exceeds the statutory powers of the enforcing agency; whether the enforcement documents are complete and properly formatted; and whether the alleged violation may constitute a criminal offense requiring referral to the judicial authorities.

After the opinions on major enforcement decisions have undergone legal review, they shall be submitted for approval in accordance with the prescribed procedures.

IV. Organizational Support

The principal officials of the Lawyers’ Work Bureau and the Legal Professional Qualification Administration are the primary persons responsible for implementing the “Three Systems” within their respective units. They must elevate their political awareness, regard the implementation of these systems as a key task for carrying out the major decisions and deployments of the CPC Central Committee and the State Council, and ensure meticulous planning and execution. The Administrative Law Enforcement Coordination and Supervision Bureau shall strengthen research on common issues, coordinate and oversee the implementation of the “Three Systems,” provide guidance and oversight, and conduct legal reviews of significant enforcement decisions made by the Ministry. It will also organize professional training and, in collaboration with relevant bureaus within the Ministry, offer guidance to local judicial administrative departments in advancing the “Three Systems.” The Equipment and Financial Support Bureau shall ensure adequate funding for the implementation of the “Three Systems.” The Lawyers’ Work Bureau, the Legal Professional Qualification Administration, and the Administrative Law Enforcement Coordination and Supervision Bureau, in coordination with the Information Center, shall develop an administrative law enforcement case-handling system for the Ministry, clearly defining the types, scope, procedures, and methods of sharing enforcement information, thereby promoting the efficient collection, effective integration, and secure sharing of enforcement data.

A joint conference mechanism has been established within the Ministry to ensure the comprehensive implementation of the “Three Systems,” strengthening organizational leadership over this work. The joint conference may be convened on an ad hoc basis as needed to deliberate and deploy major issues in implementing the “Three Systems” and to coordinate solutions to difficulties and problems encountered in the course of implementation. The convener of the joint conference shall be a Ministry leader in charge of the Administrative Law Enforcement Coordination and Supervision Bureau, while its members shall comprise relevant responsible officials from the General Office, the Administrative Review and Litigation Bureau, the Administrative Law Enforcement Coordination and Supervision Bureau, the Lawyers’ Work Bureau, the Legal Professional Qualification Administration Bureau, the Equipment and Financial Support Bureau, and the Information Center. Each member unit shall designate one department-level cadre as its liaison officer. The day-to-day operations of the joint conference shall be led and coordinated by the Administrative Law Enforcement Coordination and Supervision Bureau.

These Measures shall come into force as of December 31, 2019.

The Measures for the Handling of Reports on Illegal Acts by Banks and Insurance Institutions will come into effect on March 1.

On January 14, the China Banking and Insurance Regulatory Commission announced that it had recently issued the Measures for Handling Reports of Illegal Activities in the Banking and Insurance Sectors (hereinafter referred to as the “Measures”), further standardizing the handling of such reports by the CBIRC and its local branches, and clarifying requirements for acceptance, circumstances under which reports will not be accepted, and time limits for processing. The Measures shall take effect on March 1, 2020.

The Measures stipulate that a report shall be accepted if it simultaneously meets the following conditions: the subject of the report falls within the regulatory jurisdiction of this institution; the reported party is clearly identified; and the report sets forth specific facts of banking or insurance violations, accompanied by relevant supporting evidence.

The Measures also stipulate that banking and insurance regulatory authorities shall, within 15 calendar days of receiving a report, review and decide whether to accept it, and notify the reporter in writing. In contrast, the “Measures for Handling Reports of Insurance Law Violations” mentioned in this announcement have been revised: previously, it provided that “the China Insurance Regulatory Commission and its local branches shall, within 10 working days of receiving a report, review and decide whether to accept it; if a real-name reporter requests notification of the acceptance decision, such notification may be provided by telephone or in writing.”

The banking and insurance regulatory authority shall, upon receipt of a report, promptly initiate an investigation. Within 60 days from the date of acceptance, it shall issue a written opinion on the investigation of the alleged unlawful conduct and promptly notify the whistleblower in writing; however, it shall not disclose state secrets, commercial secrets, or personal privacy.

