JC Master Legal News Issue 963

Key Takeaways for This Issue
The China Securities Regulatory Commission is soliciting public comments on amendments to the Regulations on the Procedures for Implementing Administrative Licenses of the China Securities Regulatory Commission.
On March 26, the China Securities Regulatory Commission issued a notice soliciting public comments on amendments to the “Regulations of the China Securities Regulatory Commission on the Procedures for Implementing Administrative Licenses.” In order to implement the CPC Central Committee and the State Council’s requirement of “zero tolerance” toward illegal activities in the capital market, further enhance regulatory effectiveness, and strengthen the accountability of securities intermediary service institutions as “gatekeepers” in the capital market, the CSRC plans to revise the aforementioned regulations. Public comments are now being solicited.
Caida Securities’ IPO application has been approved—making it Hebei Province’s first securities office listed on the A-share market.
On the evening of March 26, the China Securities Regulatory Commission announced that it had recently approved Caida Securities’ initial public offering application, making Caida Securities the 41st listed securities office on the A-share market and the first listed brokerage in Hebei Province. The company plans to issue no more than 500 million shares, representing 15.41% of its total share capital after the offering.
The General Office of the CPC Central Committee and the General Office of the State Council have issued the “Opinions on Further Deepening the Reform of Tax Collection and Administration.”
The “Opinions on Further Deepening Tax Collection and Administration Reform” propose comprehensively advancing the digital upgrading and intelligent transformation of tax collection and administration, accelerating the development of smart taxation, steadily implementing the electronic invoicing reform, and deepening the sharing and application of tax-related big data.
Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Administrative Cases Applying for Retrial
The Provisions on Applications for Retrial explicitly stipulate that, in seven categories of cases—namely, those that bear general legal‑application guidance nationwide, those of significant public importance, cross‑administrative‑region cases, major cases involving foreign parties or matters concerning Hong Kong, Macao, and Taiwan, cases involving substantial national interests or the public interest, cases deliberated and decided by the adjudication committee of a higher people’s court, and other cases that the Supreme People’s Court deems should be retried—the Supreme People’s Court shall issue a ruling ordering a retrial. These provisions shall take effect as of April 1, 2021.

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission is soliciting public comments on amendments to the Regulations on the Procedures for Implementing Administrative Licenses of the China Securities Regulatory Commission.
The China Securities Regulatory Commission has issued a preliminary notice of administrative regulatory measures to Haitong Securities, Haitong Asset Management, and the relevant persons held accountable.
Standardizing Share Repurchases by Companies Listed on the New Third Board: The National Equities Exchange and Quotations Company Has Revised Relevant Detailed Rules.
Traders Association: Mandatory credit ratings for debt financing instruments have been abolished, and the requirement to mandatorily disclose bond‑specific rating reports at the issuance stage has been lifted.

Corporate & Commercial
Caida Securities’ IPO application has been approved—making it Hebei Province’s first securities office listed on the A-share market.
Zhihu closed down 11% on its first day of trading, below its IPO price.
Guangzhou has released the first batch of centrally allocated land parcels: 48 plots have been listed, with a total value exceeding RMB 90 billion.
Philips sells its home appliances business; Hillhouse Capital acquires it for €4.4 billion.

Taxation
The General Office of the CPC Central Committee and the General Office of the State Council have issued the “Opinions on Further Deepening the Reform of Tax Collection and Administration.”
The additional deduction rate for R&D expenses of manufacturing enterprises has been increased to 100%.
Announcement of the Ministry of Finance and the State Taxation Administration on the Extension of Certain Tax and Fee Preferential Policies in Response to the Epidemic
The Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs, the State Taxation Administration, and the State Administration for Market Regulation have issued a notice on expanding the pilot program for cross-border e‑commerce retail imports and ensuring strict implementation.
Notice of Regulatory Requirements

Litigation & Arbitration
Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Administrative Cases Applying for Retrial
Provisions of the Supreme People’s Court on Several Issues Concerning the Proper Determination of the Qualification of Local People’s Governments at or Above the County Level as Defendants in Administrative Litigation
Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in Adjudicating State Compensation Cases and Determining Liability for Compensation for Mental Damage
Three Penalties in One Case: The Supreme People’s Court Intellectual Property Tribunal Issues This Year’s First “Penalty Notice”

Other

Finance & Capital Markets
The China Securities Regulatory Commission is soliciting public comments on amendments to the Regulations on the Procedures for Implementing Administrative Licenses of the China Securities Regulatory Commission.
To implement the CPC Central Committee and the State Council’s requirement of “zero tolerance” for illegal activities in the capital market, further enhance the effectiveness of regulatory efforts, strengthen the accountability of securities intermediaries as “gatekeepers” in the capital market, mitigate market risks associated with suspected violations by such intermediaries, and better safeguard the rights of applicants for administrative licenses, the China Securities Regulatory Commission plans to amend the Regulations on the Procedures for the Implementation of Administrative Licenses of the China Securities Regulatory Commission (hereinafter referred to as the “License Procedures Regulations”). Public comments are now being solicited.
In 2018, the China Securities Regulatory Commission (CSRC) revised the Regulations on Licensing Procedures, standardizing the mechanism that links investigations and case filings against securities intermediaries to administrative licensing. This measure effectively safeguarded the legitimate rights and interests of applicants for administrative licenses who were not involved in the cases. Recently, the CSRC has mobilized resources to conduct another assessment and analysis of the implementation effectiveness of these Regulations. Overall, the policy linking investigations and case filings of securities intermediaries to administrative licensing has played a positive role in strengthening the accountability of such intermediaries, conserving regulatory resources, and mitigating market risks. At the same time, in order to implement the CPC Central Committee and the State Council’s “zero‑tolerance” stance toward illegal activities in the capital market, better protect the rights and interests of administrative license applicants, and enhance the capacity of financial services to support the real economy, it is necessary to further revise and improve the Regulations on Licensing Procedures.
After thorough consideration of views from all sectors of society, the revisions to these Regulations on Licensing Procedures primarily encompass the following three aspects: First, regulatory oversight of personnel at securities intermediary institutions has been strengthened. Specifically, if such personnel are subject to an investigation for suspected violations of laws or regulations and the CSRC suspends the review of their administrative licensing applications, securities intermediary institutions will no longer be permitted to re‑examine projects signed by those under investigation. Second, to enhance the quality of the review process at securities intermediary institutions and prevent it from becoming a mere formality, legal liabilities of reviewers have been clarified. The Regulations stipulate that securities offices, securities service institutions, and their practitioners, when conducting reviews in accordance with these Regulations, must exercise due diligence and strictly fulfill their statutory duties. Should the review opinions contain false records, misleading statements, or material omissions, the CSRC will impose appropriate sanctions as prescribed. Third, in order to minimize the impact on administrative licensing applications submitted by non‑involved applicants, it has been specified that, during the acceptance stage, if a securities office or securities service institution preparing and issuing relevant application materials is under investigation by the CSRC or its local branches for suspected violations, or is being investigated by judicial authorities without a final conclusion, and if the alleged misconduct falls within the same category of business as the services provided to the applicant, such office or institution may, in accordance with the Regulations, proceed with the review. However, this exemption does not apply where the office’s or institution’s internal control mechanisms exhibit serious deficiencies, or where the alleged misconduct has a significant impact on the market.
We welcome comments and suggestions from all sectors of society on the “Regulations on Licensing Procedures.” The China Securities Regulatory Commission will, based on the feedback received, revise and refine these Regulations and issue them for implementation as soon as possible.
The full text of the notice is as follows:
Notice on Soliciting Public Comments on the Amendment to the Regulations of the China Securities Regulatory Commission on the Procedures for Implementing Administrative Licenses
To implement the CPC Central Committee and the State Council’s requirement of “zero tolerance” for illegal activities in the capital market, further enhance regulatory effectiveness, and ensure that securities intermediary service institutions fulfill their responsibilities as “gatekeepers,” the Commission intends to amend the Regulations on the Procedures for the Administration of Administrative Licenses of the China Securities Regulatory Commission. Public comments are now being solicited. The public may submit feedback through the following channels and methods:
1. Log in to the Ministry of Justice of the People’s Republic of China and the China Government Legal Information Website (www.moj.gov.cn, www.chinalaw.gov.cn), and submit your comments by accessing the “Legislative Opinion Solicitation” section in the homepage’s main menu.
2. Email: flbpublic@csrc.gov.cn.
3. Mailing Address: Legal Department, China Securities Regulatory Commission, Fukaic Building, No. 19 Jinan Avenue, Xicheng District, Beijing, Postal Code 100033.
4. Fax: 010-88061401.
The deadline for submitting feedback is April 25, 2021.
China Securities Regulatory Commission
March 26, 2021

The China Securities Regulatory Commission has issued a preliminary notice of administrative regulatory measures to Haitong Securities, Haitong Asset Management, and the relevant persons held accountable.
Recently, the China Securities Regulatory Commission (CSRC) issued pre‑notice letters of administrative regulatory measures to Haitong Securities and Haitong Asset Management for violations including imprudent business practices, inadequate risk control and prevention, and deficiencies in compliance and risk‑management oversight. Specifically, the CSRC proposes to impose the following measures: for Haitong Securities, a 12‑month suspension of its bond investment advisory services to institutional investors, along with an order to increase the frequency of internal compliance inspections and submit corresponding compliance inspection reports; for Haitong Asset Management, a 12‑month suspension of providing investment advisory services for private asset management products to securities and futures operating institutions, together with a six‑month suspension of the registration of new private asset management products; and, for several directly responsible individuals and those bearing managerial accountability, the designation of “inappropriate candidates” for a period of two years.
Upon investigation, it was found that Haitong Securities, Haitong Asset Management, and relevant personnel, in the course of conducting investment advisory and private‑placement asset management activities, failed to adhere to the principle of prudent management, thereby failing to effectively control and mitigate risks and causing significant adverse market impacts. Even after the China Securities Regulatory Commission, in December 2019, guided the Shanghai and Shenzhen Stock Exchanges in issuing the “Notice on Regulating Matters Related to Corporate Bond Issuance,” Haitong Securities and Haitong Asset Management continued to harbor a sense of complacency and persisted in engaging in related violations in other trading markets. Furthermore, these entities did not integrate such business practices into their comprehensive compliance and risk‑control frameworks, leaving gaps in areas such as business segregation, conflict‑of‑interest prevention, and bond‑trading management, thus exposing deficiencies in their overall compliance and risk‑management mechanisms. Based on the facts of the violations and applicable regulations, the CSRC intends to impose the aforementioned regulatory measures on Haitong Securities and Haitong Asset Management and to hold the responsible individuals strictly accountable.
Securities and fund management institutions engage in a wide range of activities, including underwriting and issuance, investment trading, asset management, and investment advisory services, playing a pivotal role in bridging the financing gap between investors and financers, serving the real economy, and promoting high‑quality development of the capital market. As among the most critical professional entities in the capital market, they are expected to remain true to their original mission, deepen their understanding of regulatory requirements, earnestly fulfill their primary responsibilities for compliance and risk control, uphold the baseline of due diligence and conscientious performance, enhance the quality of their professional services, and proactively safeguard market order. However, a small number of institutions and practitioners have weak compliance safeguards, insufficient risk awareness, lax internal controls, and ineffective oversight, thereby violating the principles of prudence and diligence, straying from the core purpose of their business, and engaging in disorderly operations. Such behavior seriously disrupts market order and undermines the industry’s ecosystem. In response, the China Securities Regulatory Commission (CSRC) reafoffices its commitment to fully implementing a “zero‑tolerance” policy, maintaining a stringent stance against illegal and non‑compliant conduct, intensifying enforcement and accountability, and adopting穿透式监管 (penetrative supervision) and end‑to‑end chain‑wide accountability. Emphasis will be placed on inspections and enforcement targeting compliance and risk‑control frameworks as well as corporate governance, with unwavering adherence to the principles of investigating every case, imposing dual penalties where applicable, and ensuring economic sanctions are enforced. This approach seeks to ensure that violators—both institutions and individuals—bear substantial consequences, thereby leveraging rigorous regulation to compel securities and fund management offices to strengthen their compliance and risk‑control awareness and self‑governance capabilities, better serve the real economy, effectively protect investors’ legitimate rights and interests, and contribute to the high‑quality development of the capital market.

Standardizing Share Repurchases by Companies Listed on the New Third Board: The National Equities Exchange and Quotations Company Has Revised Relevant Detailed Rules.
On March 26, in order to improve the share repurchase regime for companies listed on the New Third Board and to standardize their share‑repurchase practices, the National Equities Exchange and Quotations Company issued revised detailed rules governing share repurchases by listed companies.
The newly revised “Detailed Rules for Share Repurchases by Companies Listed on the National Equities Exchange and Quotations System” has strengthened information disclosure requirements, setting forth clearer and more specific obligations regarding disclosures at key junctures of the repurchase process. For example, at the stage of disclosing the repurchase plan, a new requirement has been introduced to disclose the share‑selling activities of key persons subject to inquiries in companies listed on the Select Tier, and the disclosure obligations pertaining to situations where the repurchase may trigger delisting have been explicitly defined. During the implementation phase of the repurchase, the disclosure requirements for announcements adjusting the repurchase price due to equity distribution have also been clarified.
To enhance the reasonableness of repurchase prices, the revised rules have adjusted the upper limit for repurchase prices from 200% of the average closing price over the 60 trading days preceding the resolution to 200% of the average trading price after excluding block trades. The National Equities Exchange and Quotations Company explained that, compared with the average closing price, the average trading price excluding block trades better reflects the fair value of the company’s shares and is more resistant to artificial manipulation, thereby helping to improve the rationality of repurchase pricing and safeguard the rights and interests of listed companies and investors.
To enhance the convenience of the company’s share repurchase operations, the detailed rules no longer impose restrictions on submitting orders during the five minutes preceding the price‑matching phase for repurchases conducted via the call auction method, thereby aligning more closely with the post‑reform regime that has increased the frequency of price‑matching.
The Select Tier of the New Third Board officially commenced trading in July 2020. In response to the restructuring of market tiers, the revised rules have also established a share‑repurchase framework tailored to the Select Tier’s trading mechanisms and tier‑specific characteristics.
Traders Association: Mandatory credit ratings for debt financing instruments have been abolished, and the requirement to mandatorily disclose bond‑specific rating reports at the issuance stage has been lifted.
On March 26, the National Association of Financial Market Institutional Investors of China (hereinafter referred to as the “Association”) issued the “Notice of the National Association of Financial Market Institutional Investors of China on Arrangements for the Abolition of Mandatory Credit Ratings for Debt Financing Instruments” (hereinafter referred to as the “Notice”). The Notice states that, in order to thoroughly implement the spirit of the CPC Central Committee and the State Council’s series of policies on bond market development and to promote the credit rating industry in better serving the high-quality development of the bond market, the Association has convened market participants to study measures to reduce reliance on external credit ratings, formulated a plan to abolish mandatory credit ratings for debt financing instruments, and revised and promulgated relevant business guidelines for short-term financing bills, medium-term notes, and other products.
According to the Notice, at the filing stage, enterprises are not required to submit debt financing instrument credit rating reports or details of follow-up rating arrangements as mandatory components of their application materials. If an enterprise has already obtained the relevant rating report for this debt financing instrument at the time of filing, it shall include such report as part of its submission; if it has not yet obtained the relevant rating report, it shall make a corresponding note in the list of registration documents.
At the issuance stage, the mandatory disclosure requirement for bond‑specific rating reports is being abolished, while the disclosure obligation for corporate‑entity rating reports remains in place. However, if a bond’s repayment priority—both principal and interest—is subordinated to that of general debt and ordinary bonds, potentially resulting in a bond rating lower than the entity’s rating, the issuer must still disclose a bond‑specific rating report.
In cases where rating agencies or other intermediary institutions, as well as relevant handling personnel, are subject to penalties by the competent authorities, such cases shall be handled in accordance with the requirements set forth in Form MQ.7-4 for the Disclosure of Material Matters under the “Formulary System for Registration Documents for the Public Issuance of Debt Financing Instruments by Non-Financial Enterprises.” With respect to credit enhancement institutions, the disclosure requirements related to ratings shall be applied by analogy to those applicable to issuing entities.
This Notice applies to ultra‑short-term financing bills, short‑term financing bills, and medium‑term notes; it does not apply to asset‑backed notes (including asset‑backed commercial paper) or project revenue notes. The information disclosure requirements for credit ratings of debt financing instruments issued by non‑financial entities outside China shall be implemented by analogy. The information disclosure requirements pertaining to the ratings of debt financing instruments issued through private placement remain unchanged.
The Traders Association stated that the Notice shall take effect as of March 29, 2021, and the original “Supplementary Notice on the Issuance of Certain Matters” is hereby repealed.

Commercial & Corporate
Caida Securities’ IPO application has been approved—making it Hebei Province’s first securities office listed on the A-share market.
On March 26, the China Securities Regulatory Commission announced on its official WeChat account that it had recently approved the initial public offering applications of four companies. Among them, Caida Securities successfully obtained approval and will become the 41st listed securities office on the A-share market, as well as Hebei Province’s first publicly listed brokerage. Caida Securities plans to issue no more than 500 million shares, representing 15.41% of its total share capital after the offering. All proceeds from this fundraising will be used to replenish working capital.
Since the beginning of the year, the securities sector has been undergoing a sustained correction, with the securities‑sector index down more than 13%, while the Shanghai Composite Index has fallen by only 1.58%. Meanwhile, the static price‑to‑book ratios of some listed securities offices have retreated to near their bottom ranges. Caida Securities’ IPO application has been approved, making it the first securities office in Hebei Province to complete its public listing. In addition, the office’s state‑owned shareholder background is also worth noting.
According to the prospectus previously disclosed by Caida Securities, the Hebei Provincial State-owned Assets Supervision and Administration Commission indirectly holds 38.35% of Caida Securities’ equity through its controlling shareholder, Tanggang Group; it also holds an additional 16.09% through state‑owned asset management entities, 12.39% via Hebei Port Group, 2.27% through HBIS Holding, and 1.46% through Hebei Construction Investment, among others. In total, the Commission’s indirect holdings amount to 71.86%, making it the de facto controller of Caida Securities.
Public information indicates that Caida Securities formally began preparations for an A-share listing as early as 2016. In September of that year, CITIC Securities submitted the registration materials for Caida Securities’ pre-IPO guidance to the Hebei Securities Regulatory Bureau. Three years later, the company’s IPO application was accepted by the China Securities Regulatory Commission (CSRC). In December 2020, the CSRC approved Caida Securities’ initial public offering application.
During the company’s initial review and inquiry, the Issuance Review Committee focused on issues such as defaults in asset management business, a large outstanding balance of equity pledge repurchase transactions, volatility in performance during the reporting period, and a high proportion of brokerage revenue concentrated in specific geographic regions. The Committee noted that Caida Securities’ brokerage clients are predominantly individual investors, with net commission rates exceeding the industry average, yet the net commission rate for its brokerage business has shown a year‑over‑year downward trend over the reporting period. In response, the Committee requested an explanation of the reasons behind and the reasonableness of Caida Securities’ significantly higher net commission rate compared to the market average for the same period, as well as an assessment of whether its high regional concentration could have a material adverse impact on its ability to continue operating.
2020 was a banner year for securities offices. According to operating data for 2020 previously disclosed by the Securities Association, the industry posted total operating revenue of RMB 448.479 billion, up 24.41% year over year, and net profit of RMB 157.534 billion, up 27.98% year over year. However, Caida Securities saw a decline in its first-half 2020 profitability. From January to June 2020, the company reported operating revenue of RMB 1.056 billion, up 7.63% year over year, but net profit fell to RMB 209 million, down 46.00% compared with the same period last year. Non‑GAAP net profit stood at RMB 218 million, a 43.98% drop from the prior-year level. The reasons behind this underperformance during the reporting period have drawn close regulatory scrutiny. Caida Securities explained that, following the market downturn in 2018, the market rally in the first half of 2019 led to a rebound in the value of collateral held in its credit business. At the same time, some clients who had previously set aside impairment provisions for stock‑pledge financing provided additional collateral, prompting the reversal of those provisions originally recorded at year‑end 2018. After stripping out these factors, Caida Securities’ net profit is expected to increase by 15.09% year over year, while non‑GAAP net profit is projected to rise by 18.62%, primarily driven by a substantial year‑over‑year uptick in equity‑market trading volume.
In addition, Caida Securities stated that, this year, defaults occurred among certain clients with stock‑pledge financing due to their own circumstances compounded by the COVID‑19 pandemic, leading to a decline in the value of collateral. As a result, the company anticipates higher losses, which contributed to a substantial increase in credit impairment charges in the first half of 2020 and exerted a negative impact on its financial performance. During the first half of 2020, Caida Securities recorded credit impairment losses totaling RMB 265 million, including RMB 260 million in impairment losses on purchased‑for‑resale financial assets, primarily stemming from significant declines in the market prices of securities pledged as collateral by some of the company’s stock‑pledge repurchase clients. However, according to the prospectus, Caida Securities has been steadily reducing its overall pledge exposure, tightening credit limits for stock‑pledge transactions, and rigorously vetting new pledge projects to mitigate risks at the source. The company has also appropriately lowered pledge interest rates to further reduce the likelihood of defaults.
It is also worth noting that Caida Securities’ branches are predominantly concentrated in Hebei Province, and its brokerage business remains the primary source of revenue. From 2017 to 2019, and for the first six months of 2020, the securities brokerage segment generated revenues of RMB 782.73 million, RMB 555.38 million, RMB 671.52 million, and RMB 397.17 million, accounting for 53.27%, 38.02%, 37.03%, and 37.59% of total operating income, respectively. The company anticipates that, over the foreseeable future, securities brokerage will continue to be its principal revenue driver—this point is explicitly disclosed in the office’s risk‑warning section.