The circumstances under which a report will not be accepted have been expanded compared with certain earlier documents. In contrast to the previously mentioned Measures for Handling Reports of Insurance Law Violations, which listed only three grounds for non-acceptance, this new set of Measures now specifies seven, including: reports that have already been accepted but are re‑filed by the same complainant during the processing period, where the new submission contains no new facts or supporting evidence; reports that have already been concluded but are re‑filed by the complainant, again without any new facts or supporting evidence; and situations that have already been resolved or, in accordance with the law, should be addressed through statutory channels such as litigation, arbitration, or administrative reconsideration.

Wang Deyi, an attorney at Xunzhen Law Office, told reporters that, for example, if a whistleblower seeks civil compensation from a bank or insurance institution, the matter must be brought before a court or an arbitration body; administrative authorities lack the power to render a decision. Therefore, complainants are advised to pursue resolution through judicial channels. Industry insider Dong Zheng noted that specifying these circumstances under which complaints will not be accepted also serves to restrain whistleblowers, preventing them from making baseless claims or engaging in opportunistic litigation.

Community Corrections Law: Ushering in a New Era of Rule-of-Law-Based Community Corrections Work

On December 28, 2019, the Community Corrections Law of the People’s Republic of China (hereinafter referred to as the “Community Corrections Law”) was adopted at the fifteenth meeting of the Standing Committee of the 13th National People’s Congress. The enactment of this law represents a legislative articulation of more than a decade of achievements in community corrections and marks a landmark milestone in the development of this field. This national legislation on community corrections effectively integrates leadership, pragmatism, and openness, and is poised to usher in a new era of rule-of-law‑based community corrections in China.

National legislation on community-based correctional measures is pioneering.

By comparison, China’s community‑based correction system did not begin early on the global stage, yet it has since experienced rapid development. This Community Corrections Law is currently the world’s first specialized statute on community corrections enacted by a national legislative body, and its pioneering role at the national legislative level is self‑evident. Since the launch of reform and opening up, China has pressed forward vigorously along the path of rule of law. However, for a long time, whether in fundamental laws or sectoral legislation, the country has largely remained in a catch‑up position. The promulgation of this Community Corrections Law breaks with that pattern, marking a genuine move to lead and surpass; it also constitutes an important step toward modernizing China’s governance system and governance capacity since the 18th National Congress of the Communist Party of China, while contributing Chinese wisdom to the realm of national legislation on community corrections.

The working mechanism established by the Community Corrections Law is pioneering. Building on the accumulated practical experience of previous community corrections efforts, this national legislation has instituted a framework characterized by unified leadership from Party committees and governments, organizational implementation by judicial administrative departments, coordinated collaboration among relevant agencies, and broad participation from social forces. From the perspective of top-level design, this mechanism seamlessly integrates the leading, implementing, assisting, and participating entities, thereby effectively advancing law-based, root-cause‑addressing, systematic, and comprehensive governance of community corrections while highlighting and further strengthening the distinctive Chinese features of this work.

The Community Corrections Law plays a pioneering role in incorporating modern technological tools and information‑based approaches. As China’s scientific and technological development and applications have advanced by leaps and bounds, the internet has become ubiquitous, posing new demands on contemporary state governance and the rule of law. Keeping pace with the times, the Law—through provisions such as Articles 5, 26, and 29—specifically addresses the information‑technology capabilities of community correction institutions, electronic verification procedures, and electronic monitoring devices, thereby reflecting a strong sense of the era. At the same time, as modern technology is integrated into community correction work, due consideration is given to safeguarding the privacy and other personal rights of those subject to community correction, making this an indispensable aspect of the Law’s commitment to technological innovation.

The Community Corrections Law establishes a dedicated chapter on the special protection of juvenile offenders subject to community corrections, setting a pioneering precedent. Chapter VII of the Law provides specific provisions for the community correction of minors in a separate section, marking a groundbreaking legislative endeavor and an innovative approach in the field of juvenile community corrections.

An Analysis of the Key Highlights of the Basic Medical and Health Care and Health Promotion Law

In 2009, the “Opinions of the CPC Central Committee and the State Council on Deepening Reform of the Medical and Healthcare System” were issued, marking the official launch of a new round of healthcare reform in China. Ten years later, on December 28, 2019, the Fifteenth Meeting of the Standing Committee of the 13th National People’s Congress deliberated and adopted the Basic Medical and Health Care and Health Promotion Law of the People’s Republic of China, thereby establishing for the first time a “leading, overarching” law in the field of health and wellness in China.