Zhihu closed down 11% on its first day of trading, below its IPO price.
On March 26, Eastern Time, Chinese online Q&A platform Zhihu officially listed on the New York Stock Exchange under the ticker symbol “ZH.” The IPO price was set at $9.50 per ADS, raising a total of $850 million after full exercise of the overallotment option. Following the opening bell, Zhihu’s shares plunged more than 20%, closing down 11.16% at $8.44, with a market capitalization of $4.718 billion.
At the IPO listing ceremony on Zhihu, founder, chairman, and CEO Zhou Yuan delivered a speech, stating that Zhihu began as a Q&A platform but has since evolved beyond it. The company will anchor itself in “serving creators,” refining its internal services while expanding outward to break new ground. Zhou Yuan also announced that the company will allocate a portion of its equity to share with the outstanding creators who have grown alongside Zhihu.
In 2010, Zhou Yuan founded Zhihu, China’s first knowledge‑based community. The platform primarily employs a content‑centric, diversified monetization strategy, with online advertising, paid memberships, commercial content solutions, and additional services such as online education and e‑commerce serving as its main revenue streams.
In 2011, Zhihu secured an angel-round investment from Innovation Works, followed by early-stage funding from institutions such as Qiming Venture Partners and SAIF Partners, as well as from individual investors including Xu Xiaoping and Cai Wensheng. In August 2019, Zhihu closed its final pre-IPO financing round, raising a total of US$434 million. The round was led by Kuaishou, with Baidu as a follow-on investor, while Tencent and Today Capital—existing investors—also participated. Following this largest-ever funding round since the company’s inception, Zhihu’s valuation reached US$3.5 billion.
On March 6, 2021, Zhihu filed an IPO (initial public offering) application with the U.S. Securities and Exchange Commission (SEC), seeking to raise approximately $1 billion and planning to list on the New York Stock Exchange. Credit Suisse, Goldman Sachs, and JPMorgan Chase are serving as underwriters. Wang Hua, founder and managing partner of Innovation Works, stated that the office’s earliest investment in Zhihu delivered a return of roughly 600 times, and that Innovation Works has steadily increased its stake from the seed round through Series D, making five consecutive investments in Zhihu and achieving an overall return of several dozen times.
In terms of shareholding structure, Zhihu founder Zhou Yuan holds approximately 8.2% of the shares and wields 46.6% of the voting rights. Among institutional investors, Innovation Works holds 13.1%, Tencent holds 12.3%, Qiming Venture Partners holds 11.3%, Kuaishou holds 8.3%, and Today Capital (BVI) holds 6.8%.
Profitability and monetization have long been intractable challenges for Zhihu. Starting in 2016, the platform began offering online advertising; in 2018, it launched paid content; in the third quarter of 2019, it introduced a paid membership model; and by the second half of 2020, its commercial content‑solution offerings had entered large‑scale operation. According to its prospectus, in 2019, Zhihu reported revenue of RMB 671 million but a loss of RMB 1 billion. In 2020, revenue climbed to RMB 1.352 billion, with a net loss of RMB 518 million, bringing cumulative losses over the two years to more than RMB 1.5 billion. To address these profitability hurdles, Zhihu embarked on an intensive overhaul of its business portfolio and pursued various monetization initiatives from 2018 through 2019. In June 2018, it added a “Video” community, and in March 2019, it revamped the “Video Answer” entry point while internally testing a short‑video product called “Jiying,” which ultimately failed. In October 2019, Zhihu rolled out a live‑streaming feature, and by year’s end, it launched a “Red Packet Party”–style interface inspired by Douyin and Pinduoduo, leveraging red‑packet sharing to attract new users.
By 2020, Zhihu’s key monetization businesses—online advertising, paid memberships, commercial content solutions, and other services (including online education and e‑commerce)—had largely taken shape, accounting for 62.4%, 23.7%, 10%, and 3.9% of total revenue, respectively. Among these, online advertising generated RMB 843 million, up 46% year over year, while paid membership revenue reached RMB 320 million, a 264% increase compared with the previous year. The robust growth of the paid membership segment helped to somewhat alleviate the reliance on a single advertising‑driven business model. Years of losses and slow progress in commercialization have been major factors behind Zhihu’s continued lack of recognition from the capital markets. As of yesterday’s close, Zhihu’s market capitalization on the U.S. stock market stood at $4.718 billion—roughly one-seventh of Bilibili’s $34.202 billion and one-thirty-third of Kuaishou’s HK$1.16 trillion.
The prospectus reveals that Zhihu plans to further unlock the commercial potential of its business by expanding innovative content‑driven commerce solutions and online advertising services to meet the evolving needs of merchants and brands. It also intends to increase the monetization rate among its user base by offering a broader array of high‑quality, paid content.

Guangzhou has released the first batch of centrally allocated land parcels: 48 plots have been listed, with a total value exceeding RMB 90 billion.
On March 26, the Guangzhou Municipal Bureau of Planning and Natural Resources issued a public notice announcing the online listing for the transfer of state-owned land-use rights for 48 parcels, with a total listed price exceeding RMB 90 billion. The designated land uses include Class I and Class II residential plots as well as commercial land, among others. Bidding applications for these parcels are now open, with a deadline of April 21 and the auction scheduled to commence on April 26.
In Guangzhou’s first-ever centralized land auction, the total floor area offered reached 60% of last year’s level, underscoring a highly robust supply. Against the backdrop of multiple cities conducting centralized land auctions, competition now extends beyond property developers to encompass the cities themselves that are participating in these rounds.
According to the announcement, this round of land supply will be concentrated in eight districts, including Zengcheng, Baiyun, Panyu, and Huangpu, while no land will be offered in Yuexiu, Tianhe, or Haizhu. Among them, Zengcheng District has listed 18 parcels, covering multiple towns and subdistricts such as Xintang, Yongning, and Zhucun, with a total listed price exceeding RMB 26 billion; Huadu District has put up four parcels, including the “North Station East Square” site, with a combined listed price of over RMB 14.7 billion; Conghua District has listed four parcels, including one located north of Taiping Station on Metro Line 14, totaling more than RMB 2.3 billion; and Nansha District has listed five plots, with a combined listed price surpassing RMB 7.8 billion.
In Liwan District, only one Class II residential land parcel—known as the Xingda Plot—located at the Guangzhou–Foshan border was put up for sale. Originally listed in 2019, the auction was subsequently canceled for unspecified reasons. Following adjustments, the Xingda Plot’s gross floor area has increased by nearly 30,000 square meters, and its starting price has risen from RMB 1.878 billion to RMB 2.02 billion. In Huangpu District, which has attracted significant attention from first-time homebuyers, three parcels were offered this time, with a combined listing price approaching RMB 4 billion. Two of these parcels, located in the Sino‑Singapore Knowledge City, are designated as Class I residential land—primarily low‑rise housing, featuring low building density, high green coverage, and a pleasant environment. Baiyun District put eight parcels up for sale, with a total listing value exceeding RMB 18 billion. Among them, the Yongtai Bus Station site carries a starting price of RMB 27,200 per square meter, making it the highest‑priced parcel in this round. Panyu District offered five parcels, totaling a gross floor area of 1.48 million square meters and a combined listing price surpassing RMB 14 billion. Notably, the South Railway Station TOD project site boasts the largest gross floor area among all parcels on offer, at 917,000 square meters, with a starting price exceeding RMB 7 billion.
Since late February, the new policy on centralized land supply in 22 cities has drawn widespread attention. To date, numerous cities—including Guangzhou, Qingdao, Tianjin, Zhengzhou, Jinan, and Ningbo—have responded positively. On March 15, Changchun even listed its first batch of 51 parcels for centralized auction, becoming the first city to implement the new measures. The “centralized land supply” policy primarily entails “two concentrations”: the centralized release of land‑sale announcements and the centralized organization of auction events. Additionally, in 2021, the number of residential‑land sale announcements may not exceed three.
The policy of centralized land supply will, to a certain extent, curb the rise in land and housing prices, while joint land‑acquisition strategies are likely to gain further traction. At the same time, centralized land auctions will generate substantial concentrated funding needs, posing greater challenges in cash‑management for developers that have strategically positioned themselves in cities subject to regulatory controls, as well as for those with high leverage and fast‑turnover business models. Mid‑ to large‑sized developers with deep regional roots will enjoy advantages in capital management and investment‑development analysis, whereas smaller offices may find themselves at a competitive disadvantage. Under the impact of the new centralized land‑supply regime in 22 cities, developers are expected to increasingly favor joint land acquisitions, making the “group‑bidding” phenomenon even more pronounced.

Philips sells its home appliances business; Hillhouse Capital acquires it for €4.4 billion.
On March 25, Royal Philips (NYSE: PHG; AEX: PHIA) announced that it has signed an agreement to sell its Consumer Lifestyle business to Hillhouse Capital for approximately €3.7 billion.
Public records show that Philips Household Appliances is headquartered in the Netherlands and holds a global leadership position in kitchen, coffee, garment care, and home care appliances. The company employs more than 7,000 people worldwide and conducts innovation, manufacturing, and commercial operations in over 100 countries. Its product portfolio includes fully automatic espresso machines, air purifiers, vacuum cleaners, and more. In 2020, sales from these business segments totaled €2.2 billion.
This transaction values Philips’ home appliances business at approximately €3.7 billion. Upon completion, after accounting for taxes and transaction-related costs, Philips expects to realize cash proceeds of around €3 billion.
In addition, Philips will enter into an exclusive global brand licensing agreement with the home appliance business, granting it permission to continue using the Philips brand and certain branded home appliance products for manufacturing, brand marketing, and sales worldwide. The license term is 15 years, with the possibility of extension under specified conditions. The estimated net present value of this brand licensing arrangement is approximately €700 million; when included in the total transaction value, the overall figure amounts to roughly €4.4 billion, equivalent to nearly RMB 34 billion.
Regarding the decision to sell this core business as a whole, Philips Global CEO Frans van Houten stated: “I am delighted that Philips has entered into a partnership with Hillhouse Capital to further strengthen our market leadership in the home appliances business, build a powerful brand, and expand innovative distribution channels. Upon completion of this transaction, Philips will focus on expanding our leadership in health technology and accelerating our transformation into a health services company, delivering professional healthcare solutions to our customers.”
As a leading player in Asia’s private equity and venture capital sectors, this acquisition of Philips Home Appliances will mark another multi-billion‑dollar M&A deal for Hillhouse Capital, following its previous investments in Belle International, Prologis, and Gree Electric. In response, Hillhouse founder Zhang Lei stated: “We look forward to partnering with Philips to expand into new markets and identify additional growth opportunities worldwide. Our mission aligns with Philips’: to deliver high‑quality products and a healthy, fulfilling life to consumers around the globe.”
Henk de Jong, CEO of Philips Consumer Electronics, stated: “I am confident that, leveraging Hillhouse’s deep expertise and proven track record in e‑commerce, supply chain management, and digital transformation, we will continue to deliver meaningful innovations that enhance consumers’ home lives. Building on Philips’ market‑leading product portfolio, broad consumer base, and robust R&D capabilities, we aim to help consumers lead healthier, happier lives. We look forward to partnering with Hillhouse to explore additional growth opportunities in the years ahead.”
According to reports, the transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close by the end of the third quarter of 2021.