Since the 18th National Congress of the Communist Party of China, China’s health and wellness sector has achieved remarkable progress. In recent years, significant legislative advances have been made in this field, with the enactment of more than ten laws, including the Law on the Prevention and Control of Infectious Diseases, the Law on Frontier Health Quarantine, the Law on Maternal and Infant Health Care, the Law on Practicing Physicians, the Law on Traditional Chinese Medicine, the Mental Health Law, the Blood Donation Law, the Drug Administration Law, and the Vaccine Administration Law.

Without universal health, there can be no all-round moderate prosperity. The year 2020 marks the decisive year for completing the building of a moderately prosperous society in all respects and for implementing the 13th Five-Year Plan. “The Basic Medical and Health Care and Health Promotion Law is the first foundational, comprehensive law in China’s health sector; it is an essential requirement for guiding and advancing the development of health undertakings through the rule of law, and it carries profound significance,” noted Yuan Jie, Director of the Administrative Law Division of the Legislative Affairs Commission of the Standing Committee of the National People’s Congress. He added that enacting this law will help foster the development of medical and health services, ensure citizens’ access to basic medical and health care, improve public health, strengthen top-level design in the health sector, and further refine the legal framework for health governance.

The law comprises 10 chapters and 110 articles and will come into force on June 1.

According to the National Health Commission on January 15, in accordance with the requirements of the “Opinions of the General Office of the State Council on Further Ensuring the Supply and Stabilizing Prices of Shortage Drugs” (Guobanfa [2019] No. 47), and in order to strengthen national efforts to ensure the supply of shortage drugs and establish a sound management system for the shortage drug list, the National Health Commission, together with the member units of the National Coordination and Joint‑Action Mechanism for Ensuring the Supply of Shortage Drugs, has drafted the “Administrative Measures for the National Shortage Drug List (Trial) (Draft for Comments)” (hereinafter referred to as the “Draft for Comments”).

Shortage drugs refer to medications that have been approved for marketing by China’s drug regulatory authorities, are clinically essential and either irreplaceable or not fully substitutable, and experience insufficient or unstable supply over a specified period or within a particular region. The National Health Commission has designated the department responsible for monitoring shortage drugs and conducts a comprehensive analysis of data collected from the multi-source information‑gathering platform as well as interdepartmental shared information. In principle, a drug is included in the National Basic List of Shortage Drugs if it appears on the shortage lists of three or more provincial-level authorities during the same period, and if, despite the implementation of measures such as direct online listing, voluntary registration, and pharmaceutical reserves, the shortage cannot be effectively addressed within a defined timeframe through the provincial coordination mechanism.

The department of the National Health Commission responsible for monitoring drug shortages shall, based on the following information and through comprehensive analysis, formulate the National Key Monitoring List of Clinically Essential Drugs Prone to Shortages:

(1) Medicines included in the provincial-level key monitoring list of clinically essential but prone to shortages;

(II) Information on shortage drugs reported at the provincial level;

(3) Monitoring information from the national multi-source information collection platform for shortage drugs;

(4) Interdepartmental connectivity and information sharing;

(5) Information on essential medicines, emergency (life-saving), critical illness, public health, and medications for special populations—where the number of manufacturing enterprises is limited, clinical demand is low, and demand remains uncertain.

Other

The People’s Bank of China conducted a reverse repo operation totaling RMB 200 billion.

On the 17th, the People’s Bank of China conducted a 200-billion-yuan 14-day reverse repurchase operation through interest-rate bidding. With no reverse repos maturing on the same day, the central bank injected a net 200 billion yuan into the market.

The People’s Bank of China announced that, to offset the impact of peak cash injections and government bond issuance payments, and to ensure adequate liquidity in the banking system ahead of the Spring Festival, it conducted a 200-billion-yuan reverse repurchase operation on the same day, with a term of 14 days and a winning rate of 2.65%.

On the day, one-month interbank market rates edged higher, while three-month, six-month, and nine-month rates remained unchanged; other tenors saw declines. The Shanghai Interbank Offered Rate (Shibor) released on the 17th showed that the overnight and seven-day rates were 2.522% and 2.64%, down 8.7 and 2.3 basis points, respectively, from the previous trading day; the 14-day rate stood at 2.943%, 2.6 basis points lower than the prior session; and the one-year rate was 3.005%, 0.2 basis points lower than the previous day.

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