Taxation TAXATATION
The General Office of the CPC Central Committee and the General Office of the State Council have issued the “Opinions on Further Deepening the Reform of Tax Collection and Administration.”
Recently, the General Office of the CPC Central Committee and the General Office of the State Council issued the “Opinions on Further Deepening Tax Collection and Administration Reform” and circulated a notice requiring all regions and departments to conscientiously implement these measures in light of their specific circumstances.
The full text of the “Opinions on Further Deepening Tax Collection and Administration Reform” is as follows:
In recent years, China has continuously deepened its tax system reform, steadily optimized its tax collection and administration framework, and consistently enhanced the standardization, convenience, and precision of taxpayer services and tax enforcement. To further advance the “delegation, regulation, and service” reform in the tax sector, improve the tax supervision system, foster a market‑oriented, law‑based, and internationally competitive business environment, and better support the development of market entities, the following opinions are hereby put forward to further deepen tax collection and administration reform.
I. General Requirements
(1) Guiding Principles. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, we will comprehensively implement the spirit of the 19th National Congress of the Communist Party of China and the Second, Third, Fourth, and Fifth Plenary Sessions of the 19th CPC Central Committee. Focusing on grasping the new stage of development, applying the new development philosophy, and establishing the new development pattern, we will deepen reform of the tax collection and administration system. We will strive to build a smart tax system that is highly integrated, secure, and efficient, centered on serving taxpayers and payers, driven by invoice digitalization, and powered by tax-related big data. We will advance precise law enforcement, meticulous services, targeted regulation, and sincere collaborative governance, substantially enhance tax compliance and public satisfaction, significantly reduce compliance costs for both tax authorities and taxpayers, and fully leverage the foundational, pivotal, and safeguarding roles of taxation in national governance, thereby providing strong support for promoting high-quality development.
(II) Principles of Work. Uphold the Party’s overall leadership to ensure that the decisions and arrangements of the CPC Central Committee and the State Council are implemented fully and effectively; adhere to tax administration in accordance with the law, skillfully applying rule-of-law thinking and approaches to deepen reform, continuously optimize tax enforcement methods, and strive to elevate the level of tax governance under the rule of law; put the people first and make tax services more convenient, further improving measures that benefit businesses and facilitate taxpayers to better meet their legitimate needs; adopt a problem‑oriented approach, focus on addressing weaknesses and strengthening weak links, and effectively resolve prominent issues in tax collection and administration; pursue reform and innovation, deepen the “delegation, regulation, and service” reform in the tax sector, and promote all‑round transformations in the concepts, methods, and tools of tax enforcement, service, and supervision; and embrace a systems‑thinking perspective, coordinate and advance various reform initiatives, and comprehensively and integratively enhance the effectiveness of tax governance.
(III) Main Objectives. By 2022, significant progress will have been made in standardizing tax enforcement, enhancing the convenience of tax and fee services, and improving the precision of tax supervision. By 2023, a new tax enforcement system—characterized by “no interference without risk, accountability for violations, and robust intelligent control throughout the process”—will be essentially in place, marking a shift from experience‑based enforcement to science‑based, precise enforcement. A new tax and fee service system—featuring “comprehensive offline coverage, round‑the‑clock online services, and widely accessible customized offerings”—will also be largely established, transitioning from one‑size‑fits‑all services to refined, intelligent, and personalized support. Furthermore, a new tax supervision framework—built on the twin pillars of “double random inspections with public disclosure” and “Internet plus supervision,” supplemented by targeted oversight and underpinned by “credit‑plus‑risk” management—will be put in place, enabling a transition from tax administration based on invoices to data‑driven, category‑specific, and highly precise regulation. By 2025, substantial results will have been achieved in deepening reforms of the tax collection and administration system; a powerful smart tax system will be essentially in place, featuring a world‑class, intelligent administrative application platform, thereby comprehensively enhancing capabilities in tax enforcement, service delivery, and regulatory oversight.
II. Fully advance the digital upgrading and intelligent transformation of tax collection and administration.
(4) Accelerate the development of smart taxation. Fully leverage modern information technologies such as big data, cloud computing, artificial intelligence, and mobile internet to promote the seamless aggregation and interconnection of internal and external tax-related data, and to integrate online and offline processes. This will drive innovation in tax enforcement, service delivery, and regulatory frameworks, as well as transform business operations, further optimizing organizational structures and resource allocation. By 2022, intelligent consolidation of corporate tax and fee information on a “one‑entity” basis and individual tax and fee information on a “one‑person” basis will be largely achieved; by 2023, intelligent consolidation of tax authority information on a “one‑agency” basis and tax personnel information on a “one‑staff” basis will be largely realized. Furthermore, we will deepen automated analysis and management of taxpayer and payer behavior, implement end-to-end self‑controlled performance assessment and evaluation of tax officials’ duty fulfillment, and enable autonomous classification and targeted dissemination of tax‑related decision‑making information and tasks. By 2025, tax enforcement, services, regulation, and big‑data‑driven intelligent applications will be deeply integrated, efficiently coordinated, and comprehensively upgraded.
(5) Steadily implement the reform to digitize invoices. In 2021, a nationwide unified electronic invoice service platform was established, providing taxpayers with 24/7 free online services for applying for, issuing, delivering, and verifying electronic invoices. National standards for electronic invoices have been formulated and promulgated, and the digitalization of invoices in sectors such as railways and civil aviation is being advanced in an orderly manner. By 2025, full‑scale, end‑to‑end, and comprehensive digitization of invoices across all sectors is expected to be largely achieved, thereby helping to reduce institutional transaction costs.
(6) Deepen the sharing and application of tax‑related big data. Explore the use of blockchain technology in areas such as social insurance premium collection, real estate transactions, and real property registration, and continue to expand its applications in promoting information sharing on tax‑related matters. Continuously improve the tax‑related big data cloud platform, strengthen the development and utilization of data resources, and steadily advance the interconnection and interoperability with national and relevant departmental information systems. By 2025, establish a regularized and institutionalized mechanism for data‑sharing coordination between the tax authorities and related departments, ensuring lawful access to necessary tax‑ and fee‑related information; refine the mechanisms for externally providing tax‑ and fee‑related information; and build a comprehensive tax‑related big data infrastructure characterized by large scale, diverse types, high value, and fine granularity, thereby effectively harnessing the driving force of data as a key production factor. Enhance the governance framework and management systems for tax‑related big data security, bolster the construction of a security situational awareness platform, conduct routine data‑security risk assessments and inspections, and improve monitoring, early‑warning, and emergency response mechanisms to ensure data security throughout its entire lifecycle. Strengthen intelligent analysis of tax‑related big data and continuously deepen its applications in areas such as economic‑performance assessment and social governance.
III. Continuously Improving the Tax Enforcement System and Mechanisms
(7) Improve the legal and regulatory framework for taxes and fees. Fully implement the principle of tax legality and accelerate efforts to elevate existing interim tax regulations into law. Refine the modern tax system, enhance the effectiveness of taxation, and promote the establishment of a modern fiscal and taxation regime. Advance the revision of laws, regulations, and rules, including the Law on the Administration of Tax Collection, the Anti-Money Laundering Law, and the Measures for the Administration of Invoices. Strengthen the institutionalization of non‑tax revenue management.
(8) Strictly standardize tax enforcement practices. Adhere to the lawful and regulatory collection of taxes and fees, ensuring that all due revenues are collected in full. At the same time, resolutely prevent shortcomings in the implementation of tax and fee preferential policies, the imposition of excessive or undue taxes and fees, and inappropriate administrative interference in tax administration. Fully implement systems for publicizing administrative enforcement, recording the entire enforcement process, and conducting legal reviews of major enforcement decisions; promote online entry of enforcement information, online processing of enforcement procedures, online oversight of enforcement activities, and online access to enforcement outcomes. By 2023, a smart quality‑control system for tax enforcement will be essentially in place. Continuously refine work standards related to tax enforcement and tax‑fee services, and further improve the system of discretionary benchmarks for administrative penalties.
(9) Continuously enhance the precision of tax enforcement. Innovate administrative enforcement methods, making effective use of non‑coercive approaches such as persuasion and education, and cautionary interviews, to ensure that enforcement is both office and humane, balancing strictness with leniency and integrating law with reason. Resolutely prevent crude, selective, or one‑size‑fits‑all enforcement practices. Accurately delineate the boundary between ordinary tax violations and tax‑related crimes, ensuring that cases are handled in accordance with the law and penalties are commensurate with the offenses. Study and promote a “first‑time violation, no penalty” list system in the field of tax enforcement. Adhering to the principles of inclusiveness and prudence, actively support the sound development of new industries, business forms, and models, and refine tax enforcement by addressing specific issues, thereby fostering lawful tax compliance and fair competition.
(10) Strengthen regional coordination in tax enforcement. Promote the harmonization of tax enforcement standards across regions, facilitate the mutual sharing of enforcement information and the mutual recognition of enforcement outcomes, and better support the national strategy for balanced regional development. Streamline procedures for enterprises to transfer tax‑related and fee‑related matters across provinces, and by 2022, essentially achieve mutual recognition of qualifications across jurisdictions. Continuously expand the scope of nationwide one‑stop services for tax‑ and fee‑related matters for enterprises operating across provinces, with the goal of achieving full nationwide coverage by 2025.
(11) Strengthen internal controls and oversight of tax enforcement. By 2022, a comprehensive, end-to-end, and organization-wide information-based internal control and oversight system for tax enforcement risks had been essentially established, embedding risk-prevention measures into information systems to enable proactive early warning, real-time intervention, and post‑event accountability. Enhanced internal and external audit oversight, along with the “dual investigation” mechanism for major tax-related violations, has further refined the routine, precise, and institutionalized supervision of tax enforcement activities.
IV. Vigorously Promote High-Quality, Efficient, and Intelligent Tax and Fee Services
(12) Ensure that tax and fee preferential policies are delivered promptly and enjoyed without delay. In 2021, the issuance and interpretation of tax administration procedures and preferential policies were synchronized, enhancing the timeliness, certainty, and consistency of policy implementation. Further streamline the application processes and formalities for accessing these benefits, and continue to expand the scope of “self-assessment, self-declaration, and post‑event supervision,” thereby ensuring convenient access, swift enjoyment, and effective oversight. By 2022, leverage big data in accordance with the law to deliver targeted information on preferential policies, enabling market entities to fully benefit from policy incentives.
(13) Effectively reduce the burden of tax administration and payment. Actively collect data through information systems, strengthen inter‑departmental data sharing, and strive to minimize redundant reporting by taxpayers and payers. Fully implement the system of notification and commitment for tax‑related certification matters, expand the scope of services that can be processed with missing documents, and continue to broaden the range of tax‑related materials that are shifted from pre‑submission to retention for record‑keeping purposes.
(14) Comprehensively improve tax administration and payment methods. By 2021, online processing of corporate tax and fee matters will be largely in place, and mobile access to personal tax and fee services will be available. By 2022, a nationally unified and standardized electronic tax bureau will be established, continuously expanding “non-contact” and “face-to-face‑free” tax filing and payment services. The traditional form‑based declaration model will be gradually phased out; by 2023, information systems will largely automate data extraction, tax calculation, and pre‑filled declarations, enabling taxpayers and payers to submit their returns online after conofficeation or correction.
(15) Continuously reduce the number and time required for tax and fee payments. Implement the Regulations on Optimizing the Business Environment, benchmark against international best practices, and vigorously promote integrated filing for taxes and fees. In accordance with the law, streamline the filing periods for certain tax types to cut down on the number of filings and the time needed. Expand inter‑agency data sharing, accelerate processing of all stages of export tax rebates, and by 2022, reduce the average processing time for normal export tax rebates to within six working days; further shorten processing times for enterprises with high credit ratings.
(16) Actively promote intelligent, personalized services. Comprehensively upgrade and enhance the 12366 tax and fee service platform, accelerating its transition to a model centered on 24-hour intelligent consultation, with the goal of achieving nationwide “one‑stop, first‑line response” for inquiries by 2022. Leverage tax‑related big data and intelligent analytics to identify taxpayers’ and payers’ actual experiences and individualized needs, thereby delivering tailored online services. Continuously optimize in‑person services to better meet the needs of special groups and specific types of matters.
(17) Safeguard the legitimate rights and interests of taxpayers and payers. Improve mechanisms for protecting the rights and remedies of taxpayers and payers and for resolving tax and fee disputes, ensuring smooth channels for the effective collection of grievances, prompt responses, and timely feedback. Explore the implementation of advance pricing rulings for large enterprises and establish a sound institutional framework to support such measures. Enhance systems for the protection of personal information of taxpayers and payers, strengthen, in accordance with the law, the management of access to tax and fee data and the maintenance of audit trails, and strictly protect the commercial secrets and personal privacy of taxpayers, payers, and withholding agents, while rigorously preventing the leakage or misuse of personal information. Where tax authorities or tax personnel violate relevant laws and regulations and cause significant losses due to inadequate oversight, they shall be held strictly accountable in accordance with the law.
V. Implement Tax Supervision with Precision
(18) Establish and improve a new regulatory mechanism based on “credit + risk.” Refine systems for rewarding good faith and sanctioning breaches of trust, fully leveraging the foundational role of tax compliance credit within the broader social credit system. Develop a sound tax and fee‑payment credit evaluation framework, granting greater facilitation to market entities with high tax‑and‑fee‑compliance scores. Building on the comprehensive implementation of the real‑name registration system for tax and fee administration, introduce dynamic credit‑rating classification for taxpayers and fee payers, coupled with intelligent risk‑based supervision—ensuring that tax evasion is prevented to the highest standard while minimizing disruption to enterprises’ normal production and operations. Further refine the individual‑tax and fee‑service and regulatory system, centered on “data integration + high‑quality services + timely reminders and error correction + lawful enforcement.” Strengthen, in accordance with the law, tax and fee services and oversight for high‑income, high‑net‑worth individuals.
(19) Strengthen risk prevention and regulatory oversight in key areas. For industries, regions, and population groups where tax evasion is particularly prevalent, appropriately increase the proportion of “double-random, one-public” inspections based on tax‑risk assessments. With respect to tax‑evasion practices such as concealing income, falsely inflating costs, shifting profits, and exploiting tax havens, yin‑yang contracts, and related-party transactions, enhance preventive institutional frameworks and intensify law‑based prevention, supervision, and inspection efforts.
(20) Severely crack down on tax-related illegal and criminal activities in accordance with the law. Fully leverage the power of tax‑related big data, relying on the tax authority’s trusted digital identity system to conduct real-time verification and monitoring across all stages of invoice issuance and use, thereby shifting the response to such offenses—from post‑event prosecution to proactive, in‑process prevention. Strengthen the enforcement and investigation framework, making full use of the national “Internet Plus Supervision” system’s capabilities for aggregating diverse data sets, to precisely and effectively combat fraudulent invoicing by “fake enterprises,” tax rebate fraud through “fake exports,” and tax‑and‑fee benefit fraud via “false declarations,” thus safeguarding national tax revenue security. For major tax‑related illegal and criminal cases, impose strict legal penalties, publicly disclose the findings, and, in accordance with relevant regulations, record the violations in the credit histories of both enterprises and individuals, sharing this information with the National Credit Information Platform.
VI. Continuously Deepen and Expand the Collaborative Governance Framework for Taxation
(21) Strengthen inter‑departmental collaboration. Vigorously advance the digitalization of accounting and financial management by integrating electronic invoices with fiscal payment systems, financial payment platforms, various institutional accounting systems, and electronic archive management information systems, thereby accelerating the paperless processing of electronic invoice reimbursement, recording, archiving, and storage. Continuously deepen “bank‑tax cooperation” to help address the challenges of difficult and costly financing faced by small and micro enterprises. Enhance intelligence sharing, information reporting, and coordinated law enforcement, and actively promote cross‑departmental collaborative regulatory efforts.
(22) Strengthen social collaboration. Actively leverage the roles of industry associations and social intermediary organizations, support third parties in providing taxpayers with personalized services on a market‑based basis, and enhance professional and sectoral oversight of tax‑related intermediary entities. Vigorously promote public awareness of tax and fee laws and regulations, continuously deepen tax‑law education for young people, and harness the preventive and guiding functions of tax‑law publicity and education, thereby fostering a strong societal culture of honest tax compliance.
(23) Strengthen judicial safeguards for taxation. Public security organs shall reinforce their capacity to investigate and prosecute tax-related criminal cases and further refine and institutionalize the mechanism for stationing public security officers at tax authorities. Implement a system of institutionalized, information‑based, and routine joint case handling between police and tax authorities, and further streamline the mechanisms for seamless coordination between administrative enforcement and criminal prosecution. When the procuratorial organs discover that administrative agencies with responsibilities for tax supervision fail to perform their duties in accordance with the law, they shall, in accordance with the law, issue prosecutorial recommendations. Improve tax‑related judicial interpretations to clarify standards for judicial adjudication.
(24) Strengthen international tax cooperation. Deeply engage in the formulation of international tax rules and standards in areas such as the digital economy, and continue to advance the development of the global tax governance system. Implement the Action Plan to Prevent Base Erosion and Profit Shifting, vigorously combat international tax avoidance, safeguard the legitimate rights and interests of foreign-invested enterprises, and protect China’s tax interests. Continuously improve the Belt and Road Tax Administration Cooperation Mechanism, and support developing countries in enhancing their tax administration capacity. Further expand and refine the network of tax treaties, intensify consultations on cross-border tax disputes, and effectively implement bilateral agreements for the avoidance of double taxation on income, thereby providing robust support for attracting high‑quality investment and promoting high‑level outbound investment.
VII. Strengthening Tax Administration Support and Assurance
(25) Optimize tax administration responsibilities and resource allocation. Strengthen the duties of municipal and county tax authorities in routine services, handling tax‑related matters and fee‑related issues, and managing risks, while appropriately transferring to higher levels those functions that are of a more overarching or complex nature. Continuously streamline business processes, clearly delineate functional boundaries, scientifically define job responsibilities, and establish a robust closed‑loop management system. Increase the reallocation of human resources toward risk management, tax and fee analysis, and big data applications, and bolster the capacity of tax inspection and enforcement.
(26) Strengthen capacity building in tax collection and administration. Uphold higher standards and stricter requirements, focus on developing a high-caliber tax enforcement team that combines integrity with competence, and intensify efforts to cultivate leading tax professionals as well as core personnel at all levels. Promote the high-quality development and application of the “Learning to Enhance Taxation” platform, fostering the integration of learning into daily work and turning work into a form of learning.
(27) Enhance and refine performance appraisal. Building on the comprehensive recording and digital, intelligent aggregation of tax enforcement, tax and fee services, and tax supervision activities, we will integrate performance management into business processes, align it with job‑responsibility frameworks, and embed it within information systems. We will implement automated appraisal for tax enforcement and other functions, making legal literacy and compliance with statutory duties key components of cadre assessment and evaluation, thereby continuously improving the quality and effectiveness of our work.
VIII. Diligently ensure thorough implementation
(28) Strengthen organizational leadership. All regions and relevant departments must enhance their “four consciousnesses,” officely uphold the “four confidences,” and ensure the “two safeguards,” earnestly fulfill their responsibilities, and coordinate closely to ensure that all tasks are effectively implemented and yield tangible results. The State Taxation Administration shall take the lead in organizing and implementing these measures, proactively study and resolve major issues arising in the course of work, strengthen coordination and communication, and ensure thorough implementation. Local Party committees and governments at all levels shall, in accordance with the requirements of the tax system’s dual‑leadership management structure, provide support in areas such as law‑based and regulation‑compliant tax and fee collection, the effective implementation of tax and fee reductions, the promotion of collaborative tax governance, the reinforcement of judicial safeguards, the deepening of information sharing, the enhancement of tax‑law publicity, and the strengthening of financial resource guarantees.
(29) Strengthen monitoring and performance evaluation. Deeply implement the “positive–negative feedback” system in the tax administration sector, conduct timely supervisory inspections and evaluations, summarize lessons learned, reduce the burden on the grassroots level, and promote the continuous optimization of enforcement practices and the sustained improvement of tax collection and administration efficiency.
(30) Strengthen publicity and guidance. The State Taxation Administration shall, in coordination with relevant departments, earnestly carry out publicity efforts, accurately interpret policies and measures that facilitate businesses and the public, promptly address public concerns, appropriately shape social expectations, and foster a positive public opinion environment.

The additional deduction rate for R&D expenses of manufacturing enterprises has been increased to 100%.
At its executive meeting held on March 24, the State Council decided that, effective January 1 of this year, the additional deduction rate for R&D expenses incurred by manufacturing enterprises will be increased from 75% to 100%. Implementation of this policy is expected to generate an additional tax reduction of 80 billion yuan for businesses this year, building on last year’s tax cuts totaling over 360 billion yuan. This institutional measure has become the most substantial component of this year’s structural tax‑reduction package.
According to industry insiders, the additional deduction is a tax‑base‑based preferential treatment under corporate income tax. Typically, it involves adding a certain percentage to the actual amount of expenses incurred, as prescribed by tax law, and using this increased amount as a deductible expense when calculating taxable income. This reduces the current‑period tax base for corporate income tax, thereby lowering the corporation’s payable tax liability.
In recent years, the number of market entities benefiting from this preferential policy has continued to grow, and the policy has been steadily expanded and refined, encouraging enterprises to increase R&D investment and promoting the optimization of the economic structure. A set of data underscores these achievements: the number of enterprises nationwide eligible for the R&D expense super‑deduction policy rose from 53,000 in 2015 to 339,000 in 2019, a 5.4‑fold increase over five years; the amount of tax reductions and exemptions climbed from RMB 72.6 billion to RMB 355.2 billion, reaching RMB 360 billion in 2020, with an average annual growth rate of 37.8%.
For manufacturing enterprises, this year’s policy incentives have been further strengthened: the additional deduction rate for R&D expenses has been raised from 75% to 100%. This means that for every RMB 1 million invested in R&D, a company can deduct RMB 2 million from its taxable income. In Shandong Province, in 2020, enterprises across the province benefited from R&D expense additional deductions totaling RMB 90 billion. According to estimates by the Shandong Provincial Tax Service of the State Taxation Administration, following the increase in the deduction rate, the total amount of this preferential treatment is expected to reach approximately RMB 128 billion this year.
Under the current policy implementation, the additional deduction for R&D expenses is a preferential measure that can only be claimed during the annual corporate income tax final settlement in the following year, resulting in a time lag before enterprises can benefit from this policy. To enable enterprises to reap the benefits sooner, the meeting decided to reform the accounting and settlement procedures for the R&D expense additional deduction, allowing companies to opt to claim the additional deduction on a semi‑annual basis. Accordingly, R&D expenses incurred in the first half of the year will no longer be deductible only at the time of the next year’s annual corporate income tax final settlement; instead, they may be deducted when paying the October interim installment for the current year.
The State Council Executive Meeting called for strengthening policy communication and interpretation, optimizing tax administration services, streamlining review procedures, and enhancing the convenience with which enterprises can access these policies, ensuring that good initiatives are implemented effectively. In response, the tax authorities have already taken action. In Guangdong, tax policy guidelines for R&D expenses in ten key sectors have been released. By mapping out business matters, clarifying the policy basis, establishing operational standards, and standardizing workflows, targeted tax policy guidance has been rolled out, focusing on areas such as next-generation information technology and high-end equipment manufacturing.
Meanwhile, the tax authorities are also working to enhance the precision of policy implementation by establishing a tagging system for tax and fee preferential policies. Leveraging big data on cloud platforms, they proactively identify eligible entities and further ensure that policy measures are delivered directly and accurately to businesses.

Announcement of the Ministry of Finance and the State Taxation Administration on the Extension of Certain Tax and Fee Preferential Policies in Response to the Epidemic
Announcement No. 7 of 2021 by the Ministry of Finance and the State Taxation Administration
To further support epidemic prevention and control efforts and help enterprises alleviate difficulties and achieve sustainable development, the relevant tax and fee policies are hereby announced as follows:
I. The tax preferential policies stipulated in the “Announcement of the Ministry of Finance and the State Taxation Administration on Value-Added Tax Policies to Support the Resumption of Business by Individual Industrial and Commercial Households” (Ministry of Finance and State Taxation Administration Announcement No. 13 of 2020) have had their implementation period extended to December 31, 2021. Specifically, from April 1, 2021, to December 31, 2021, for small-scale VAT taxpayers in Hubei Province, taxable sales revenue subject to a 3% VAT rate shall be taxed at a reduced rate of 1%; and for VAT prepayment items subject to a 3% withholding rate, the prepayment shall be made at a reduced rate of 1%.
II. With respect to the tax and fee preferential policies stipulated in the “Announcement of the Ministry of Finance and the State Taxation Administration on Personal Income Tax Policies Supporting the Prevention and Control of Pneumonia Caused by the Novel Coronavirus Infection” (Ministry of Finance and State Taxation Administration Announcement No. 10 of 2020) and the “Announcement of the Ministry of Finance and the State Taxation Administration on Tax and Fee Support Policies for the Film Industry and Other Sectors” (Ministry of Finance and State Taxation Administration Announcement No. 25 of 2020), any measures that have already expired shall have their implementation period extended until December 31, 2021.
III. With respect to the tax preferential policies stipulated in the “Announcement of the Ministry of Finance and the State Taxation Administration on Tax Policies Supporting the Prevention and Control of Pneumonia Caused by the Novel Coronavirus Infection” (Ministry of Finance and State Taxation Administration Announcement No. 8 of 2020) and the “Announcement of the Ministry of Finance and the State Taxation Administration on Tax Policies for Donations Supporting the Prevention and Control of Pneumonia Caused by the Novel Coronavirus Infection” (Ministry of Finance and State Taxation Administration Announcement No. 9 of 2020), any measures that have already expired shall have their implementation period extended to March 31, 2021.
IV. With respect to taxes and fees that have already been collected between January 1, 2021, and the date of this announcement, which are eligible for reduction or exemption in accordance with the provisions of this announcement, such amounts may be offset against the taxpayer’s or payer’s future tax and fee liabilities or refunded.

This is hereby announced.
Ministry of Finance, State Taxation Administration
March 17, 2021

Notice from the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs, the State Taxation Administration, and the State Administration for Market Regulation on Expanding the Pilot Program for Cross-Border E‑Commerce Retail Imports and Strictly Implementing Regulatory Requirements
Shangcai Fa [2021] No. 39
With the approval of the State Council, the following notice is hereby issued regarding further expansion of the scope of pilot cities for cross-border e‑commerce retail imports and the strict implementation of regulatory requirements:
I. The pilot program for cross-border e‑commerce retail imports will be expanded to cover all cities (and regions) where free trade pilot zones, cross-border e‑commerce comprehensive pilot zones, comprehensive bonded zones, import trade promotion and innovation demonstration zones, or Type B bonded logistics centers are located. Going forward, once the relevant cities (or regions) have been conofficeed by their local customs authorities as meeting the regulatory requirements, they may, in accordance with the “Notice of the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs, the State Taxation Administration, and the State Administration for Market Regulation on Improving the Supervision of Cross‑Border E‑Commerce Retail Imports” (Shang Cai Fa [2018] No. 486), conduct bonded import operations for online shopping (customs supervision mode code 1210).
II. Each pilot city (or region) shall earnestly assume primary responsibility for the pilot implementation of cross-border e‑commerce retail import policies within its jurisdiction, strictly enforce applicable regulatory requirements, comprehensively strengthen quality and safety risk prevention and control, promptly investigate and address violations such as conducting “bonded online shopping with offline self‑pickup” or engaging in secondary sales outside customs special supervision zones, and ensure the smooth advancement of the pilot program, thereby jointly promoting the industry’s standardized, sound, and sustainable development.
III. This Notice shall take effect from the date of its issuance. Any significant issues or circumstances arising during the pilot phase shall be promptly reported to the Ministry of Commerce and other relevant authorities.

Ministry of Commerce, National Development and Reform Commission, Ministry of Finance
General Administration of Customs, State Taxation Administration, State Administration for Market Regulation
March 18, 2021
Litigation & Arbitration
Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Administrative Cases Applying for Retrial
Interpretation of the Supreme People’s Court [2021] No. 6
(Adopted at the 1833rd Meeting of the Judicial Committee of the Supreme People’s Court on March 1, 2021; effective April 1, 2021)
In order to effectively safeguard the parties’ right to apply for retrial and to resolve administrative disputes in a practical and efficient manner, and in light of the practice of administrative adjudication in the people’s courts, this Interpretation is hereby formulated in accordance with the provisions of the Administrative Litigation Law of the People’s Republic of China.
Article 1: Where a party, dissatisfied with a judgment or ruling of a higher people’s court that has already become legally effective, applies to the Supreme People’s Court for a retrial in accordance with Article 90 of the Administrative Litigation Law, the Supreme People’s Court shall review the application in accordance with the law and handle it on a case-by-case basis.
Article 2: In the following administrative applications for retrial, where the original judgment or ruling has indeed erred in the application of laws and regulations, the Supreme People’s Court shall rule to grant a retrial:
(1) Cases that have general guiding significance for the application of law nationwide;
(2) Cases that have a significant impact nationwide or within a province, autonomous region, or directly administered municipality;
(3) Cases that span multiple provinces, autonomous regions, or municipalities directly under the central government;
(4) Cases of significant foreign-related nature or involving the Hong Kong Special Administrative Region, the Macao Special Administrative Region, or Taiwan;
(5) Cases involving major national interests or public interests;
(6) Cases decided upon deliberation by the Adjudication Committee of a Higher People’s Court;
(7) Other cases that the Supreme People’s Court deems should be retried.
Article 3 Where any of the following circumstances exists in an administrative application for retrial, the Supreme People’s Court may decide that the higher people’s court which rendered the final judgment or ruling shall conduct the review:
(1) Where the basic facts of the case are unclear, the litigation procedures are unlawful, or claims have been omitted;
(2) Where the number of applicants for retrial or third parties is large;
(3) Where it is more appropriate for the Higher People’s Court to review in order to substantively resolve the administrative dispute;
(4) Other circumstances that the Supreme People’s Court deems may be reviewed by a higher people’s court.
Article 4: Where a judgment or ruling that has already attained legal effect clearly establishes the facts and correctly applies the laws and regulations, and where the grounds for retrial asserted by the parties are found to be unfounded, the Supreme People’s Court may, without further proceedings, issue a ruling dismissing the application for retrial.
Article 5: Where a party is dissatisfied with a retrial judgment or ruling rendered by the people’s court, such party may, in accordance with the law, apply to the people’s procuratorate for a protest or for a prosecutorial recommendation.
Article 6 This Interpretation shall take effect as of April 1, 2021. After the entry into force of this Interpretation, any prior judicial interpretations issued by the Supreme People’s Court that are inconsistent with this Interpretation shall be superseded by this Interpretation.

Provisions of the Supreme People’s Court on Several Issues Concerning the Proper Determination of the Qualification of Local People’s Governments at or Above the County Level as Defendants in Administrative Litigation
Interpretation of the Supreme People’s Court No. 5 [2021]
(Adopted at the 1832nd Meeting of the Judicial Committee of the Supreme People’s Court on February 22, 2021; effective April 1, 2021)
In order to ensure the accurate application of the Administrative Litigation Law of the People’s Republic of China and to properly determine, in accordance with the law, the standing of local people’s governments at or above the county level as defendants in administrative litigation, this Interpretation is hereby formulated in light of the actual practices of administrative adjudication in the people’s courts.
Article 1: Where laws, regulations, or rules confer administrative powers upon the functional departments of local people’s governments at or above the county level, and such local people’s governments exercise guidance over these departments through means such as hearing reports, convening meetings, organizing research, or issuing documents, if citizens, legal persons, or other organizations file a lawsuit challenging the guiding actions of such local people’s governments, the people’s courts shall clarify the matter and inform them that the defendant should be the specific functional department that actually carried out the administrative act.
Article 2: In accordance with the provisions of the Urban and Rural Planning Law, people’s governments at or above the county level shall instruct the relevant competent departments to carry out compulsory demolition of illegal constructions. If citizens, legal persons, or other organizations file a lawsuit challenging such compulsory demolition, the people’s courts shall, pursuant to Article 26, Paragraph 1 of the Administrative Litigation Law, designate the administrative organ that issued the decision on compulsory demolition as the defendant; where no written decision on compulsory demolition has been issued, the competent department that actually carried out the compulsory demolition shall be named as the defendant.
Article 3. Where citizens, legal persons, or other organizations bring a lawsuit challenging acts such as the forcible demolition of houses in the context of collective land expropriation, unless there is evidence demonstrating that such acts were carried out by a local people’s government at or above the county level, the people’s court shall, in accordance with Article 26, Paragraph 1 of the Administrative Litigation Law, designate as the defendant the administrative agency that issued the decision on the forcible demolition; if no such decision has been issued, the defendant shall be the administrative agency that actually carried out the forcible demolition or other related acts.
Where a local people’s government at or above the county level has already issued a decision on the expropriation and compensation of houses on state-owned land, and a citizen, legal person, or other organization files a lawsuit challenging such actions as the forcible demolition of houses carried out in the course of implementing the expropriation and compensation, the people’s court shall, in accordance with Article 26, Paragraph 1 of the Administrative Litigation Law, designate the administrative organ that made the decision to carry out the forcible demolition as the defendant; if no such decision has been issued, the housing expropriation authority designated by the local people’s government at or above the county level shall be the defendant.
Article 4. Where a citizen, legal person, or other organization applies to a local people’s government at or above the county level for the performance of a statutory duty or the provision of a benefit, and the law, regulations, or rules stipulate that such duty or benefit falls within the administrative jurisdiction of a lower-level people’s government or the relevant competent department, and the higher-level people’s government has already forwarded the matter to the lower-level government or the relevant department for handling and notified the applicant accordingly, if the applicant brings an action seeking the performance of the statutory duty or the provision of the benefit, the lower-level people’s government or the relevant competent department shall be named as the defendant.
Article 5: The real estate registration agency designated by the people’s government at or above the county level, or any other competent department that actually performs such functions, shall handle real estate registration in accordance with the provisions of the Interim Regulations on Real Estate Registration. If a citizen, legal person, or other organization files a lawsuit challenging such registration, the real estate registration agency or the competent department actually performing the relevant duties shall be named as the defendant.
Where citizens, legal persons, or other organizations bring suit challenging real estate registration actions taken by local people’s governments at or above the county level prior to the implementation of the Interim Regulations on Real Estate Registration, the defendant shall be the real estate registration agency that continues to exercise its functions and powers, or the competent functional department that actually performs such duties.
Article 6: Local people’s governments at or above the county level shall, in accordance with the Regulations of the People’s Republic of China on Government Information Disclosure, designate specific agencies to be responsible for the day-to-day work of government information disclosure. Where citizens, legal persons, or other organizations bring a lawsuit challenging the government information disclosure actions taken by such designated agency in its own name, that designated agency shall be named as the defendant.
Article 7: If the administrative act challenged in the lawsuit was not made by a local people’s government at or above the county level, and a citizen, legal person, or other organization brings suit against such a government as the defendant, the people’s court shall provide guidance and clarification, informing the party to file the suit with the people’s court that has jurisdiction. If, after receiving such clarification from the people’s court, the citizen, legal person, or other organization still fails to amend the complaint, the people’s court may either rule not to accept the case or transfer the case to the people’s court that has jurisdiction.
Article 8 This Interpretation shall take effect as of April 1, 2021. Following the entry into force of this Interpretation, any prior judicial interpretations issued by the Supreme People’s Court that are inconsistent with this Interpretation shall be superseded by this Interpretation.
The Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Administrative Applications for Retrial were adopted at the 1833rd Meeting of the Judicial Committee of the Supreme People’s Court on March 1, 2021, and are hereby promulgated, entering into force as of April 1, 2021.
Supreme People’s Court
March 25, 2021

Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in Adjudicating State Compensation Cases and Determining Liability for Compensation for Mental Damage
The “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in Adjudicating State Compensation Cases and Determining Liability for Compensation for Mental Damage” was adopted at the 1831st Meeting of the Judicial Committee of the Supreme People’s Court on February 7, 2021. It is hereby promulgated and shall enter into force as of April 1, 2021.
Supreme People’s Court
March 24, 2021
Interpretation of the Supreme People’s Court No. 3 [2021]
Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in Adjudicating State Compensation Cases and Determining Liability for Compensation for Mental Damage
In order to ensure the proper application of the relevant provisions of the State Compensation Law of the People’s Republic of China and to appropriately determine liability for compensation for mental damages, this Interpretation is hereby formulated in light of the practical experience of adjudicating state compensation cases.
Article 1: Where a citizen, on the ground that his or her personal rights have been infringed, files an application for state compensation and, in accordance with Article 35 of the State Compensation Law, seeks compensation for non-pecuniary damage, this Interpretation shall apply.
Where a legal person or an unincorporated organization seeks compensation for non‑pecuniary damage, the people’s court shall not accept the case.
Article 2. Where a citizen files an application for state compensation on the ground that his or her personal rights have been infringed, but does not seek compensation for mental damages, nor simultaneously request measures to eliminate the adverse effects, restore reputation, offer an apology, or obtain monetary compensation for mental distress, the people’s court shall provide clarification. If, after such clarification, the applicant fails to amend the claim, and subsequently files another application based on the same facts of infringement after the case has been concluded, the people’s court shall refuse to accept the application.
Article 3 Where the organ obligated to compensate falls under any of the circumstances set forth in Articles 3 and 17 of the State Compensation Law and is legally required to bear state compensation liability, it may concurrently recognize that the tortious act has caused mental harm to the victim. However, this shall not apply where the organ obligated to compensate has evidence demonstrating that no mental harm was suffered by the citizen, or where the determination of mental harm would contravene public order and good morals.
Article 4: Where a tort causes mental harm to another, the tortfeasor shall eliminate the adverse effects, restore the victim’s reputation, or offer an apology. If the tort causes mental harm and results in serious consequences, in addition to paying compensation for mental distress, the tortfeasor shall, depending on the specific circumstances of the case, also eliminate the adverse effects, restore the victim’s reputation, or offer an apology.
Elimination of the adverse effects, restoration of reputation, and apology may be imposed either separately or jointly, and shall be commensurate with the specific nature of the tortious act and the extent of the harm caused.
Article 5. The people’s court may, depending on the specific circumstances of the case, facilitate consultations between the claimant for compensation and the agency obligated to compensate, with a view to determining the specific manner in which to eliminate the adverse effects, restore reputation, or offer an apology.
Where no agreement can be reached through consultation, a decision shall be made in accordance with the following procedures:
(1) Publish relevant information at the victim’s place of residence or workplace;
(2) Publish reports in media outlets within the direct sphere of influence of the infringing act;
(3) The responsible official of the agency obligated to compensate shall offer an apology to the claimant.
Article 6: Where a decision is made to eliminate the adverse effects, restore the victim’s reputation, or offer an apology, such measures shall be set forth in the operative part of the decision.
If, prior to the issuance of the decision, the agency obligated to provide compensation has already eliminated the adverse effects, restored the victim’s reputation, or offered an apology, or if the rectification of the original tortious act has been widely reported by the media and has objectively served to mitigate the harm and restore the victim’s reputation, and such measures comply with the provisions of this Interpretation, the agency may set forth these facts in the decision.
Article 7: Where any of the following circumstances exists, it may be deemed to constitute “causing serious consequences” as stipulated in Article 35 of the State Compensation Law:
(1) A person who is found not guilty or whose criminal liability has been terminated has been detained for six months or longer;
(2) The victim has been assessed as sustaining injuries classified as minor injury or above, or as having a disability;
(3) The victim has been diagnosed and assessed as having a mental disorder or a mental disability, and such condition is causally related to the tortious act;
(4) The victim has suffered serious harm to their reputation, honor, family, career, education, and other related aspects, and such harm is causally linked to the tortious act.
Where the victim was wrongly detained for ten years or more; where the victim has died; where the victim has been assessed as having serious injury or a disability of Grade I to IV and is unable to care for themselves; or where the victim has been diagnosed or assessed as having a severe mental disorder or a mental disability of Grade I or II, is unable to care for themselves, and such condition is causally linked to the tortious act, the consequences may be deemed particularly severe.
Article 8: Where mental harm is inflicted and serious consequences ensue, the amount of compensation for mental distress shall generally be determined at no more than fifty percent of the total sum of the compensation for deprivation of personal liberty and the compensation for injury to life and health as prescribed in Articles 33 and 34 of the State Compensation Law, inclusive of the upper limit. If the consequences are particularly severe, or if, although the circumstances set forth in Paragraph 2 of Article 7 of this Interpretation do not apply, there is sufficient evidence demonstrating that the aforementioned standard is inadequate to provide adequate redress, the compensation may be set at a level exceeding fifty percent.
Article 9: The specific amount of compensation for mental damages shall be reasonably determined by taking into account the overall level of social development and, at the same time, by referring to the following factors:
(1) Cases in which the victim has suffered mental harm and such harm has resulted in serious consequences;
(2) The specific circumstances of the infringing act, including its purpose, means, and manner;
(3) The degree of illegality and fault attributable to the tort‑committing authority and its staff, as well as the proportion of causative contribution.
(4) The originally erroneous conviction, the severity of the sentence, and the duration of detention;
(5) The victim’s occupation and the scope of its impact;
(6) The grounds for and the process of correcting errors;
(7) Other factors that should be taken into consideration.
Article 10: The amount of compensation for mental distress shall generally be no less than RMB 1,000; where the amount exceeds RMB 1,000, it shall be calculated in units of RMB 1,000.
If the claimant’s request for compensation for mental distress is less than RMB 1,000 and the grounds for the claim fall within the circumstances of serious consequences as stipulated in this Interpretation, and the claimant, after being duly informed, refuses to amend the amount, the compensation shall be paid in accordance with the amount claimed.
Article 11: If the victim bears fault for the occurrence or aggravation of the damage and its consequences, the amount of compensation for mental distress may be reduced or denied in accordance with the degree of such fault.
Article 12: The organ obligated to compensate shall fulfill the obligations set forth in the decision, including the payment of compensation for mental distress and other forms of liability.
Article 13. When the people’s courts hear state compensation cases involving infringement of citizens’ personal rights as provided for in Article 38 of the State Compensation Law, and when the organs obligated to provide compensation review and handle such cases, if the case involves compensation for mental damage, the provisions of this Interpretation shall apply by analogy.
Article 14 This Interpretation shall take effect as of April 1, 2021. Any other relevant provisions in force prior to the entry into force of this Interpretation that are inconsistent with it shall be superseded by this Interpretation.

Three Penalties in One Case: The Supreme People’s Court Intellectual Property Tribunal Issues This Year’s First “Penalty Notice”
(2021) Supreme People’s Court Zhi Si Cheng No. 1, (2020) Supreme People’s Court Zhi Min Zhong No. 862
Recently, the Intellectual Property Court of the Supreme People’s Court issued the court’s first penalty notice for 2021, imposing three sanctions—totaling RMB 200,000 in fines—on both the party and its legal representative in a patent infringement case for obstructing the court’s on-site inspection and deliberately filing evidence late. The court also urged the parties to comply immediately.
In the dispute over infringement of a utility‑model patent between Shenzhen Xinhui Mechanical and Electrical Equipment Co., Ltd. (hereinafter “Xinhui Company”) and Dongguan Yicheng Intelligent Equipment Co., Ltd. (hereinafter “Yicheng Company”), Yicheng Company filed a lawsuit alleging that the winding machines manufactured and sold by Xinhui Company infringe its patent rights, and sought an injunction against Xinhui Company to cease the infringement, together with compensation for economic losses.
To ascertain the facts of the case, the trial‑court judge conducted an on‑site inspection at the location where the allegedly infringing equipment was stored. However, the legal representative of Xin Hui Company refused to provide the equipment’s startup password and even instructed staff to remotely invalidate it. Moreover, as court personnel prepared to employ alternative methods to power up the device, Xin Hui’s representatives continued to obstruct, ultimately preventing the trial court from examining the technical solution of the winding machine manufactured by Xin Hui. The trial court further explicitly required Xin Hui to bear the burden of proof regarding the operation of its winding machine and its relevant technical features, but Xin Hui declined to submit such evidence. On this basis, the trial court determined that the technical solution of Xin Hui’s winding machine fell within the scope of protection of the patent in question, and accordingly ordered Xin Hui to cease infringement and compensate Yicheng Company for economic losses in the amount of RMB 200,000. After receiving the adverse judgment, Xin Hui, in order to demonstrate the technical characteristics of the allegedly infringing equipment, submitted a video recording of the equipment in operation as new evidence during the second‑instance proceedings; Yicheng Company also acknowledged the content of this video. Relying on these findings, the Supreme People’s Court re‑determined the factual circumstances of the case and reversed the original judgment.
During the first-instance proceedings, Xin Hui Company obstructed the court’s fact-finding efforts through on-site inspection; then, only in the second-instance did it submit crucial evidence—evidence that it had possessed all along, pertained to the case’s essential facts, and which the first-instance court had expressly required it to produce. Such conduct constitutes intentional late submission of evidence, for which no reasonable explanation was provided. Article 65, paragraph 2, and Article 111, paragraph 1, item 5, and paragraph 2, of the Civil Procedure Law of the People’s Republic of China prescribe penalties, including fines, for these two types of acts that impede civil litigation. Relying on the aforementioned legal provisions, the Supreme People’s Court imposed a fine of RMB 100,000 on Xin Hui Company and a fine of RMB 50,000 on its legal representative for obstructing judicial officers in the performance of their duties. Furthermore, for Xin Hui Company’s deliberate late submission of evidence, the Court levied a fine of RMB 50,000. These measures serve as a stern deterrent against conduct that violates the principle of good faith in litigation, abuses procedural rights, disrupts the orderly administration of justice, and wastes judicial resources.
On March 17, the Supreme People’s Court delivered its public judgment in the second instance of this case and read out and served the fine decision on the spot. Both Xin Hui Company and its legal representative stated that they had recognized their own mistakes, respected the court’s ruling and decisions, and voluntarily paid the fine within the prescribed time limit.
Good faith and honesty are fundamental principles of civil litigation and permeate the entire process of intellectual property civil proceedings. The adjudication of patent infringement disputes involves extensive technical comparison, and on-site inspections constitute an essential means for the people’s courts to ascertain the relevant technical facts and render accurate findings. To foster innovation, protect inventions and creations, and fully leverage the judicial function of intellectual property protection, it is imperative not only that the people’s courts strengthen their safeguards for intellectual property rights but also that the parties involved offer their support and cooperation in the courts’ adjudicatory work. In intellectual property civil litigation, both the rights holder asserting its claims and the alleged infringer mounting a defense must, in accordance with the law, submit evidence comprehensively, accurately, and in good faith, and actively cooperate with the people’s courts in the conduct of the proceedings.
In this case, the Supreme People’s Court explicitly condemned, through the imposition of fines, the parties’ conduct of obstructing judicial officers in the performance of their duties and deliberately filing evidence late. This measure is an important step toward establishing an evidentiary regime in intellectual property civil litigation that incentivizes and guides parties to proactively present evidence, jointly strengthening the integrity‑building framework for IP litigation and enhancing the quality and efficiency of adjudication in IP cases. It underscores the people’s courts’ office commitment to supporting high‑quality development and intensifying judicial protection of intellectual property rights.

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